PARTNERSHIP DISPUTES:

COMMON CAUSES ACTION

C

OF LITIGATION
Group 3 Reporter
Villamor, Jeraldine C.
 Partnership Disputes
1. Breach of Contract in Partnership Disputes

Important characteristics of the business

• Ownership interest
• Management duties
• Compensation
• Decision making
• Profit allocation
• When and how to issue dividends and compensation
• Admission of new partners or shareholders
• Buy sell agreement
 Partnership Disputes
2. Business Partners owe a fiduciary duty

When plaintiffs prevail in their breach of fiduciary duty claims, they may be entitled to damages
and equitably remedies such as;
• accounting;
• fee forfeiture;
• constructive trust;
• profit disgorgement;
• injunction, and more.
 Partnership Disputes
3. When a Business Partner Commits Fraud

Business fraud may include:

• Fraud, or the intentional representation of facts known to be false I order to deceive.
• Misrepresentation, or the representation of false information believed to be true.
• Fraudulent conveyance/ transfer
• Misappropriation of trade secrets
• Patent infringement or trademark infringement
• Embezzlement
 Partnership Disputes
4. Tortious Interference in a Business Partnership?

Tortious interference claims commonly involve competitors and third-parties, but they can also
involve current or former partners who interfere with existing contracts or prospective business
as a result of:
• Violating partnership or shareholder agreements, non-competes, or confidentiality agreements
• Client poaching
• Fraud or misrepresentation
• Being forces, threatened, influenced, or coerced into violating a contract
• Obstructing business relationships with third parties
 Partnership Disputes
5. Resolving Shareholder Disputes with an Unjust Enrichment Claim

Claims for unjust enrichment have three elements:

• A benefit received;
• At the plaintiff’s expense; and
• Under circumstances that make it unjust for the defendant to retain the benefit without commensurate
compensation.
 Partnership Disputes
6. Partnership Illegal Transactions

Illegal transactions in a partnership can occur in two primary ways. The first refers to when a
partnership participates in transactions that are specifically prohibited by law, such as the sale
of illegal goods, drugs, or other types of contraband. The second happens when a partner of the
partnership enters into a transaction without the authorization of the other partners.

Examples of Illegal Transactions of a Partnership

• Surety Agreements
• Termination of Cessation of Business
• Debt or Personal Obligations
G.R. No. L-45425 April 29, 1939

JOSE GATCHALIAN, ET AL., plaintiffs-appellants, vs. THE

COLLECTOR OF INTERNAL REVENUE, defendant-appellee.
FACTS:
That plaintiff are all residents of the municipality of Pulilan, Bulacan, and that defendant is the Collector of Internal Revenue of
the Philippines. Prior to December 15, 1934 plaintiffs, in order to enable them to purchase one sweepstakes ticket valued at two
pesos (P2), subscribed and paid therefor the amounts.

Prior to December 15, 1934, plaintiffs purchased, from one of the duly authorized agents of the National Charity Sweepstakes
Office one ticket bearing No. 178637 for the sum of two pesos (P2) and the ticket was registered in the name of Jose Gatchalian
and Company.

As a result, the ticket bearing No. 178637 won one of the third prizes in the amount of P50,000 and that the corresponding check
was drawn by the National Charity Sweepstakes Office in favor of Jose Gatchalian & Company against the Philippine National
Bank, which check was cashed during the latter part of December, 1934 by Jose Gatchalian & Company.

Jose Gatchalian was required by income tax examiner Alfredo David to file the corresponding income tax return covering the
prize won by Jose Gatchalian & Company and the said return was signed by Jose Gatchalian.
The defendant made an assessment against Jose Gatchalian & Company requesting the payment of the sum
of P1,499.94 to the deputy provincial treasurer of Pulilan, Bulacan, giving to said Jose Gatchalian &
Company until January 20, 1935 within which to pay the said amount.

Plaintiffs’ through their attorney, sent to defendant a reply requesting exemption from the payment of the
income tax to which reply there were enclosed fifteen (15) separate individual income tax returns files
separately by each one of the plaintiffs.

Defendant denied plaintiffs' request for exemption from the payment of tax in view of the failure of the
plaintiffs' to pay the amount of tax demanded by defendant, notwithstanding subsequent demand issued a
warrant of distraint and levy against the property of the plaintiffs.

Plaintiffs through Gregoria Cristobal, Maria C. Legaspi and Jesus Legaspi paid under protest the sum of
P601.51 as part of the tax and requested defendant that plaintiffs be allowed to pay under protest the balance.

Plaintiffs demanded upon defendant the refund of the total sum of P1,863.44 paid under protest by them but
that defendant refused and still refuses to refund the said amount, notwithstanding the plaintiffs' demands.
ISSUE:
Whether the plaintiffs formed a partnership, or merely a community of property without a personality of its
own. Whether they should pay the tax collectively or whether the latter should be prorated among them and
paid individually.

RULING:
There is no doubt that if the plaintiffs merely formed a community of property the latter is exempt from the
payment of income tax under the law. But according to the stipulation facts the plaintiffs organized a
partnership of a civil nature because each of them put up money to buy a sweepstakes ticket for the sole purpose
of dividing equally the prize which they may win, as they did in fact in the amount of P50,000 (article 1665,
Civil Code). The partnership was not only formed, but upon the organization thereof and the winning of the
prize, Jose Gatchalian personally appeared in the office of the Philippines Charity Sweepstakes, in his capacity
as co-partner, as such collection the prize, the office issued the check for P50,000 in favor of Jose Gatchalian
and company, and the said partner, in the same capacity, collected the said check. All these circumstances repel
the idea that the plaintiffs organized and formed a community of property only.

Having organized and constituted a partnership of a civil nature, the said entity is the one bound to pay the
income tax which the defendant collected under the aforesaid section 10 (a) of Act No. 2833, as amended by
section 2 of Act No. 3761. There is no merit in plaintiff's contention that the tax should be prorated among them
and paid individually, resulting in their exemption from the tax.

In view of the foregoing, the appealed decision is affirmed, with the costs of this instance to the plaintiffs
appellants. So ordered.
Reference/s:

https://lawphil.net/judjuris/juri1939/apr1939/gr_l-45425_1939.html
https://www.hchlawyers.com/blog/2021/february/shareholder-and-partnership-disputes-5-common-ca/
https://www.legalmatch.com/law-library/article/partnership-illegal-transactions.html
THANK YOU!
C