Partnership
Week 3
Art. 1776. As to its object, a partnership is either universal or
particular.As regards the liability of the partners, a partnership may
be general or limited. (1671a)
Art. 1782. Persons who are prohibited from giving each other any
donation or advantage cannot enter into universal partnership.
(1677)
Art. 739. The following donations shall be void:
(1) Those made between persons who were guilty of adultery or
concubinage at the time of the donation;
(2) Those made between persons found guilty of the same criminal
offense, in consideration thereof;
(3) Those made to a public officer or his wife, descedants and
ascendants, by reason of his office.
In the case referred to in No. 1, the action for declaration of nullity
may be brought by the spouse of the donor or donee; and the guilt
of the donor and donee may be proved by preponderance of
evidence in the same action. (n)
Art. 1783. A particular partnership has for its object determinate
things, their use or fruits, or specific undertaking, or the exercise of
a profession or vocation. (1678)
Art. 1785. When a partnership for a fixed term or particular
undertaking is continued after the termination of such term or
particular undertaking without any express agreement, the rights
and duties of the partners remain the same as they were at such
termination, so far as is consistent with a partnership at will.
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.
Two or more persons may also form a partnership for the exercise
of a profession. (1665a)
Art. 1825. When a person, by words spoken or written or by
conduct, represents himself, or consents to another representing
him to anyone, as a partner in an existing partnership or with one or
more persons not actual partners, he is liable to any such persons to
whom such representation has been made, who has, on the faith of
such representation, given credit to the actual or apparent
partnership, and if he has made such representation or consented
to its being made in a public manner he is liable to such person,
whether the representation has or has not been made or
communicated to such person so giving credit by or with the
knowledge of the apparent partner making the representation or
consenting to its being made:
(1) When a partnership liability results, he is liable as though he
were an actual member of the partnership;
(2) When no partnership liability results, he is liable pro rata with
the other persons, if any, so consenting to the contract or
representation as to incur liability, otherwise separately.
When a person has been thus represented to be a partner in an
existing partnership, or with one or more persons not actual
Partnership
partners, he is an agent of the persons consenting to such
representation to bind them to the same extent and in the same
manner as though he were a partner in fact, with respect to persons
who rely upon the representation. When all the members of the
existing partnership consent to the representation, a partnership
act or obligation results; but in all other cases it is the joint act or
obligation of the person acting and the persons consenting to the
representation. (n)
Ortega v CA
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 at anytime, such as by withdrawal therefrom,
regardless of good faith or bad faith, since no partner 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
regardless of his good or bad faith;
Held: 1. Yes. The partnership agreement of the firm
provides that ”[t]he 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.”
2. Yes. Any one of the partners may, at his sole pleasure,
dictate a dissolution of the partnership at will (e.g. by way
of withdrawal of a partner). 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
Art. 1789. An industrial partner cannot engage in business for
himself, unless the partnership expressly permits him to do so; and
if he should do so, the capitalist partners may either exclude him
from the firm or avail themselves of the benefits which he may have
obtained in violation of this provision, with a right to damages in
either case. (n)
Art. 1797. The losses and profits shall be distributed in conformity
with the agreement. If only the share of each partner in the profits
has been agreed upon, the share of each in the losses shall be in the
same proportion.
In the absence of stipulation, the share of each partner in the profits
and losses shall be in proportion to what he may have contributed,
but the industrial partner shall not be liable for the losses. As for the
profits, the industrial partner shall receive such share as may be just
and equitable under the circumstances. If besides his services he
has contributed capital, he shall also receive a share in the profits in
proportion to his capital. (1689a)
Art. 1790. Unless there is a stipulation to the contrary, the partners
shall contribute equal shares to the capital of the partnership. (n)
Art. 1808. The capitalist partners cannot engage for their own
account in any operation which is of the kind of business in which
the partnership is engaged, unless there is a stipulation to the
contrary.
Partnership
Art. 1792. If a partner authorized to manage collects a demandable
sum which was owed to him in his own name, from a person who
owed the partnership another sum also demandable, the sum thus
collected shall be applied to the two credits in proportion to their
amounts, even though he may have given a receipt for his own
credit only; but should he have given it for the account of the
partnership credit, the amount shall be fully applied to the latter.
