Bastida vs Menzi

Facts:Bastida offered to assign to Menzi & Co. his contract with Phil Sugar Centrals Agencyand to
supervise the mixing of the fertilizer and to obtain other orders for 50 % of the net profit that Menzi &
Co., Inc., might derive therefrom. J. M. Menzi (gen. manager of Menzi & Co.) accepted the offer. The
agreement between the parties was verbal and wasconfirmed by the letter of Menzi to the plaintiff on
January 10, 1922.Pursuant to the verbal agreement, the defendant corporation on April 27, 1922
enteredinto a written contract with the plaintiff, marked Exhibit A, which is the basis of the present
action. Still, the fertilizer business as carried on in the same manner as it was prior to the written
contract, but the net profit that the plaintiff herein shall get wouldonly be 35%. The intervention of the
plaintiff was limited to supervising the mixing of the fertilizers in the bodegas of Menzi.Prior to the
expiration of the contract (April 27, 1927), the manager of Menzi notified the plaintiff that the contract
for his services would not be renewed. Subsequently, when thecontract expired, Menzi proceeded to
liquidate the fertilizer business in question. The plaintiff refused to agree to this. It argued, among
others, that the written contract enteredinto by the parties is a contract of general regular commercial
partnership, wherein Menziwas the capitalist and the plaintiff the industrial partner.Issue: Is the
relationship between the petitioner and Menzi that of partners?Held:The relationship established
between the parties was not that of partners, but that of employer and employee, whereby the plaintiff
was to receive 35% of the net profits of thefertilizer business of Menzi in compensation for his services
for supervising the mixingof the fertilizers. Neither the provisions of the contract nor the conduct of the
parties prior or subsequent to its execution justified the finding that it was a contract of co- partnership.
The written contract was, in fact, a continuation of the verbal agreement between the parties, whereby
the plaintiff worked for the defendant corporation for one-half of the net profits derived by the
corporation form certain fertilizer contracts.According to Art. 116 of the Code of Commerce, articles of
association by which two or more persons obligate themselves to place in a common fund any property,
industry, or any of these things, in order to obtain profit, shall be commercial, no matter what it classmay
be, provided it has been established in accordance with the provisions of the Code.However in this case,
there was no common fund. The business belonged to Menzi & Co.The plaintiff was working for Menzi,
and instead of receiving a fixed salary, he was to

receive 35% of the net profits as compensation for his services. The phrase in the writtencontract “en
sociedad con”, which is used as a basis of the plaintiff to prove partnershipin this case, merely means “en
reunion con” or in association with.It is also important to note that although Menzi agreed to furnish the
necessary financialaid for the fertilizer business, it did not obligate itself to contribute any fixed sum
ascapital or to defray at its own expense the cost of securing the necessary credit.

LA COMPAÑIA MARITIMA v. MUÑOZ

LA COMPAÑIA MARITIMA v. MUÑOZ

G.R. No. L-3704; December 12, 1907

Ponente: J. Willard

FACTS:

On the 31st day of March, 1905, the defendants Francisco Muñoz, Emilio Muñoz, and Rafael Naval
formed on ordinary general mercantile partnership under the name of Francisco Muñoz & Sons for the
purpose of carrying on the mercantile business in the Province of Albay which had formerly been carried
on by Francisco Muñoz.

In the articles of partnership, it is expressly stated that they have agreed to form, and do form, an
ordinary, general mercantile partnership. The object of the partnership, as stated in the fourth paragraph
of the articles, is a purely mercantile one and all the requirements of the Code of Commerce in reference
to such partnership were complied with. The articles of partnership were recorded in the mercantile
registry in the Province of Albay.

Rafael Naval was entitled by the articles of agreement to a fixed salary of P2,500 as long as he was in
charge of the branch office established at Ligao

The argument of the appellees seems to be that, because no yearly or monthly salary was assigned to
Emilio Muñoz, he contributed nothing to the partnership and received nothing from it.

