Lilibeth Sunga-Chan v.

Lamberto Chua
FACTS: On June 22, 1992, Lamberto T. Chua
filed a complaint against Lilibeth Sunga Chan
and Cecilia Sunga, daughter and wife of the
deceased Jacinto L. Sunga, for Winding Up of
Partnership Affairs, Accounting, Appraisal and
Recovery of Shares and Damages with Writ of
Preliminary Attachment with the RTC of
Zamboanga del Norte.
Respondent alleged that in 1977, he verbally
entered into a partnership with Jacinto in the
distribution of Shellane LPG in Manila. For
business convenience, respondent and Jacinto
allegedly agreed to register the business name
of their partnership, SHELLITE GAS APPLIANCE
CENTER, under the name of Jacinto as a sole
proprietorship.
Respondent
alleged
that
they
equally
contributed 100,000.00 as initial capital with
the intention that the profits would be equally
divided between them.
The partnership allegedly had Jacinto as
manager, assisted by Josephine Sy, a sister of
the wife of respondent, Erlinda Sy. As
compensation,
Jacinto
would
receive
a
managers fee of 10% of the gross profit and
Josephine would receive 10% of the net profits,
in addition to her wages and other
remuneration from the business.
Its business operation went quite well and was
profitable. While Jacinto furnished respondent
with the merchandise inventories, balance
sheets and net worth of Shellite from 1977 to
1989, Chua however suspected that the
amount indicated in these documents were
understated and undervalued by Jacinto and
Josephine for their own selfish reasons and for
tax avoidance.
Upon Jacintos death, his surviving wife, Cecilia
and his daughter, Lilibeth, took over the
operations, control, custody, disposition and
management of Shellite without respondents
consent. Despite his repeated demands upon
petitioners for accounting, inventory, appraisal,
winding up and restitution of his net shares in
the partnership, petitioners failed to comply.
Lilibeth allegedly continued the operations of

Shellite, converting to her

advantage its properties.

own

use

and

After Lilibeth ran out of alibis and reasons to

evade respondents demands, she disbursed
out of the partnership funds the amount of
P200,000.00 and partially paid the same to
respondent. Petitioner
Lilibeth
allegedly
informed respondent that such amount
represented partial payment of the latters
share in the partnership, with a promise that
the she would make the complete inventory
and winding up of the properties of the
business
establishment. Despite
such
commitment, petitioners allegedly failed to
comply with their duty to account, and
continued to benefit from the assets and
income of Shellite to the damage and prejudice
of respondent.
Petitioners contendied that they are not liable
for respondent does not have a cause of action
against them, and the trial court has no
jurisdiction over the nature of the action, the
SEC being the agency that has original and
exclusive jurisdiction over the case.
RTC ruled in favour of Chua. CA denied MR of
petitioner.
ISSUE: WON partnership existed bet. Chua and
Jacinto
RULING: YES. According to Art. 1771 of NCC,
A partnership may be constituted in any form,
except where immovable property or real rights
are contributed thereto, in which case a public
instrument shall be necessary.Hence, based on
the intention of the parties, as gathered from
the facts and ascertained from their language
and conduct, a verbal contract of partnership
may arise. The essential points that must be
proven to show that a partnership was agreed
upon are (1) mutual contribution to a common
stock, and (2) a joint interest in the
profits. Understandably so, in view of the
absence of a written contract of partnership
between respondent and Jacinto, respondent
resorted to the introduction of documentary
and testimonial evidence to prove said
partnership.

In addition, the joint venture/partnership had

also acquired various other assets, but Eduardo
caused to be registered in the names of other
parties. The substantial assets of most of the
corporate defendants consist of real properties.
Sometime in 1992, the relations between
Aurelio and Eduardo became sour. Aurelio then
requested for an accounting and liquidation of
his share in the joint venture/partnership, but
these demands for complete accounting and
liquidation were not heeded.

Litonjua v. Litonjua (Art. 1771, 1773)

FACTS: Petitioner Aurelio K. Litonjua, Jr.
(Aurelio) and herein respondent Eduardo K.
Litonjua, Sr. (Eduardo) are brothers. The legal
dispute between them started when Aurelio
filed a suit against his brother Eduardo, Robert
T. Yang and several corporations for specific
performance and accounting.
In his complaint, Aurelio alleged that, on 22
June 1973, Aurelio and Eduardo entered into a
joint venture/partnership for the continuation of
their family business and common family
funds.
This joint venture/partnership agreement was
contained in a memorandum addressed by
Eduardo to his siblings, parents and other
relatives.
It was then agreed upon between Aurelio and
Eduardo that, in consideration of Aurelios
retaining his share in the remaining family
businesses (mostly, movie theaters, shipping
and land devt) and contributing his industry to
the continued operation of these businesses,
Aurelio will be given P1 Million or 10% equity in
all these businesses and those to be
subsequently acquired by them whichever is
greater.
In a span of 28 years, Aurelio and Eduardo had
accumulated in their joint venture/partnership
various assets including but not limited to the
corporate defendants and their respective
assets.

What is worse was Aurelio has reasonable

cause to believe that Eduardo and/or the
corporate defendants as well as Bobby [Yang],
are transferring various real properties of the
corporations
belonging
to
the
joint
venture/partnership to other parties in fraud of
him. In consequence, Aurelio then annotated a
notice of lis pendens on the titles of these real
properties.

ISSUE: WON was no partnership created by

the actionable document because this was not
a public instrument and immovable properties
were contributed to the partnership.
RULING: YES, there was no partnership.
Art. 1771. A partnership may be constituted in
any form, except where immovable property or
real rights are contributed thereto, in which
case a public instrument shall be necessary.
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 partnership is void and legally nonexistent. The documentary evidence presented
by Aurelio, i.e. the letter from Eduardo and the
Memorandum, did not prove partnership.
The 1973 letter from Eduardo on its face,
contains typewritten entries, personal in tone,
but is unsigned and undated. As an
unsigned document, there can be no quibbling
that said letter does not meet the public
instrument requirements exacted under Article

1771 (how partnership is constituted) of the

Civil Code.
Moreover, being unsigned and doubtless
referring to a partnership involving more than
P3,000.00 in money or property, said
letter cannot be presented for notarization, let
alone registered with the Securities and
Exchange Commission (SEC), as called for
under the Article 1772 (capitalization of a
partnership) of the Code. And inasmuch as the
inventory requirement under the succeeding
Article 1773 goes into the matter of validity
when immovable property is contributed to the
partnership, the next logical point of inquiry
turns on the nature of Aurelios contribution, if
any, to the supposed partnership.
The Memorandum is also not a proof of the
partnership for the same is not a public
instrument and again, no inventory was made
of the immovable property and no inventory
was attached to the Memorandum. Article 1773
of the Civil Code requires that if immovable
property is contributed to the partnership an
inventory shall be had and attached to the
contract.