The provisions of this article are understood to be without prejudice
to the right granted to the other debtor by Article 1252, but only if
the personal credit of the partner should be more onerous to him.
(1684)
Art. 1800. The partner who has been appointed manager in the
articles of partnership may execute all acts of administration
despite the opposition of his partners, unless he should act in bad
faith; and his power is irrevocable without just or lawful cause. The
vote of the partners representing the controlling interest shall be
necessary for such revocation of power.
A power granted after the partnership has been constituted may be
revoked at any time. (1692a)
Art. 1801. If two or more partners have been intrusted with the
management of the partnership without specification of their
respective duties, or without a stipulation that one of them shall not
act without the consent of all the others, each one may separately
execute all acts of administration, but if any of them should oppose
the acts of the others, the decision of the majority shall prevail. In
case of a tie, the matter shall be decided by the partners owning the
controlling interest. (1693a)
Art. 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)
Art. 1825. When a person, by words spoken or written or by
conduct, represents himself, or consents to another representing
him to anyone, as a partner in an existing partnership or with one or
more persons not actual partners, he is liable to any such persons to
whom such representation has been made, who has, on the faith of
such representation, given credit to the actual or apparent
partnership, and if he has made such representation or consented
to its being made in a public manner he is liable to such person,
whether the representation has or has not been made or
communicated to such person so giving credit by or with the
knowledge of the apparent partner making the representation or
consenting to its being made:
(1) When a partnership liability results, he is liable as though he
were an actual member of the partnership;
(2) When no partnership liability results, he is liable pro rata with
the other persons, if any, so consenting to the contract or
representation as to incur liability, otherwise separately.
When a person has been thus represented to be a partner in an
existing partnership, or with one or more persons not actual
partners, he is an agent of the persons consenting to such
representation to bind them to the same extent and in the same
Partnership
manner as though he were a partner in fact, with respect to persons
who rely upon the representation. When all the members of the
existing partnership consent to the representation, a partnership
act or obligation results; but in all other cases it is the joint act or
obligation of the person acting and the persons consenting to the
representation. (n)
Art. 1786. Every partner is a debtor of the partnership for whatever
he may have promised to contribute thereto.
He shall also be bound for warranty in case of eviction with regard
to specific and determinate things which he may have contributed
to the partnership, in the same cases and in the same manner as the
vendor is bound with respect to the vendee. He shall also be liable
for the fruits thereof from the time they should have been
delivered, without the need of any demand. (1681a)
Art. 1787. When the capital or a part thereof which a partner is
bound to contribute consists of goods, their appraisal must be made
in the manner prescribed in the contract of partnership, and in the
absence of stipulation, it shall be made by experts chosen by the
partners, and according to current prices, the subsequent changes
thereof being for account of the partnership. (n)
Art. 1788. A partner who has undertaken to contribute a sum of
money and fails to do so becomes a debtor for the interest and
damages from the time he should have complied with his
obligation.
The same rule applies to any amount he may have taken from the
partnership coffers, and his liability shall begin from the time he
converted the amount to his own use. (1682)
Art. 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)
LIM TANHU V REMOLETE
FACTS:
Private respondent Tan Put alleged that she is the widow of Tee
Hoon Lim Po Chuan, who was a partner and practically the owner
who has controlling interest of Glory Commercial Company and a
Chinese Citizen until his death. Defendant Antonio Lim Tanhu and
Alfonso Leonardo Ng Sua were partners in name but they were
mere employees of Po Chuan and were naturalized Filipino Citizens.
Tan Put filed complaint against spouses-petitoner Lim Tanhu and Dy
Ochay including their son Tech Chuan and the other spouses-
petitoner Ng Sua and Co Oyo including also their son Eng Chong
Leonardo, that through fraud and machination took actual and
active management of the partnership and that she alleged
entitlement to share not only in the capital and profits of the
partnership but also in the other assets, both real and personal,
acquired by the partnership with funds of the latter during its
lifetime."
