1. We will have a long quiz next Wednesday (March 4, 2014).
2. The types of examination are: DEFINITIONS, DISTINCTIONS,
ILLUSTRATIONS and ESSAY.
3. You arrange this reviewer of yours, according to the type of
examinations, for your own convenience.
4. we are in a hurry to finish the syllabus/coverage of the
partnership. Several vacations are the reasons.
PARTNERSHIP
I. DEFINITIONS:
Article 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.
Two or more persons may also form a partnership for the exercise
of a profession. (1665a)
Case: Lim Tong Lim versus Philippine Fishing Gear Industries,
Inc., G.R. No. 136448, November 3, 1999
Facts: On behalf of "Ocean Quest Fishing Corporation," Antonio
Chua and Peter Yao entered into a Contract dated February 7, 1990,
for the purchase of fishing nets of various sizes from the
Philippine Fishing Gear Industries, Inc. (herein respondent). They
claimed that they were engaged in a business venture with
Petitioner Lim Tong Lim, who however was not a signatory to the
agreement. The total price of the nets amounted to P532,045. Four
hundred pieces of floats worth P68,000 were also sold to the
Corporation.
The buyers, however, failed to pay for the fishing nets and the
floats; hence, private respondents filed a collection suit against
Chua, Yao and Petitioner Lim Tong Lim. The suit was brought against
the three in their capacities as general partners, on the
allegation that "Ocean Quest Fishing Corporation" was a nonexistent
corporation as shown by a Certification from the Securities and
Exchange Commission.
Defendants filed an Answer, after which he was deemed to have
waived his right to cross-examine witnesses and to present evidence
on his behalf, because of his failure to appear in subsequent
hearings.
Issue: Whether by their acts, Lim, Chua and Yao could be deemed
to have entered into a partnership.
Ruling: Yes, they entered into a partnership.
There existed a partnership among Chua, Yao and him, pursuant to
Article 1767 of the Civil Code which provides:
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.
It is clear that Chua, Yao and Lim had decided to engage in a
fishing business, which they started by buying boats worth P3.35
million, financed by a loan secured from Jesus Lim who was
petitioner's brother. The boats, the purchase and the repair of
which were financed with borrowed money, fell under the term
"common fund" under Article 1767. The contribution to such fund
need not be cash or fixed assets; it could be an intangible like
credit or industry.
Moreover, it is clear that the partnership extended not only to
the purchase of the boat, but also to that of the nets and the
floats. The fishing nets and the floats, both essential to fishing,
were obviously acquired in furtherance of their business.
Case: Lourdes Navarro and Menardo Navarro vs. COURT OF APPEALS,
Regional Trial Court of Bacolod City, Branch 52, Sixth Judicial
Region and Spouses OLIVIA V. YANSON AND RICARDO B. YANSON,
respondents. G.R. No. 101847 May 27, 1993
Facts: Private respondent Olivia V. Yanson and Petitioner
Lourdes Navarro were engaged in the business of Air Freight Service
Agency. Pursuant to the Agreement which they entered, they agreed
to operate the said Agency. It is the Private Respondent Olivia
Yanson who supplies the necessary equipment and money used in the
operation of the agency. Her brother in the person of Atty. Rodolfo
Villaflores was the manager thereof while petitioner Lourdes
Navarro was the Cashier. In compliance to her obligation as stated
in their agreement, private respondent brought into their business
certain chattels or movables or personal properties. However, those
personal properties remain to be registered in her name. Among the
provisions stipulated in their agreement is the equal sharing of
whatever proceeds realized from their business; However, sometime
on July 23, 1976, private respondent Olivia V. Yanson, in order for
her to recovery the above mentioned personal properties which she
brought into their business, filed a complaint against petitioner
Lourdes Navarro for "Delivery of Personal Properties With Damages
and with an application for a writ of replevin. Private
respondents' application for a writ of replevin was later
approved/granted by the trial court. For her defense, petitioner
Navarro argue that she and private respondent Yanson actually
formed a verbal partnership which was engaged in the business of
Air Freight Service Agency. She contended that the decision
sustaining the writ of replevin is void since the properties
belonging to the partnership do not actually belong to any of the
parties until the final disposition and winding up of the
partnership.Issue: Whether or not a partnership existed between the
parties.