ISSUE:

Whether Muñoz is liable to third person even if he is an industrial partner

HELD:

Yes, Muñoz is liable to third persons even if he is an industrial partner.

The Supreme Court held that in limited partnership, the Code of Commerce recognizes a difference
between general and special partners, but in a general partnership there is no such distinction — all the
members are general partners. The fact that some may be industrial and some capitalist partners does
not make the members of either of these classes alone such general partners.

Our construction of the article is that it relates exclusively to the settlement of the partnership affairs
among the partners themselves and has nothing to do with the liability of the partners to third persons;
that each one of the industrial partners is liable to third persons for the debts of the firm; that if he has
paid such debts out of his private property during the life of the partnership, when its affairs are settled
he is entitled to credit for the amount so paid, and if it results that there is not enough property in the
partnership to pay him, then the capitalist partners must pay him.

Our conclusion is upon this branch of the case that neither on principle nor on authority can the
industrial partner be relieved from liability to third persons for the debts of the partnership

La Compañia Maritama vs Francisco Muñoz et alIn 1905, Francisco Muñoz, Emilio Muñoz, and Rafael
Naval formed an ordinary general mercantile partnership in accordance with the Code of Commerce.
They named the partnership “Francisco Muñoz & Sons”. Francisco was the capitalist partner while the
other two were industrial partners. In the articles of partnership, it was agreed upon by the three that
for profits, Francisco shall have a 3/4th share while the other two would have 1/8th each. For losses,
only Francisco shall bear it.

Later, the partnership was sued by La Compañia Martitama for collection of sum of money amounting to
P26,828.30. The partnership lost the case and was ordered to make said payment; that in case the
partnership can’t pay the debt, all the partners should be liable for it.

The ruling is in accordance with Article 127 of the Code of Commerce which states:

All the members of the general copartnership, be they or be they not managing partners of the same,
are liable personally and in solidum with all their property for the results of the transactions made in the
name and for the account of the partnership, under the signature of the latter, and by a person
authorized to make use thereof. (emphasis supplied)
Francisco now argues that the industrial partners should NOT be liable pursuant to Article 141 of the
Code of Commerce which states:

Losses shall be charged in the same proportion among the partners who have contributed capital,
without including those who have not, unless by special agreement the latter have been constituted as
participants therein. (emphasis supplied)

ISSUE: Whether or not the industrial partners are liable to third parties like La Compañia Martitama.

HELD: Yes. The controlling law is Article 127. There is no injustice in imposing this liability upon the
industrial partners. They have a voice in the management of the business, if no manager has been
named in the articles; they share in the profits and as to third persons it is no more than right that they
should share in the obligations. It is admitted that if in this case there had been a capitalist partner who
had contributed only P100 he would be liable for this entire debt of P26,000.

Article 141 relates exclusively to the settlement of the partnership affairs among the partners themselves
and has nothing to do with the liability of the partners to third persons; that each one of the industrial
partners is liable to third persons for the debts of the firm; that if he has paid such debts out of his
private property during the life of the partnership, when its affairs are settled he is entitled to credit for
the amount so paid, and if it results that there is not enough property in the partnership to pay him,
then the capitalist partners must pay him.

In relation to this, the Supreme Court noted that partnerships under the Civil Code provides for a
scenario where all partners are industrial partners (like when it is a partnership for the exercise of a
profession). In such case, if it is permitted that industrial partners are not liable to third persons then
such third persons would get practically nothing from such partnerships if the latter is indebted.

Gregorio Ortega, Tomas del Castillo, Jr. and Benjamin Bacorro v. CA, SEC and Joaquin Misa

G.R. No. 109248 July 3, 1995

Vitug, J.

Facts:

Ortega, then a senior partner in the law firm Bito, Misa, and Lozada withdrew in said firm.

He filed with SEC a petition for dissolution and liquidation of partnership.