According to the petitioners, Ang Siok Tin is the legitimate wife, still
living, and with whom Tee Hoon had four legitimate children, a twin
Partnership
born in 1942, and two others born in 1949 and 1965, all presently
residing in Hong Kong. Tee Hoon died in 1966 and as a result of
which the partnership was dissolved and what corresponded to him
were all given to his legitimate wife and children.
Tan Put prior of her alleged marriage with Tee Hoon on 1949, was
engaged in the drugstore business; that not long after her marriage,
upon the suggestion of the latter sold her drugstore for P125,000.00
which amount she gave to her husband as investment in Glory
Commercial Co. sometime in 1950; that after the investment of the
above-stated amount in the partnership its business flourished and
it embarked in the import business and also engaged in the
wholesale and retail trade of cement and GI sheets and under huge
profits.
Defendants interpose that Tan Put knew and was are that she was
merely the common-law wife of Tee Hoon. Tan Put and Tee Hoon
were childless but the former had a foster child, Antonio Nunez.
ISSUES:
Whether Tan Put, as she alleged being married with Tee Hoon, can
claim from the company of the latter’s share.
Whether the allegations of Tan Put pertaining to defrauding by the
surviving partners on Teen Hoon are founded in order to ask them
for accounting of alleged properties they accumulated from said
action.
HELD:
Under Article 55 of the Civil Code, “the declaration of the
contracting parties that they take each other as husband and wife
"shall be set forth in an instrument" signed by the parties as well as
by their witnesses and the person solemnizing the marriage.
Accordingly, the primary evidence of a marriage must be an
authentic copy of the marriage contract”. While a marriage may
also be proved by other competent evidence, the absence of the
contract must first be satisfactorily explained. Surely, the
certification of the person who allegedly solemnized a marriage is
not admissible evidence of such marriage unless proof of loss of the
contract or of any other satisfactory reason for its non-production is
first presented to the court. In the case at bar, the purported
certification issued by a Mons. Jose M. Recoleto, Bishop, Philippine
Independent Church, Cebu City, is not, therefore, competent
evidence, there being absolutely no showing as to unavailability of
the marriage contract and, indeed, as to the authenticity of the
signature of said certifier, the jurat allegedly signed by a second
assistant provincial fiscal not being authorized by law, since it is not
part of the functions of his office. Besides, inasmuch as the bishop
did not testify, the same is hearsay.
An agreement with Tee Hoon was shown and signed by Tan Put that
she received P40,000 for her subsistence when they terminated
their relationship of common-law marriage and promised not to
interfere with each other’s affairs since they are incompatible and
not in the position to keep living together permanently. Hence, this
document not only proves that her relation was that of a common-
law wife but had also settled property interests in the payment of
P40,000.
Partnership
If Po Chuan was in control of the affairs and the running of the
partnership, how could the defendants have defrauded him of such
huge amounts as plaintiff had made his Honor believe? Upon the
other hand, since Po Chuan was in control of the affairs of the
partnership, the more logical inference is that if defendants had
obtained any portion of the funds of the partnership for themselves,
it must have been with the knowledge and consent of Po Chuan, for
which reason no accounting could be demanded from them
therefor, considering that Article 1807 of the Civil Code refers only
to what is taken by a partner without the consent of the other
partner or partners. Incidentally again, this theory about Po Chuan
having been actively managing the partnership up to his death is a
substantial deviation from the allegation in the amended complaint
to the effect that "defendants Antonio Lim Tanhu, Alfonso Leonardo
Ng Sua, Lim Teck Chuan and Eng Chong Leonardo, through fraud
and machination, took actual and active management of the
partnership and although Tee Hoon Lim Po Chuan was the manager
of Glory Commercial Co., defendants managed to use the funds of
the partnership to purchase lands and buildings etc. (Par. 4, p. 2 of
amended complaint, Annex B of petition) and should not have been
permitted to be proven by the hearing officer, who naturally did not
know any better.