RULING: No partnership is formed.
Article 1767 of the New Civil Code defines the contract of
partnership:
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 proceeds among
themselves.
In the case at bar, no proof that a partnership, whether oral or
written had been constituted. In fact, those movables brought by
the plaintiff for the use in the operation of the business remain
registered in her name.
While there may have been co-ownership or co-possession of some
items and/or any sharing of proceeds by way of advances received by
both plaintiff and the defendant, these are not indicative and
supportive of the existence of any partnership between them.
Art. 1769 par. 2 provides: Co-ownership or co-possession does
not of itself establish a partnership, whether such co-owners or
co-possessors do or do not share any profits made by the use of the
property
There being no partnership that existed, any dissolution,
liquidation or winding up is beside the point.
Article 1768. The partnership has a juridical personality
separate and distinct from that of each of the partners, even in
case of failure to comply with the requirements of article 1772,
first paragraph. (n)
Case: LUZVIMINDA J. VILLAREAL, DIOGENES VILLAREAL and CARMELITO
JOSE,petitioners,versus DONALDO EFREN C. RAMIREZ and Spouses CESAR
G. RAMIREZ JR. and CARMELITA C. RAMIREZ, respondents. G.R. No.
144214, July 14, 2003
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 Complaintdated November 10,
1987, for the collection of a sum of money from petitioners.
In their Answer, petitioners/defendants 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.
Issues:
Whether petitioners are liable to respondents for the latter's
share in the partnership.
Ruling:
The respondents have no right to demand from petitioners the
return of their equity share. 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."(Art. 1768
of the Civil Code). Since the capital was contributed to the
partnership, not to petitioners, it is the partnership that must
refund the equity of the retiring partners. (Magdusa v. Albaran,
115 Phil. 511, June 30, 1962).
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 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.
II. ENUMERATIONS:
The following facts do not establish that a person is a
partner:
1. Giving orders and directions to his subordinates.So long,
therefore, that an employees position is higher in rank, it is not
unusual that he orders around those lower in rank.
2. Ordering materials from supplier. This is so, even a
messenger or other trusted employee, over whom confidence is
reposed by the owner, can order materials from suppliers.
3. Although Tan Eng Kee, together with his family, lived in the
lumber compound and this privilege was not accorded to other
employees, the undisputed fact remains thatTan Eng Kee is the
brother of Tan Eng Lay, but they are not partners.4. Tan Eng Kee
was quarrelling with Tan Eng Lay in connection with the pricing of
stocks, this does not adequately prove the existence of a
partnership.
There is sharing of profits and losses but no partnership is
formed:
1. Persons who contribute property or funds for a common
enterprise and agree to share the gross returns of that enterprise
in proportion to their contribution, but who severally retain the
title to their respective contribution, are not thereby rendered
partners.
2. Where plaintiff, his brother, and another agreed to become
owners of a single tract of realty, holding as tenants in common,
and to divide the profits of disposing of it, the brother and the
other not being entitled to share in plaintiffs commission, no
partnership existed as between the three parties, whatever their
relation may have been as to third parties.
3. The common ownership of property does not itself create a
partnership between the owners, though they may use it for the
purpose of making gains; and they may, without becoming partners,
agree among themselves as to the management, and use of such
property and the application of the proceeds therefrom.
4. The sharing of returns does not in itself establish a
partnership whether or not the persons sharing therein have a joint
or common right or interest in the property. There must be a clear
intent to form a partnership, the existence of a juridical
personality different from the individual partners, and the freedom
of each party to transfer or assign the whole property.5. The two
isolated transactions whereby they purchased properties and sold
the same a few years thereafter did not thereby make them partners.
Under the circumstances, they cannot be considered to have formed
an unregistered partnership which is thereby liable for corporate
income tax, as the respondent commissioner proposes.
How to determine the existence of a partnership ? (Note:
Requisites are not the answers)
Answer: In order to determine a partnership there must be:
(a) An intent to form the same;
(b) generally participating in both profits and losses;
(c) and such a community of interest, as far as third persons
are concerned as enables each party to make contract, manage the
business, and dispose of the whole property.-Municipal Paving Co.
vs. Herring 150 P. 1067, 50 III 470.) (Id.)
