1.

Moran Jr vs CA
Isabelo Moran and Mariano Pecson entered into a partnership
agreement where they agreed to contribute P15k each for the purpose
of printing 95k posters of the delegates to the then 1971 Constitutional
Commission.
Moran shall be in charge in managing the printing of the posters and
Pecson will receive a commission of 1k a month starting from April to
December 1971
Pecson partially fulfilled his obligation to the partnership when he
issued P10k in favor of the partnership.
o Private respondent failed to give his entire contribution in the amount of
P15,000.00. He contributed only P10,000.00.
o Petitioner failed to give any of the amount expected of him. He further failed
to comply with the agreement to print 95,000 copies of the posters. Instead,
he printed only 2,000 copies.
Being a contract of partnership, each partner must share in the profits and losses of the
venture. That is the essence of a partnership.
o Even with an assurance made by one of the partners that they would earn a
huge amount of profits, in the absence of fraud, the other partner cannot claim
a right to recover the highly speculative profits.
o The fantastic nature of expected profits is obvious.
o The failure of the Commission on Elections to proclaim all the 320 candidates
of the Constitutional Convention on time was a major factor in Moran’s
decision not to go on with the printing 95,000 posters.

Moran however did not add anything and, instead, he only used
P4k out of the P10k in printing 2,000 posters. He only printed 2,000
posters because he felt that printing all 95k posters is a losing venture
because of the delay by the COMELEC in announcing the full
delegates. All the posters were sold for a total of P10k.

Pecson sued Moran.

RTC: Ordered Moran to pay Pecson damages.

CA: the decision of the trial court but modified the same as it ordered Moran
to pay P47.5k for unrealized profit; P8k for Pecson’s monthly commissions;
P7k as return of investment because the venture never took off; plus
interest.

WON Moran is obliged to give Pecson the amount of expected profits and the latter’s
commission in the partnership

RULING:

No.

The rule is, when a partner who has undertaken to contribute a sum of money fails to
do so, he becomes a debtor of the partnership for whatever he may have promised to
contribute (Art. 1786, Civil Code) and for interests and damages from the time he
should have complied with his obligation (Art. 1788, Civil Code).

In this case, there was mutual breach.

SANCHO V. LIZARAGA

FACTS:

 The plaintiff brought an action for:

o rescission of a partnership contract between himself and the
defendant
o reimbursement of his 50,000 peso investment
o any other just and equitable remedy
 Defendant – denies generally and specifically all the allegations of the
complaint
o He asked for the dissolution of the partnership, and the payment to
him as its manager and administrator

CFI: The defendant had not contributed all the capital he had bound himself to invest
hence it demanded that the defendant liquidate the partnership.
o declared it dissolved on account of the expiration of the period for
which it was constituted
o ordered the defendant, as managing partner, to proceed without
delay to liquidate it, submitting to the court the result of the liquidation
together with the accounts and vouchers

The plaintiff appealed from said decision praying for the rescission of the partnership
contract between him and the defendant in accordance with Art. 1124.

ISSUE:

WON plaintiff acquired the right to demand rescission of the partnership contract
according to article 1124 of the Civil Code

RULING:

No.