IN VIEW OF ALL THE FOREGOING, the petition is granted. All
proceedings held in respondent court in its Civil Case No. 12328
subsequent to the order of dismissal of October 21, 1974 are hereby
annulled and set aside, particularly the ex-parteproceedings against
petitioners and the decision on December 20, 1974. Respondent
court is hereby ordered to enter an order extending the effects of
its order of dismissal of the action dated October 21, 1974 to herein
petitioners Antonio Lim Tanhu, Dy Ochay, Alfonso Leonardo Ng Sua
and Co Oyo. And respondent court is hereby permanently enjoined
from taking any further action in said civil case gave and except as
herein indicated. Costs against private respondent.
Liwanag v. CA, 281 SCRA 225 (1997)
Facts:
Liwanag asked Isidora Rosales to join her and Thelma Tagbilaran in
the business of buying and selling cigarettes. Under their agreement,
Rosales would give the money needed
tobuy the cigarettes while Liwanag and Tabligan would act as her age
nts, with acorresponding 40% commission to her if the goods are sold;
otherwise the money would be returned to Rosales. Rosales gave
several cash advances amounting to 633,650. Money was
misappropriated. Rosales files a complaint of estafa against them.
After trial on the merits, the trial court rendered a decision finding L
guilty as charged. On appeal to the Court of Appeals, said decision
was affirmed. L then filed her appeal before the Court alleging that the
appellate court erred in affirming her conviction for the crime of estafa,
when clearly the contract that existed between them was either that of
a simple loan or that of a partnership or joint venture, hence purely
civil in nature and not criminal.
Issue:
1. WON the parties entered into a partnership agreement; 2. if in the
negative, WON the transaction is a simple loan?
Held:
1. No. Even assuming that a contract of partnership was indeed
entered into by and between the parties, when money or property
have been received by a partner for a specific purpose for the
purchase of cigarette and she later misappropriated it, such partner is
guilty of estafa.2. No. In a contract of loan once the money is received
Partnership
by the debtor, ownership over the same is transferred. Being the
owner, the borrower can dispose of it for whatever purpose he may
deem proper
US v. Clarin, 17 Phil 84
Facts: Pedro Clarin had an agreement to form a partnership and the
divide the profits equally to Pedro Tarug, Eusebia Clarin, and Carlos
De Guzman. Larin delivered to Tarug P172, as his contribution to the
partnership, to buy and sell mangoes. Tarug, Clarin, and De Guzman
were able to obtain P203 from the business of buying and selling
mangoes but the three did not comply with the terms of the contract of
delivering to Larin his half of the profits neither did they render him
any account of the capital. Larin charged them with the crime of estafa
but the provincial fiscal filed an information only against Eusebio
Clarin in which the trial court sentenced the defendant to six months
arresto mayor and return Pedro Larin P172 and P30.50 which is his
share of the profits. The defendant appealed.
Issue: W/N a partner in a partnership may be charged with estafa.
Held: NO. The failure on the part of the industrial partners to return to
the capitalist partner the capital brought into the partnership by the
latter is not an act constituting the crime of estafa as defined in the
RPC. When Larin put the P172 into the partnership which her formed
with Tarug et. al., 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 one of his three partners to return the 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 furnishes the capital
for the recovery of his money is not a criminal action for estafa, 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.
Pang Lim v. Lo Seng, 42 Phil 282
Facts:
1. Pang Lim and Lo Seng were partners under the firm name,
Lo Seng & Co. The partnership was in the business of
running a distillery
2. The land on which the distillery was build was leased from
another, Lo Yao, through his agent Lo Shui.
3. Upon expiration of the lease, a contract to extend the lease
for 15 years was entered into by the parties
4. Later on, Lim sold ALL his interest in the distillery to Seng
(including his interest in the lease).
5. Lo Shui, as agent of Lo Yao, conveyed the land to Pang Lim
and Benito Galvez. However, Lo Seng refused to yield the
property causing Lim and Galvez to institute an action for
unlawful detainer against Seng.
Justice of Peace: Favored Lim and Galvez
CFI: Upheld
Issue: Whether it is contrary to law for partner who has left the
partnership may, after his departure, use information known to him
by reason of the partnership for his own benefit.
Held: Yes, it is contrary.
Ratio:
Partnership
1. In business relations, partners are required to exhibit
towards each other the highest degree of good faith. The
relation of the partners is essentially fiduciary as one is the
confidential agent of the other.
