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CHARLES F. WOODHOUSE, plaintiff-appellant, vs.

FORTUNATO F. HALILI, defendant-appellant.

Doctrine: Fraud
On November 29, 1947, plaintiff Woodhouse entered into a written
agreement with defendant Halili stating among others that: 1) that they shall
organize a partnership for the bottling and distribution of Missionsoft drinks,
plaintiff to act as industrial partner or manager, and the defendant as a
capitalist, furnishing the capital necessary therefore; 2) that plaintiff was to
secure the Mission Soft Drinks franchise for and in behalf of the proposed
partnership and 3) that the plaintiff was to receive 30 per cent of the net
profits of the business.
Prior to entering into this agreement, plaintiff had informed the Mission Dry
Corporation of Los Angeles, California, that he had interested a prominent
financier (defendant herein) in the business, who was willing to invest half a
milliondollars in the bottling and distribution of the said beverages, and
requested, in order that he may close the deal with him, that the right to bottle
and distribute be granted him for a limited time under the condition that it will
finally be transferred to the corporation. Pursuant to this request, plaintiff was
given a thirty days option on exclusive bottling and distribution rights for the
Philippines. The contract was finally signed by plaintiff on December 3,
When the bottling plant was already in operation, plaintiff demanded of
defendant that the partnership papers be executed. Defendant Halili gave
excuses and would not execute said agreement, thus the complaint by the
Plaintiff prays for the : 1.execution of the contract of partnership; 2)
accounting of profits and 3)share thereof of 30 percent with 4) damages in
the amount of P200,000. The Defendant on the other hand claims that: 1) the
defendants consent to the agreement, was secured by the representation of
plaintiff that he was the owner, or was about to become owner of an
exclusive bottling franchise, which representation was false, and that plaintiff
did not secure the franchise but was given to defendant himself 2) that
defendant did not fail to carry out his undertakings, but that it was plaintiff
who failed and 3)that plaintiff agreed to contribute to the exclusive franchise
to the partnership, but plaintiff failed to do so with a 4) counterclaim for
P200,00 as damages.
The CFI ruling: 1) accounting of profits and to pay plaintiff 15 % of the profits
and that the 2) execution of contract cannot be enforced upon parties. Lastly,
the 3) fraud wasnt proved
1. WON plaintiff falsely represented that he had an exclusive franchise to
bottle Mission beverages
2. WON false representation, if it existed, annuls the agreement to form the
1. Yes. Plaintiff did make false representations and this can be seen through
his letters to Mission Dry Corporation asking for the latter to grant him
temporary franchise so that he could settle the agreement with defendant.
The trial court reasoned, and the plaintiff on this appeal argues, that plaintiff
only undertook in the agreement to secure the Mission Dry franchise for and
in behalf of the proposed partnership. The existence of this provision in the
final agreement does not militate against plaintiff having represented that he
had the exclusive franchise; it rather strengthens belief that he did actually
make the representation. The defendant believed, or was made to believe,
that plaintiff was the grantee of an exclusive franchise. Thus it is that it was
also agreed upon that the franchise was to be transferred to the name of the
partnership, and that, upon its dissolution or termination, the same shall be
reassigned to the plaintiff.
Again, the immediate reaction of defendant, when in California he learned
that plaintiff did not have the exclusive franchise, was to reduce, as he
himself testified, plaintiffs participation in the net profits to one half of that
agreed upon. He could not have had such a feeling had not plaintiff actually
made him believe that he(plaintiff) was the exclusive grantee of the franchise.
2. No. In consequence, article 1270 of the Spanish Civil Code distinguishes
two kinds of (civil) fraud, the causal fraud, which may be ground for the
annulment of a contract, and the incidental deceit, which only renders the
party who employs it liable for damages only. The Supreme Court has held
that in order that fraud may vitiate consent, it must be the causal (dolo
causante), not merely the incidental (dolo incidente) inducement to the
making of the contract.
The record abounds with circumstances indicative of the fact that the
principal consideration, the main cause that induced defendant to enter into
the partnership agreement with plaintiff, was the ability of plaintiff to get the
exclusive franchise to bottle and distribute for the defendant or for the