SEC en banc ruled that withdrawal of Misa from the firm had dissolved the partnership.Reason: since it is
partnership at will, the law firm could be dissolved by any partner atanytime, such as by withdrawal
therefrom, regardless of good faith or bad faith, since nopartner can be forced to continue in the
partnership against his will.

Issue:

1. WON the partnership of Bito, Misa & Lozada (now Bito, Lozada, Ortega & Castillo)is a partnership at
will; 2. WON the withdrawal of Misa dissolved the partnership regardlessof his good or bad faith;

Held:

1. Yes. The partnership agreement of the firm provides that ”[t]he partnership shallcontinue so long as
mutually satisfactory and upon the death or legal incapacity of one of the partners, shall be continued by
the surviving partners.”2. Yes. Any one of the partners may, at his sole pleasure, dictate a dissolution of
thepartnership at will (e.g. by way of withdrawal of a partner). He must, however, act in goodfaith, not
that the attendance of bad faith can prevent the dissolution of the partnership butthat it can result in a
liability for damages

Ortega vs. CA

FACTS:

On December 19, 1980, respondent Misa associated himself together, as senior partner with petitioners
Ortega, del Castillo, Jr., and Bacorro, as junior partners. On Feb. 17, 1988, respondent Misa wrote a letter
stating that he is withdrawing and retiring from the firm and asking for a meeting with the petitioners to
discuss the mechanics of the liquidation. On June 30, 1988, petitioner filed a petition to the Commision's
Securities Investigation and Clearing Department for the formal dissolution and liquidation of the
partnership. On March 31, 1989, the hearing officer rendered a decision ruling that the withdrawal of
the petitioner has not dissolved the partnership. On appeal, the SEC en banc reversed the decision and
was affirmed by the Court of Appeals. Hence, this petition.

ISSUE:

Whether or not the Court of Appeals has erred in holding that the partnership is a partnership at will and
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

HELD:

No. The SC upheld the ruling of the CA regarding the nature of the partnership. The SC further stated
that a partnership that does not fix its term is a partnership at will. 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.

[ G.R. No. 21639, September 25, 1924 ]

ALBERT F. KIEL, PLAINTIFF AND APPELLEE, VS. ESTATE OF P. S. SABERT, DEFENDANT AND APPELLANT.

DECISION

MALCOLM, J.:

This action relates to the legal right of Albert F. Kiel to secure from the estate of P. S. Sabert the sum of
P20,000, on a claim first presented to the commissioners and disallowed, then on appeal to the Court of
First Instance allowed, and ultimately the subject-matter of the appeal taken to this court.

A skeletonized statement of the case and the facts based on the complaint, the findings of the trial
judge, and the record, may be made in the following manner:

In 1907, Albert F. Kiel along with William Milfeil commenced to work on certain public lands situated in
the municipality of Parang, Province of Cotabato, known as Parang Plantation Company. Kiel
subsequently took over the interest of Milfeil. In 1910, Kiel and P. S. Sabert entered into an agreement to
develop the Parang Plantation Company. Sabert was to furnish the capital to run the plantation and Kiel
was to manage it. They were to share and share alike in the property. It seems that this partnership was
formed so that the land could be acquired in the name of Sabert, Kiel being a German citizen and not
deemed eligible to acquire public lands in the Philippines.

By virtue of the agreement, from 1910 to 1917, Kiel worked upon and developed the plantation. During
the World War, he was deported from the Philippines.

On August 16, 1919, five persons, including P. S. Sabert, organized the Nituan Plantation Company, with a
subscribed capital of P40,000. On April 10, 1922, P. S. Sabert transferred all of his rights in two parcels of
land situated in the municipality of Parang, Province of Cotabato, embraced within his homestead
application No. 21045 and his purchase application No. 1048, in consideration of the sum of Pl, to the
Nituan Plantation Company.
In this same period, Kiel appears to have tried to secure a settlement from Sabert. At least in a letter
dated June 6, 1918, Sabert wrote Kiel that he had offered "to sell all property that I have for P40,000 or
take in a partner who is willing to develop the plantation, to take up the K. & S. debt no matter which
way I will straiten out with you." But Sabert's death came before any amicable arrangement could be
reached and before an action by Kiel against Sabert could be decided. So these proceedings against the
estate of Sabert.