Effects of an unlawful partnership:
Answer: 1. The contract is void from the very beginning. No need
for judicial decree to dissolve illegal partnership. 2. The
properties shall be confiscated in favor of the government3.The
instruments or tools and proceeds of the crime shall be forfeited
in favor of the government (Art. 45, RPC)
Case: Mauricio Agad versus Severino Mabato and Mabato and Agad
Company, G.R. No. L-24193, June 28, 1968, En banc
Facts: Mauricio Agad and defendant Severino Mabato pursuant to a
public instrument are partners in a fishpond business. Agad
contributed P1,000, with the right to receive 50% of the profits;
that from 1952 up to and including 1956, Mabato who handled the
partnership funds, had yearly rendered accounts of the operations
of the partnership; and that, despite repeated demands, Mabato had
failed and refused to render accounts for the years 1957 to 1963,
Agad prayed in his complaint against Mabato and Mabato & Agad
Company, that judgment be rendered sentencing Mabato to pay him
(Agad) the sum of P14,000, as his share in the profits of the
partnership for the period from 1957 to 1963.
Mabato filed a motion to dismiss, upon the ground that the
complaint states no cause of action and that the lower court had no
jurisdiction over the subject matter of the case, because it
involves principally the determination of rights over public
lands.
Issue: Whether or not "immovable property or real rights" have
beencontributedto the partnership under consideration.
Answer/Ruling: The operation of the fishpond was the purpose of
the partnership. Neither said fishpond nor a real right thereto was
contributed to the partnership or became part of the capital
thereof. That the capital of the said partnership is Two Thousand
(P2,000.00) Pesos Philippine Currency only. The One Thousand
(P1,000.00) pesos has been contributed by Severino Mabato and the
other One Thousand (P1,000.00) Pesos has been contributed by
Mauricio Agad. Hence, there is no need for an inventory of the
fishpond referred to in Article 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.
Article 1772. Every contract of partnership having a capital of
three thousand pesos or more, in money or property, shall appear in
a public instrument, which must be recorded in the Office of the
Securities and Exchange Commission.
Failure to comply with the requirements of the preceding
paragraph shall not affect the liability of the partnership and the
members thereof to third persons. (n)
To be considered a juridical personality, a partnership must
fulfill what requisites?
Answer:
(1) two or more persons bind themselves to contribute money,
property or industry to a common fund; and
(2) intention on the part of the partners to divide the profits
among themselves.
3. 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. Where no immovable property or real rights
are involved, what matters is that the parties have complied with
the requisites of a partnership.The fact that there appears to be
no record in the Securities and Exchange Commission of a public
instrument embodying the partnership agreement pursuant to Article
1772 of the Civil Codedid not cause the nullification of the
partnership.The pertinent provision of the Civil Code on the matter
states:Article 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. (1668a)
NOTES
Article 1773 was intended primarily to protect third persons.In
the case at bar it does not involve third parties who may be
prejudiced. (Antonia Torres versus Court of Appeals and Manuel
Torres, G.R. No. 134559, December 9, 1999)
Case: Antonia Torres versus Court of Appeals and Manuel Torres,
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.5
Subsequently, petitioners filed a criminal case for estafa
against respondent and his wife, who were however acquitted.
Thereafter, they filed the present civil case which, upon
respondent's motion, was later dismissed by the trial court in an
Order dated September 6, 1982. On appeal, however, the appellate
court remanded the case for further proceedings. Thereafter, the
RTC issued its assailed Decision, which was affirmed by the CA.
Hence, this Petition.
Issue:1. Whether or not a partnership is void.
Ruling/Answer: The partnership is not void.
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.
The Supreme Court clarify, Article 1773 was intended primarily
to protect third persons. 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.
Petitioners contention that the Joint Venture
Agreement/partnership is void because there is no consideration for
the sale of the land is not correct. The Joint Venture Agreement
clearly states that the consideration for the sale was the
expectation of profits from the subdivision project. Its first
stipulation states that petitioners did not actually receive
payment for the parcel of land sold to respondent. Consideration,
more properly denominated ascause, can take different forms, such
as the prestation or promise of a thing or service by another.