Owing to the defendant's failure to pay to the partnership the whole amount which he
bound himself to pay, he became indebted to it for the remainder, with interest and any
damages occasioned thereby, but the plaintiff did not thereby acquire the right to
demand rescission of the partnership contract according to article 1124 of the Code.
This article cannot be applied to the case in question, because it refers to the resolution
of obligations in general, whereas article 1681 and 1682 specifically refer to the contract
of partnership in particular. And it is a well-known principle that special provisions
prevail over general provisions.
Uy vs. Puzon
Puzon entered into a contract with the Republic of the Philippines for
the construction of a road and 5 bridges.
However, Puzon found difficulty in accomplishing both projects, so he
established a partnership with Uy as sub-contractor of the projects for
financial assistance.
 the profits shall be divided equally between them;
 the resulting partnership is “UP Construction
Company”.
The partners agreed to contribute P50, 000 each as capital.
However, Puzon failed to pay but promised to contribute his share as
soon as his application of loan with the PNB shall be approved.
Uy gave Puzon advance contribution of his share in partnership. He was
entrusted with the management of the project since Puzon is busy with
his other projects;
 whatever expense Uy may incur shall be considered
part of his contribution.
Upon approval of Puzon’s loan with the PNB, he gave Uy P60, 000 for
reimbursement of Uy’s contribution and Puzon’s contribution to the
partnership capital.
 To guarantee the payment of the loan, Puzon
assigned to PNB all payments to be received on
account of the contracts with the Bureau of Public
Highways for the construction; (this was done
without the knowledge and consent of Uy).
Financial demands of the project increased, thus, Uy called on Puzon
to place his capital contribution; Puzon failed to do so.
Uy thereafter sent letters of demand to which Puzon replied that he’s
not capable of putting additional capital.
> Puzon wrote UP Construction Company terminating their
subcontract agreement.
Because Uy was not allowed in the office of UP Construction
Company and his authority to deal with BPH was revoked:
 he instituted an action against Puzon seeking the
dissolution of the partnership and payment of
damages for the violation of the latter of the terms
of their partnership agreement.
RTC: found that Puzon failed to contribute his share in the capital of the
partnership and caused the failure of partnership to realize expected
profits.
 The court ordered the dissolution of the partnership
and Puzon to pay Uy a certain sum.
WON Puzon failed to comply with his obligation of paying the capital contribution to the
company
RULING:
Yes.
According to the court, there was failure on the part of Puzon to contribute capital to
the partnership. When his loan with PNB was approved, he only gave P60,000 to Uy;
P40,000 was for reimbursement to the payments made by Uy and the other P20,000
was for the capital contribution. Thereafter, Puzon never made additional
contribution.
Also, it was found by the SC that Puzon misapplied partnership funds by assigning all
payments for the projects to PNB.
Such assignment was prejudicial to the partnership since the partnership only received
a small share from the total payments made by the Bureau of Public Highways. As a
result, the partnership was unable to discharge its obligations.
UNITED STATES v. CLARIN
Doctrine: The action of a partner who furnished the capital for the recovery of
his money is NOT a criminal action for estafa, but a civil one arising from the
partnership contract for a liquidation of the partnership and a levy on its assets
if there should be any.:
 Pedro Larin delivered to Pedro Tarug P172.00 in order for Tarug,
Eusebio Clarin and Carlos de Guzman to buy and sell mangoes,
believing that he could make some money out of the business.
 Larin made an agreement with the 3 men that the profits will be divided
equally among the 4 of them.
 Tarug, Clarin, de Guzman traded in mangoes and obtained P203.00;
however, they did not comply with the terms of the contract –
 that is, to deliver to Larin his half of the profits.
 They also did not render him any account of the capital.
sale of mangoes, and, even though he had reserved the capital and
conveyed only the usufruct of his money, it would not devolve upon
his 3 partners to return his capital to him, but upon the partnership of
which he himself formed part.
 The P172.00 having been received by the partnership, the business
commenced and profits accrued, the action that lies with the
partner who furnished the capital for the recovery of his money
is NOT a criminal action for estafa, but a civil one arising from
the partnership contract for a liquidation of the partnership and
a levy on its assets if there should be any.
 The provision of estafa in the Penal Code does not include money
received for a partnership; otherwise the result would be that, if the
partnership, instead of obtaining profits, suffered losses, as it could
not be held liable civilly for the share of the capitalist partner who
reserved the ownership of the money brought in by him, it would have
to answer to the charge of estafa, for which it would be sufficient to
argue that the partnership had received the money under obligation to
return it.

 This led Larin to charge them with the estafa, but the provincial fiscal
filed an information only against Clarin.

Clarin was accused of appropriating to himself not only P172.00 but also
the share of profits that belonged to Larin, amounting to P15.50.

CA: charged Clarin with estafa and ordered him to return to Larin P172.00
and P30.50 as Larin’s share to the profits.

