I.
GENERAL PROVISIONS
FERNANDO SANTOS, petitioner,
vs. SPOUSES ARSENIO and NIEVES
REYES, respondents.
TOPIC focused on: W/N Parties'
relationship was one of partnership or
of employer-employee?
Facts:
This is a petition for review on certiorari
assailing CA decision which affirmed the
RTC decision. Santos and Nieves Reyes
verbally agreed that Santos would act
as financier while Nieves and Meliton
Zabat would act as solicitors for
membership and collectors of loan
payment. 70% of the profits would go
to Santos while Nieves and Zabat would
get 15% each. It was a lending venture
business.
Nieves introduced Gragera of Monte
Maria Corp, who obtained short term
loans for the partnership in
consideration of commissions. In 1986,
Nieves and Zabat executed an
agreement which formalized their earlier
verbal agreement. But, Santos and
Nieves later discovered that Zabat
engaged in the same lending business.
Hence, Zabat was expelled from the
partnership. On June 1987, Santos filed
a complaint for recovery of sum of
money and damages against the
respondents, alleging them as
employees who misappropriated the
funds. Respondents assert they were
partners and not mere employees.
Santos claimed that after discovery of
Zabat's activities, he ceased infusing
funds thereby extinguishing the
partnership.
RTC RULING: the trial court held that
respondents were partners, not mere
employees, of petitioner. It further ruled
that Gragera was only a commission
agent of petitioner, not his partner.
Petitioner moreover failed to prove that
he had entrusted any money to Nieves.
Thus, respondents' counterclaim for
their share in the partnership and for
damages was granted.
CA RULING: On appeal, the Decision
of the trial court was upheld, and the
counterclaim of respondents was
dismissed. Upon the latter's Motion for
Reconsideration, however, the trial
court's Decision was reinstated in toto.
Subsequently, petitioner's own Motion
for Reconsideration was denied in the
CA. The CA disbelieved petitioner's
claim that Nieves had
misappropriated a total of
P200,000 which was supposed to
be delivered to Gragera to cover
unpaid commissions. It was his task
to collect the amounts due, while hers
was merely to prepare the daily cash
flow reports to keep track of his
collections.
Issue:
W/N the parties' relationship was one of
partnership or of employer-employee?
Held:
Yes they were partners. The petitioners
contentions is that he employed the
services of respondent spouses in the
money-lending venture with Gragera,
with Nieves as bookkeeper and Arsenio
as credit investigator. That Nieves
introduced Gragera to Santos did not
make her a partner. She was only a
witness to the Agreement between the
two. Separate from the partnership
between petitioner and Gragera was
that which existed among petitioner,
Nieves and Zabat, a partnership that
was dissolved when Zabat was expelled.
However by the contract of partnership,
two or more persons bind themselves to
contribute money, property or industry
to a common fund, with the intention of
dividing the profits among
themselves. The "Articles of
Agreement" stipulated that the
signatories shall share the profits of the
business in a 70-15-15 manner, with
petitioner getting the lion's share. This
stipulation clearly proved the
establishment of a partnership.
Indeed, the partnership was established
to engage in a money-lending business,
despite the fact that it was formalized
only after the Memorandum of
Agreement had been signed by
petitioner and Gragera.
SEVILLA v. COURT OF APPEALS
(160 SCRA 171)
FACTS: On the strength of a contract,
Tourist World Service Inc. (TWS) leased
the premises belonging to Segundina
Noguera for the former’s use as a
branch office. Lina Sevilla found herself
solidarily liable with TWS for the prompt
payment of the monthly rentals
thereon. When the branch office was
opened, it was run by appellant Sevilla,
payable to TWS by any airline for any
fare brought in on the efforts of Sevilla,
4% was to go to Sevilla and 3% was to
be withheld by TWS. TWS appears to
have been informed that Sevilla was
connected with a rival firm, the
Philippine Travel Bureau, and, since the
branch office was anyhow losing, the
TWS considered closing down its office.
Two resolutions of the TWS board of
directors were passed to abolish the
office of the manager and vice president
of the branch office and authorizing the
corporate secretary to receive the
properties in the said branch office.
Subsequently, the corporate secretary
went to the branch office, and finding
the premises locked and being unable to
contact Sevilla, padlocked the premises
to protect the interests of TWS. When
neither Sevilla nor her employees could
enter the locked premises, she filed a
complaint against TWS with a prayer for
the issuance of a mandatory preliminary
injunction. The trial court dismissed the
case, holding that TWS, being the true
lessee, was within its prerogative to
terminate the lease and padlock the
premises. It likewise found that Sevilla
was a mere employee of TWS and as
such, was bound by the acts of her
employer. The CA affirmed. Hence this
petition.
ISSUE: WHETHER OR NOT THERE
WAS AN EMPLOYER-EMPLOYEE
RELATIONSHIP BETWEEN TWS AND
SEVILLA.
RULING: NONE. It was a principal-
agent relationship. The records show
that petitioner, Sevilla, was not subject
to control by the private respondent
TWS.
In the first place, under the contract of
lease, she has bound herself in solidum
for rental payments, an arrangement
that would belie claims of a master-
servant relationship. That does not
make her an employee of TWS, since a
true employee cannot be made to part
with his own money in pursuance of his
employer’s business, or otherwise,
assume any liability thereof.
In the second place, when the branch
office was opened, the same was run by
the appellant Sevilla payable to TWS by
any airline for any fare brought in on
the effort of Sevilla. Thus, it cannot be
said that Sevilla was under the control
of TWS. Sevilla, in pursuing the
business, relied on her own capabilities.
It is further admitted that Sevilla was
not in the company’s payroll. For her
efforts, she retained 4% in commissions
from airline bookings, the remaining 3%
going to TWS. Unlike an employee, who
earns a fixed salary, she earned
compensation in fluctuating amount
depending on her booking successes.
The fact that Sevilla has been
designated “branch manager” does not
make her a TWS employee. It appears
that Sevilla is a bona fide travel agent
herself, and she acquired an interest in
the business entrusted to her. She also
had assumed personal obligation for the
operation thereof, holding herself
solidary liable for the payment of
rentals. Therefore, TWS and Canilao are
jointly and severally liable to indemnify
the petitioner, Sevilla.
ELIGIO ESTANISLAO, JR.,
petitioner,
vs.
THE HONORABLE COURT OF
APPEALS, REMEDIOS ESTANISLAO,
EMILIO and LEOCADIO SANTIAGO,
respondents.
G.R. No. L-49982 April 27, 1988
FACTS
Petitioner and private respondents are
brothers and sisters who are co-owners
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). A joint affidavit was prepared
by Atty. Democrito Angeles and was
executed by the siblings on April 11,
1966 stipulating that 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. It was also
agreed that they would help their
brother, petitioner herein, by allowing
him to operate and manage the
gasoline service station of the family. In
the aforesaid Joint Affidavit of April 11,
1966, it was clearly stipulated by the
parties that the P 15,000.00 advance
rental due to them from SHELL shall
augment their "capital investment" in
the operation of the gasoline station,
which advance rentals shall be credited
as rentals from May 25, 1966 up to four
and one-half months or until 10 October
1966, more or less covering said P
15,000.00.
On May 20, 1966, the parties herein
entered into an Additional Cash Pledge
Agreement with SHELL wherein the
former shall waive and assign to SHELL
the total monthly rentals equivalent to
P15,000.00 due to all of them
commencing on May 24, 1966, with a
proviso that said agreement "cancels
and supersedes the Joint Affidavit dated
April 11, 1966 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.
Hence, a demand was made on
petitioner to render an accounting of
the profits.