2. The partner cannot, to the detriment of another, apply
exclusively to his own benefit, knowledge and information
gained as a partner.
RE: W/N the Unlawful Detainer action may prosper
Held: No, it may not.
Ratio:
1. In an action for unlawful detainer, the question to be
resolved is that of the right to possession. It must be shown
that the occupant’s possession is unlawful.
2. In selling all his share in the partnership, Lim likewise sold
his interest in the lease. Hence, Lo Seng became the owner
of such rights in the lease. Lim cannot terminate the lease
on the basis that he is estopped from the sale (estoppel by
deed).
Catalan v. Gatchalian, 105 Phil 1270
FACTS: Catalan and Gatchalian are partners. They
mortgaged two lots to Dr. Marave together with the
improvements thereon to secure a credit from the latter.
The partnership failed to pay the obligation. The
properties were sold to Dr. Marave at a public
auction. Catalan redeemed the property and he
contends that title should be cancelled and a new one
must be issued in his name.
ISSUE: Did Catalan’s redemption of the properties make
him the absolute owner of the lands?
HELD: No. Under Article 1807 of the NCC every partner
becomes a trustee for his copartner with regard to any
benefits or profits derived from his act as a
partner. Consequently, when Catalan redeemed the
properties in question, he became a trustee and held the
same in trust for his copartner Gatchalian, subject to his
right to demand from the latter his contribution to the
amount of redemption.
Pioneer Insurance v. CA, 175 SCRA 668 (1989)
Facts: Petitioner Jacob Lim, owner-operator of Southern Airlines
(SAL) entered in to a contract with Japan Domestic Airlines (JDA) for
the sale and purchase of 2 aircrafts and 1 set of spare parts for $109k
to be paid in installments. Pioneer Insurance as surety executed and
issued its surety bond in favor of JDA on behalf of its principal Lim for
the balance. Border Machinery and Heavy Equip. Co. (BorMaHeCo),
Francisco and Modesto Cervantes and Maglana gave some funds
used in the purchase or aircrafts and spare parts as contribution to
new corporation proposed by Lim to expand his airline business. They
executed 2 indemnity agreements stipulating that the indemnitors
principally agree and bind themselves solidarily to indemnify, hold and
save Pioneer from damages, losses, costs, taxes, penalties, etc.
which Pioneer may incur from becoming surety. Lim, (acting under
SAL), executed in favor of pioneer a deed of chattel mortgage as
security, stipulating that Lim was to transfer and convey to the surety
the 2 aircrafts. Lim defaulted on installment payments and JDA asked
Pioneer to pay, which Pioneer did in the amount of P298k. Pioneer
filed for extrajudicial foreclosure of chattel mortgage (to which
Cervanteses and Maglana filed a 3rd party claim alleging co-
ownership over aircrafts) and judicial foreclosure with writ of prelim
attachment against Lim, Cervanteses, Bormaheco and Maglana. Trial
Partnership
Court held that Lim was liable and dismissed Pioneer’s claim against
all other defendants.
ISSUE: Was there a de facto partnership created among Cervantes,
Maglana and Lim as a result of their failure to incorporate?
HELD. No de facto partnership was created among the parties which
would entitle the petitioner to a reimbursement of the supposed losses
of the proposed corporation. Petitioner was acting on his own and not
in behalf of his other would be incorporators in transacting the sale of
aircrafts and spare parts. Persons who attempt but fail to form a
corporation and who carry on business under the corporate name
occupy the position of partners inter se. HOWEVER, such relation
does not necessarily exist, for ordinarily, persons cannot be made to
assume the relation of partners as between themselves when their
purpose is that no partnership shall exist. In the instant case, it is clear
that Lim never intended to form a corporation with respondents
despite his representations to them, giving credence to the cross-
claims of respondents saying that they were induced and lured to
make contributions to a proposed corporation which was never
formed because petitioner reneged on their agreement.