Issue: WON Clarin is guilty of estafa -> NO.

Held:

 The Court held that when 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, a contract of
partnership is formed (Art. 1165, CC).

 When Larin put the P172.00 into the partnership, he invested his
capital with the risks or benefits of the business of the purchase and
LIWANAG V. CA
FACTS:
 Liwanag and Tabligan went to the house of complainant Rosales and asked
her to join them in the business of buying and selling cigarettes.
o Rosales readily agreed.
 Under their agreement:
o Rosales would give the money needed to buy the cigarettes.
o Liwanag and Tabligan would act as her agents with a corresponding
to her if the goods are sold.
 If not sold, the money would be returned to Rosales.
Consequently, Rosales gave several cash advances to Liwanag and
Tabligan.
 During the first months, Liwanag and Tabligan made periodic visits to Rosales
to report on the progress of the transactions.
o The visits suddenly stopped, and all efforts by Rosales to obtain
information regarding their business proved futile,
The language of the receipt could not be any clearer. It indicates that the money
delivered to Liwanag was for a specific purpose, that is, for the purchase of cigarettes,
and in the event the cigarettes cannot be sold, the money must be returned to Rosales.
Thus, even assuming that a contract of partnership was indeed entered into by
and between the parties, we have ruled that when money or property have been
received by a partner for a specific purpose (such as that obtaining in the instant
case) and he later misappropriated it, such partner is guilty of estafa.
Neither can the transaction be considered a loan, since in a contract of loan once the
money is received by the debtor, ownership over the same is transferred. Being the
owner, the borrower can dispose of it for whatever purpose he may deem proper.
It is evident that Liwanag could not dispose of the money as she pleased because it
was only delivered to her for a single purpose, namely, for the purchase of cigarettes,
and if this was not possible then to return the money to Rosales. Since in this case
there was no transfer of ownership of the money delivered, Liwanag is liable for
conversion under Art. 315, par. l(b) of the Revised Penal Code.

 Alarmed by this development and believing that the amounts she advanced
were being misappropriated, Rosales filed a case of estafa against Liwanag.

RTC: Liwanag guilty as charged.

CA: Affirmed RTC’s decision with modification.

ISSUE:

WON Liwanag can be acquitted from the crime of estafa because she and Rosales
formed a partnership

RULING:

No.

Estafa is a crime committed by a person who defrauds another causing him to suffer
damages, by means of unfaithfulness or abuse of confidence, or of false pretenses of
fraudulent acts.

The elements of estafa are present, as follows: (1) that the accused defrauded another
by abuse of confidence or deceit; and (2) that damage or prejudice capable of pecuniary
estimation is caused to the offended party or third party, and it is essential that there
be a fiduciary relation between them either in the form of a trust, commission or
administration.
TEAGUE VS MARTIN
Teague and Martin formed a partnership for the operation of a fish business
and similar commercial transactions, which by mutual consent was called
"Malangpaya Fish Co.," with a capital of P35,000.
 Teague paid P25,000, Martin P5,000, Maddy P2,500, and
Golucke P2,500;
Teague was named the general partner; that the share in the profits and
losses is in proportion to the amount of contributed capital; that there was no
agreement as to the duration of the partnership;
The partnership purchased and owns a lighter (Lapu-Lapu), a motorship
(Barracuda), and other properties, which are in the possession of the
defendants who are making use of them.
CA:, the plaintiff further contended that he is the managing partner of the
partnership and the three properties (Lapu-Lapu, Barracuda & Ford truck) are
properties of the partnership since they were paid from the profits of the
partnership thus do not belong to him.
ISSUES:
WON the plaintiff was the manager of the unregistered partnership of
Malangpaya Fish Company.
Yes, the powers and duties of the three partners are specifically defined, and
that each of them was more or less the general manager in his particular part
of the business. The plaintiff’s powers and duties were confined and limited to
"selling fish in Manila and the purchase of supplies."
WON the three properties are owned by the partnership.