partnership. The original draft prepared by defendants counsel was to the

effect that plaintiff obligated himself to secure a franchise for the defendant.
But if plaintiff was guilty of a false representation, this was not the causal
consideration, or the principal inducement, that led plaintiff to enter into the
partnership agreement. On the other hand, this supposed ownership of an
exclusive franchise was actually the consideration or price plaintiff gave in
exchange for the share of 30 per cent granted him in the net profits of the
partnership business. Defendant agreed to give plaintiff 30 per cent share in
the net profits because he was transferring his exclusive franchise to the
Having arrived at the conclusion that the contract cannot be declared null and
void, may the agreement be carried out or executed? The SC finds no merit
in the claim of plaintiff that the partnership was already a fait accompli from
the time of the operation of the plant, as it is evident from the very language
of the agreement that the parties intended that the execution of the
agreement to form a partnership was to be carried out at a later date. , The
defendant may not be compelled against his will to carry out the agreement
nor execute the partnership papers. The law recognizes the individuals
freedom or liberty to do an act he has promised to do, or not to do it, as he


G.R. No. L-9996, October 15, 1957

Petitioners borrowed sum of money from their father and together with their
own personal funds theyused said money to buy several real properties.
They then appointed their brother (Simeon) as manager of thesaid real
properties with powers and authority to sell, lease or rent out said properties
to third persons. Theyrealized rental income from the said properties for the
period 1945-1949.On September 24, 1954 respondent Collector of Internal
Revenue demanded the payment of income tax oncorporations, real estate
dealer's fixed tax and corporation residence tax for the years 1945-1949.
The letter of demand and corresponding assessments were delivered to
petitioners on December 3, 1954, whereupon theyinstituted the present case
in the Court of Tax Appeals, with a prayer that "the decision of the
respondent contained in his letter of demand dated September 24, 1954" be
reversed, and that they be absolved from thepayment of the taxes in
question. CTA denied their petition and subsequent MR and New Trials were
denied.Hence this petition.
Whether or not petitioners have formed a partnership and consequently, are
subject to the tax oncorporations provided for in section 24 of Commonwealth
Act. No. 466, otherwise known as the NationalInternal Revenue Code, as
well as to the residence tax for corporations and the real estate dealers fixed
Held: YES.
The essential elements of a partnership are two, namely: (a)an agreement to
contribute money,property or industry to a common fund; and (b)intent to
divide the profits among the contractingparties. The first element is
undoubtedly present in the case at bar, for, admittedly, petitioners have
agreed to,and did, contribute money and property to a common fund. Upon
consideration of all the facts andcircumstances surrounding the case, we are
fully satisfied that their purpose was to engage in real estatetransactions for
monetary gain and then divide the same among themselves, because of the
followingobservations, among others: (1) Said common fund was not
something they found already in existence; (2)They invested the same, not
merely in one transaction, but in a series of transactions; (3) The aforesaid
lotswere not devoted to residential purposes, or to other personal uses, of
petitioners herein.Although, taken singly, they might not suffice to establish
the intent necessary to constitute a partnership, thecollective effect of these
circumstances is such as to leave no room for doubt on the existence of said
intent inpetitioners herein.For purposes of the tax on corporations, our
National Internal Revenue Code, includes these partnerships with the
exception only of duly registered general copartnershipswithin the purview
of the term"corporation." It is, therefore, clear to our mind that petitioners
herein constitute a partnership, insofar as saidCode is concerned and are
subject to the income tax for corporations.