Private respondents then filed a
complaint against petitioner praying
that the latter be ordered to execute a
public document embodying all the
provisions of the partnership agreement
entered into between plaintiffs and
defendant as provided in Article 1771 of
the New Civil Code.
Petitioner contends that because of the
said stipulation cancelling and
superseding that previous Joint
Affidavit, whatever partnership
agreement there was in said previous
agreement had thereby been
abrogated.
ISSUE
Whether or not a partnership
agreement exists between petitioner
and private respondents?
HELD
Yes. The cancelling provision was
necessary because the Joint Affidavit
speaks of P 15,000.00 advance rentals
starting May 25, 1966 while the
Additional Cash Pledge Agreement also
refers to advance rentals of the same
amount starting May 24, 1966. There is,
therefore, a duplication of reference to
the P 15,000.00 hence the need to
provide in the subsequent document
that it "cancels and supersedes" the
previous one. True it is that in the latter
document, it is silent as to the
statement in the Joint Affidavit that the
P 15,000.00 represents the "capital
investment" of the parties in the
gasoline station business and it speaks
of petitioner as the sole dealer, but this
is as it should be for in the latter
document SHELL was a signatory and it
would be against its policy if in the
agreement it should be stated that the
business is a partnership with private
respondents and not a sole
proprietorship of petitioner.
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
Remedios Estanislao and Atty. Angeles.
Petitioner submitted to private
respondents a periodic accounting of
the business and gave a written
authority to private respondent
Remedios Estanislao, his sister, to
examine and audit the books of their
"common business”. Respondent
Remedios also 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. 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.
DAN FUE LEUNG, petitioner, vs.
IAC, respondents.
G.R. No. 70926 January 31, 1989
**SHARE OF PROFITS & LOSES**
Facts:
Sun Wah Panciteria, a restaurant, was
registered as a single proprietorship and
its licenses and permits were issued to
and in favor of petitioner Dan Fue
Leung as the sole proprietor.
Respondent Leung Yiu adduced
evidence during the trial of the case to
show that Sun Wah Panciteria was
actually a partnership and that he was
one of the partners having contributed
P4,000.00 to its initial establishment.
About the time the Sun Wah Panciteria
started to become operational, the
private respondent gave P4,000.00 as
his contribution to the partnership. This
is evidenced by a receipt wherein the
petitioner acknowledged his acceptance
of the P4,000.00 by affixing his
signature thereto. The private
respondent received from the petitioner
the amount of P12,000.00 covered by
the latter's Equitable Banking
Corporation Check from the profits of
the operation of the restaurant for the
year 1974.
The petitioner denied having received
from the private respondent the amount
of P4,000.00. He contested and
impugned the genuineness of the
receipt. The petitioner did not receive
any contribution at the time he started
the Sun Wah Panciteria. He used his
savings from his salaries as an
employee at Camp Stotsenberg in Clark
Field and later as waiter at the Toho
Restaurant amounting to a little more
than P2,000.00 as capital in establishing
Sun Wah Panciteria. To bolster his
contention that he was the sole owner
of the restaurant, the petitioner
presented various government licenses
and permits showing the Sun Wah
Panciteria was and still is a single
proprietorship solely owned and
operated by himself alone.
Both the trial court and the appellate
court found that the private respondent
is a partner of the petitioner in the
setting up and operations of the
panciteria. While the dispositive portions
merely ordered the payment of the
respondents share, there is no question
from the factual findings that the
respondent invested in the business as
a partner.
ISSUE:
Whether or not the private respondent
is a partner of the petitioner in the
establishment of Sun Wah Panciteria
RULING:
Yes. The private respondent alleged
that when Sun Wah Panciteria was
established, he gave P4,000.00 to the
petitioner with the understanding that
he would be entitled to twenty-two
percent (22%) of the annual profit
derived from the operation of the said
panciteria. These allegations, which
were proved, make the private
respondent and the petitioner partners
in the establishment of Sun Wah
Panciteria because Article 1767 of the
Civil Code provides that "By the contract
of partnership two or more persons bind
themselves to contribute money,
property or industry to a common fund,
with the intention of dividing the profits
among themselves".
Therefore, the lower courts did not err
in construing the complaint as one
wherein the private respondent asserted
his rights as partner of the petitioner in
the establishment of the Sun Wah
Panciteria, notwithstanding the use of
the term financial assistance therein.
We agree with the appellate court's
observation to the effect that "... given
its ordinary meaning, financial
assistance is the giving out of money to
another without the expectation of any
returns therefrom'.
The private respondent is a partner
of the petitioner in Sun Wah
Panciteria. The requisites of a
partnership which are — 1) two or more
persons bind themselves to contribute
money, property, or industry to a
common fund; and 2) intention on the
part of the partners to divide the profits
among themselves (Article 1767, Civil
Code; Yulo v. Yang Chiao Cheng, 106
Phil. 110)-have been established. As
stated by the respondent, a partner
shares not only in profits but also in the
losses of the firm. If excellent relations
exist among the partners at the start of
business and all the partners are more
interested in seeing the firm grow
rather than get immediate returns, a
deferment of sharing in the profits is
perfectly plausible. It would be incorrect
to state that if a partner does not assert
his rights anytime within ten years from
the start of operations, such rights are
irretrievably lost. The private
respondent's cause of action is
premised upon the failure of the
petitioner to give him the agreed profits
in the operation of Sun Wah Panciteria.
In effect the private respondent was
asking for an accounting of his interests
in the partnership.
It is Article 1842 of the Civil Code in
conjunction with Articles 1144 and 1155
which is applicable. Article 1842 states:
The right to an account
of his interest shall
accrue to any partner, or
his legal representative
as against the winding up
partners or the surviving
partners or the person or
partnership continuing
the business, at the date
of dissolution, in the
absence or any
agreement to the
contrary.
Regarding the prescriptive period
within which the private
respondent may demand an
accounting, Articles 1806, 1807,
and 1809 show that the right to
demand an accounting exists as
long as the partnership exists.
Prescription begins to run only
upon the dissolution of the
partnership when the final
accounting is done.
FERNANDO SANTOS, petitioner ,
vs. Spouses ARSENIO and NIEVES
REYES, respondents ( An Industrial
Partner's share in Net Profits)
FACTS:
Fernando Santos and Nieves Reyes
were introduced to each other by one
Meliton Zabat regarding a lending
business venture proposed by Nieves. It
was verbally agreed that Santos would
act as financier while Nieves and Zabat
would take charge of solicitation of
members and collection of loan
payments. The venture was launched
on June 13, 1986, with the
understanding that petitioner would
receive 70% of the profits while Nieves
and Zabat would earn 15% each.
Thereafter, Petitioner executed a deal
with Monte Maria Corp., under the
agreement, Monte Maria, represented
by Gragera, was entitled to P1.31
commission per thousand paid daily to
petitioner. Nieves kept the books as
representative of petitioner while
Respondent Arsenio, husband of Nieves,
acted as credit investigator
On August 6, 1986, Petitioner et al
formalized their earlier verbal
arrangement by executing the "Articles
of Partnership and later discovered that,
their partner Zabat engaged in the
same lending business in competition
with their partnership. Zabat was
thereby expelled from the partnership.
The operations with Monte Maria
continued.
On June 5, 1987 Petitioner charged
respondents for having misappropriated
funds intended for Gragera. Upon
Gragera's complaint that his
commissions were inadequately
remitted.
Respondents contented that they were
partners and not mere employees of
petitioner, also respondents alleged that
case was filed in order to prevent them
from claiming their rightful share to the
profits of the partnership.
Petitioner on the other hand insisted
that respondents were his mere
employees and not partners with
respect to the agreement with Gragera.