Evangelista v. Abad Santos, 51 SCRA 416
FACTS: On October 9, 1954 a co-partnership was formed under the name
of "Evangelista & Co." On June 7, 1955 the Articles of Co-partnership was
amended as to include herein respondent, Estrella Abad Santos, as industrial
partner, with herein petitioners Domingo C. Evangelista, Jr., Leonardo
Atienza Abad Santos and Conchita P. Navarro, the original capitalist
partners, remaining in that capacity, with a contribution of P17,500 each.
The amended Articles provided, inter alia, that "the contribution of Estrella
Abad Santos consists of her industry being an industrial partner", and that
the profits and losses "shall be divided and distributed among the partners ...
in the proportion of 70% for the first three partners, Domingo C.
Evangelista, Jr., Conchita P. Navarro and Leonardo Atienza Abad Santos to
be divided among them equally; and 30% for the fourth partner Estrella
Abad Santos."
On December 17, 1963 herein respondent filed suit against the three other
partners in the Court of First Instance of Manila, alleging that the
partnership, which was also made a party-defendant, had been paying
dividends to the partners except to her; and that notwithstanding her
demands the defendants had refused and continued to refuse and let her
examine the partnership books or to give her information regarding the
partnership affairs to pay her any share in the dividends declared by the
partnership. She therefore prayed that the defendants be ordered to render
accounting to her of the partnership business and to pay her corresponding
share in the partnership profits after such accounting, plus attorney's fees
and costs.
ISSUE: Whether or not Abad Santos is an industrial partner and is entitled
to the shares of the partnership?
HELD: Yes. 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 with this prestation. That appellee has
faithfully complied with her prestation with respect to appellants is clearly
shown by the fact that it was only after filing of the complaint in this case
and the answer thereto appellants exercised their right of exclusion under
the codal art just mentioned by alleging in their Supplemental Answer,
subsequent to the filing of defendants' answer to the complaint, defendants
reached an agreement whereby the herein plaintiff been excluded from, and
deprived of, her alleged share, interests or participation, as an alleged
industrial partner, in the defendant partnership and/or in its net profits or
income, on the ground plaintiff has never contributed her industry to the
partnership, instead she has been and still is a judge of the City Court
(formerly Municipal Court) of the City of Manila, devoting her time to
performance of her duties as such judge and enjoying the privilege and
Partnership
emoluments appertaining to the said office, aside from teaching in law
school in Manila, without the express consent of the herein defendants'.
Having always knows as a appellee as a City judge even before she joined
appellant company as an industrial partner, why did it take appellants many
yearn before excluding her from said company as aforequoted allegations?
And how can they reconcile such exclusive with their main theory that
appellee has never been such a partner because "The real agreement was to
grant the appellee a share of 30% of the net profits which the appellant
partnership may realize from June 7, 1955, until the mortgage of
P30,000.00 obtained from the Rehabilitation Finance Corporal shall have
been fully paid.
Moran v. CA, 133 SCRA 88
Facts:
• Pecson and Moran entered into an agreement for the
printing of posters featuring the delegates of the 1971
Constitutional Convention
o That 95k posters were supposed to be printed and sold at
P2/each
o That each would contribute P15k
o That Moran will supervise the work, while Pecson would
receive a P1k monthly commission
• Pecson gave Moran P10k for which the latter issued a
receipt
• Only 2k posters were printed, but each was sold for P5
o 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 P10k contribution, 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 respective promises (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’s commission 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, he becomes 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.
o 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 highly speculative profits
Partnership
o In the present case, the fantastic nature of expected profits
is obvious that various factors need to be considered
o 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 on with the printing of all 95,000 posters
o Hidden risks in any business venture have to be considered
• However, as it was shown that Pecson gave money to
Moran (P10k) which the latter used to print the first batch of
posters, and since these posters were sold and profits were realized
from such sale, Pecson is entitled to recover his share of such profits
Martinez v. Ong Pong Co, 14 Phil 726
Facts:
Martinez delivered P1,500 to Ong Pong Co and Ong Lay to invest in
a store. They agreed that the profits and losses would be equally
shared by all of them.
Martinez was demanding for the two Ongs to render an accounting
or to refund him the P1,500.
Ong Pong Co alleged that Ong Lay, now deceased, was the one who
managed the business, and the capital of P1,500 resulted in a loss
so that he should not be made liable
Issue: WON Ong Pong Co is liable?