Kinds of partnership as to liability:
1. General partnership The member are all general partners (no
limited partners). All the members are liable even beyond their
contribution to the partnership.
2. Limited partnership The memebrrs are one or more general
partners and one or more limited partners. Only the general
partners (not limited partners) are liable beyond their
contribution to the partnership. This is so, because a limited
partner does not take part in the control of the
partnership/business.
Distintions between:
Art. 1779. Universal Partnership of All Present Property.
1. The property which belonged to each of the partners at the
time of the constitution of the partnership becomes the property of
all the partners/partnership. In other words, ownership is
transferred to the partnership.
2. All profits derived from the contributed property shall
belong to the partnership. Other profits to be acquired by the
partner from donation, legacy, or inheritance may belong also to
the partnership, if it was agreed upon.Art. 1780. Universal
Partnership of Profits
1. Property which may posses at the time of the celebration of
the contract shall continue to pertain exclusively to each partner.
In other words, usufruct only is contributed to the
partnership.
2. All profits acquired or may acquire by the partners thru
their industry or work and during the existence of the partnership
shall belong to the partnership.
Article 1782. Persons who are prohibited from giving each other
any donation or advantage cannot enter into universal partnership.
(1677)
Case: Commissioner of Internal Revenue vs. William J. Suter and
C.A. February 28, 1969,G.R. No. L-25532, En Banc
Facts: William J. Suter Morcoin Co., Ltd. was formed. Respondent
William J. Suter is the general partner, and Julia Spirig and
Gustav Carlson as the limited partners. After the partnership was
formed general partner Suter and limited partner Spirig got
married. Limitedd partner Carlson sold his share in the partnership
to Suter and his wife. The limited partnership had been filing its
income tax returns as a corporation, without objection by the
herein petitioner, Commissioner of Internal Revenue, until in 1959
when the latter, in an assessment, consolidated the income of the
firm and the individual incomes of the partners-spouses Suter and
Spirig resulting in a determination of a deficiency income tax
against respondent Suter in the amount of P2,678.06 for 1954 and
P4,567.00 for 1955.The theory of the petitioner, Commissioner of
Internal Revenue, is that the marriage of Suter and Spirig and
their subsequent acquisition of the interests of remaining partner
Carlson in the partnership dissolved the limited
partnership,Respondent Suter protested the assessment, and
requested its cancellation and withdrawal, as not in accordance
with law, but his request was denied. Unable to secure a
reconsideration, he appealed to the Court of Tax Appeals, which
court, after trial, rendered a decision, reversing that of the
Commissioner of Internal Revenue.
Issue: Whether or not the partnership was dissolved after the
marriage of the partners, respondent William J. Suter and Julia
Spirig Suter and the subsequent sale to them by the remaining
limited partner, Gustav Carlson, of his share in the
partnership
Answer/Ruling: We find the Commissioner's appeal
unmeritorious.
The petitioner-appellant has evidently failed to observe the
fact that William J. Suter "Morcoin" Co., Ltd. wasnot a
universalpartnership, but aparticular one.
It follows that William J. Suter "Morcoin" Co., Ltd. was not a
partnership that spouses were forbidden to enter by Article 1677 of
the Civil Code of 1889.
The appellant's view, that by the marriage of both partners the
company became a single proprietorship, is equally erroneous. The
capital contributions of partners William J. Suter and Julia Spirig
were separately owned and contributed by thembeforetheir marriage;
and after they were joined in wedlock, such contributions remained
their respective separate property under the Spanish Civil Code
(Article 1396).
FOR THE FOREGOING REASONS, the decision under review is hereby
affirmed.
No costs.
CHAPTER 2Obligations of the Partners
Doctrine ofdelectus personae(the selection or choice of the
person) this doctrine is respecting the right of a person to choose
a partner whom he likes to be associated with.