Business Organization Partnership, Agency, Trust Sharing of Loss in a
Partnership Industrial Partner
In 1969, sisters Antonia Torres and Emeteria Baring entered into a joint
venture agreement with Manuel Torres. Under the agreement, the sisters
agreed to execute a deed of sale in favor Manuel over a parcel of land, the
sisters received no cash payment from Manuel but the promise of profits
(60% for the sisters and 40% for Manuel) said parcel of land is to be
developed as a subdivision.
Manuel then had the title of the land transferred in his name and he
subsequently mortgaged the property. He used the proceeds from the
mortgage to start building roads, curbs and gutters. Manuel also contracted
an engineering firm for the building of housing units. But due to adverse
claims in the land, prospective buyers were scared off and the subdivision
project eventually failed.
The sisters then filed a civil case against Manuel for damages equivalent to
60% of the value of the property, which according to the sisters, is whats due
them as per the contract.
The lower court ruled in favor of Manuel and the Court of Appeals affirmed
the lower court.
The sisters then appealed before the Supreme Court where they argued that
there is no partnership between them and Manuel because the joint venture
agreement is void.
ISSUE: Whether or not there exists a partnership.
HELD: Yes. The joint venture agreement the sisters entered into with Manuel
is a partnership agreement whereby they agreed to contribute property (their
land) which was to be developed as a subdivision. While on the other hand,
though Manuel did not contribute capital, he is an industrial partner for his
contribution for general expenses and other costs. Furthermore, the income
from the said project would be divided according to the stipulated percentage
(60-40). Clearly, the contract manifested the intention of the parties to form a
partnership. Further still, the sisters cannot invoke their right to the 60% value
of the property and at the same time deny the same contract which entitles
them to it.
At any rate, the failure of the partnership cannot be blamed on the sisters,
nor can it be blamed to Manuel (the sisters on their appeal did not show
evidence as to Manuels fault in the failure of the partnership). The sisters
must then bear their loss (which is 60%). Manuel does not bear the loss of
the other 40% because as an industrial partner he is exempt from losses.

Jose Gatchalian, et.al.plaintiffs-appellants, vs.The Collector of Internal

A distraint warrant is a document served by the sheriff that indicates the
amount of overdue taxes, the due date and instructions prohibiting the
removal or destruction of any property within the business.
Plaintiffs purchased, in the ordinary course of business, from oneof the duly
authorized agents of the National CharitySweepstakesOffice one ticket for
the sum of two pesos (P2), said ticket was registered in the name of
Jose Gatchalian and Company.The ticket won one of the thirdprizes in the amount of P50,000. Jose Gatchalian was required to file the corr
esponding income taxreturn covering the prize won. Defendant-Collector
made an assessment against Jose Gatchalian and Co. requesting the
payment of the sum ofP1,499.94 to the deputy provincial treasurer of Pulilan,
Bulacan. Plaintiffs, however through counsel made a request forexemption. It
was denied.Plaintiffs failed to pay the amount due, hence
a warrant ofdistraint and levy was issued. Plaintiffs paid under protest a
part of the tax and penalties to avoid the effects of the warrant. A
request that the balance be paid by plaintiffs in installments wasmade. This
was granted on the condition that a bond be filed.
Plaintiffs failed in their installment payments.Hence a request for execution of
the warrant of distraint and levywas
made.Plaintiffs paid under protest to avoid the execution.A claim for refund
was made by the plaintiffs, which wasdismissed, hence the appeal.
Issue: Whether the plaintiffs formed a partnership or community ofproperty. If
a partnership, hence liable for income tax.
Held: Yes. The plaintiffs formed a formed a partnership.
According to the stipulation facts the plaintiffs organized apartnership of a
civil nature because each of them put up moneyto buy a sweepstakes ticket
for the sole purpose of dividingequally the prize which they may win, as they
did in fact in theamount of P50,000.
The partnership was not only formed, but upon the organizationthereof and
the winning of the prize, Jose Gatchalian personallyappeared in the office of
the Philippines Charity Sweepstakes, in his capacity as co-partner, as such
collection the prize, the officeissued the check for P50,000 in favor of Jose
Gatchalian andcompany, and the said partner, in the same capacity,
collectedthe said check.
All these circumstances repel the idea that the plaintiffs organizedand formed
a community of property only.