The limited partnership was then registered

with the SEC. The firm engaged, among other
activities, in the importation, marketing,
distribution and operation of automatic
phonographs, radios, television sets and
amusement
machines,
their
parts
and
accessories. It had an office and held itself out
as a limited partnership, handling and carrying
merchandise,
using
invoices,
bills
and
letterheads
bearing
its
trade-name,
maintaining its own books of accounts and
bank accounts, and had a quota allocation with
the Central Bank.
General partner Suter and limited partner
Spirig got married and, thereafter, limited
partner Carlson sold his share in the
partnership to Suter and his wife. The sale was
duly recorded with the SEC.
The limited partnership had been filing its
income tax returns as a corporation, without
objection by CIR. But in 1959, when the CIR
consolidated the income of the firm and the
individual incomes of the partners-spouses
Suter and Spirig in an assessment, it showed a
deficiency in income tax against respondent
Suter. Suter protested but such was denied.
ISSUE: WON the partnership was dissolved
after the marriage of the partners Suter and
Spirig, and the subsequent sale to them by the
remaining partner, Carlson.
RULING: NO. CIR has evidently failed to
observe the fact that William J. Suter "Morcoin"
Co., Ltd. was not a universal partnership, but
a particular one.

CIR v. Suter (Art. 1783)

FACTS: William Suter, Julia Spirig and Gustav
Carlson formed a limited partnership named
William J. Suter 'Morcoin' Co., Ltd., on
September 30, 1947. Suter was the general
partner, while the other 2 were limited
partners.
The
partners
contributed,
respectively, P20,000.00, P18,000.00 and
P2,000.00 to the partnership.

As appears from Articles 1674 and 1675 of the

Spanish Civil Code, of 1889 (which was the law
in force when the subject firm was organized in
1947), a universal partnership requires either
that the object of the association be all the
present
property of
the
partners,
as
contributed by them to the common fund, or
else "all that the partners may acquire by
their industry or work during the existence of
the partnership".
William J. Suter "Morcoin" Co., Ltd. was not
such a universal partnership, since the

contributions of the partners were fixed sums

of money, P20,000.00 by William Suter and
P18,000.00 by Julia Spirig and neither one of
them was an industrial partner. 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
nor could the subsequent marriage of the
partners operate to dissolve it, such marriage
not being one of the causes provided for that
purpose either by the Spanish Civil Code or the
Code of Commerce.
CIR contended 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 them before their marriage; and
after they were joined in wedlock, such
contributions
remained
their
respective
separate property under the Spanish Civil
Code.
Thus, the individual interest of each consort in
William J. Suter "Morcoin" Co., Ltd. did not
become common property of both after their
marriage in 1948.

Anfenson v. Banks (foreign case)

FACTS: Penfield operated in a small village a
private unincorporated bank, under the name
of "The Bank of Kelley." He caused a booklet
relative to the financial affairs of the bank to be
issued and circulated in the village and
contiguous territory

In effect, he represented in this circular that

Banks, his father-in-law, was a partner in said
banking business. This representation was
wholly without the authority of Banks. Very
soon thereafter, Banks was informed by his
nephew that such a paper had been issued,
and on the following day, Banks went to the
village for the purpose of learning why his
name had been so used.
Penfield was absent from the village, but Banks
protested to the cashier against the use of his
name, and the cashier promised to report the
matter to Penfield and to have the matter
corrected. On the same day, Banks saw
Penfield's father, whose name had also been
used in the circular, and the father told Banks
that he had seen a lawyer about the use of
their names, and assured Banks that he need
not bother about it. Two days later, Penfield
visited at Banks' house, and Banks again
protested against the use of his name. Penfield
told Banks that he used his (Banks') name
because he thought it would make the bank
look better. Penfield apologized, and promised
that the use of Banks' name should cease. This
promise was kept, and the circular was not
thereafter circulated;
But, from the circulation already had, some
general reputation and talk subsequently grew
up, in and around the village, that Banks was a
partner in the bank, a fact of which Banks had
no knowledge. After the last talk with Penfield,
Banks gave the matter no further attention.
Banks lived on a farm over 6 miles from the
village, and did all his business and banking in
another town. Banks' visits to the village were
infrequent. At times, he was seen in the bank
and behind the counter, but this latter practice
was common with callers at the bank. He never
did any business for the bank, never assumed
any authority in the management thereof, and
was never a borrower of or loaner to or
depositor in the bank, or in any manner
interested therein.
3 1/2 years after the circular or booklet was
first issued, the bank failed, and Penfield
absconded. Many of the old depositors then
claimed that they had allowed their deposits to
remain in the bank on the strength of said
circular, and their belief that Banks was a

partner. Many new depositors claimed that

they had made their deposits on the same
basis and in the same belief. After the bank
failed, Banks, for the first time, actually saw
one of the circulars. Banks was at all times
known to all the depositors, either personally or
by reputation. None of the depositors ever
asked Banks whether he was a partner in the
bank, though they had ample opportunity to do
so. Banks had no knowledge that anyone was
dealing with the bank on the belief that he
(Banks) was a partner therein.
The depositors sought to hold Banks as a quasi
partner.

ISSUE: WON Banks is liable as quasi partner.

RULING: NO.

Banks was under no legal or moral duty

to give wider publicity to his
repudiation of Penfield's unauthorized
acts.

That Banks, being guilty of no moral

turpitude, was not equitably estopped
to deny that he was a partner of
Penfield's

That Banks was under no obligation to

speak, further than he did speak, with
reference to Penfield's unauthorized
act, and therefore his subsequent
silence did not work an equitable
estoppel.

Irrespective of the conduct of Banks,

the depositors might not recover,
because of their failure to exercise due
diligence to learn whether Banks was in
fact a partner of Penfield's.