He claimed that after he discovered
Zabat's activities, he ceased infusing
funds, thereby causing the
extinguishment of the partnership. The
agreement with Gragera was a distinct
partnership from that of respondent and
Zabat. Petitioner asserted that
respondents were hired as salaried
employees with respect to the
partnership between petitioner and
Gragera
ISSUE:
whether respondents were entitled to
their counterclaim for share in the
profits?
RULING:
INDUSTRIAL PARTNER'S SHARE
MUST COME FROM THE NET
PROFITS; INDUSTRIAL PARTNER
DOES NOT SHARE IN THE LOSSES
IF LATTER EXCEEDS THE INCOME.
— For the purpose of determining the
profit that should go to an industrial
partner (who shares in the profits but is
not liable for the losses), the gross
income from all the transactions carried
on by the firm must be added together,
and from this sum must be subtracted
the expenses or the losses sustained in
the business. Only in the difference
representing the net profits does the
industrial partner share. But if, on the
contrary, the losses exceed the income,
the industrial partner does not share in
the losses.
SHARE OF EACH PARTNER SHOULD
BE BASED ON THE NET PROFIT. —
Noticeably missing from the
computation of the "total income" is the
deduction of the weekly allowance
disbursed to respondents. The evidence
show that Arsenio received allowances
from July 19, 1986 to March 27, 1987 in
the aggregate amount of P25,500; and
Nieves, from July 12, 1986 to March 27,
1987 in the total amount of P25,600.
These allowances are different from the
profit already received by Arsenio. They
represent expenses that should have
been deducted from the business
profits. The point is that all expenses
incurred by the money-lending
enterprise of the parties must first be
deducted from the "total income" in
order to arrive at the "net profit" of the
partnership. The share of each one of
them should be based on this "net
profit" and not from the "gross income"
or "total income" reflected in Exhibit
"10-I," which the two courts invariably
referred to as "cash flow" sheets.
Sunga v Chua
Petitioners: Lilibeth Sunga – Chan
& Cecilia Sunga
Respondents: CA, Presiding Judge
of RTC, Branch 11, Sindangan,
Zamboanga del Norte, Clerk of
Court of Manila, Lamberto Chua
Present case: Petition for Review
under Rule 45.
FACTS:
Chua and Jacinto Sunga – in 1977,
verbally formed a partnership to engage
in the marketing of liquefied petroleum
gas. For convenience, the Shellite Gas
Appliance Center (Shellite), was
registered as a sole proprietorship in the
name of Jacinto, albeit the partnership
arrangement called for equal sharing of
the net profit. Respondent allegedly
delivered his initial capital contribution
of Php 100,000 to Jacinto while the
latter in turn produced Php 100,000 as
his counterpart contribution.. with the
intention that the profits would be
EQUALLY DIVIDED between them.
Composition:
 Jacinto Sunga – manager;
would receive a manager’s
fee / remuneration of 10%
of the gross profit
 Josephine Sy – assistant,
sister of the wife of
respondent; would receive
10% of the net profits (in
addition to her wages and
other remuneration from the
business)
From the time Shellite opened for
business on June 8, 1977, the business
was profitable. While Jacinto furnished
respondent with the merchandise
inventories, balance sheets and net
worth of Shellite from 1977 to 1989,
respondent 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.
Jacinto died in 1989. Thereafter, Cecilia
Sunga (widow) and Lilibeth Sunga –
Chan (married daughter) continued with
the business WITHOUT Chua’s consent.
Chua’s subsequent repeated demands
for accounting & winding up went
unheeded, propting him to file on June
22, 1992 a Complaint for Winding Up of
a Partnership Affairs, Accounting,
Appraisal, and Recovery of Shares &
Damages with Writ of Preliminary
Attachment in Sindangan, Zamboanga
del Norte.
March 31, 1991 – petitioner Lilibeth ran
out of reasons to evade respondent’s
demands. Hence, she disbursed out of
the partnership funds Php 200,000 and
partially paid the same to the
respondent. Lilibeth allegedly informed
respondent that this was th latter’s
chare in the partnership and promised
that she would make the complete
inventory & winding up of the
properties. However, she failed to
comply.
Dec 19,1992 – petitioned filed a Motion
to Dismiss on the ground that SEC MNL
had jurisdiction.. NOT the RTC in
Zamboanga del Norte. Respondent
opposed the motion
Jan 12, 1993 – RTC denied the motion
to dismiss
Nov 29, 1993 – petitioners filed with the
RTC a Motion to Suspend Pre-trial
Conference; RTC granted.
Nov. 15, 1994 – CA denied the Motion
to Suspend Pre-trial Conference.
RTC: Untimately issued a judgment for
Chua. Granted Chua’s motion for
execution. Over a month later, the RTC,
acting on another motion of Chua,
issued an amended writ of execution.
(1) DIRECTING them to render an
accounting in acceptable form under
accounting procedures and standards of
the properties, assets, income and
profits of [Shellite] since the time of
death of Jacinto L. Sunga, from whom
they continued the business operations
including all businesses derived from
[Shellite]; submit an inventory, and
appraisal of all these properties, assets,
income, profits, etc. to the Court and to
plaintiff for approval or disapproval;
(2) ORDERING them to return and
restitute to the partnership any and
all properties, assets, income and profits
they misapplied and converted to their
own use and advantage that legally
pertain to the plaintiff
(3) DIRECTING them to restitute
and pay to the plaintiff ½ shares and
interest of the plaintiff in the
partnership
(4) ORDERING them to pay the plaintiff
earned but unreceived income and
profits from the partnership from 1988
to May 30, 1992
(5) ORDERING them to wind up the
affairs of the partnership and terminate
its business activities pursuant to law,
after delivering to the plaintiff all the ½
interest, shares, participation and equity
in the partnership, or the value thereof
in money or money’s worth, if the
properties are not physically divisible;
and
(6) FINDING them especially Lilibeth
Sunga-Chan guilty of breach of trust
and in bad faith and hold them liable to
the plaintiff the sum of P50,000.00 as
moral and exemplary damages
CA: dismissed the appeal
Issue: WON there existed a partnership
between respondent Lamberto T. Chua
and the late Jacinto L. Sunga upon the
latter's invitation and offer and that
upon his death the partnership assets
and business were taken over by
petitioners.
Ruling:
 Yes. A partnership may be
constituted in any form,
except where immovable
property or real rights are
contributed thereto, in chich
case a public instrument
shall be necessary.
 Based on the intention of the
parties, as gathered from the
facts & ascertained from
their language & 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.
 The crucial issue to settle
then is: WON the “Dead
Man’s Statute” applies to this
case so as to render
inadmissible respondent’s
testimony & that of his
witness, Josephine.
*The "Dead Man's Statute" provides
that if one party to the alleged
transaction is precluded from testifying
by death, insanity, or other mental
disabilities, the surviving party is not
entitled to the undue advantage of
giving his own uncontradicted and
unexplained account of the
transaction. But before this rule can be
successfully invoked to bar the
introduction of testimonial evidence, it is
necessary that:
1. The witness is a party or assignor of
a party to a case or persons in whose
behalf a case is prosecuted. EDCIcH
2. The action is against an executor or
administrator or other representative of
a deceased person or a person of
unsound mind;
3. The subject-matter of the action is a
claim or demand against the estate of
such deceased person or against person
of unsound mind;
4. His testimony refers to any matter of
fact which occurred before the death of
such deceased person or before such
person became of unsound mind.