Business Organization Partnership, Agency, Trust Dissolution of the
William Belo introduced Nenita Anay to his girlfriend, Marjorie Tocao. The
three agreed to form a joint venture for the sale of cooking wares. Belo was
to contribute P2.5 million; Tocao also contributed some cash and she shall
also act as president and general manager; and Anay shall be in charge of
marketing. Belo and Tocao specifically asked Anay because of her
experience and connections as a marketer. They agreed further that Anay
shall receive the following:
10% share of annual net profits
6% overriding commission for weekly sales
30% of sales Anay will make herself
2% share for her demo services
They operated under the name Geminesse Enterprise, this name was
however registered as a sole proprietorship with the Bureau of Domestic
Trade under Tocao. The joint venture agreement was not reduced to writing
because Anay trusted Belos assurances.
The venture succeeded under Anays marketing prowess.
But then the relationship between Anay and Tocao soured. One day, Tocao
advised one of the branch managers that Anay was no longer a part of the
company. Anay then demanded that the company be audited and her shares
be given to her.
ISSUE: Whether or not there is a partnership.
HELD: Yes, even though it was not reduced to writing, for a partnership can
be instituted in any form. The fact that it was registered as a sole
proprietorship is of no moment for such registration was only for the
companys trade name.
Anay was not even an employee because when they ventured into the
agreement, they explicitly agreed to profit sharing this is even though Anay
was receiving commissions because this is only incidental to her efforts as a
head marketer.
The Supreme Court also noted that a partner who is excluded wrongfully
from a partnership is an innocent partner. Hence, the guilty partner must give
him his due upon the dissolution of the partnership as well as damages or
share in the profits realized from the appropriation of the partnership
business and goodwill. An innocent partner thus possesses pecuniary
interest in every existing contract that was incomplete and in the trade name
of the co-partnership and assets at the time he was wrongfully expelled.
An unjustified dissolution by a partner can subject him to action for damages
because by the mutual agency that arises in a partnership, the doctrine
of delectus personae allows the partners to have the power, although not
necessarily the right to dissolve the partnership.
Tocaos unilateral exclusion of Anay from the partnership is shown by her
memo to the Cubao office plainly stating that Anay was, as of October 9,
1987, no longer the vice-president for sales of Geminesse Enterprise. By that
memo, petitioner Tocao effected her own withdrawal from the partnership and
considered herself as having ceased to be associated with the partnership in
the carrying on of the business. Nevertheless, the partnership was not
terminated thereby; it continues until the winding up of the business.


This is an action to bring about liquidation of the funds and property of the
association called "Turnuhan Polistico & Co." The plaintiffs were
members or shareholders, and the defendants were designated as
president-treasurer, directors and secretary of said association. This case is
brought for 2nd time. In the 1st one, the court court held then that in an action
against the officers of a voluntary association to wind up its affairs and
enforce an accounting for money and property in their possessions, it is
not necessary that all members of the association be made parties to the
action. The court appointed commissioner of Insular Auditor's Office, to
examine all the books, documents, and accounts of "Turnuhan Polistico
& Co.," and to receive whatever evidence. Commissioner's report show a
balance of P24, 607.80 cash on hand. Despite defendants objection to
the report, the trial court rendered judgment holding said association is
unlawful. And sentenced defendants jointly and severally to return the
amount and documents to the plaintiffs and members of the
association. The Appellant alleged that the association being unlawful, some
charitable institution to whom the partnership funds may be ordered to be
turned over, should be included, as a party defendant. Referring to article
1666 of the Civil Code, which provides: A partnership musthave a lawful
object, and must be established for the common benefit of the partners.
When the dissolution of an unlawful partnership is decreed, the profits shall
be given to charitable institutions of the domicile of the partnership, or, in
default of such, to those of the province.
Whether or not charitable institution is a necessary party to this case.
No. No charitable institution is a necessary party in the present case of
determination of the rights of the parties. The action which may arise
from said article, in the case of unlawful partnership, is that for the recovery
of the amounts paid by the member from those in charge of the
administration of said partnership, and it is not necessary for the said
parties to base their action to the existence of the partnership, but on
the fact that of having contributed some money to the partnership
capital. And hence, the charitable institution of the domicile of the
partnership, and in the default thereof, those of the province are not
necessary parties in this case. The article cited above permits no action for
the purpose of obtaining the earnings made by the unlawful partnership,
during its existence as result of the business in which it was engaged,
because for the purpose, as Manresa remarks, the partner will have to
base his action upon the partnership contract, which is to annul and
without legal existence by reason of its unlawful object; and it is self
evident that what does not exist cannot be a cause of action. Hence,
paragraph 2 of the same article provides that when the dissolution of
the unlawful partnership is decreed, the profits cannot inure to the
benefit of the partners, but must be given to some charitable
institution.The profits are so applied, and not the contributions, because
this would be an excessive and unjust sanction for, as we have seen, there is
no reason, in such a case, for depriving the partner of the portion of the
capital that he contributed, the circumstances of the two cases being
entirely different.
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.