Case: 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, G.R.. No. 109248 July 3, 1995
Facts: The law firm of ROSS, LAWRENCE, SELPH and CARRASCOSO was
duly registered in the Mercantile Registry on 4 January 1937 and
reconstituted with the Securities and Exchange Commission on 4
August 1948. The SEC records show that there were several
subsequent amendments to the articles of partnership on 18
September 1958, to change the firm [name] to ROSS, SELPH and
CARRASCOSO; on 6 July 1965 . . . to ROSS, SELPH, SALCEDO, DEL
ROSARIO, BITO & MISA; on 18 April 1972 to SALCEDO, DEL ROSARIO,
BITO, MISA & LOZADA; on 4 December 1972 to SALCEDO, DEL
ROSARIO, BITO, MISA & LOZADA; on 11 March 1977 to DEL ROSARIO,
BITO, MISA & LOZADA; on 7 June 1977 to BITO, MISA & LOZADA;
on 19 December 1980, [Joaquin L. Misa] 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, respondent Atty. Misa wrote the
following:
I am withdrawing and retiring from the firm of Bito, Misa and
Lozada, effective at the end of this month.
"I trust that the accountants will be instructed to make the
proper liquidation of my participation in the firm."
Issue: Can respondent Misa withdraw from the partnership?
Answer/ Ruling: Yes, he can withdraw.
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. 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 ( Art. 1830 (1) (b) Civil Code), but that it can result
in a liability for damages(Art. 19, Civil Code).
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 ofdelectus personae(the selection or choice of the person)
allows them to have thepower, although not necessarily theright, to
dissolve the partnership. An unjustified dissolution by the partner
can subject him to a possible action for damages.
Explain the limitations on industrial partner. Give the reason
for limitations:
Answer: As a rule, an industrial partner cannot engage in
business for himself. Except if the partnership permits him to do
so. (Reason: an industrial partner contributed nothing in the
formation of the partnership, except his future labor or industry.
Also, an industrial partner must focus on his contribution to the
partnership for a better chance of success of the firm. That if he
engaged in business for himself, it is not remote that the
partnership will suffer great loss).
If the industrial partner engaged in business for himself, the
capitalist partners may exercise the following options:
1. Exclude the industrial partner from the partnership, plus
damages, or2. Avail by the partnership the benefits which the
industrial partner may have obtained in violation of this law, plus
damages.
It is not disputed that the provision against the industrial
partner engaging in business for himself seeks to prevent any
conflict of interest between the industrial partner and the
partnership, and to insure faithful compliance by said partner.
Facts: Pedro Larin delivered to Pedro Tarug P172, in order that
the latter, in company with Eusebio Clarin and Carlos de Guzman,
might buy and sell mangoes, and, believing that he could make some
money in this business, the said Larin made an agreement with the
three men by which the profits were to be divided equally between
him and them.
Pedro Tarug, Eusebio Clarin, and Carlos de Guzman did in fact
trade in mangoes and obtained P203 from the business, but did not
comply with the terms of the contract by delivering to Larin his
half of the profits; neither did they render him any account of the
capital.
Larin charged them with the crime ofestafa, but the provincial
fiscal filed an information only against Eusebio Clarin in which he
accused him of appropriating to himself not only the P172 but also
the share of the profits that belonged to Larin, amounting to
P15.50.
Pedro Tarug and Carlos de Guzman appeared in the case as
witnesses and assumed that the facts presented concerned the
defendant and themselves together.
If you are a judge, how will you decide a case?
Answer/Ruling: When 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, a contract is
formed, which is called partnership.
When Larin put the P172 into the partnership which he formed
with Tarug, Clarin, and Guzman, he invested his capital in the
risks or benefits of the business of the purchase and sale of
mangoes, and, even though he had reserved the capital and conveyed
only the usufruct of his money, it would not devolve upon of his
three partners to return his capital to him, but upon the
partnership of which he himself formed part, or if it were to be
done by one of the three specifically, it would be Tarug, who,
according to the evidence, was the person who received the money
directly from Larin.
The P172 having been received by the partnership, the business
commenced and profits accrued, the action that lies with the
partner who furnished the capital for the recovery of his money is
not a criminal action forestafa, but a civil one arising from the
partnership contract for a liquidation of the partnership and a
levy on its assets if there should be any.