It was alleged that it is the best interest of the parties to have a receiver No, the Lapu-Lapu, Barracuda, and the adding machine, although paid for by
appointed pending this litigation, to take possession of the properties, and he the partnership funds, are owned by petitioner for it was registered in his own
prays that the Philippine Trust Company be appointed receiver, and for name.
judgment dissolving the partnership, with costs.
He is estopped from claiming otherwise. The purchase of the properties in
Each of the defendants filed a separate answer, but of the same nature. It is question are not within the scope of plaintiff’s authority. It is but right that the
then alleged, among others, plaintiff reimburse the partnership for the use of its funds. However, it noted
that the partnership also made use of the Lapu-Lapu. In the interest of justice,
a) that Maddy will have charge of the Barracuda and the navigating of
the plaintiff should be compensated for such use.
the same, salary P300 per month;
b) Martin will have charge of the southern station, cold stores,
commissary and procuring fish, salary P300 per month;
c) Teague will have charge of selling fish in Manila and purchasing
supplies. No salary until business is on paying basis.

CFI: (1) dissolving the partnership and liquidating its assets;

(2) that the barge Lapu-Lapu as well as the Ford truck and adding machine
belong exclusively to Teague, but he must return to and reimburse the
partnership the amount which was taken from its funds for the purchase of the
Lapu-Lapu and the Ford truck.
EVANGELISTA V. ABAD SANTOS antagonistic business to the partnership, the petitioners, subsequent of petitioners’
answer to the complaint, petitioners reached the decision that respondent be excluded
FACTS: from and deprived of her alleged share in the interest or participation as an alleged
industrial partner in the net profits or income of the partnership.
 October 9, 1954 – a co-partnership was formed under the name of
"Evangelista & Co." The act of exclusion is premised on the ground that respondent has always been a
 June 7, 1955 – the AOCoP was amended as to include respondent, Estrella partner, an industrial partner. In addition, the Court further held that with the
Abad Santos, as industrial partner, with petitioners Domingo C. Evangelista, consideration of Article 1767 that ‘By a contract of partnership two or more persons
Jr., Leonardo Atienza Abad Santos and Conchita P. Navarro, the original bind themselves, to contribute money, property, or industry to a common fund, with the
capitalist partners, remaining in that capacity, with a contribution of P17,500 intention of dividing profits among themselves’, the services rendered by respondent
each. may legitimately be considered the respondent’s contribution to the common fund.
 Abad Santos filed suit against the three (3) capitalist partners alleging:
o That the partnership had been paying dividends to the partners
except to her
o That despite her demands, the defendants had refused and
continued to refuse and let her examine the partnership books or to
give her information regarding the partnership affairs to pay her any
share in the dividends declared by the partnership.
o She therefore prayed that the defendants be ordered to render
accounting to her of the partnership business and to pay her
corresponding share in the partnership profits after such accounting,
plus attorney's fees and costs.

CFI: The court found for the plaintiff and rendered judgement "declaring her an
industrial partner of Evangelista & Co., ordering the defendants to render an accounting
of the business operations of the partnership and to pay the plaintiff such amounts as
may be due as her share in the partnership profits and/or dividends.

CA: Affirmed judgement of CFI.

ISSUE:

Whether the respondent (Santos) is an industrial partner as claimed by her or merely

a profit sharer

RULING:

Yes.

The Court upheld that respondent is an industrial partner of the company.

Article 1789 provides that ‘An industrial partner cannot engage in business for himself,
unless the partnership expressly permits him to do so; and if he should do so, the
capitalist partners may either exclude him from the firm or avail themselves of the
benefits which he may have obtained in violation of this provision, with a right to
damages in either case.’

Since 1954 and until after the promulgation of the decision of the appellate court, Abad
Santos has served as a judge of the City Court of Manila and had been paid for services
rendered allegedly contributed by her to the partnership. Though being a judge of the
City Court of Manila cannot be characterized a business and/or may be considered an
SONCUYA V. DE LUNA

FACTS:

 Plaintiff Josue Soncuya filed a complaint against respondent for damages as

a result of the fraudulent administration of the partnership, “Centro Escolar de
Senoritas” of which petitioner and the deceased Avelino Librada were
members.
 Carmen de Luna interposed a demurrer based on the following grounds:
o That the complaint does not contain facts sufficient to constitute a
cause of action
o That the complaint is ambiguous, unintelligible and vague.

