1

Digested Cases on Partnership

Bastida vs Menzi 58 Phil 188 GR No. L-358 !" Mar#h 31" 1$33 %a#ts& This is an appeal by Menzi & Co., Inc., one of the defendants, from a decision of the Court of First Instance of Manila. Bastida offered to assign to Menzi & Co. his contract ith !hil "ugar Centrals #gency and to super$ise the mi%ing of the fertilizer and to obtain other orders for &' ( of the net profit that Menzi & Co., Inc., might deri$e therefrom. ). M. Menzi *gen. manager of Menzi & Co.+ accepted the offer. The agreement bet een the parties as $erbal and as confirmed by the letter of Menzi to the plaintiff. !ursuant to the $erbal agreement, the defendant corporation on #pril ,-, 1.,, entered into a ritten contract ith the plaintiff, mar/ed 0%hibit #, hich is the basis of the present action. "till, the fertilizer business as carried on in the same manner as it as prior to the ritten contract, but the net profit that the plaintiff herein shall get ould only be 1&(. !rior to the e%piration of the contract *#pril ,-, 1.,-+, the manager of Menzi notified the plaintiff that the contract for his ser$ices ould not be rene ed. "ubse2uently, hen the contract e%pired, Menzi proceeded to li2uidate the fertilizer business in 2uestion. The plaintiff refused to agree to this. It argued, among others, that the ritten contract entered into by the parties is a contract of general regular commercial partnership, herein Menzi as the capitalist and the plaintiff the industrial partner. Issue3 Is the relationship bet een the petitioner and Menzi that of partners4 5eld3 The relationship established bet een the parties as not that of partners, but that of employer and employee, hereby the plaintiff as to recei$e 1&( of the net profits of the fertilizer business of Menzi in compensation for his ser$ices for super$ising the mi%ing of the fertilizers. 6either the pro$isions of the contract nor the conduct of the parties prior or subse2uent to its e%ecution 7ustified the finding that it as a contract of co8partnership #ccording to #rt. 119 of the Code of Commerce, articles of association by hich t o or more persons obligate themsel$es to place in a common fund any property, industry, or any of these things, in order to obtain profit, shall be commercial, no matter hat it class may be, pro$ided it has been established in accordance ith the pro$isions of the Code. 5o e$er in this case, there as no common fund. The business belonged to Menzi & Co. The plaintiff as or/ing for Menzi, and instead of recei$ing a fi%ed salary, he as to recei$e 1&( of the net profits as compensation for his ser$ices. The phrase in the ritten contract :en sociedad con;, hich is used as a basis of the plaintiff to pro$e partnership in this case, merely means :en reunion con; or in association ith. It is also important to note that although Menzi agreed to furnish the necessary financial aid for the fertilizer business, it did not obligate itself to contribute any fi%ed sum as capital or to defray at its o n e%pense the cost of securing the necessary credit.

Pas#'al vs. C(R

Digested Cases on Partnership

<.= 6o. ->111 ?ct. 1>, 1.>> %a#ts& ?n )une ,,, 1.9&, petitioners bought t o *,+parcels of land from "antiago Bernardino, et al.and on May ,>, 1.99, they bought another three *1+ parcels of land from )uan =o2ue. The first t o parcels of land ere sold by petitioners in 1.9> to Marenir @e$elopment Corporation, hile the three parcels of land ere sold by petitioners to 0rlinda =eyes and Maria "amson on March 1.,1.-'. !etitioner realized a net profit in the sale made in 1.9> in the amount of !19&, ,,A.-', hile they realized a net profit of !9',''' in the sale made in 1.-'. The corresponding capital gains ta%es ere paid by petitioners in 1.-1 and 1.-A .=espondent Commissioner informed petitioners that in the years 1.9> and 1.-', petitioners as co8o ners in the real estate transactions formed an unregistered partnership or 7oint $enture ta%able as a corporation under "ection ,'*b+and its income as sub7ect to the ta%es in the 6ational Internal =e$enue CodeB that the unregistered partnership as sub7ect to corporate income ta% as distinguished from profits deri$ed from the partnership by them hich is sub7ect to indi$idual income ta%. Issue Chether petitioners formed an unregistered partnership sub7ect to corporate income ta%*partnership $s. co8o nership 5eld3 #rticle 1-9. of the ne Ci$il Code lays do n the rule for determining hen a transaction should be deemed a partnership or a co8o nership. "aid article paragraphs , and 1, pro$ides3*,+ Co8o nership or co8possession does not itself establish a partnership, hether such co8o ners or co8possessors do or do not share any profits The sharing of returns foes not in itself establish a partnership hether or not the persons sharing therein ha$e a 7oint or common right or interest in the property. There must be a clear intent to form partnership, the e%istence of a 7uridical personality different from the indi$idual partners, and the freedom of each party to transfer or assign the hole property. In the present case, there is clear e$idence of co8o nership bet een the petitioners. There is no ade2uate basis to support the proposition that they thereby formed an unregistered partnership. The t o isolated transactions hereby they purchased properties and sold the same a fe years thereafter did not there by ma/e them partners. They shared in the gross profits as co8 o ners and paid their capital gains ta%es on their net profits and a$ailed of the ta% amnesty thereby. Dnder the circumstances, they cannot be considered to ha$e formed an unregistered partnership hich is thereby liable for corporate income ta%, as the respondent commissioner proposes.