Two reasons forestall the application of
the “Dead Man’s Statute” to this case:
1. Petitioners filed a compulsory
counterclaim against respondent
in their answer before the trial
court, and with the filing of their
counterclaim, petitioners
themselves effectively removed
this case from the ambit of the
"Dead Man's Statute". Well
entrenched is the rule that when
it is the executor or
administrator or representatives
of the estate that sets up the
counterclaim, the plaintiff, herein
respondent, may testify to
occurrences before the death of
the deceased to defeat the
counterclaim. Moreover, as
defendant in the counterclaim,
respondent is not disqualified
from testifying as to matters of
fact occurring before the death
of the deceased, said action not
having been brought against but
by the estate or representatives
of the deceased.
2. The testimony of Josephine is
not covered by the "Dead Man's
Statute" for the simple reason
that she is not "a party or
assignor of a party to a case or
persons in whose behalf a case
is prosecuted".
The court is not convinced by
petitioners' allegation that Josephine's
testimony lacks probative value because
she was allegedly coerced by
respondent, her brother-in-law, to
testify in his favor. Josephine merely
declared in court that she was
requested by respondent to testify and
that if she were not requested to do so
she would not have testified. We fail to
see how we can conclude from this
candid admission that Josephine's
testimony is involuntary when she did
not in any way categorically say that
she was forced to be a witness of
respondent. Petitioners' reliance alone
on the "Dead Man's Statute" to defeat
respondent's claim cannot prevail over
the factual findings of the trial court and
the Court of Appeals that a partnership
was established between respondent
and Jacinto. Based not only on the
testimonial evidence, but the
documentary evidence as well, the trial
court and the Court of Appeals
considered the evidence for respondent
as sufficient. Notably, petitioners did not
present any evidence in their favor
during trial. By the weight of judicial
precedents, a factual matter like the
finding of the existence of a partnership
between respondent and Jacinto cannot
be inquired into by this Court on review.
PEDRO R. PALTING, petitioner vs.
SAN JOSE PETROLEUM
INCORPORATED, respondent
FACTS
On September 7, 1956, SAN JOSE
PETROLEUM filed with the Philippine
Securities and Exchange Commission a
sworn registration statement, for the
registration and licensing for sale in the
Philippines Voting Trust Certificates
representing 2,000,000 shares of its
capital stock of a par value of $0.35 a
share, at P1.00 per share.
It was alleged that the entire proceeds
of the sale of said securities will be
devoted or used exclusively to finance
the operations of San Jose Oil
Company, Inc. (a domestic mining
corporation hereafter to be referred to
as SAN JOSE OIL) which has 14
petroleum exploration concessions
covering an area of a little less than
1,000,000 hectares, located in the
provinces of Pangasinan, Tarlac, Nueva
Ecija, La Union, Iloilo, Cotabato, Davao
and Agusan.
SAN JOSE PETROLEUM filed an
amended Statement on June 20, 1958,
for registration of the sale in the
Philippines of its shares of capital stock,
which was increased from 2,000,000 to
5,000,000, at a reduced offering price
of from P1.00 to P0.70 per share. At
this time the par value of the shares has
also been reduced from $.35 to $.01 per
share.
Pedro R. Palting together with other
investors in the share of SJP filed with
the SEC an opposing the registration
and licensing of the securities on the
grounds that:
1. tie-up between the issuer, SJP, a
Panamanian corp. and San Jose
Oil (SJO), a domestic
corporation, violates the
Constitution of the Philippines,
the Corporation Law and the
Petroleum Act of 1949
2. issuer has not been licensed to
transact business in the
Philippines
3. sale of the shares of the issuer is
fraudulent, and works or tends
to work a fraud upon Philippine
purchasers
4. issuer as an enterprise, as well
as its business, is based upon
unsound business principles
ISSUE
Whether or not the “tie-up”
between the respondent SAN JOSE
PETROLEUM, a foreign corporation, and
SAN JOSE OIL COMPANY, INC., a
domestic mining corporation, is violative
of the Constitution, the Laurel-Langley
Agreement, the Petroleum Act of 1949,
and the Corporation Law
Ruling/Held
Yes, In the 1946 Ordinance
Appended to the Constitution, this right
was extended to citizens of the United
States; states that to all forms of
business enterprises owned or
controlled, directly or indirectly, by
citizens of the United States in the same
manner as to, and under the same
conditions imposed upon, citizens of the
Philippines or corporations or
associations owned or controlled by
citizens of the Philippines, would have
the privilege of disposition, exploitation,
development, and utilization of all
Philippine natural resources. However,
respondent is owned, controlled,
directly and indirectly by Panamanian
Corporation.
The Laurel-Langley Agreement also
states that with respect to natural
resources in the public domain in the
Philippines, only through the medium of
a corporation organized under the laws
of the Philippines and at least 60% of
the capital stock of which is owned or
controlled by citizens of the United
States.
Although it was claimed that the
corporation has stockholders residing in
United States, there was no indication if
they are all citizens of America, how
much percentage do they occupy as
stockholders, and if they have the same
rules that apply to the conditions
mentioned. In the circumstances, the
court ruled that the respondent SAN
JOSE PETROLEUM, as presently
constituted, is not a business enterprise
that is authorized to exercise the parity
privileges under the Parity Ordinance,
the Laurel-Langley Agreement and the
Petroleum Law. Its tie-up with SAN
JOSE OIL is, consequently, illegal.
The parity rights agreement is not
applicable to SJP. The parity rights are
only granted to American business
enterprises or enterprises directly or
indirectly controlled by US citizens. SJP
is a Panamanian corporate citizen. The
other owners of SJO are Venezuelan
corporations, not Americans. SJP was
not able to show contrary evidence.
Further, the Supreme Court emphasized
that the stocks of these corporations are
being traded in stocks exchanges
abroad which renders their foreign
ownership subject to change from time
to time. This fact renders a practical
impossibility to meet the requirements
under the parity rights. Hence, the tie
up between SJP and SJO is illegal, SJP
not being a domestic corporation or an
American business enterprise
contemplated under the Laurel-Langley
Agreement
FRANCISCO BASTIDA, plaintiff-
appellee, vs. MENZI & CO., INC., J.M.
MENZI and C. SCHLOBOHM,
defendants. MENZI & CO., INC.,
appellant
G.R. No, 35840. March 31, 1933
FACTS:
Bastida and Menzi & Co. agreed to
assign Bastida’s contract with Phil.
Sugar Centrals Agency. Such agreement
indicates that Menzi & Co. shall
supervise the mixing of the fertilizer and
to obtain other orders for 50% of the
net profit that Menzi & Co. might derive
therefrom. The initial agreement was
verbal and was confirmed through a
letter of J.M. Menzi, the general
manager of Menzi & Co. to the plaintiff.
On April 27, 1922, Menzi & Co. entered
into a verbal agreement with the
plaintiff, wherein the fertilizer business
is carried on in the same manner as it
was to the prior contract, however, the
net profit that the plaintiff would get will
inly be 35%. Before the expiration of
the second contract, the manager of
Menzi & Co. notified the plaintiff that his
services will not be renewed.
Thereafter, when the contract expired,
Menzi liquidated the fertilizer business
with which the plaintiff rebuffed. The
plaintiff argued that the written contract
they entered into was a contract of
general regular commercial partnership,
wherein the capitalist is Menzi and the
industrial partner is Bastida.
ISSUE:
W/N the relationship between Menzi &
Co. and the plaintiff is that of partners.
HELD:
No, the relationship between the parties
was not that of partners, rather, it was
that of employer and employee.
According to Article 116 of the Code of
Commerce, articles of association by
which two or more persons obligate
themselves to place in a common fund
property, industry, or any of these
things, in order to obtain profit, shall be
commercial, no matter what its class
may be. Provided it has been
established in accordance with the
provisions of this Code. In this case,
there was no common fund between
Bastida and Menzi & Co. In place of
receiving a fixed salary, the plaintiff
received 35% of the net profits in
compensation for his services.