ISSUE:

WON Josue Soncuya can claim damages against De Luna

RULING:

No.

For the purpose of adjudicating to plaintiff damages which he alleges to have suffered
as a partner, it is necessary that a liquidation of the business be made that the end
profits and losses may be known and the causes of the latter and the responsibility of
the defendant as well as the damages in which each partner may have suffered, maybe
determined.

According to the Supreme Court, the complaint is not sufficient to constitute a cause of
action on the part of the plaintiff as member of the partnership to collect damages from
defendant as managing partner thereof, without previous liquidation. Thus, for a
partner to be able to claim from another partner who manages the general co-
partnership, allegedly suffered by him by reason of the fraudulent administration
of the latter, a previous liquidation of said partnership is necessary.
PO YENG CHEO, vs. LIM KA YAM, defendant-appellant.
Po Yeng Cheo, is the sole heir of one Po Gui Yao, deceased, inherited the interest left
by Po Gui Yao in a business conducted in Manila under the style of Kwong Cheong
Tay.
This business had been in existence in Manila for many years prior
to 1903, as a mercantile partnership, with a capitalization of P160,000,
engaged in the import and export trade;
After the death of Po Gui Yao there are seven persons were interested therein as
partners in the amounts set opposite their respective names, to wit: Po Yeng Cheo,
P60,000; Chua Chi Yek, P50,000; Lim Ka Yam, P10,000; Lee Kom Chuen, P10,000;
Ley Wing Kwong, P10,000; Chan Liong Chao, P10,000; Lee Ho Yuen, P10,000.
The manager of Kwong Cheong Tay, for many years prior of its complete cessation
from business in 1910, was Lim Ka Yam, the original defendant herein.
Among the properties pertaining to Kwong Cheong Tay and consisting part of its
assets were ten shares of a total par value of P10,000 in an enterprise conducted under
the name of Yut Siong Chyip Konski and certain shares to the among of P1,000 in the
Manila Electric Railroad and Light Company, of Manila.
In the year 1910 Kwong Cheong Tay ceased to do business, owing principally to the
fact that the Po Yeng Cheo ceased at that time to transmit merchandise from
Hongkong, where he then resided.
Lim Ka Yam appears at no time to have submitted to the partners any formal
liquidation of the business, though repeated demands to that effect have been made
upon him by the plaintiff.
RTC: rendered judgment in favor Of Po Yeng Cheo, to recover of the defendant Lim
Yock Tock, as administrator of Lim Ka Yam, the sum of sixty thousand pesos
(P60,000), constituting the interest of the plaintiff in the capital of Kwong Cheong
Tay, plus the plaintiff's proportional interest in shares of the Yut Siong Chyip Konski
and Manila Electric Railroad and Light Company.
ISSUE: WON the decision of the trial court was proper in the liquidation of the
partnership.
RULING: NO.
It was erroneous in any event to give judgment in favor of the plaintiff to the extent of
his share of the capital of Kwong Cheong Tay. The managing partner of a mercantile
enterprise is not a debtor to the shareholders for the capital embarked by them in the
business; and he can only be made liable for the capital when, upon liquidation of the
business, there are found to be assets in his hands applicable to capital account.
In the present case, the shares referred to--constituting the only assets of Kwong
Cheong Tay--have not been converted into ready money and doubtless still remain in
the name of Kwong Cheong Tay as owner. Under these circumstances it is impossible
to sustain a judgment in favor of the plaintiff for his aliquot part of the par value of
said shares, which would be equivalent to allowing one of several coowners to recover