In this court, the defendant-appellant assigns the following errors:

"The lower court erred

"(1) In finding this was an action to establish a resulting trust in land.

"(2) In finding a resulting trust in land could have been established in public lands in favor of plaintiff
herein who was an alien subject at the same time said alleged resulting trust was created.

" (3) In finding a resulting trust in land had been established by the evidence in the case.

"(4) In admitting the testimony of the plaintiff herein.

"(5) In admitting the testimony of William Milfeil, John

C. Beyersdorfer, Frank R. Lasage, Oscar C. Butler and Stephen Jurika with reference to alleged statements
and declarations of the deceased P. S. Sabert.

"(6) In finding any copartnership existed between plaintiff and the deceased Sabert.

"(7) In rendering judgment for the plaintiff herein."

Errors 1, 2, and 3, relating to resulting trusts. These three errors discussing the same subject may be
resolved together. In effect, as will soon appear, we reach the conclusion that both parties were in error
in devoting so much time to the elaboration of these questions, and that a ruling on the same is not
needed.

It is conceivable, that the facts in this case could have been so presented to the court by means of
allegations in the complaint, as to disclose characteristics of a resulting trust. But the complaint as
framed asks for a straight money judgment against an estate. In no part of the complaint did plaintiff
allege any interest in land, claim any interest in land, or pretend to establish a resulting trust in land. That
the plaintiff did not care to press such an action is demonstrated by the relation of the fact of alienage
with the rule, that a trust will not be created when, for the purpose of evading the law prohibiting one
from taking or holding real property, he takes a conveyance thereof in the name of a third person. (26 R.
C. L., 1214- 1222; Leggett vs. Dubois [1835], 5 Paige, N. Y., 114; 28 Am. Dec, 413.)

The parties are wrong in assuming that the trial judge found that this was an action to establish a
resulting trust in land. In reality, all that the trial judge did was to ground one point of his decision on an
authority coming from the Supreme Court of California, which discussed the subject of resulting trusts.

Error 4, relating to the admission of testimony of the plaintiff herein. Well taken.

The Code of Civil Procedure in section 383, No. 7, names as incompetent witnesses, parties to an action
or proceeding against an executor or administrator of a deceased person upon a claim or demand
against the estate of such deceased person, who "cannot testify as to any matter of fact occurring before
the death of such deceased person." But the trial judge, misled somewhat by the decision of the
Supreme Court of California in the case of Myers vs. Reinstein ([1885], 67 Cal., 89), permitted this
testimony to go in, whereas if the decision had been read more carefully, it would have been noted that
"the action was not on a claim or demand against the estate of Reinstein." Here this is exactly the
situation which confronts us.

The case of Maxilom vs. Tabotabo ([1907], 9 Phil., 390), is squarely on all fours with the case at bar. It
was there held that "A party to an action against an executor or administrator of a deceased person,
upon a claim against the estate of the latter, is absolutely prohibited by law from giving testimony
concerning such claim or demand as to anything that occurred before the death of the person against
whose estate the action is prosecuted."

Error 5, relating to the testimony of five witnesses with reference to alleged statements and declarations
of the deceased P. S. Sabert. Not well taken.

By section 282 of the Code of Civil Procedure, the declaration, act, or omission of a deceased person
having sufficient knowledge of the subject, against his pecuniary interest, is admissible as evidence to
that extent against his successor in interest. By section 298, No. 4, of the same Code, evidence may be
given upon a trial of the following facts: " * * * the act or declaration of a deceased person, done or
made against his interests in respect to his real property." (See Leonardo vs. Santiago [1907], 7 Phil.,
401.) The testimony of these witnesses with reference to the acts or declarations of Sabert was,
therefore, properly received for whatever they might be worth.