Evidence that a person is generally reputed to

be the partner of another, when in fact no
partnership existed, is admissible solely on the
one narrow issue whether the party who seeks

to establish a partnership by estoppel relied on

the reputed existence of such partnership.
No one should be held to be under a duty to
know that he is reputed to be the partner of
another when in truth he does not know such
fact, directly or indirectly, and when for the
existence of such reputation he is in no manner
responsible.
One setting up an estoppel by conduct is under
obligation to exercise good faith and due
diligence to know the truth. Therefore, the
creditors of a bank who seek to hold defendant
as a quasi partner because of his having been
held out by another as a partner, may not
recover if they had ample opportunity to learn,
with trifling trouble or expense, that defendant
was not such partner, and failed to avail
themselves of such opportunity.

Primelink v. Lazatin-Magat (joint venture)

FACTS: Primelink Properties and Development
Corporation
(Primelink)
is
a
domestic
corporation
engaged
in
real
estate
development. Rafaelito Lopez is its President
and Chief Executive Officer.
Ma. Clara Lazatin-Magat and her brothers, (the
Lazatins), are co-owners of 2 adjoining parcels
of land, with a combined area of 30,000 sq.m.,
located in Tagaytay City. The Lazatins and

Primelink, represented by Lopez, in his capacity

as President, entered into a Joint Venture
Agreement (JVA) for the development of the
aforementioned property into a residential
subdivision to be known as "Tagaytay Garden
Villas."
Under the JVA, the Lazatin siblings obliged
themselves to contribute the 2 parcels of land
as their share in the joint venture. For its part,
Primelink undertook to contribute money,
labor, personnel, machineries, equipment,
contractors
pool,
marketing
activities,
managerial expertise and other needed
resources to develop the property and
construct therein the units for sale to the
public.
The Lazatins and Primelink covenanted that
they
shall
be
entitled
to
draw
allowances/advances. They also agreed to
share in the profits from the joint venture.
For 4 years however, Primelink failed to
develop the said land. So in 1998, the Lazatins
filed a complaint to rescind the joint venture
agreement
with
prayer
for
preliminary
injunction. In said case, Primelink was declared
in default or failing to file an answer and for
asking multiple motions for extension. The trial
court eventually ruled in favor of the Lazatins
and it ordered Primelink to return the
possession of said land to the Lazatins as well
as some improvements which Primelink had so
far over the property without the Lazatins
paying for said improvements. This decision
was affirmed by the Court of Appeals. Primelink
is now assailing the order; that turning over
improvements
to
the
Lazatins
without
reimbursement is unjust; that the Lazatins did
not ask the properties to be placed under their
possession but they merely asked for
rescission.
ISSUE: WON the improvements made by
Primelink, together with the property itself,
should also be turned over under the
possession of the Lazatins even without
reimbursing expenses.
RULING: As a general rule, the relation of the
parties in joint ventures is governed by their
agreement. When the agreement is silent on

any particular issue, the general principles of

partnership may be resorted to. The legal
concept of a joint venture is of common law
origin. It has no precise legal definition, but it
has been generally understood to mean an
organization formed for some temporary
purpose. The main distinction cited by most
opinions in common law jurisdictions is that the
partnership contemplates a general business
with some degree of continuity, while the joint
venture is formed for the execution of a single
transaction, and is thus of a temporary nature.
Under Philippine law, a joint venture is a form
of partnership and should thus be governed by
the laws of partnership. The Supreme Court
has, however, recognized a distinction between
these two business forms, and has held that
although a corporation cannot enter into a
partnership contract, it may, however, engage
in a joint venture with others.
Yes. In the first place, even though the Lazatins
did specifically pray for possession the same
(placing
of
improvements
under
their
possession) is incidental in the relief they
prayed for. They are therefore entitled
possession over the parcel of land plus the
improvements
made
thereon
made by
Primelink.

In this jurisdiction, joint ventures are governed

by the laws of partnership. Under the laws of
partnership, when a partnership is dissolved,
as in this case when the trial court rescinded
the joint venture agreement, the innocent
party has the right to wind up the partnership
affairs.
With the rescission of the JVA on account of
petitioners fraudulent acts, all authority of any
partner to act for the partnership is terminated
except so far as may be necessary to wind up
the partnership affairs or to complete
transactions begun but not yet finished. On
dissolution, the partnership is not terminated
but continues until the winding up of
partnership affairs is completed. Winding up
means the administration of the assets of the
partnership for the purpose of terminating the
business and discharging the obligations of the
partnership.

It must be stressed, too, that although the

Lazatins acquired possession of the lands and
the improvements thereon, the said lands and
improvements remained partnership property,
subject to the rights and obligations of the
parties, inter se, of the creditors and of third
parties and subject to the outcome of the
settlement of the accounts between the
parties, absent any agreement of the parties in
their JVA to the contrary (here no agreement in
the JVA as to winding up). Until the partnership
accounts are determined, it cannot be
ascertained how much any of the parties is
entitled to, if at all.

Aurbach v. Sanitary Wares

FACTS: In 1961, Saniwares, a domestic
corporation was incorporated for the primary
purpose of manufacturing and marketing
sanitary wares. One of the incorporators, Mr.
Baldwin Young went abroad to look for foreign
partners, European or American who could help
in its expansion plans.
On August 15, 1962, ASI, a foreign corporation
based United States entered into an Agreement
with Saniwares and some Filipino investors
whereby ASI and the Filipino investors agreed
to participate in the ownership of an enterprise
which would engage primarily in the business
of manufacturing in the Philippines and selling
here and abroad vitreous china and sanitary
wares. The parties agreed that the business
operations in the Philippines shall be carried on
by an incorporated enterprise and that the
name of the corporation shall initially be
"Sanitary Wares Manufacturing Corporation."
At the request of ASI, the agreement contained
provisions designed to protect it as a minority
group, including the grant of veto powers over
a number of corporate acts and the right to
designate certain officers, such as a member of
the Executive Committee whose vote was
required for important corporate transactions.

Later, the 30% capital stock of ASI was

increased to 40%. The corporation was also
registered with the Board of Investments for
availment of incentives with the condition that
at least 60% of the capital stock of the
corporation shall be owned by Philippine
nationals.
The joint enterprise thus entered into by the
Filipino investors and the American corporation
prospered.
Unfortunately, with the business successes,
there came a deterioration of the initially
harmonious relations between the two groups.
According to the Filipino group, a basic
disagreement was due to their desire to
expand the export operations of the company
to which ASI objected as it apparently had
other subsidiaries of joint joint venture groups
in the countries where Philippine exports were
contemplated.
ISSUE: WON the business established is a joint
venture or a corporation.
RULING: JOINT VENTURE. While certain
provisions of the Agreement would make it
appear that the parties thereto disclaim being
partners or joint venturers such disclaimer is
directed at third parties and is not inconsistent
with, and does not preclude, the existence of
two distinct groups of stockholders in
Saniwares one of which (the Philippine
Investors) shall constitute the majority, and the
other ASI shall constitute the minority
stockholder.
In any event, the evident intention of the
Philippine Investors and ASI in entering into the
Agreement is to enter into a joint venture
enterprise.