MAGALONA, ET AL. v. PESAYCO
G.R. No. 39607. February 6, 1934.
FACTS:
In the year1930, the plaintiffs and the
defendant formed a partnership for the
purpose of catching "semillas de bañgus
o aua" in the sea and rivers for the year
1931. The defendant managed the
business from January 1, 1931 and
never gave any account of his catches
or sales to his partners, the plaintiffs.
In view of this the herein complaint was
filed April 21, 1931, in which it was
prayed that the defendant be ordered to
render an account of his management
and to pay to the plaintiffs their
participation in the profits thereof.
However, the defendant denied that
there was a partnership and depends
principally upon the fact that the
partnership agreement was not in
writing.
ISSUES:
1. W/N there exist a contract of
partnership.
2. W/N a contract of partnership should
be in writing.
HELD:
1. YES. The Supreme Court ruled that if
a party permits a contract, which the
law provides shall be in writing, to be
proved, without objection as to the form
of the proof, it is just as binding as if
the statute had been complied with.
2. NO. The Supreme Court ruled that
Article 1667 of the Civil Code provides
that "Civil partnerships may be
established in any form whatever,
unless real property or real rights are
contributed to the same, in which case
a public instrument shall be necessary."
MAURICIO AGAD, plaintiff-
appellant,
vs.
SEVERINO MABATO and MABATO
and AGAD COMPANY, defendants-
appellees.
CASE DOCTRINE: CIVIL LAW;
PARTNERSHIP; PURPOSE TO "OPERATE
A FISHPOND"; APPLICABILITY OF ART.
1773 N.C.C. — Where a partnership was
formed "to operate a fishpond", not to
"engage in a fishpond business", and
the partners contributed P1,000.00 each
as their share, Art. 1773 of the Civil
Code does not apply, it appearing that
neither a fishpond nor a real right
thereto was contributed to the
partnership or become a part of the
capital thereof, even if a fishpond or a
real right thereto could become part of
its assets.
FACTS: Petitioner Mauricio Agad
claims that he and defendant Severino
Mabato are partners in a fishpond
business to which they contributed
P1000 each. Pursuant to the public
instrument is attached to the complaint
as Annex "A" — partners in a
fishpond business, to the capital of
which Agad contributed P1,000,
with the right to receive 50% of
the profits; that from 1952 up to
and including 1956, Mabato as
managing partner who handled the
partnership funds, had yearly
rendered accounts of the
operations of the partnership; and
that, despite repeated demands,
Mabato had failed and refused to
render accounts for the years 1957
to 1963. Petitioner filed a complaint
against Mabato to which a copy of the
public instrument evidencing their
partnership is attached. Aside from the
share of profits (P14,000) and
attorney’s 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 the complaint 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 the fishpond
referred in said instrument had not
been attached thereto. 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 inventory of said property
is not made, signed by the parties;
and attached to the public instrument
ISSUE: W/N "immovable property
or real rights" have
been contributed to the
partnership under consideration.
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
business.” Thus, Mabato’s contention
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 was contributed to the
partnership. Therefore, Article 1773 of
the Civil Code finds no application in the
case at bar. Case remanded to the
lower court for further proceedings.
II. OBLIGATIONS OF PARTNERS
THE GREAT COUNCIL OF THE
UNITED STATES OF THE IMPROVED
ORDER OF RED MEN v. THE
VETERAN ARMY OF THE
PHILIPPINES (G.R. No. 3186;
March 7, 1907)
FACTS: Article 3 of the Constitution of
the Veteran Army of the Philippines
provides that “The object of this
association shall be to perpetuate the
spirit of patriotism and fraternity those
men who upheld the Stars and Stripes
in the Philippine Islands during the
Spanish war and the Philippine
insurrection, and to promote the welfare
of its members in every just and
honorable way; to assist the sick and
afflicted and to bury the dead, to
maintain among its members in time of
peace the same union and harmony
with which they served their country in
times of war and insurrection.”
Article 5 provides that: “This association
shall be composed of –
(a) A department.
(b) Two or more posts.”
It is also provided in Article 6 that the
department shall be composed of a
department commander, fourteen
officers, and the commander of each
post, or some member of the post
appointed by him. Six members of the
department constitute a quorum for the
transaction of business.
ISSUE: WHETHER OR NOT THE
ASSOCIATION OF VETERANS ARMY OF
THE PHILIPPINES IS CONSIDERED A
PARTNERSHIP IN THE ABSENCE OF
PROFIT AS THE REASON OF IT’S
EXISTENCE
RULING: NO, the association of The
Veteran Army of the Philippines is not
considered as a Partnership, in view of
the definition of the term in Article 1665
of the Civil Code. (“Partnership is a
contract by which two or more persons
bind themselves to contribute money,
property, or industry to a common fund,
with the intention of dividing the profits
among themselves”).
It seems to be the opinion of the
commentators that where the society is
not constituted for the purpose of gain,
it does not fall within this article of the
Civil Code. Such an organization is fully
covered by the Law of Associations of
1887, but that law was never intended
to be enforced in the Philippine Islands.
Article 1695 of the Civil Code provides
that: “Should no agreement have been
made with regard to the form of
management, the following rules shall
be observed: (1) All the partners shall
be considered as agents, and whatever
any one of them may do by himself
shall bind the partnership; but each one
may oppose the act of the others before
they may have produced any legal
effect.” One partner, therefore, is
empowered to contract in the name of
the partnership only when the articles of
partnership make no provision for the
management of the partnership
business.
In the case at bar the Court think that
the articles of the Veteran Army of the
Philippines do so provide. It is true that
an express disposition to that effect is
not found therein, but the Court thinks
one may be fairly deduced from the
contents of those articles.
LEOPOLDO CRIADO, plaintiff-
appellant,
vs.
GUTIERREZ HERMANOS,
defendant-appellant.
37 Phil 883 March 23, 1918
FACTS
Leopoldo Criado filed a complaint
against the firm of Gutierrez Hermanos
for the recovery of a sum of money.
The proceedings in the Court of First
Instance having been reopened upon
petition by plaintiff, on May 24, 1915,
the judge ordered the defendant
Gutierrez Hermanos to render within a
period of twenty days a detailed
account, supported by vouchers, of the
share which the plaintiff might have in
the capital stock of said firm up to that
date. In compliance with this order,
defendant presented an account
certified by the bookkeeper of the firm
of Gutierrez Hermanos on June 3 of the
same year.
In view of the fact that the defendant
firm had not complied with the order of
the court in respect to the account
presented, counsel for plaintiff moved in
writing that the clerk of court,
McMicking, be appointed so that, in his
presence and in that of the parties, G.
B. Wicks might proceed to make true
liquidation of plaintiff's said share of the
capital stock of the firm of Gutierrez
Hermanos, since he began his
connection therewith, on January 1,
1900, until his separation therefrom, on
December 31, 1911. Said motion was
accompanied by an affidavit in which
the plaintiff Leopoldo Criado declared
under oath that he had examined the
accounts presented by the defendant
referring to his capital in that firm and
that said accounts were based upon a
false debit balance of P26,349.13 — a
balance which had been previously
impeached by the affiant as well as the
accounts from which said sum is sought
to be derived.
After a rehearing of the case and an
examination of George B. Wicks was
made regarding the contents of the
report that he submitted after studying
for that purpose the books and other
documents placed at his disposal by the
defendant — to which report he
attached several documents in proof or
substantiation of the different items
mentioned in said report — in view of
the result and the evidence adduced by
the parties, and by the said
commissioner's report duly supported
by vouchers, the court rendered the
judgment aforementioned, on
September 11, 1916. This motion was
denied, exception was taken, and, upon
receipt of the proper bill of exceptions,
both appeals were forwarded in the in
the usual manner.