Why Industrial partner is exempted from losses?
Answer: According to Manresa, while capitalist partners can
withdraw their capital, the industrial partner cannot withdraw any
labor or industry he had already exerted. Moreover, in a certain
sense, he already has shared in the losses in that, if the
partnership shows no profit, this means that he has labored in
vain.
Case: Taitong Chuachie & Co. vs. The Insurance Commission
and Travellers Mult-Indemnity Corporation,, G.R. No. L-55397,
February 29, 1988
Facts: On April 19, 1975, Azucena Palomo obtained a loan from
Tai Tong Chuache Inc.in the amount of P100,000.00. To secure the
payment of the loan, a mortgage was executed over the land and the
building in favor of Tai Tong Chuache & Co. On April 25, 1975,
Arsenio Chua,representative of Thai Tong Chuache & Co.insured
the latter's interest with Travellers Multi-Indemnity Corporation
for P100,000.00 (P70,000.00 for the building and P30,000.00 for the
contents thereof.
On July 31, 1975, the building and the contents were totally
razed by fire.
Demand was made from respondent Travellers Multi-Indemnity for
its share in the loss but the same was refused.
Issue: Whether or not Arsenio Lopez Chua can act for and on
behalf of the partnership.
Ruling: Arsenio Lopez Chua can act for and on behalf of the
partnership.
Public respondent pointed out that the action must be brought in
the name of the real party in interest. The public respondent,
however, forgot that the 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 administrationincluding 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.Public
respondent's allegation that the civil case filed by Arsenio Chua
was in his capacity as personal creditor of spouses Palomo has no
basis.
Article 1802. In case it should have been stipulated that none
of the managing partners shall act without the consent of the
others, the concurrence of all shall be necessary for the validity
of the acts, and the absence or disability of any one of them
cannot be alleged, unless there is imminent danger of grave or
irreparable injury to the partnership. (1694)
A. What is the reason/s of the law.
Answer: The reason or purpose behind these legal provisions is
no other than to protect a third person who contracts with one of
the managing partners of the partnership, thus avoiding fraud and
deceit to which he may easily fall a victim without this
protection.
B. Give an exact example of the above provisions of the law.
Answer: Illustration: Three (3) managing partners in a
partnership. The two managers required their employees to render
overtime work, although it is not a company practice ever since, in
order to keep safe the business plant from the incoming strong
typhoon. The other partner cannot give his consent since his
whereabouts is unknown and cannot be reached thru a cellular phone.
In this situation the act of the two managing partners is valid.
The purpose of the act is to save the partnership business plant
from the imminent danger of grave or irreparable injury.
The Unanimous Concurrence of the Managing Partners is required
in this Article. If one of the managing partners did not give his
consent to a particular act, that act shall not be valid, The
absence or the disability of one who did not give his consent
cannot be alleged to insist the validity of the said act. But the
act may be valid if the purpose of which is to save the partnership
from the imminent danger of grave or irreparable injury to the
partnership.
Rules to be followed in the management of the partnership.
1. Follow the agreement.
2. In the absence of the agreement, all the partners shall be
considered agents of the partnership. Any partner partner,
therefore shall bind the partnership
3. But no partner can make important alteration in the immovable
property of the partnership, without the consent of other partners
Even if the alteration is may be useful to the partnership, no
partner can make alteration without the consent of other
partners.
4. If the refusal of consent by the other partners is manifestly
prejudicial to the interest of the partnership, a willing partner
can get a relief from the court
Article 1807. Every partner must account to the partnership for
any benefit, and hold as trustee for it any profits derived by him
without the consent of the other partners from any transaction
connected with the formation, conduct, or liquidation of the
partnership or from any use by him of its property. (n)
Case: Tuazon & San Pedro vs. Gavina Zamora & Sons, G.R.
No. 39, May 19, 1903, En Banc Facts: In February, 1898, Tuason
entered into the contract with Don Juan Feliciano. The contract was
for the construction of a house. He did not mention in the contract
that it was made on behalf of the firm of Tuason & San
Pedro.