Gregorio )rtega" *o+as del Castillo" ,r. and Ben-a+in Ba#orro v. C." /0C and ,oa1'in Misa <.=. 6o. 1'.,A> )uly 1, 1..& %a#ts&

Digested Cases on Partnership

?rtega, then a senior partner in the la firm Bito, Misa, and Eozada ithdre in said firm. 5e filed ith "0C a petition for dissolution and li2uidation of partnership. "0C en banc ruled that ithdra al of Misa from the firm had dissol$ed the partnership. Because since it is partnership at ill, the la firm could be dissol$ed by any partner at anytime, such as by ithdra al there from, regardless of good faith or bad faith, since no partner can be forced to continue in the partnership against his ill. (ss'e& 1. C?6 the partnership of Bito, Misa & Eozada *no Bito, Eozada, ?rtega & Castillo+is a partnership at illB ,. C?6 the ithdra al of Misa dissol$ed the partnership regardless of his good or bad faithB 2eld& 1. Fes. The partnership agreement of the firm pro$ides that ;GtHhe 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 sur$i$ing partners.; ,. Fes. #ny one of the partners may, at his sole pleasure, dictate a dissolution of the partnership at ill *e.g. by ay of ithdra al of a partner+. 5e must, ho e$er, act in good faith, not that the attendance of bad faith can pre$ent the dissolution of the partnership but that it can result in a liability for damages.

Car+en Li3anag v. C. and People 481 /CR. 445 <.=. 6o. 11A1.> ?ctober ,A, 1..%a#ts& Ei anag as/ed Isidora =osales to 7oin her and Thelma Tagbilaran in the business of buying and selling cigarettes. Dnder their agreement, =osales ould gi$e the money needed tobuy the cigarettes hile Ei anag and Tabligan ould act as her agents, ith acor responding A'( commission to her if the goods are soldB other ise the money

Digested Cases on Partnership

ould be returned to =osales. =osales ga$e se$eral cash ad$ances amounting to 911,9&'. Money as misappropriated. =osales files a complaint of estafa against them. #fter trial on the merits, the trial court rendered a decision finding E guilty as charged. ?n appeal to the Court of #ppeals, said decision as affirmed. E then filed her appeal before the Court alleging that the appellate court erred in affirming her con$iction for the crime of estafa, hen clearly the contract that e%isted bet een them as either that of a simple loan or that of a partnership or 7oint $enture, hence purely ci$il in nature and not criminal. (ss'e& 1. C?6 the parties entered into a partnership agreementB ,. if in the negati$e, C?6 the transaction is a simple loan4 2eld& 1. 6o. 0$en assuming that a contract of partnership as indeed entered into by and bet een the parties, hen money or property ha$e been recei$ed by a partner for a specific purpose for the purchase of cigarette and she later misappropriated it, such partner is guilty of estafa.,. 6o. In a contract of loan once the money is recei$ed by the debtor, o nership o$er the same is transferred. Being the o ner, the borro er can dispose of it for hate$er purpose he may deem proper #guila )r. $s C# G.R. No. 1453 5 Nove+6er 45" 1$$$" 317 /CR. 4 7 In #pril 1..1, the spouses =uben and Felicidad #brogar entered into a loan agreement ith a lending firm called #.C. #guila & "ons, Co., a partnership. To secure the loan, the spouses mortgaged their house and lot located in a subdi$ision. The terms of the loan further stipulates that in case of non8payment, the property shall be automatically appropriated to the partnership and a deed of sale be readily e%ecuted in fa$or of the partnership. "he does ha$e a .' day redemption period. =uben died, and Felicidad failed to ma/e payment. "he refused to turn o$er the property and so the firm filed an e7ectment case against her * herein she lost+. "he also failed to redeem the property ithin the period stipulated. "he then filed a ci$il case against #lfredo #guila, manager of the firm, see/ing for the declaration of nullity of the deed of sale. The =TC retained the $alidity of the deed of sale. The Court of #ppeals re$ersed the =TC. The C# ruled that the sale is $oid for it is a pactum commissorium sale hich is prohibited under #rt. ,'>> of the Ci$il Code . (//80& Chether or not the case filed by Felicidad shall prosper. 20LD& 6o. Dnfortunately, the ci$il case as filed not against the real party in interest. #s pointed out by #guila, he is not the real party in interest but rather it as the partnership #.C. #guila & "ons, Co. The =ules of Court pro$ide that :e$ery action must be prosecuted and defended in the name of the real party in interest.; # real party in interest is one ho ould be benefited or in7ured by the 7udgment, or ho is entitled to the a$ails of the suit. #ny decision rendered against a person ho is not a real party in interest in the case cannot be e%ecuted. 5ence, a complaint filed against such a person should be dismissed for failure to state a cause of action, as in the case at bar. Dnder #rt. 1-9> of the Ci$il Code, a partnership :has a 7uridical personality separate and distinct from that of each of the partners.; The partners cannot be held liable for the obligations of the partnership unless it is sho n that the legal fiction of a different 7uridical personality is being used for fraudulent, unfair, or illegal purposes. In this case, Felicidad has not sho n that #.C. #guila & "ons, Co., as a separate 7uridical entity, is being used for fraudulent, unfair, or illegal purposes. Moreo$er, the title to the sub7ect property is in the name of #.C. #guila &

&

Digested Cases on Partnership

"ons, Co. It is the partnership, not its officers or agents, hich should be impleaded in any litigation in$ol$ing property registered in its name. # $iolation of this rule ill result in the dismissal of the complaint.