Counsel for the defendant-appellant
assails in general the judgment
appealed from because the trial court
did not determine the issues raised in
the first, second, third, fourth, sixth,
seventh, eighth, ninth, and tenth causes
of action, and in defendant's cross-
complaint; and inasmuch as in the
judgment the contrary appears with the
exception of the first cause of action,
the court will now proceed to examine
each of the causes of action referred to
in the cross-complaint filed by the latter
in its answer.
The first cause of action consists in the
obligation assumed by Miguel Alonso,
formerly one of the general partners
and manager of the firm of Gutierrez
Hermanos, to pay to the plaintiff
Leopoldo Criado, and sum P1,100 by
reason of the contract of loan prevent
plaintiff from suing for the recovery of
that debt an action against the testate
or intestate estate of the debtor who
died without having paid his debt; the
other partner Miguel Gutierrez de Celis,
manager of the firm, succeeded in
persuading the plaintiff by promising to
return said sum to Criado — this not
being a strange obligation, for at the
time of his death the deceased debtor
Miguel Alonso, was a partner in the firm
of Gutierrez Hermanos and had a share
in the firm's assets. But the fact is that
from 1898, when Alonso died, until
1912, the date the complaint was filed,
such settlement had already been made
of the decedent's said share and in spite
of the attempts to collect made by the
creditor he was unable to recover the
loan.
ISSUE
Whether or not the act of the partner
Alonso will hold the partnership obliged
to pay the sum involved?
HELD
No. Even on the supposition that at the
time of his death the debtor Miguel
Alonso certainly and positively left this
debt and that in order to avoid judicial
proceedings on the part of the creditor,
Miguel Gutierrez de Celis subrogated
and put himself in the place of the
debtor, binding himself to pay said
amount to plaintiff, yet, in view of the
fact that said, loan was made as an
independent private act, unconnected
with the mercantile operations of the
firm of Gutierrez Hermanos, and that
the record does not duly show that this
firm, though its manager assumed the
obligation to reimbursed the sum, there
is no provision of law to warrant us in
holding that the firm of Gutierrez
Hermanos is obliged to pay the amount
claimed by the plaintiff as the subject-
matter of his first cause of action. The
defendant should also be absolved from
the complaint by the first cause of
action
JOSE GARRIDO, Plaintiff-Appellant, v.
AGUSTIN ASENCIO, Defendant-
Appellee.
G.R. No. L-4281. March 30, 1908
Facts:
Garrido and Asencio were members of a
partnership doing business under the
firm name of Asencio y Cia. The
business of the partnership did not
prosper and it was dissolved by mutual
agreement of the members. Garrido
brings this action to recover from
Asencio, who appears to have been left
in charge of the books and the funds of
the firm, the amount of the capital
which he had invested in the business.
The defendant, alleging that there had
been considerable losses in the conduct
of the business of the partnership,
denied that there was anything due the
plaintiff as claimed, and filed a cross
complaint wherein he prayed for a
judgment against the plaintiff for a
certain amount which he alleged to be
due by the plaintiff under the articles of
partnership on account of plaintiff’s
share of these losses.
The trial court found that the evidence
substantially sustains the claim of the
defendant as to the alleged losses in the
business of the partnership and gave
judgment in his favor.
Issue:
Whether or not the statement of
account of the partnership of Asencio y
Cia. submitted by the defendant is a
competent and sufficient evidence in
this case
Ruling:
It appears from the record that by
mutual agreement the Asencio had
general charge and supervision of the
books and funds of the firm, but it
appears that these books were at all
times open to the inspection of Garrido,
and there is evidence which tends to
show that the plaintiff himself made
entries in these books touching
particular transactions in which he
happened to be interested.
At the trial the principal question at
issue was the amount of the profits or
losses of the business of the partnership
during the period of its operation. The
plaintiff made no allegation as to profits,
but denied defendant’s allegation as to
the losses. The defendant in support of
his allegations offered in evidence the
estado de cuentas (general statement
of accounts) of the partnership,
supported by a number of vouchers,
and by his own testimony under oath as
to the accuracy and correctness of the
items set out therein. Garrido assigns
as error the admission of this
account on the ground that the
books of the partnership were not
kept in accordance with the
provisions of Title III, Book I, of
the Code of Commerce.
No objection was made to its admission
in the court below; and further, because
in any event it was admissible under the
provisions of section 338 of the Code of
Civil Procedure as memorandum used to
refresh the memory of the witness.
(Tan Machan v. Gan Aya, 3 Phil. Rep.,
684.) We think further that in view of
the testimony of record that the plaintiff
jointly with the defendant kept these
books, made entries therein, and was
responsible with him therefor, the
doctrine laid down in Behn, Meyer &
Co., v. Rosatzin (5 Phil. Rep., 660) is
applicable in this case, and the
correctness of the entries in these
books must be taken to be admitted by
him, except so far as it is made to
appear that they are erroneous as a
result of fraud or mistake.
It appears from the record that the
statement of account, the vouchers, and
the books of the company were placed
at the disposition of the plaintiff for
more than six weeks prior to the trial,
and that during the trial he was given
every opportunity to indicate any
erroneous or fraudulent items appearing
in the account, yet he was unable, or in
any event he declined to specify such
items, contenting himself with a general
statement to the effect that there must
be some mistake, as he did not and
could not believe that the business had
been conducted at a loss.
DAN FUE LEUNG, petitioner , vs.
HON. INTERMEDIATE APPELLATE
COURT and LEUNG YIU,
respondents.
(RIGHT TO DEMAND AN
ACCOUNTING)
Facts:
About the time the Sun Wah Panciteria
started to become operational, the
private respondent gave P4,000.00 as
his contribution to the partnership,
wherein the petitioner acknowledged his
acceptance of the P4,000.00 by affixing
his signature thereto. Furthermore, the
private respondent received from the
petitioner the amount of P12,000.00
covered by the latter's Equitable
Banking Corporation Check from the
profits of the operation of the
restaurant for the year 1974.
Petitioner contended that he did not
receive any contribution at the time he
started the Sun Wah Panciteria. He
used his savings from his salaries as an
employee at Camp Stotsenberg in Clark
Field and later as waiter at the Toho
Restaurant amounting to a little more
than P2,000.00 as capital in establishing
Sun Wah Panciteria. To bolster his
contention that he
was the sole owner of the restaurant,
the petitioner presented various
government licensesand permits
showing the Sun Wah Panciteria was
and still is a single proprietorship
solelyowned and operated by himself
alone. Fue Leung also flatly denied
having issued to the private respondent
the receipt and the Equitable Banking
Corporation's Check
No. 13389470 in the amount of
P12,000.00
RTC and IAC both ruled that the
private respondent is a partner of the
petitioner in the setting up and
operations of the panciteria.
ISSUE: W/N LEUNG YIU IS A PARTNER
AND MAY ASK FOR AN ACCOUNTING
OF HIS INTERESTS IN THE
PARTNERSHIP?
RULING: Yes
The Court ruled that, the private
respondent is a partner of the petitioner
in Sun Wah Panciteria. The requisites
of a partnership which are — 1) two or
more persons bind themselves to
contribute money, property, or industry
to a common fund; and 2) intention on
the part of the partners to divide the
profits among themselves (Article 1767,
Civil Code; Yulo v. Yang Chiao Cheng,
106Phil. 110) — have been established.