The Agreement also requires a 75% supermajority vote for the amendment of the articles
and by-laws of Saniwares. ASI is also given the
right to designate the president and plant
manager. The Agreement further provides that
the sales policy of Saniwares shall be that
which is normally followed by ASI and that
Saniwares should not export "Standard"
products otherwise than through ASI's Export
Marketing Services. Under the Agreement, ASI
agreed to provide technology and know-how to
Saniwares and the latter paid royalties for the
same.
The legal concept of a joint venture is of
common law origin. It has no precise legal
definition but it has been generally understood
to mean an organization formed for some
temporary purpose. It is in fact hardly
distinguishable from the partnership, since
their elements are similar community of
interest in the business, sharing of profits and
losses, and a mutual right of control.
The main distinction cited by most opinions in
common law jurisdictions
is that the
partnership contemplates a general business
with some degree of continuity, while the joint
venture is formed for the execution of a single
transaction, and is thus of a temporary nature.
It would seem therefore that under Philippine
law, a joint venture is a form of partnership and
should thus be governed by the law of
partnerships. The Supreme Court has however
recognized a distinction between these two
business forms, and has held that although a
corporation cannot enter into a partnership
contract, it may however engage in a joint
venture with others.

An examination of the Agreement shows that

certain provisions were included to protect the
interests of ASI as the minority. For example,
the vote of 7 out of 9 directors is required in
certain enumerated corporate acts. ASI is
contractually entitled to designate a member
of the Executive Committee and the vote of
this member is required for certain transactions
Mediola v. CA

FACTS:
Private
respondent
Pacific Forest Resources, Phils., Inc. (Pacfor) is a
corporation organized and existing under the
laws of California, USA. It is a subsidiary of
Cellulose Marketing International, a corporation
duly organized under the laws of Sweden.

the Side Agreement, petitioner insisted that he

and Pacfor equally own Pacfor Phils. Thus, it
follows that he and Pacfor likewise own, on a
50/50 basis, Pacfor Phils. office furniture and
equipment and the service car.
ISSUE: WON there is partnership existed.

Pacfor entered into a Side Agreement on

Representative Office known as Pacific Forest
Resources
(Phils.),
Inc.
with
petitioner
Mendiola, assuming that Pacfor-Phils. is already
approved by the SEC. The Side Agreement
outlines the business relationship of the parties
with regard to the Philippine operations of
Pacfor. Pacfor will establish a representative
office in the Philippines, to be known as Pacfor
Phils,
and
Mendiola
will
be
its
President. Mendiolas base salary and the
overhead expenditures of the company shall be
borne by the representative office and funded
by Pacfor/Mendiola, since Pacfor Phils. is
equally owned on a 50-50 equity.
Side Agreement was amended through a
Revised Operating and Profit Sharing where the
salary of petitioner was increased and that the
operational expenses will be borne by the
representative office and funded by all parties
as equal partners, while the profits and
commissions will be shared among them.
Mendiola wrote to the VP for Asia of Pacfor,
seeking confirmation of his 50% equity of
Pacfor Phils. Pacfor, through its President,
replied that petitioner is not a part-owner of
Pacfor Phils. because the latter is merely
Pacfor-USAs representative office and not an
entity separate and distinct from PacforUSA. Its simply a theoretical company with the
purpose of dividing the income 50-50.
Petitioner
presumably
knew
of
this
arrangement from the start, having been the
one to propose to private respondent Pacfor
the setting up of a representative office, and
not a branch office in the Philippines to save on
taxes.
Petitioner claimed that he was all along made
to believe that he was in a joint venture with
them. Had he known that no joint venture
existed, he would not have allowed Pacfor to
take the profitable business of his own
company, ATM Marketing Corp. On the basis of

RULING: NO. The SC held that petitioner is an

employee of private respondent Pacfor and that
no partnership or co-ownership exists between
the parties.
In a partnership, the members become coowners of what is contributed to the firm
capital and of all property that may be acquired
thereby and through the efforts of the
members. The property or stock of the
partnership forms a community of goods, a
common fund, in which each party has a
proprietary interest.
This essential element, the community of
interest, or co-ownership of, or joint interest in
partnership property is absent in the relations
between petitioner and private respondent
Pacfor. Petitioner is not a part-owner of Pacfor
Phils. William Gleason, private respondent
Pacfors President established this fact when he
said that Pacfor Phils. is simply a theoretical
company for the purpose of dividing the
income 50-50. He stressed that petitioner knew
of this arrangement from the very start, having
been the one to propose to private respondent
Pacfor the setting up of a representative office,
and not a branch office in the Philippines to
save on taxes. Thus, the parties in this case,
merely shared profits. This alone does not
make a partnership.

Besides, a corporation cannot become a

member of a partnership in the absence of
express authorization by statute or charter.
This doctrine is based on the following
considerations: (1) that the mutual agency
between the partners, whereby the corporation
would be bound by the acts of persons who are
not its duly appointed and authorized agents
and officers, would be inconsistent with the
policy of the law that the corporation shall
manage its own affairs separately and
exclusively; and, (2) that such an arrangement
would improperly allow corporate property to
become subject to risks not contemplated by
the stockholders when they originally invested
in the corporation. No such authorization has
been proved in the case at bar.

investment to its other feasible projects and for

the amounts they already paid to be
considered as partial payment for there
placement unit/s. On a separate answer,
petitioner claims that its prestation under the
JVA consisted of contributing the property on
which the condominium was to be contributed.