from another, without process of division, a part of an undivided property.
In the first place, it is well settled that when a member of a mercantile partnership
dies, the duty of liquidating its affair devolves upon the surviving member, or
members, of the firm, not upon the legal representative of the deceased partner.
(Wahl vs. Donaldson Sim & Co., 5 Phil., 11; Sugo and Shibata vs. Green, 6 Phil., 744)
And the same rule must be equally applicable to a civil partnership clothed with
the form of a commercial association (art. 1670, Civil Code; Lichauco vs. Lichauco,
33 Phil., 350)
Upon the death of Lim Ka Yam it therefore became the duty of his
surviving associates to take the proper steps to settle the affairs of the firm,
and any claim against him, or his estate, for a sum of money due to the
partnership by reason of any misappropriation of its funds by him, or for
damages resulting from his wrongful acts as manager, should be prosecuted
against his estate in administration in the manner pointed out in sections 686
to 701, inclusive, of the Code of Civil Procedure. Moreover, when it appears,
as here, that the property pertaining to Kwong Cheong Tay, like the shares in
the Yut Siong Chyip Konski and the Manila Electric Railroad and Light
Company, are in the possession of the deceased partner, the proper step for
the surviving associates to take would be to make application to the court
having charge to the administration to require the administrator to surrender
such property.
MARTINEZ V. ONG PONG CO. PABALAN VS VELEZ
FACTS:
Pabalan owned two lots, a rural real estate devoted to agricultural
 Pedro Martinez (plaintiff) delivered Php.1,500.00 to Ong Pong Co and Ong purposes and an urban lot.
Lay (defendants).
 Said amount was reflected in a private instrument where the plaintiff and In his desire to put the two lots to productive use, he
defendants agreed that “they are to invest the amount in a store, the profits or
losses of which we are to divide with the former, in equal shares.” The store agreed to enter into a regular mercantile partnership with Walter
business was a failure and the plaintiff demanded from the defendants either Fitton.
to render an accounting of the partnership as agreed to, or to refund him the
Php.1,500.00.
 Ong Pong Co alleged in his defense that his co-defendant Ong Lay, now The agreement stipulates that they form a partnership known by the
deceased, was the one who managed the business. He also alleged that name of “AM Pabalan and Company” with a capital stock at P9,000;
nothing had resulted from the business venture save the loss of the capital of
Php.1,500.00, to which the plaintiff agreed.
that Pabalan would contribute P3,000 in cash while
ISSUE:
Fitton would contribute P6,000 in real property;
Up to what extent is the liability of the partners?
that Pabalan would sell his two lots to Fitton for P6,000; that Pabalan
RULING:
would receive P3,000 of the purchase price while the remaining will be
The partners are liable jointly. his contribution to the capital; and that Fitton would contribute the said
The defendants acted as administrators and as such, they were obliged to render an
two lots as his agreed capital contribution.
accounting of the business.
Pabalan received P3,000 of the purchase price.
Since both failed in this aspect, they are obliged to return the capital. Article 1688 of
the Civil Code (Article 1796 of the New Civil Code) which provides “that the partnership
is liable to every partner for the amounts he may have disbursed on account of the
When Fitton died, he failed to pay into the partnership funds the
same and for the proper interest” does not apply to the case at bar since no other remaining P3,000.
money than the one contributed by the plaintiff was involved.