Business Organization Partnership, Agency, Trust Partner Periodic
Accounting Profit Sharing
In 1980, the heirs of Jose Lim alleged that Jose Lim entered into a
partnership agreement with Jimmy Yu and Norberto Uy. The three
contributed P50,000.00 each and used the funds to purchase a truck to start
their trucking business. A year later however, Jose Lim died. The eldest son
of Jose Lim, Elfledo Lim, took over the trucking business and under his
management, the trucking business prospered. Elfledo was able to but real
properties in his name. From one truck, he increased it to 9 trucks, all trucks
were in his name however. He also acquired other motor vehicles in his
In 1993, Norberto Uy was killed. In 1995, Elfledo Lim died of a heart attack.
Elfledos wife, Juliet Lim, took over the properties but she intimated to Jimmy
and the heirs of Norberto that she could not go on with the business. So the
properties in the partnership were divided among them.
Now the other heirs of Jose Lim, represented by Elenito Lim, required Juliet
to do an accounting of all income, profits, and properties from the estate of
Elfledo Lim as they claimed that they are co-owners thereof. Juliet refused
hence they sued her.
The heirs of Jose Lim argued that Elfledo Lim acquired his properties from
the partnership that Jose Lim formed with Norberto and Jimmy. In court,
Jimmy Yu testified that Jose Lim was the partner and not Elfledo Lim. The
heirs testified that Elfledo was merely the driver of Jose Lim.
ISSUE: Who is the partner between Jose Lim and Elfledo Lim?
HELD: It is Elfledo Lim based on the evidence presented regardless of
Jimmy Yus testimony in court that Jose Lim was the partner. If Jose Lim was
the partner, then the partnership would have been dissolved upon his death
(in fact, though the SC did not say so, I believe it should have been dissolved
upon Norbertos death in 1993). A partnership is dissolved upon the death of
the partner. Further, no evidence was presented as to the articles of
partnership or contract of partnership between Jose, Norberto and Jimmy.
Unfortunately, there is none in this case, because the alleged partnership
was never formally organized.
But at any rate, the Supreme Court noted that based on the functions
performed by Elfledo, he is the actual partner.
The following circumstances tend to prove that Elfledo was himself the
partner of Jimmy and Norberto:
1.) Cresencia testified that Jose gave Elfledo P50,000.00, as share in the
partnership, on a date that coincided with the payment of the initial capital in
the partnership;
2.) Elfledo ran the affairs of the partnership, wielding absolute control, power
and authority, without any intervention or opposition whatsoever from any of
petitioners herein;
3.) all of the properties, particularly the nine trucks of the partnership, were
registered in the name of Elfledo;
4.) Jimmy testified that Elfledo did not receive wages or salaries from the
partnership, indicating that what he actually received were shares of the
profits of the business; and
5.) none of the heirs of Jose, the alleged partner, demanded periodic
accounting from Elfledo during his lifetime. As repeatedly stressed in the
case of Heirs of Tan Eng Kee, a demand for periodic accounting is evidence
of a partnership.
Furthermore, petitioners failed to adduce any evidence to show that the real
and personal properties acquired and registered in the names of Elfledo and
Juliet formed part of the estate of Jose, having been derived from Joses
alleged partnership with Jimmy and Norberto.
Elfledo was not just a hired help but one of the partners in the trucking
business, active and visible in the running of its affairs from day one until this
ceased operations upon his demise. The extent of his control, administration
and management of the partnership and its business, the fact that its
properties were placed in his name, and that he was not paid salary or other
compensation by the partners, are indicative of the fact that Elfledo was a
partner and a controlling one at that. It is apparent that the other partners
only contributed in the initial capital but had no say thereafter on how the
business was ran. Evidently it was through Elfredos efforts and hard work
that the partnership was able to acquire more trucks and otherwise prosper.
Even the appellant participated in the affairs of the partnership by acting as
the bookkeeper sans salary.