As stated by the respondent, a partner
shares not only
in profits but also in the losses of the
firm. If excellent relations exist among
the partners at the start of business and
all the partners are more interested in
seeing the firm grow rather than get
immediate returns, a deferment of
sharing in the profits is perfectly
plausible. It would be incorrect to state
that if a partner does not assert his
rights anytime within ten
years from the start of operations, such
rights are irretrievably lost. The private
respondent's cause of action is
premised upon the failure of the
petitioner to give him the agreed profits
in the operation of Sun Wah Panciteria.
In effect the private respondent was
asking for an accounting of his interests
in the partnership.
It is Article 1842 of the Civil Code in
conjunction with Articles 1144 and 1155
which is applicable. Article 1842 states:
"The right to an account of his interest
shall accrue to any partner, or his legal
representative as against the winding
up partners or the surviving partners or
the person or partnership continuing the
business, at the date of dissolution, in
the absence or any agreement to the
contrary."
Regarding the prescriptive period within
which the private respondent may
demand an accounting, Articles 1806,
1807, and 1809 show that the right to
demand an accounting exists as long as
the partnership exists. Prescription
begins to run only upon the dissolution
of the partnership when the final
accounting is done.
III.OBLIGATIONS OF THE
PARTNERS W/ REGARD TO THIRD
PERSONS
Sharruf & Co. v Baloise
Petitioners: Sharuff & Eskenazi,
Salomon Sharruf & Elias Eskenazi
Respondents: Baloise Fire
Insurance Co., Sun Insurance
Office, Ltd., and Springfield
Insurance Co.
FACTS:
 June & July, 1933 – Salomon
Sharruf & Elias Eskenazi were
doing business under the firm
name of Sharruf & Co. As they
had applied to the defendant
companies for insurance of the
merchandise they had in stock,
their representative (P.E.
Schiess) examined and assessed
such merchandises.
 July 25, 1933 – The defendant
insurance companies issued
insurance policies in the amount
of Php25, 000 in the name of
Sharruf & Co. Then an additional
policy was issued, in the sum of
of Php 15,000 in favor of said
firm Sharruf & Co., raising the
total amount of the insurance on
said merch to Php 40,000.
 August 26, 1933 – plaintiffs
executed a contract of
partnership between themselves
wherein they substituted the
name of Sharruf & Co. with the
Sharruf & Eskenazi, stating that
Elias Eskenazi contributed to the
partnership as his capital—goods
valued at Php 26, 299.94. It was
likewise stated in the contract
that Salomon Sharruf brought to
said partnership (as his capital)
goods valued at Php 24,205.10.
The total value of the
merchandise contributed by both
partners amounted to
Php50,505.04.
 Part of the merchandise (mostly
were textiles) was sold for
Php8,000, leaving goods worth
Php 43,000. In all there were
 from 60 – 70 bolts of silk. All the
goods, most of which were
alumni kitchen utensils, various
porcelain & glass wares, & other
articles of stucco, were
contained in about 39 or 40
cases. The last time the plaintiffs
were in the building was on
September 19, 1933 at 4 PM. Up
to the month of September
1933, about 30 or 40 cases of
merchandise belonging to the
plaintiffs were in Robles’ garage
at No. 1012 Mabini Street.
 September 22, 1933 – at about
12:41 AM, the fire alarm bell
rang in the different stations in
the city. The firemen of the San
Nicolas Fire Station (headed by
Capt. Charles Baker) were the
first to arrive at the scene of the
fire, followed by Captain Thomas
McIntyre (Sta Cruz Fire Station)
who arrived at 12:44 AM.
 Having found the door at No.
301, Muelle de la Industria
Street, where the building was in
flames, locked, the firemen
pumped water on the upper part
of the building & later broke
open the door through which
they entered the premises.
 There is an inflamed liquid
flowing towards the sidewalk,
the flames blazing more
intensely every time water fell
on them. The liquid apparently
came from under the staircase
of said floor. They likewise noted
that the entire space occupied
by the staircase was in flames
except the adjoining room.
 After the fire had been
extinguished, an earthen pot
containing ashes and the residue
of a certain substance, all of
which smelled of petroleum, was
found by detective Manalo near
the railing fo the stairway of the
2nd floor. At about 8:30 o’ clock
that same morning, detective
Irada found another earthen
pot, one-fourth full of water
smelled of petroleum, under the
staircase of the 1st floor; straw
and excelsior, that also smelled
of petroleum, around said pot, a
red rag in front of the toilet, and
a towel which also smelled of
petroleum can.
 September 23, 1933 –
photographs were taken of the
condition of the different parts
of the building and of the goods
found therein, showing the ff:
1. the interior of the first floor
partially burned, with the
staircase, the doorway, the
wooden partition wall and
pieces of wood scattered on
the floor supposed to be
from the door that was
demolished;
2. 8 or 9 scorched cases, some
closed and others open;
3. the space or hall of the
upper floor partially
damaged by the fire at the
place occupied by the
staircase, with chairs piled
up and unburnt, pieces of
wood and debris apparently
from the cement partition
wall beside the staircase and
the attic;
4. the same space taken from
another angle, with the
partition wall of cement and
stone and some broken
railings of the stairways;
5. a room with partially burnt
partition wall, with a through it, or whether or
wardrobe and a table in the
background, another table in
the center, a showcase near
the wall with porcelain and
iron articles on top thereof
and fallen and burnt window
shutters on the floor;
6. an open unburnt showcase
containing necklaces with
limitation stones and other
jewelry;
7. piled up chairs and boxes
and the burned and
destroyed upper part of the
partition wall and attic;
8. a showcase with a burnt top,
containing kitchen utensils,
tableware, dinner pails and
other articles;
9. a half-open trunk with
protruding ends of cloth,
other pieces of cloth
scattered on the floor, a step
of the staircase and a bench;
10. the partially destroyed attic
and wires wound around the
beams;
11. another view of the same
attic from another angle; and
12. on the 27th of said month
and year, the following
photographs were taken:
 presenting a close-up of
the beams and electric
wiring on September 25,
1933, was of the opinion
that the wires wound
around the beam and a
nail might have caused
the fire, but he could not
assure whether any of
the wires was burned
due to an electrical
discharge the passed
not the fire started from
the lighting system. In
the burned building the
plaintiffs kept petroleum
used for cleaning the
floor.
Issue: WON Salomon Sharruf and Elias
Eskenazi had juridical personality to
bring this action, either individually or
collectively, and whether or not they
had insurable interest.
Ruling:
 Yes. Salomon Sharruf and Elias
Eskenazi were doing business
under the firm name of Sharruf
& Co. in whose name the
insurance policies were issued,
Elias Eskenazi having paid the
corresponding premiums.
 In Lim Cuan Sy vs. Northern
Assurance Co, this court said: A
policy insuring merchandise
against fire is not invalidated by
the fact that the name of the
insured in the policy is
incorrectly written "Lim Cuan Sy"
instead of "Lim Cuan Sy & Co.",
the latter being the proper legal
designation of the firm, where it
appears that the designation
"Lim Cuan Sy" was commonly
used as the name of the firm in
its business dealings and that
the error in the designation of
the insured in the policy was not
due to any fraudulent intent on
the part of the latter and did not
 mislead the insurer as to the promissory note for P9,440.00, payable
extent of the liability assumed. in twelve (12) equal monthly
 In the present case, while it is installments of P786.63, the first
true that at the beginning the installment payable on or before May
plaintiffs had been doing 22, 1961 and the subsequent
business in said name of installments on the 22nd day of every
"Sharruf & Co.", insuring their month thereafter, until fully paid, with
business in said name, and upon the condition that failure to pay any of
executing the contract of said installments as they fall due would
partnership on August 26, 1933, render the whole unpaid balance
they changed the title thereof to immediately due and demandable.
"Sharruf & Eskenazi," the
membership of the partnership Having failed to receive the installment
in question remained due on July 22, 1961, the plaintiff sued
unchanged, the same and only the defendant company for the unpaid
members of the former, balance amounting to P7,119.07.