San Pedro makes this protest with respect to the delivery of the
house, and wants it on behalf of the firm of "Tuason & San
Pedro," On August 25, 1900, partnership Tuason & San Pedro
brought an action against partner Tuazon to recover the price of
the house built. Tuazon questioned the right of the
plaintiff/partnership to sue him
Issue: Whether or not a partnership can maintain an action in
its own behalf upon a contract entered into by one of the partners
in the latters name.
Ruling: Although Tuason may have operated in his own name, it
certainly was not with his own private funds. He used partnership
funds. Accordingly, partner Tuazon who received the payment for the
construction of the house should be accounted by him to the
partnership. Tuazon is a mere trustee of the partnership insofar as
the payment/benefits he received from Don Juan Feliciano-owner the
house. Definitely, a partnership can maintain an action against one
of its partners on the ground that the partnership has a juridical
personality separate and distinct from that of each of the
partners.
Prohibitions against the capitalist partners and consequences of
violations:
1. They cannot engaged for their own account in any business
that is of the same business of the present partnership ( there is
a sort of conflict of interest), except the articles of partnership
allowed them to engaged in the same business.
2. If they violate, they shall bring to the partnerships common
fund any profits accruing to them from their transaction, and shall
personally bear all the losses.
SECTION 2Property Rights of a Partner
What are the property rights of a partner: Answer:
(1) His rights in specific partnership property;(2) His interest
in the partnership; and(3) His right to participate in the
management
Case: Roger V. Navarro versus Hon. Jose L. Escobido and Karen
Go, doing business under the name Kargo Enterprises, G.R. No.
153788, November 27, 2009
Facts: Respondent Karen T. Go doing business under the trade
name KARGO ENTERPRISES filed two complaints before the RTC for
replevin and/or sum of money with damages against Navarro. In these
complaints, Karen Go prayed that the RTC issue writs of replevin
for the seizure of two (2) motor vehicles in Navarros
possession.
In his Answers, Navarro alleged as a special affirmative defense
that the two complaints stated no cause of action, since Karen Go
was not a real party in interest to recover the two motor vehicles.
Karen Go was not a party to the Lease Agreements with Option to
Purchase the actionable document.
Issue: Whether or not Karen Go can maintain an action recovery
of the co-owned property without including the other co-owner.
Answer/ Ruling: Karen Go is the real party-in-interest. The
other co-owners are not indispensable parties, since the suit is
presumed to have been filed for the benefit of all co-owners.
The central factor in appreciating the issues presented in this
case is the business name Kargo Enterprises. The name appears in
the title of the Complaint where the plaintiff was identified as
"KAREN T. GO doing business under the name KARGO ENTERPRISES,"
Article 124 of the Family Code, on the administration of the
conjugal property, provides:
Art. 124.The administration and enjoyment of the conjugal
partnership property shall belong to both spouses jointly.In case
of disagreement, the husbands decision shall prevail, subject to
recourse to the court by the wife for proper remedy, which must be
availed of within five years from the date of the contract
implementing such decision.
This provision, by its terms, allows either Karen or Glenn Go to
speak and act with authority in managing their conjugal
property,i.e.,Kargo Enterprises. No need therefore, for one to
obtain the consent of the other before performing an act of
administration..
Either of the spouses Go, therefore, may bring an action against
Navarro to recover possession of the Kargo Enterprises-leased
vehicles which they co-own.
Three (3) ways to name a partnership:
1. To write/include all the names of the partners in the
partnerships name;2. To write/include some of the names of the
partners in the partnerships name;3. To write/include the names of
others who are not partners in the partnership. (There are partners
who are adopting/using the name of other people because the latters
name has a goodwill already).
A person who allowed and consented to use his in the
partnerships name although he is not a partner shasll be liable to
the liability of a partner. The legal basis are: the express
provison of the law (Article 1815) and pursuant also to the
doctrine of estoppels.
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. (n)
NOTES
For the purpose of determining the profit that should go to an
industrial partner (who shares in the profits but is not liable for
the losses), the gross income from all the transactions carried on
by the firm must be added together, and from this sum must be
subtracted the expenses or the losses sustained in the business.