Agad vs MabatoFacts: Petitioner Mauricio Agad claims that he and defendant

Severino Mabato are partners in afishpond business to which they
contributed P1000 each. As managing partner, Mabato yearly renderedthe
accounts of the operations of the partnership. However, for the years 19571963, defendant failedto render the accounts despite repeated
demands. Petitioner filed a complaint against Mabato to whicha copy of the
public instrument evidencing their partnership is attached. Aside from the
share of profits
(P14,000) and attorneys fees (P1000), petitioner prayed for the dissolution of
the partnership and
winding up of its affairs.Mabato denied the existence of the partnership
alleging that Agad failed to pay hisP1000 contribution.He then filed a motion
to dismiss on the ground of lack of cause of action. The lower court
dismissed thecomplaint finding a failure to state a cause of action predicated
upon the theory that the contract of partnership is null and void, pursuant to
Art. 1773 of our Civil Code, because an inventory of thefishpond referred in
said instrument had not been attached thereto.Art. 1771. A partnership may
be constituted in any form, except where immovable property or realrights
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 inventory of said property is not made,
signed by the parties; and attached to the public instrument.Issue: Whether
or not immovable property or real rights have been contributed to the
partnership.Held: Based on the copy of the public instrument attached in
the complaint, the partnership wasestablished to operate a fishpond", and not
to "engage in a fishpond busines
s. Thus, Mabatoscontention that it is really inconceivable how a partnership
engaged in the
fishpond business could
exist without said fishpond property (being) contributed to the partnership is
without merit. Their
contributions were limited to P1000 each and neither a fishpond nor a real
right thereto wascontributed to the partnership.Therefore, Article 1773 of the
Civil Code finds no application in the case at bar. Case remanded to thelower
court for further proceedings

Business Organization Partnership, Agency, Trust Partnership, how
Aurelio and Eduardo are brothers. In 1973, Aurelio alleged that Eduardo
entered into a contract of partnership with him. Aurelio showed as evidence a
letter sent to him by Eduardo that the latter is allowing Aurelio to manage
their family business (if Eduardos away) and in exchange thereof he will be
giving Aurelio P1 million or 10% equity, whichever is higher. A memorandum
was subsequently made for the said partnership agreement. The
memorandum this time stated that in exchange of Aurelio, who just got
married, retaining his share in the family business (movie theatres, shipping
and land development) and some other immovable properties, he will be
given P1 Million or 10% equity in all these businesses and those to be
subsequently acquired by them whichever is greater.
In 1992 however, the relationship between the brothers went sour. And so
Aurelio demanded an accounting and the liquidation of his share in the
partnership. Eduardo did not heed and so Aurelio sued Eduardo.
ISSUE: Whether or not there exists a partnership.
HELD: No. 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
instrumentation 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.


G.R. No. 109248 July 3, 1995
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
SEC en banc ruled that withdrawal of Misa from the firm had dissolved the
partnership.Reason: since it is partnership at will, the law firm could be
dissolved by any partner atanytime, such as by withdrawal therefrom,
regardless of good faith or bad faith, since nopartner can be forced to
continue in the partnership against his will.
1. WON the partnership of Bito, Misa & Lozada (now Bito, Lozada, Ortega &
Castillo)is a partnership at will; 2. WON the withdrawal of Misa dissolved the
partnership regardlessof his good or bad faith;
1. Yes. The partnership agreement of the firm provides that [t]he partnership
shallcontinue so long as mutually satisfactory and upon the death or legal
incapacity of one of the partners, shall be continued by the surviving
partners.2. Yes. Any one of the partners may, at his sole pleasure, dictate a
dissolution of thepartnership at will (e.g. by way of withdrawal of a partner).
He must, however, act in goodfaith, not that the attendance of bad faith can
prevent the dissolution of the partnership butthat it can result in a liability for


(July 29, 2005)

A partnership truly existed between the Angeles spouses and

Mercado, which was clear from the fact that they contributed money
to a common fund and divided the profits among themselves.
Angeles spouses acknowledged their joint business venture in the
barangay conciliation proceedings although they assailed the manner
the business was conducted
Although the legal formalities for the formation were not adhered to,
the partnership relationship was evident.
There is no estafa where money is delivered by a partner to his copartner on the latters representation that the amount shall be applied
to the business of their partnership. In case of the money received,
the co-partners liability is civil in nature


Oscar Angeles and Emerita Angeles, petitioners, v. The Hon. Secretary of

Justice and Felino Mercado, respondents

DOCTRINE: The purpose of registration of the contract of partnership with

the SEC is to give notice to third parties. Failure to register the contract of
partnership does not affect the liability of the partnership and of the partners
to third persons, nor does it affect the partnerships juridical personality. A
partnership may exist even if the partners do not use the words partner or



NATURE: Special civil action. Certiorari.