Error 6, relating to the existence of a copartnership between Kiel and Sabert, Not well taken.

No partnership agreement in writing was entered into by Kiel and Sabert. The question consequently is
whether or not the alleged verbal copartnership formed by Kiel and Sabert has been proved, if we
eliminate the testimony of Kiel and only consider the relevant testimony of other witnesses. In
performing this task, we are not unaware of the rule of partnership that the declarations of one partner,
not made in the presence of his copartner, are not competent to prove the existence of a partnership
between them as against such other partner, and that the existence of a partnership cannot be
established by general reputation, rumor, or hearsay. (Mechem on Partnership, sec. 65; 20 R. C. L., sec.
53; Owensboro Wagon Company vs. Bliss [1901], 132 Ala., 253.)

The testimony of the plaintiff's witnesses, together with the documentary evidence, leaves the firm
impression with us that Kiel and Sabert did enter into a partnership, said that they were to share equally.
Applying the tests as to the existence of partnership, we feel that competent evidence exists establishing
the partnership. Even more primary than any of the rules of partnership above announced, is the
injunction to seek out the intention of the parties, as gathered from the facts and as ascertained from
their language and conduct, and then to give this intention effect. (Giles V6. Vette [1924], 263 U. S., 553.)

Error 7, relating to the judgment rendered for the plaintiff. Well taken in part.
The judgment handed down, it will be remembered, permitted the plaintiff to recover from the estate
the full amount claimed, presumably on the assumption that Sabert having sold.the property to the
Nituan Plantation Company for P40,000, Kiel should have one-half of the same, or P20,000. There is,
however, extant in the record absolutely no evidence as to the precise amount received by Sabert from
the sale of this particular land. If it is true that Sabert sold all his land to the Nituan Plantation Company
for P40,000, although this fact was not proven, what part of the P40,000 would correspond to the
property which belonged to Kiel and Sabert under their partnership agreement? It impresses us further
that Kiel under the facts has no standing in court to ask for any part of the land and in fact he does not
do so; his only legal right is to ask for what is in effect an accounting with reference to its improvements
and income as of 1917 when Sabert became the trustee of the estate on behalf of Kiel.

As we have already intimated, we do not think that Kiel is entitled to any share in the land itself, but we
are of the opinion that he has clearly shown his right to one-half of the value of the improvements and
personal property on the land as of the date upon which he left the plantation.

Such improvements and personal property include buildings, coconut palms, and other plantings, cattle
and other animals, implements, fences, and other constructions, as well as outstanding collectible
credits, if any, belonging to the partnership. The value of these improvements and of the personal
property cannot be ascertained from the record and the case must therefore be remanded for further
proceedings.

In resume, we disregard errors 1, 2, and 3, we find well taken, errors 4 and 7, and we find not well taken,
errors 5 and 6.

The judgment appealed from is set aside and the record is returned to the lower court where the
plaintiff, if he so desires, may proceed further to prove his claim against the estate of P. S. Sabert.
Without costs. So ordered.

Johnson, Street, Avancem, Villamor, Ostrand, and Romualdez, JJ., concur.

Moran, Jr. v. CA

G.R. No. L-59956 Oct. 31, 1984Justice Gutierrez, Jr.

Facts:


Pecson and Moran entered into an agreement for the printing of posters featuring the delegatesof the
1971 Constitutional Convention

That 95k posters were supposed to be printed and sold at P2/each

That each would contribute P15k

That Moran will supervise the work, while Pecson would receive a P1k monthlycommission

Pecson gave Moran P10k for which the latter issued a receipt

Only 2k posters were printed, but each was sold for P5

Moran then executed 2 promissory notes in favor of Pecson

Pecson then filed an action for the recovery of a sum of money for the return of his P10kcontribution,
payment of his share in the profits that the partnership would have earned


TC: each party is entitled to rescind the contract since both failed to fulfill their respectivepromises
(Moran

the printing of the 95k posters; Pecson

the P15k contribution)

CA: Moran must pay Pecson, among others, the amount of expected profits and the latter’

scommission in the partnership

Issue:

WON Moran is obliged to give Pecson the amount of expected profits from their partnership.