8/ vs Clarin 15 Phil 8 " 1$1! %a#ts& !edro Clarin had an agreement to form a partnership and the di$ide the profits e2ually to !edro Tarug, 0usebia Clarin, and Carlos @e <uzman. Earin deli$ered to Tarug !1-,, as his contribution to the partnership, to buy and sell mangoes. Tarug, Clarin, and @e <uzman ere able to obtain !,'1 from the business of buying and selling mangoes but the three did not comply ith the terms of the contract of deli$ering to Earin his half of the profits neither did they render him any account of the capital. Earin charged them ith the crime of estafa but the pro$incial fiscal filed an information only against 0usebio Clarin in hich the trial court sentenced the defendant to si% months arresto mayor and return !edro Earin !1-, and !1'.&' hich is his share of the profits. The defendant appealed. (ss'e& CI6 a partner in a partnership may be charged ith estafa.

2eld& N). 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 =!C. Chen Earin put the !1-, into the partnership hich her formed ith Tarug et. al., he in$ested his capital in the ris/s or benefits of the business of the purchase and sale of mangoes, and, e$en though he had reser$ed the capital and con$eyed 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 !1-, ha$ing been recei$ed 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.

<o2uilay $s. "ycip, . "C=# 991 F#CT"3 Facts3 Tan "in #n and #ntonio <o2uiolay entered into a general commercial partnership hich as to last for 1' years for the purpose of dealing in real8estate. The agreement lodged upon Tan "in #n the sole management of the partnership affairs and his co J partner, <o2uiolay, has no $oice or participation in the management of the affairs of the co Jpartnership. They further agreed upon that in the e$ent of the death of any of the partners at any time before the e%piration of the term, the co J partnership shall not be dissol$ed but ill ha$e to be continued and the deceased partner shall be represented by his heirs or assigns in the said co Jpartnership. # general po er of attorney *<!#+ as e%ecuted by <o2uiolay in fa$or of Tan "in #n

Digested Cases on Partnership

hich included buy, sell, alienate and con$ey properties of the partnership as ell as obtain loans as he maydeem ad$isable for the best interest of the co J partnership. Cith the authority of the <!#, thepartnership through Tan "in #n purchased 1 parcels of land hich as mortgaged to Ea Drbana "ociedadand another A9 parcels of land hich hich ere purchased by Tan "in #n in his indi$idual capacity,and assumed mortgaged debt thereon. The do n payment for the A9 parcels of land as ad$anced by Futi$o and Co. The t o separate obligations ere consolidated in an instrument e%ecuted by the partnership and Tan "in #n, hereby the entire A. lots ere mortgaged in fa$orof the Banco 5ipotecario de Filipinas *as successor toEa Drbana+. Chen Tan "in #n died, his ife KongChia !in as appointed administrati% of the intestate estate of her deceased husband. =epeated demands for payment ere made by Banco 5ipotecario on thepartnership and on Tan "in #n hich as initially paid by Futi$o and Co. and "ing Fee Cuan and Co.The matter no pending is the appellantLs motion for
reconsideration of our main decision, herein e ha$e upheld the $alidity of the sale of the lands o ned by the partnership <o2uiolay & Tan "in #n, made in 1.A. by the ido of the managing partner, Tan "in #n *0%ecuted in her dual capacity as #dministratri% of the husbandLs estate and as partner in lieu of the husband+, in fa$or of the buyers Cashington "ycip and Betty Eee. (//803 CI6 the consent of the other partner partnership properties to "ycip and Betty J 6?. as necessary to perfect the sale of the

50E@3 "trangers dealing ith a partnership ha$e the right to assume, in the absence of restricti$e clauses in the co J partnership agreement, that e$ery general partner has the po er to bind the partnership and has the re2uisite authority from his co J partners. 5o e$er, consonant ith the articles of co Jpartnership pro$iding for the continuation of the firm not ithstanding the death of one of the partners, the heir of the deceased, by ne$er repudiating or refusing to be bound under said pro$ision, became indi$idual partner ith <o2uiolay upon TanMs demise. By allo ing Kong Chai !in to retain control of the partnership properties from 1.A, to 1.A., <o2uiolay is estopped from denying her legal representation of the partnership, ith the po er to bind it ith proper contracts. By authorizing the ido of the managing partner to manage partnership property * hich a limited partner could not be authorized to do+, the other general partner recognized her as a general partner, and is no in estoppel to deny her position as a general partner, ith authority.