PONENTE: Carpio, J.


Angeles spouses filed a criminal complaint for estafa against Mercado, their
Claimed that Mercado convinced them to enter into a contract of
antichresis, to last for 5 years, covering 8 parcels of land planted with
fruit-bearing lanzones trees in Nagcarlan, Laguna and owned by
Juan Sanzo
The parties agreed that Mercado would administer the ands and
complete the necessary paperwork
After 3 years, the Angeles spouses asked for an accounting from
Mercado, and they claim that only after this demand for an
accounting did thy discover that Mercado had put the contract of
antichresis over the subject land under Mercado and his spouses
Mercado denied the Angeles spouses allegations
Claimed that there exists an industrial partnership, colloquially
known as sosyo industrial, between him and his spouse as industrial
partners and the Angeles spouses as financiers, and that this had
existed since 1991, before the contract of antichresis over the subject
Mercado used his and his spouses earnings as part of the capital in
the business transactions which he entered into in behalf of the
Angeles spouses. It was their practice to enter into business
transactions with other people under the name of Mercado because
the Angeles spouses did not want to be identified as the financiers
Attached bank receipts showing deposits in behalf of Emerita
Angeles and contracts under his name for the Angeles spouses
During the barangay conciliation proceedings, Oscar Angeles stated that
there was a written sosyo industrial agreement: capital would come from
the Angeles spouses while the profit would be divided evenly between
Mercado and the Angeles spouses
Provincial Prosecution Office: first recommended the filing of a criminal
information for estafa, but after Mercado filed his counter-affidavit and
moved for reconsideration, issued an amended resolution dismissing the
Angeles spouses appealed to Sec. of Justice, saying that the document
evidencing the contract of antichresis executed in the name of the
Mercado spouses, instead of the Angeles spouses, and that such
document alone proves Mercados misappropriation of their P210, 000
Sec. of Justice: dismissed the appeal
Angeles spouses failed to show sufficient proof that Mercado
deliberately deceived them in the transaction
Mercado satisfactorily explained that the Angeles spouses do not
want to be revealed as the financiers
Under the circumstances, it was more likely that the Angeles spouses
knew from the very start that the questioned document was not really
in their names

W/N the Sec. of Justice committed grave abuse of discretion in

dismissing the appeal - No
W/N a partnership existed between Mercado and the Angeles
spouses - Yes
W/N there was misappropriation by Mercado No


1. Angeles spouses fail to convince that the Secretary of Justice committed

grave abuse of discretion when he dismissed their appeal. Moreover, they
committed a procedural error when they failed to file a motion for
reconsideration of the Sec. of Justices resolution, which is already enough
reason to dismiss the case.

2. Angeles spouses allege that they had no partnership with Mercado, relying
on Arts. 1771 to 1773 of the Civil Code.

The Angeles spouses position that there is no partnership because of the

lack of a public instrument indicating the same and a lack of registration
with the SEC holds no water
The Angeles spouses contributed money to the partnership and not
immovable property
Mere failure to register the contract of partnership with the SEC does
not invalidate a contract that has the essential requisites of a
partnership. The purpose of registration is to give notice to third
Failure to register does not affect the liability of the partnership and of the
partners to third persons, nor does it affect the partnerships juridical
The Angeles spouses admit to facts that prove the existence of a partnership
A contract showing a sosyo industrial or industrial partnership
Contribution of money & industry to a common fund
Division of profits between the Angeles spouses and Mercado
3. Mercado satisfactorily explained that the Angeles spouses do not want to
be revealed as the financiers, thus the document which was in the name of
Mercado and his spouse fail to convince that there was deceit or false
representation that induced the Angeles spouses to part with their money

Even the RTC of Sta. Cruz, Laguna, which handled the civil case filed by the
Angeles spouses against Mercado and Leo Cerayban stated that it was
the practice to have the contracts secured in Mercados name as the
Angeles spouses fear being kidnapped by the NPA or being questioned
by the BIR as Oscar Angeles was working with the government.
Accounting of the proceeds is not a proper subject for the present case.
DISPOSITION: Petition for certiorari dismissed. Decision of Sec. of Justice

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