Salomon Sharruf and Elias Benjamin C. Daco, Daniel A. Guizona,
Eskenazi, being the ones Noel C. Sim, Romulo B. Lumauig, and
composing the latter, and it does Augusto Palisoc were included as co-
not appear that in changing the defendants in their capacity as general
title of the partnership they had partners of the defendant company.
the intention of defrauding the Daniel A. Guizona failed to file an
herein defendant insurance answer and was consequently declared
companies. Therefore, under the in default.
above-cited doctrine the
responsibility of said defendants Subsequently, on motion of the plaintiff,
to the plaintiffs by virtue of the the complaint was dismissed insofar as
respective insurance policies has the defendant Romulo B. Lumauig is
not been altered. If this is true, concerned.
the plaintiffs have juridical
When the case was called for hearing,
personality to bring this action.
the defendants and their counsels failed
to appear notwithstanding the notices
ISLAND SALES, INC., plaintiff- sent to them. Consequently, the trial
appellee vs. UNITED PIONEERS court authorized the plaintiff to present
GENERAL CONSTRUCTION its evidence ex-parte, after which the
COMPANY, ET. AL defendant- trial court rendered the decision
appellant. appealed from.

FACTS The defendants Benjamin C. Daco and

On April 22, 1961, the defendant
company, a general partnership duly
registered under the laws of the
Philippines, purchased from the plaintiff
a motor vehicle on the installment basis
and for this purpose executed a
Noel C. Sim moved to reconsider the
decision claiming that since there are
five (5) general partners, the joint and
subsidiary liability of each partner
should not exceed one-fifth (1/5) of the
obligations of the defendant company.
But the trial court denied the said
motion notwithstanding the conformity
of the plaintiff to limit the liability of the
defendants Daco and Sim to only one-
fifth (1/5) of the obligations of the
defendant company.4 Hence, this
appeal.
ISSUE
Whether the condonation of a
partner’s share in the debts of the
company increases the remaining
partners’ liability?
RULING/HELD
No, according to Art. 1816. All
partners including industrial ones, shall
be liable pro rata with all their
property…
In the instant case, there were
five general partners when the
promissory note in question was
executed for and in behalf of the
partnership. Since the liability of the
partners is pro rata, the liability of the
appellant Benjamin C. Daco shall be
limited to only one-fifth (1/ 5 ) of the
obligations of the defendant company.
The fact that the complaint against the
defendant Romulo B. Lumauig was
dismissed, upon motion of the plaintiff,
does not unmake the said Lumauig as a
general partner in the defendant
company. In so moving to dismiss the
complaint, the plaintiff merely condoned
Lumauig’s individual liability to the
plaintiff.
G.R. No. 24243, January 15, 1926
ILDEFONSO DE LA ROSA,
administrator of the intestate
estate of the deceased Go-Lio,
plaintiff-appellant, vs. ENRIQUE
ORTEGA GO-COTAY, defendant-
appellant
FACTS:
Go-Lio and Vicente Go-Sengco formed a
partnership for the purchase and sale of
articles of commerce. Subsequently, Go-
Lio went to China. Vicente Go-Sengco
died and his son Enrique Ortega Go-
Sengco took charge of the business. In
October 1916, Go-Lio died in China. One
of his three children went to the
Philippines and filed a petition for the
appointment of Ildefonso de la Rosa as
administrator of the intestate estate of
Go-Lio, which was granted by the CFI of
Nueva Ecija. Thereafter, Ildefonso
requested for the winding up of the
business and to deliver to him the
portion corresponding to the late Go-
Lio. Enrique Ortega Go-Coatay refused,
alleging that the business was
exclusively his. Enrique denied all
allegations against him filed by
Ildefonso, he further argued that more
than ten years has passed before the
filing of the complaint, and prayed that
he be absolved therefrom, with costs
against the plaintiff.
The CFI appointed 3 commissioners to
make an inventory, liquidate, and
determine the respective portions of
both parties. The report showed a net
profit of P25,038.70 from 1913 to 1917.
On August 8, 1918, to prevent Justo
Cabo-Chan, one of the commissioners,
from assuming the office of receiver,
the defendant filed a bond in the sum of
P10,000. In view of the appeal taken by
the defendant, the parties entered into
an agreement on December 7, 1921,
whereby they agreed to suspend the
liquidation until the appeal to the
Supreme Court was decided, and
whereby the defendant was authorized
to continue the possession of the
property in litigation, upon giving a
bond in the amount of P25,000, and
cancelling the former bond of P10,000.
After the trial, the lower court adopted
the report made by Cabo-Chan which
showed that the business suffered a
loss of P89, 099.22 and rejected the
report of the other commissioners.
Because of the loss, the plaintiff had
nothing to recover as there was no
profit to divide.
ISSUE:
W/N the loss should be borne by the
partnership.
HELD:
No, the loss should only be borne by the
defendant. On August 2, 1918,
defendant assumed complete
responsibility for the business by
objecting to the appointment of a
receiver as prayed for by the plaintiff
and giving a bond therefor. Until that
date, his acts were those of a managing
partner binding against the partnership;
but thereafter, his acts were those of a
receiver whose authority is contained in
section 175 of the Code of Civil
Procedure. A receiver has no right to
carry on and conduct a business unless
he is authorized or directed by the court
to do so, and such authority was not
given.
IV. DISSOLUTION AND WINDING
UP
GOQUIOLAY v. SYCIP
G.R. No. L-11840. December 10, 1963.
FACTS:
On May 29, 1940, Tan Sin An and
Antonio C. Goquiolay entered into a
general commercial partnership under
the partnership name "Tan Sin An and
Antonio C. Goquiolay", for the purpose
of dealing in real estate. On June 26,
1942, Tan Sin An died, leaving as
surviving heirs his widow, Kong Chai
Pin, and four minor children.
On March 29, 1949, Kong Chai Pin filed
a petition with the probate court for
authority to sell all the 49 parcels of
land to Washington Z. Sycip and Betty
Y. Lee, for the purpose primarily of
settling the debts of Tan Sin An and the
partnership which was granted by the
probate court. Learning about the sale
to Sycip and Lee, the surviving partner
Antonio Goquiolay filed a petition in the
intestate proceedings seeking to set
aside the order of the probate court
approving the sale in so far as his
interest over the parcels of land sold
was concerned.
ISSUE:
W/N the sale is valid.
HELD:
YES. The Supreme Court ruled that it
must be remembered that the articles of
co-partnership here involved expressly
stipulated that:
"In the event of the death of any of the
partners at any time before the
expiration of said term, the co-
partnership shall not be dissolved but
will have to be continued and the
deceased partner shall be represented
by his heirs or assigns in said co-
partnership" (Art. XII, Articles of Co-
Partnership).
The Articles did not provide that the
heirs of the deceased would be merely
limited partners; on the contrary, they
expressly stipulated that in case of
death of either partner "the co-
partnership will have to be continued"
with the heirs or assigns. It certainly
could not be continued if it were to be
converted from a general partnership in
to a limited partnership, since the
difference between the two kinds of
associations is fundamental; and
especially because the conversion into a
limited association would leave the heirs
of the deceased partner without a share
in the management. Hence, the
contractual stipulation does actually
contemplate that the heirs would
become general partners rather than
limited ones.

Knowing that by law a limited partner is

barred from managing the partnership
business or property, third parties who
found the widow possessing and
managing the firm property with the
acquiescence of the surviving partners
were perfectly justified in assuming that
she had become a general partner, and,
therefore, in negotiating with her as
such a partner, having authority to act
for, and in behalf of the firm.