J. Tiosejo Investment v. Sps. Ang

FACTS: J. Tiosejo entered into a Joint Venture
Agreement with PPGI for the development of a
residential condominium project known as
Meditel in Mandaluyong City. Petitioner
contributed the lot while PPGI undertook to
develop the condominium. The parties further
agreed to a 17%-83% sharing as to developed
units.
PPGI further undertook to use all proceeds from
the pre-selling of its saleable units for the
completion of the Condominium Project.
Sometime in 1996, PPGI executed a Contract to
Sell with Spouses Ang on a certain
condominium unit and parking slot for
P2,077,334.25 and P313,500.00, respectively.
On July 1999, respondent Spouses filed before
the Housing and Land Use Regulatory
Board(HLURB) a complaint for the rescission of
the Contract to Sell, against J. Tiosejo and PPGI.
They claim that they were promised that the
condo unit would be available for turn-over and
occupancy by December 1998, however the
project was not completed as of the said date.
Spouses Ang instructed petitioner and PPGI to
stop depositing the post-dated checks they
issued and to cancel said Contracts to Sell.
Despite several demands, petitioner and PPGI
have failed and refused to refund the
P611,519.52 they already paid under the
circumstances. As defense, PPGI claim that the
delay was attributable to the economic crisis
and to force majeure (unexpected and
unforeseen inflation and increase rates and
cost of building materials).
They also state that it offered several
alternatives to Spouses Ang to transfer their

Not being privy to the Contracts to Sell

executed by PPGI and respondents, it did not
receive any portion of the payments made by
the latter; and, that without any contributory
fault and negligence on its part, PPGI (and not
the petitioner) breached its undertakings under
the JVA by failing to complete the condominium
project. The Housing and Land Use (HLU) ruled
in favor of respondents, rescinding the contract
and ordering petitioner and PPGI to pay refund,
interest, damages, attorneys fees and
administrative fines. The HLURB Board of
Commissioners affirmed the HLUs order. MR
was deniedThe case was subsequently raised
to the Office of the President (OP) which
rendered a decisiondismissing petitioners
appeal on the ground that the latters appeal
memorandum was filed out of timeand that the
HLURB Board committed no grave abuse of
discretion
in
rendering
the
appealed
decision.MR was also denied. Petitioner filed
before the CA a motion for extension within
which to file its petition for review, claiming
heavy workload of its counsel. This was denied
by the CA. MR was denied for lack of merit.
ISSUE: WON the CA erred in affirming the
HLURBs decision insofar as it found J. Teosejos
with PPGI to pay Spouses Ang.
RULING: NO, the HLURB Arbiter and Board
correctly held petitioner liable alongside PPGI
for respondents claims and the administrative
fine.
By express terms of the JVA, it appears that
petitioner not only retained ownership of the
property
pending
completion
of
the
condominium project but had also bound itself
to answer liabilities proceeding from contracts
entered into by PPGI with third parties. Article
VIII, Section 1 of the JVA distinctly provides as
follows:
Section 1: Rescission and damages:
In any case, the Owner shall respect and
strictly comply with any covenant entered into
by the Developer and third parties with respect
to any of its units in the Condominium Project.
To enable the owner to comply with this
contingent liability, the Developer shall furnish
the Owner with a copy of its contracts with the
said buyers on a month-to-month basis.

Viewed in the light of the foregoing

the JVA, petitioner cannot avoid
claiming that it was not in any way
Contracts to Sell executed by
respondents.

provision of
liability by
privy to the
PPGI and

Moreover, a joint venture is considered in

this jurisdiction as a form of partnership
and is, accordingly, governed by the law
of partnerships. Under Article 1824 of the
Civil Code of the Philippines, all partners
are solidarily liable with the partnership
for
everything
chargeable
to
the
partnership, including loss or injury
caused to a third person or penalties
incurred due to any wrongful act or
omission of any partner acting in the
ordinary course of the business of the
partnership or with the authority of his
co- partners. Whether innocent or guilty,
all the partners are solidarily liable with
the partnership itself.

March 14, 1979, it paid the 15% branch profit

remittance tax, pursuant to Sec. 24 (b) (2) (ii)
and remitted to its head office the amount of
P6,499,999.30 computed as follows:
Amount applied for remittance P7,647,058.00
Deduct: 15% branch profit
remittance tax

1,147,058.70

Net
amount
P6,499,999.30

actually

remitted

Claiming that the 15% profit remittance tax

should have been computed on the basis of the
amount actually remitted (P6,499,999.30) and
not on the amount before profit remittance tax
(P7,647,058.00), private respondent filed on
December 24, 1980, a written claim for the
refund or tax credit of the amount of
P172,058.90 representing alleged overpaid
branch profit remittance tax, computed as
follows:
Profits actually remitted

P6,499,999.30

Remittance tax rate 15%

CIR v. Burroughs & CTA
Petition for certiorari to review and set aside
the Decision dated June 27, 1983 of respondent
Court of Tax Appeals in its C.T.A. Case No.
3204,
entitled
"Burroughs
Limited
vs.
Commissioner of Internal Revenue" which
ordered petitioner Commissioner of Internal
Revenue to grant in favor of private respondent
Burroughs Limited, tax credit in the sum of
P172,058.90,
representing
erroneously
overpaid branch profit remittance tax.
Burroughs Limited is a foreign corporation
authorized to engage in trade or business in
the Philippines through a branch office located
at De la Rosa corner Esteban Streets, Legaspi
Village, Makati, Metro Manila.
Sometime in March 1979, said branch office
applied with the Central Bank for authority to
remit to its parent company abroad, branch
profit amounting to P7,647,058.00. Thus, on

Branch profit remittance tax- due thereon

974,999.89
Branch
profit
Pl,147,058.70

remittance

tax

paid

Less: Branch profit remittance tax as above

computed 974,999.89
Total amount refundable

P172,058.81

On February 24, 1981, private respondent filed

with respondent court, a petition for review,
docketed as C.T.A. Case No. 3204 for the
recovery of the above-mentioned amount of
P172,058.81.
On June 27, 1983, respondent court rendered
its Decision, the dispositive portion of which
reads