Only in the difference representing the net profits does the
industrial partner share. But if, on the contrary, the losses
exceed the income, the industrial partner does not share in the
losses.(Criado v. Gutierrez Hermanos, 37 Phil. 883, 894-895, March
23, 1918; andMoran Jr. v. Court of Appeals, 133 SCRA 88, 96,
October 31, 1984). [cited in the case of Fernando Santos vs.
Spouses Arsenio and Nieves Reyes, G.R. No. 135813, October 25,
2001)
This Article 1816 if third person are involved/affected should
be read together with Article 1822, 1823 and 1824 to determine
exactly the liability of the partners/partnership. For quick
evaluation hereto reproduced Article 1824:
Article 1824. All partners are liable solidarily with the
partnership for everything chargeable to the partnership under
articles 1822 and 1823. (n)
In the following case there were five (5) general partners when
the promissory note in question was executed for and in behalf of
the partnership. Since the liability of the partners is pro rata,
the liability of the appellant Benjamin C. Daco shall be limited to
only one-fifth (1/5) of the obligations of the defendant
company:
Case: ISLAND SALES, INC.versus UNITED PIONEERS GENERAL
CONSTRUCTION COMPANY, ET. AL. BENJAMIN C. DACO,
defendant-appellant,G.R. No. L-22493 July 31, 1975Facts: On April
22, 1961, the defendant company, a general partnership duly
registered under the laws of the Philippines, purchased from the
plaintiff a motor vehicle on the installment basis and for this
purpose executed a promissory note for P9,440.00, payable in twelve
(12) equal monthly installments of P786.63, the first installment
payable on or before May 22, 1961 and the subsequent installments
on the 22nd day of every month thereafter, until fully paid, with
the condition that failure to pay any of said installments as they
fall due would render the whole unpaid balance immediately due and
demandable.
Having failed to receive the installment due on July 22, 1961,
the plaintiff sued the defendant company. Benjamin C. Daco, Daniel
A. Guizona, Noel C. Sim, Romulo B. Lumauig, and Augusto Palisoc
were included as co-defendants in their capacity as general
partners of the defendant company.
Daniel A. Guizona failed to file an answer and was consequently
declared in default.
Subsequently, on motion of the plaintiff, the complaint was
dismissed insofar as the defendant Romulo B. Lumauig is
concerned.
When the case was called for hearing, the defendants and their
counsels failed to appear notwithstanding the notices sent to them.
Consequently, the trial court authorized the plaintiff to present
its evidenceex-parte after which the trial court rendered the
decision appealed from.
The defendants Benjamin C. Daco and Noel C. Sim moved to
reconsider the decision claiming that since there are five (5)
general partners, the joint and subsidiary liability of each
partner should not exceed one-fifth (1/5) of the obligations of the
defendant company. But the trial court denied the said motion
notwithstanding the conformity of the plaintiff to limit the
liability of the defendants Daco and Sim to only one-fifth (1/5) of
the obligations of the defendant company.Hence, this appeal.
Issue: Whether or not the dismissal of the complaint to favor
one of the general partners of a partnership increases the joint
and subsidiary liability of each of the remaining partners for the
obligations of the partnership. Rule on the issue.
Ruling: It does not increase. The fact that the complaint
against one of the general partners was dismissed, upon motion of
the plaintiff, does not unmake a general partner in the defendant
company. In so moving to dismiss the complaint, the plaintiff
merely condoned the individual liability to the plaintiff.
To illustrate, if there are five (5) general partners, the
liability of the partners is pro rata, and that is limited to
one-fifth (1/5) of the obligations. Accordingly, a plaintiff can
recover a four-fifth (4/5) only of the total obligations because he
condoned the other one-fifth proportion
What are the things that a partner cannot do without the
authority from the other partners?
(1) Assign the partnership property in trust for creditors or on
the assignee's promise to pay the debts of the partnership;
(2) Dispose of the good-will of the business;
(3) Do any other act which would make it impossible to carry on
the ordinary business of a partnership;
(4) Confess a judgment;
(5) Enter into a compromise concerning a partnership claim or
liability;
(6) Submit a partnership claim or liability to arbitration;
(7) Renounce a claim of the partnership.
MARCH 11, 2015= Article 1819
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