Held:

No, he is not.

Rule: when a partner who has undertaken to contribute a sum of money fails to do so, hebecomes a
debtor of the partnership for whatever he may have promised to contribute (Art.1786) and for interests
and damages from the time he should have complied with his obligations(Art. 1788)


Being a contract of partnership, each partner must share in the profits and losses of the venture,for that
is the essence of partnership.

Even in the assurance of the other partner that they would earn a huge amount of profits, in the absence
of fraud, the other cannot claim a right to recover the highlyspeculative profits

In the present case, the fantastic nature of expected profits is obvious that variousfactors need to be
considered

The failure of COMELEC to proclaim all 320 candidates of the Constitutional Convention

on time was a major factor in Moran’s decision not to go o

n with the printing of all95,000 posters

Isabelo Moran vs Court of Appeals In February 1971, Isabelo Moran and Mariano Pecson entered into a
partnership agreement where they agreed to contribute P15k each for the purpose of printing 95k
posters of the delegates to the then 1971 Constitutional Commission. Moran shall be in charge in
managing the printing of the posters. It was further agreed that Pecson will receive a commission of P1k
a month starting from April 1971 to December 1971; that the partnership is to be liquidated on
December 15, 1971.

Pecson partially fulfilled his obligation to the partnership when he issued P10k in favor of the
partnership. He gave the P10k to Moran as the managing partner. Moran however did not add anything
and, instead, he only used P4k out of the P10k in printing 2,000 posters. He only printed 2,000 posters
because he felt that printing all 95k posters is a losing venture because of the delay by the COMELEC in
announcing the full delegates. All the posters were sold for a total of P10k.
Pecson sued Moran. The trial court ordered Moran to pay Pecson damages. The Court of Appeals
affirmed the decision of the trial court but modified the same as it ordered Moran to pay P47.5k for
unrealized profit; P8k for Pecson’s monthly commissions; P7k as return of investment because the
venture never took off; plus interest.

ISSUE: Whether or not the CA judgment is correct.

HELD: No. The award of P47.5k for unrealized profit is speculative. There is no evidence whatsoever that
the partnership between the Moran and Pecson would have been a profitable venture (because base on
the circumstances then i.e. the delay of the COMELEC in proclaiming the candidates, profit is highly
unlikely). In fact, it was a failure doomed from the start. There is therefore no basis for the award of
speculative damages in favor of Pecson. Further, there is mutual breach in this case, Pecson only gave
P10k instead of P15k while Moran gave nothing at all.

As for the P8k monthly commission, this is without basis. The agreement does not state the basis of the
commission. The payment of the commission could only have been predicated on relatively extravagant
profits. The parties could not have intended the giving of a commission inspite of loss or failure of the
venture. Since the venture was a failure, Pecson is not entitled to the P8k commission.

As for the P7k award as return for Pecson’s investment, the CA erred in his ruling too. Though the
venture failed, it did took off the ground as evidenced by the 2,000 posters printed. Hence, return of
investment is not proper in this case. There are risks in any business venture and the failure of the
undertaking cannot entirely be blamed on the managing partner alone, specially if the latter exercised
his best business judgment, which seems to be true in this case.

Moran must however return the unused P6k of Pecson’s contribution to the partnership plus P3k
representing Pecson’s profit share in the sale of the printed posters. Computation of P3k profit share is
as follows: (P10k profit from the sale of the 2,000 posters printed) – (P4k expense in printing the 2k
posters) = (P6k profit); Profit ÷ 2 = P3k each.