ACCORDINGLY, respondent Commission of

Internal Revenue is hereby ordered to grant a
tax credit in favor of petitioner Burroughs
Limited the amount of P 172,058.90. Without
pronouncement as to costs. SO ORDERED.
Unable to obtain a reconsideration from the
aforesaid decision, petitioner filed the instant
petition before this Court with the prayers as
herein earlier stated upon the sole issue of
whether the tax base upon which the 15%
branch profit remittance tax shall be imposed
under the provisions of section 24(b) of the Tax
Code, as amended, is the amount applied for
remittance on the profit actually remitted after
deducting the 15% profit remittance tax.
Stated differently is private respondent
Burroughs Limited legally entitled to a refund
of the aforementioned amount of P172,058.90.
We rule in the affirmative. The pertinent
provision of the National Revenue Code is Sec.
24 (b) (2) (ii) which states:
Sec. 24. Rates of tax on corporations....
(b) Tax on foreign corporations. ...
(2) (ii) Tax on branch profits remittances. Any
profit remitted abroad by a branch to its head
office shall be subject to a tax of fifteen per
cent (15 %) ...
In a Bureau of Internal Revenue ruling dated
January 21, 1980 by then Acting Commissioner
of Internal Revenue Hon. Efren I. Plana the
aforequoted provision had been interpreted to
mean that "the tax base upon which the 15%
branch profit remittance tax ... shall be
imposed...(is) the profit actually remitted
abroad and not on the total branch profits out
of which the remittance is to be made. " The
said ruling is hereinbelow quoted as follows:
In reply to your letter of November 3, 1978,
relative to your query as to the tax base upon
which the 15% branch profits remittance tax
provided for under Section 24 (b) (2) of the
1977 Tax Code shall be imposed, please be
advised that the 15% branch profit tax shall be
imposed on the branch profits actually remitted

abroad and not on the total branch profits out

of which the remittance is to be made.
Please be guided accordingly.
Applying, therefore, the aforequoted ruling, the
claim of private respondent that it made an
overpayment in the amount of P172,058.90
which is the difference between the remittance
tax actually paid of Pl,147,058.70 and the
remittance tax that should have been paid of
P974,999,89, computed as follows
Profits actually remitted P6,499,999.30
Remittance tax rate 15%
Remittance tax due P974,999.89 is well-taken.
As correctly held by respondent Court in its
assailed decision Respondent concedes at least
that in his ruling dated January 21, 1980 he
held that under Section 24 (b) (2) of the Tax
Code the 15% branch profit remittance tax
shall be imposed on the profit actually remitted
abroad and not on the total branch profit out of
which the remittance is to be made. Based on
such ruling petitioner should have paid only the
amount of P974,999.89 in remittance tax
computed by taking the 15% of the profits of
P6,499,999.89 in remittance tax actually
remitted to its head office in the United States,
instead of Pl,147,058.70, on its net profits of
P7,647,058.00. Undoubtedly, petitioner has
overpaid its branch profit remittance tax in the
amount of P172,058.90.
Petitioner contends that respondent is no
longer
entitled
to
a
refund
because
Memorandum Circular No. 8-82 dated March
17, 1982 had revoked and/or repealed the BIR
ruling of January 21, 1980. The said
memorandum circular states
Considering that the 15% branch profit
remittance tax is imposed and collected at
source, necessarily the tax base should be the
amount actually applied for by the branch with
the Central Bank of the Philippines as profit to
be remitted abroad.
Petitioner's aforesaid contention is without
merit. What is applicable in the case at bar is

still the Revenue Ruling of January 21, 1980

because private respondent Burroughs Limited
paid the branch profit remittance tax in
question on March 14, 1979. Memorandum
Circular No. 8-82 dated March 17, 1982 cannot
be given retroactive effect in the light of
Section 327 of the National Internal Revenue
Code which providesSec. 327.
Non-retroactivity of rulings. Any
revocation, modification, or reversal of any of
the rules and regulations promulgated in
accordance with the preceding section or any
of the rulings or circulars promulgated by the
Commissioner shag not be given retroactive
application if the revocation, modification, or
reversal will be prejudicial to the taxpayer
except in the following cases (a) where the
taxpayer deliberately misstates or omits
material facts from his return or in any
document required of him by the Bureau of
Internal Revenue; (b) where the facts
subsequently gathered by the Bureau of
Internal Revenue are materially different from
the facts on which the ruling is based, or (c)
where the taxpayer acted in bad faith. (ABSCBN Broadcasting Corp. v. CTA, 108 SCRA 151152)
The prejudice that would result to private
respondent Burroughs Limited by a retroactive
application of Memorandum Circular No. 8-82 is
beyond question for it would be deprived of the
substantial amount of P172,058.90. And,
insofar as the enumerated exceptions are
concerned, admittedly, Burroughs Limited does
not fall under any of them.
WHEREFORE,
the
assailed
decision
of
respondent Court of Tax Appeals is hereby
AFFIRMED. No pronouncement as to costs.

PETITION
FOR
AUTHORITY
TO
CONTINUE USE OF THE FIRM NAME
"SYCIP,
SALAZAR,
FELICIANO,
HERNANDEZ &CASTILLO" and IN THE
MATTER OF THE PETITION FOR
AUTHORITY TO CONTINUE USE OF
THE FIRM NAME "OZAETA, ROMULO,
DE LEON, MABANTA & REYES."
1979 / Melencio-Herrera / Obligations of
partners with regard to third persons >
Partnership name.
FACTS: Two firms ask that they be
allowed to continue using the names of
their firms despite the fact that Attys.
Sycip and Ozaeta died.
PETITIONERS ARGUMENTS
1. Under the law, a partnership is not
prohibited from continuing its business
under a firm name that includes the name
of a deceased partner. NCC 1840 explicitly
sanctions the practice. The use by the
person or partnership continuing the
business of the partnership name, or the
name of a deceased partner as part
thereof, shall not of itself make the
individual property of the deceased

partner liable for any debts contracted by

such person or partnership.
2.
In
regulating
other
professions
(accountancy
and engineering),
the
legislature has authorized the adoption of
firm names without any restriction as to
the use of the name of a deceased
partner. There is
no fundamental policy that is offended by
the continued use by a firm of
professionals of a firm name, which
includes the name of a deceased partner,
at least where such firm name has
acquired the characteristics of a "trade
name."
ISSUE: WON they may be allowed to
continue using the current names of their
firms.
RULING: NO. Petitioners advised to drop
the names SYCIP and OZAETA from their
respective firm names. Names may be
included in the listing of individuals who
have been partners, indicating the years
during which they served.
RATIO/JURISPRUDENCE
The Deen case [1953] Court advised the
firm to desist from including in their firm
designation the name of C. D. Johnston,
who has long been dead
Register of Deeds of Manila v. China
Banking Corporation [1958] In this case,
the law firm of Perkins & Ponce Enrile
moved to intervene as amicus curiae. The
Court in a Resolution stated that it "would
like to be informed why the name of
Perkins is still being used although Atty. E.
A. Perkins is already dead." The Court
advised the firm to drop the name of E. A.
Perkins from the firm name, and ruled that
no practice should be allowed which even
in a remote degree could give rise to the
possibility of deception. Deen case cited
in the ruling.
Judicial decisions applying or interpreting
the laws form part of the legal system.
The Supreme Court in the Deen and
Perkins cases laid down a legal rule
against which no custom or practice to the