YES What is the extent of his liability? joint
Held:
The 2 partners (Ongs) were the administrators/managers and are
obliged torender accounting. Since neither of them rendered an
account, nor proved the alleged losses, they are obliged to return
the capital to Martinez.Where two partners receive from another a
sum of money for the establishmentof a business, and agree to
share with the latter the profits or losses that mayresult therefrom,
the said two persons, as the apparent administrators of the
partnership, acted as agents for the capitalist partner, and by virtue
thereof arebound to fulfill the contract whichimplies the
management of the business.Article 1796 is not applicable because
no other money than that contributed ascapital was involved.The
liability of the partners is joint. Ong Pong Co shall onlypay P750 to
Martinez.
Agustin v. Inocencio, 9 Phil 134
The parties to this controversy, who had been conducting a
partnership as industrial partners without capital, contributed from
its profits the sum of P807.28 as a fund toward the construction of a
casco for use in their business, to which they added P3,500,
borrowed from Maria del Kosario, the wife of the defendant,
Bartolome Inocencio, he being the managing partner. It is admitted
that this total, a little over P4,300, was the estimated cost of the
casco, but in the progress of the work the defendant found that it
called for additional funds, which he advanced to the amount of
P2,024.49. It satisfactorily appears from the evidence that this,
amount was necessary in order to complete the work undertaken.
Although it would seem1 that he failed to notify his partners of the
various items from time to time going to make up this sum, it is
shown that the books where at all times open to their inspection,
and that, being asked to examine them, they omitted to do so, and
Partnership
that the plaintiff Juan Agustin, representing all the partners, was
also present at the construction of the casco, in charge of the
practical work and cognizant of its needs and its progress.
The work done on the casco having been within the scope of the
association and necessary to carry out its express object, the
borrowing of the money required to carry it on, with the
acquiescence if not with the affirmative consent of his associates,
was not outside the powers of the managing partner and
constitutes a debt for which all the associates are liable.
The note passed into the hands of the defendant by reason of the
successive deaths of his wife and of their only child, each without
debts, and for the amount thereof he became a creditor, subject,
however, to the deduction therefrom of his proportionate part of
the indebtedness.
The trial court treated his claim on this note, as well as the sum of
P2,024.49 furnished by him, as an addition to his capital in the firm,
rather than as a loan, and this constitutes one of the grounds of
error stated by the appellant. We do not deem it necessary to pass
upon this objection, for the reason that, considered as a loan, this
sum would place the defendant as a creditor in a stronger position
as against his associates than if regarded as a mere contribution to
capital. The error, if it be an error, is not, therefore, prejudicial to
the plaintiff, but is rather beneficial to him. The respondent did not
except to it.
Various small sums have been paid out of the profits to some of the
partners and these were properly allowed in the judgment.
On the theory on which the action was disposed of, the trial court
committed no error in the computation of the various shares.
Of the four parties plaintiff, but one, Victor del Rosario, is interested
in this appeal, which has been dismissed as to the others, and as to
him the judgment of the trial court must be affirmed, with costs of
this instance. So ordered.
Soncuya v. De Luna, 67 Phil 646
Facts:
Petitioner filed a complaint against respondent for damages as a
result of the fraudulent administration of the partnership, “Centro
Escolar de Senoritas” of which petitioner and the deceased Avelino
Librada were members. For the purpose of adjudicating to plaintiff
damages which he alleges to have suffered as a partner, it is
necessary that a liquidation of the business be made that the end
profits and losses maybe known and the causes of the latter and the
responsibility of the defendant as well as the damages in which each
partner may have suffered, maybe determined.
Issue: Whether the petitioner is entitled to damages.
Ruling:
According to the Supreme Court the complaint is not sufficient to
constitute a cause of action on the part of the plaintiff as member of
the partnership to collect damages from defendant as managing
partner thereof, without previous liquidation. Thus, for a partner to be
able to claim from another partner who manages the general co-
partnership, allegedly suffered by him by reason of the fraudulent
administration of the latter, a previous liquidation of said partnership
is necessary.