contrary, even if proven, can prevail. This

is not to speak of our civil law which
clearly ordains that a partnership is
dissolved by the death of any partner.
Custom which are contrary to law, public
order or public policy shall not be
countenanced.
The
use
in
their
partnership names of the names of
deceased partners will run counter to NCC
1815.Art. 1815.
Every partnership shall operate under a
firm name, which may or may not include
the name of one or more of the partners.
Those who, not being members of the
partnership, include their names in the
firm name shall be subject to the liability
of a partner. Names in a firm name of a
partnership must either be those of living
partners and in the case of non-partners,
should be living persons who can be
subjected to liability.
NCC 1825 prohibits a third person from
including his name in the firm name under
pain of assuming the liability of a partner.
The heirs of a deceased partner in a law
firm cannot be held liable as the old
members to the creditors of a firm
particularly where they are non-lawyers.
ON ARGUMENT #1
NCC 1840 is within Chapter 3 of Title IX
entitled "Dissolution and Winding Up." It
primarily deals with the exemption from
liability
in
cases
of
a
dissolved
partnership, of the individual property of
the deceased partner for debts contracted
by the person or partnership, which
continues the business
using the partnership name or the name
of the deceased partner as part thereof.
What the law contemplates therein is a
hold-over situation preparatory to formal
reorganization. Secondly, NCC 1840 treats
more of a commercial partnership with a
good will to protect rather than of a
professional partnership. [with no saleable
goodwill but whose reputation depends on
the personal qualifications of its individual
members]. A saleable goodwill can exist
only in a commercial partnership, not in a

professional
lawyers.

partnership

consisting

of

ON ARGUMENT #2A
Partnership for the practice of law cannot
be likened to partnerships formed by
other professionals or for business.
The law on accountancy specifically allows
the use of a trade name in connection
with the practice of accountancy. A
partnership for the practice of law is not a
legal entity. It is a mere relationship or
association for a particular purpose. It is
not a partnership formed to carry on trade
or business or of holding property. The use
of a nom de plume, assumed or trade
name in law practice is improper.
Primary characteristics which distinguish
the legal profession from business
1. A duty of public service, of which the
emolument is a by product, and in which
one may attain the highest eminence
without making much money
2. A relation as an "officer of court" to the
administration
of
justice
involving
thorough sincerity, integrity, and reliability
3. A relation to clients in the highest
degree fiduciary
4. A relation to colleagues at the bar
characterized by candor, fairness, and
unwillingness to resort to current business
methods of advertising and encroachment
on their practice, or dealing directly with
their clients. The right to practice law
does not only presuppose in its possessor
integrity, legal standing and attainment,
but also the exercise of a special privilege,
highly personal and partaking of the
nature of a public trust.
Petitioners' desire to preserve the identity
of their firms in the eyes of the public
must
bow
to
legal
and
ethical
impediment. Petitions DENIED.

CONCURRENCE OF J. FERNANDO

It is out of delicadeza that the

undersigned did not participate in the
disposition of these petitions. Sycip
Salazar started with partnership of
Quisumbing, Sycip, and Quisumbing, the
senior
partner,
the
late
Ramon
Quisumbing, being the father-in-law of the
undersigned, and the most junior partner
then, Norberto J. Quisumbing, being his
brother- in-law.
DISSENT OF J. AQUINO
The petition may be granted with the
condition that it be indicated in the
letterheads of the two firms (as the case
may be) that A. Sycip, former J. Ozaeta
and H. Ozaeta are dead or the period
when they served as partners should be
stated therein. The purpose of the two
firms in continuing the use of the names
of their deceased founders is to retain the
clients who had customarily sought the
legal services of Attys. Sycip and Ozaeta
and to benefit from the goodwill attached
to the names of those respected and
esteemed law practitioners. That is a
legitimate motivation. The retention of
their names is not illegal per se.

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 fi rm had
dissolved the partnership. Reason:
since it is partnership at will, the law
fi rm could be dissolved by any
partner at any time, 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;
3. WON the CA has erred in holding that
private respondent's demand for the
dissolution of the partnership so that he
can get a physical partition of partnership
was not made in bad faith
RULING:
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 . Ye s . A n y o n e o f t h e p a r t n e r s
ma y, at his sole ple asu re , dict ate
a d i s s o l u t i o n o f t h e 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.

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.
3. On the third and final issue, we accord due
respect to the appellate court and respondent
Commission
on
their
common
factual
finding, i.e., that Attorney Misa did not act in bad
faith. Public respondents viewed his withdrawal
to have been spurred by "interpersonal conflict"
among the partners. It would not be right, we
agree, to let any of the partners remain in the
partnership under such an atmosphere of
animosity;
certainly,
not
against
their
will. Indeed, for as long as the reason for
withdrawal of a partner is not contrary to the
dictates of justice and fairness, nor for the
purpose of unduly visiting harm and damage
upon the partnership, bad faith cannot be said to
characterize the act. Bad faith, in the context
here used, is no different from its normal
concept of a conscious and intentional design to
do a wrongful act for a dishonest purpose or
moral obliquity.

family that the P15,000.00 advance rental

due to them from SHELL shall augment
their "capital investment" in the operation
of the gasoline station.

Estanislao v. CA
FACTS: Petitioner and private respondents
are brothers and sisters who are coowners of certain lots at the corner of
Annapolis and Aurora Blvd., Quezon City
which were then being leased to the Shell
Company of the Philippines Limited
(SHELL). They agreed to open and operate
a gas station thereat to be known as
Estanislao Shell Service Station with an
initial investment of P15,000.00 to be
taken from the advance rentals due to
them from SHELL for the occupancy of the
said lots owned in common by them.
On May 26, 1966, the parties herein
entered into an Additional Agreement with
a proviso that said agreement cancels and
supersedes
the
original
agreement
executed by the co-owners.
For some time, the petitioner submitted
financial
statements
regarding
the
operation of the business to private
respondents, but thereafter petitioner
failed to render subsequent accounting.
A demand was made on petitioner:
1. to render an accounting of the profits;
2.to
execute
a
public
document
embodying all the provisions of the
partnership agreement;
3. to pay the plaintiffs their lawful shares
and participation in the net profits of the
business.
ISSUE: WON A PARTNERSHIP WAS
FORMED WHERE MEMBERS OF THE SAME
FAMILY BIND THEMSELVES TO CONTRIBUTE
MONEY TO A COMMON FUND WITH THE
INTENTION OF DIVIDING THE PROFITS
AMONG THEMSELVES?
RULING: YES. Their Joint Affidavit clearly
stipulated by the members of the same

In the subsequent document entitled

"Additional Cash Pledge Agreement"
above reproduced (Exhibit 6), the private
respondents and petitioners assigned to
SHELL the monthly rentals due them
commencing the 24th of May 1966 until
such time that the monthly rentals
accumulated equal P 15,000.00 which
private respondents agree to be a cash
deposit of petitioner in favor of SHELL to
increase his credit limit as dealer. As
above-stated it provided therein that "This
agreement,
therefore,
cancels
and
supersedes the Joint Affidavit dated 11
April 1966 executed by the CO-OWNERS."
Moreover other evidence in the record
shows that there was in fact such
partnership agreement between the
parties. This is attested by the testimonies
of private respondent Remedies Estanislao
and Atty. Angeles. Petitioner submitted to
private respondents periodic accounting of
the business. 4 Petitioner gave a written
authority to private respondent Remedies
Estanislao, his sister, to examine and audit
the books of their "common business'
aming negosyo). 5 Respondent Remedios
assisted in the running of the business.
There is no doubt that the parties hereto
formed a partnership when they bound
themselves to contribute money to a
common fund with the intention of
dividing
the
profits
among
themselves. 6 The sole dealership by the
petitioner and the issuance of all
government permits and licenses in the
name of petitioner was in compliance with
the afore-stated policy of SHELL and the
understanding of the parties of having
only one dealer of the SHELL products.

be predicated
obligations.

is

the

failure

to

pay

The failure of Campos, Rueda & Co., to pay

its obligations constitutes an act w/c is
specifically provided for in the Insolvency
Law
for
declaration
of
involuntary
insolvency. The petitioners have a right to
a judicial decree declaring the involuntary
insolvency of said partnership.

Campos Rueda v. Pacific Commercial

FACTS: Campos, Rueda & Co., a limited
partnership, is indebted to the appellants:
Pacific Commercial Co., Asiatic Petroleum
Co, and International Banking Corporation
amounting to not less than P1,000.00
(which were not paid more than 30 days
prior to the date of the filing by petitioners
of
the
application
for
voluntary
insolvency).
The trial court denied their petition on the
ground that it was not proven, nor alleged,
that the members of the firm were
insolvent at the time the application was
filed. It also held that the partners are
personally and solidarily liable for the
consequences of the transactions of the
partnership.
ISSUE: WON a limited partnership may be
held to have committed an act of
insolvency.
RULING: YES. A limited partnerships
juridical personality is different from the
personality of its members. On general
principle, the limited partnership must
answer for and suffer the consequence of
its acts. Under our Insolvency Law, one of
the acts of bankruptcy upon w/c an
adjudication of involuntary insolvency can

partnership, it is necessary, in bringing an

action against it, to serve the summons on
all of the partners, delivering to each one of
them personally a copy thereof; and that the
summons in this case having been served on
the managing agent of the company only,
the service was of no effect as against the
company and the members thereof and the
judgment entered by virtue of such a service
was void.

Vargas & Co. v. Chan

FACTS: Plaintiff is a merchantile association
duly organized under the laws of the
Philippine Islands and presumably registered
as required by law. On the 19th day of
August, 1911, an action was begun by Chan
Hang Chiu against the plaintiff in this case to
recover a sum of money. The summons and
complaint were placed in the hands of the
sheriff, who certified that on the 19th day of
August, 1911, he served the same on Vargas
& Co. by delivering to and leaving with one
Jose Macapinlac personally true copies
thereof, he being the managing agent of said
Vargas & Co. at the time of such service. On
July 2. 1912, the justice's court rendered
judgment against Vargas & Co. for the sum
of 372.28. Thereafter execution was duly
issued and the property of Vargas & Co.
levied on for the payment thereof.
Thereupon Vargas & Co. paid the amount of
the judgment and costs under protest, with
notice that it would sue to recover the
amount paid. The execution was returned
satisfied and there the matter rested until
the present action was brought.
The contention of plaintiff is, and that
contention is supported by the decision of
the court below, that Vargas & Co. being a

ISSUE: WON the contention is correct.

RULING: NO. As to the first, we may say
that it has been the universal practice in the
Philippine
Islands
since
American
occupation, and was the practice prior to
that time, to treat companies of the class to
which the plaintiff belongs as legal or
juridicial entities and to permit them to sue
and be sued in the name of the company,
the summons being served solely on the
managing agent or other official of the
company specified by the section of the
Code of Civil Procedure referred to. This very
action is an illustration of the practice in
vogue in the Philippine Islands. The plaintiff
brings this action in the company name and
not in the name of the members of the firm.
Actions against companies of the class to
which
plaintiff
belongs
are
brought,
according to the uninterrupted practice,
against such companies in their company
names and not against the individual
partners constituting the firm. In the States,
in which the individual members of the firm
must be separately served with process, the
rule also prevails that they must be parties
to the action, either plaintiffs or defendant,
and that the action cannot be brought in the
name of or against the company itself. This
follows naturally for the reason that, if it is
necessary to serve the partners individually,
they are entitled to be heard individually in
the action and they must, therefore, be
made parties thereto so that they can be
heard. It would be idle to serve process on
individual members of a partnership if the
litigation were to be conducted in the name
of the partnership itself and by the duly
constituted officials of the partnership
exclusively.

From what has been said it is apparent that

the plaintiff in this action is acting contrary
to its own contention by bringing the action
in the name of the company be served with
process, then the action should be brought
in the individual names of the partners and
not in the name of the company itself.
Article 35 of the Civil Code provides the
following as judicial persons:
1. The corporation, associations, and
institutions of public interest recognized by
law.
2. The associations of private interest, be
they civil, commercial, or industrial, to which
the
law
grants
proper
personality,
independent of that of each member thereof.
Article 38 provides: "Judicial persons may
acquire and possess property of all kinds, as
well as contract obligations and institute civil

or criminal actions in accordance with the

laws and rules of their establishment."
Article 116 of the Code of Commerce
provides in part: "After a commercial
association has been established, it shall
have legal representation in all its acts and
contracts."
These provisions have been the foundation
of the practice followed without interruption
for many years that association of the class
to which plaintiff belongs have an
independent and separate legal entity
sufficient to permit them to sue and be sued
in the company name and to be served with
process through the chief officer or
managing agent thereof or any other official
of the company specified by law.