The court ruled that Ong Pong Co should pay Pedro Martinez the sum of Php.750.00
Owing to the failure of Fitton to comply with his obligation, the
with the legal interest thereon, being liable jointly. properties in question had been entirely unproductive, resulting in losses
and damages to Pabalan.

PABALAN prayed for the rescission of the double contract (partnership

and sale) entered into. Defendant Velez is the administrator of Fitton’s
estate.

ISSUE: WON recission is the proper remedy.

RULING:
Yes, in bilateral contracts, when one of the parties fails to comply with
his engagements, the party prejudiced is entitled to choose between
enforcement of the obligation or a rescission of the contract, with the
payment of damages and interest in either case. In the case at bar,
enforcement cannot be had because the defaulting partner is already
dead. Justice requires the dissolution of the company and the rescission
of the said sale.
Agustin v. Inocencio

The parties, who had been conducting a partnership as industrial

partners without capital, contributed from its profits the sum of P807.28
as a fund toward the construction of a casco for use in their business.
 They they added P3,500, borrowed from Maria del
Rosario, the wife of Inocencio, he being the
managing partner.

It is admitted that this total (a little over P4,300), was the estimated cost
of the casco but in the progress of the work Inocencio found that it called
for additional funds, which he advanced to the amount of P2,024.49..

Although Inocencio failed to notify his partners of the various items

from time to time going to make up this sum, it is shown that the books
were at all times open for the partners inspection, and that, being asked
to examine them, they omitted to do so,

Agustin, representing all the partners, was also present at the

construction of the casco, in charge of the practical work and cognizant
of its needs and its progress.

ISSUE/HELD: WON Inocencio, in borrowing money and advancing

funds, was acting within the scope of his authority as a managing
partner.
YES
The work done in the casco having been within the scope of the
association and necessary to carry out its express object, the borrowing
of the money required to carry it on, with the acquiescence if not with
the affirmative consent of his associates, was not outside the powers
of the managing partner and constitutes a debt for which all the
associates are liable.
RAMNANI V. CA and collected the rentals. Through the industry and genius of Choithram, Ishwar's
property was developed and improved into what it is now.
FACTS:
Justice and equity dictate that the two share equally the fruit of their joint investment
and efforts. Perhaps this Solomonic solution may pave the way towards their
 Ishwar, Choithram and Navalrai, all surnamed Jethmal Ramnani, are brothers
reconciliation. Both would stand to gain. No one would end up the loser. After all, blood
of the full blood. Ishwar and his spouse Sonya had their main business based
is thicker than water.
in New York. Realizing the difficulty of managing their investments in the
Philippines they executed a general power of attorney on January 24, 1966
appointing Navalrai and Choithram as attorneys-in-fact, empowering them to
manage and conduct their business concern in the Philippines
 Choithram entered into two agreements for the purchase of two parcels of
land located in Barrio Ugong, Pasig, Rizal, from Ortigas & Company, Ltd.
Partnership. A building was constructed thereon by Choithram in 1966. Three
other buildings were built thereon by Choithram through a loan of P100,000.00
obtained from the Merchants Bank as well as the income derived from the first
building.
 Sometime in 1970 Ishwar asked Choithram to account for the income and
expenses relative to these properties during the period 1967 to 1970.
Choithram failed and refused to render such accounting. Thereafter, Ishwar
revoked the general power of attorney. Choithram and Ortigas were duly
notified of such revocation on April 1, 1971 and May 24, 1971,
respectively. Said notice was also registered with the Securities and
Exchange Commission on March 29, 1971 and was published in the April 2,
1971 issue of The Manila Times for the information of the general public.
 Nevertheless, Choithram, transferred all rights and interests of Ishwar and
Sonya in favor of his daughter-in-law, Nirmla Ramnani, on February 19, 1973.
 Ishwar and Sonya filed a complaint against Choitram and/or spouses Nirmla
and Moti and Ortigas for reconveyance of said properties or payment of its
value and damages.

ISSUE:
Whether Ishram can recover the entire properties subject in the ligitation

RULING:

No, Ishram cannot recover the entire properties subject.

The Supreme Court held that despite the fact that Choithram, et al., have committed
acts which demonstrate their bad faith and scheme to defraud spouses Ishwar and
Sonya of their rightful share in the properties in litigation, the Court cannot ignore the
fact that Choithram must have been motivated by a strong conviction that as the
industrial partner in the acquisition of said assets he has as much claim to said
properties as Ishwar, the capitalist partner in the joint venture.
Choithram in turn decided to invest in the real estate business. He bought the two (2)
parcels of land in question from Ortigas as attorney-in-fact of Ishwar. Instead of paying
for the lots in cash, he paid in installments and used the balance of the capital entrusted
to him, plus a loan, to build two buildings. Although the buildings were burned later,
Choithram was able to build two other buildings on the property. He rented them out
 credit for the amount so paid, and if it results that there is not enough property in the
partnership to pay him, then the capitalist partners must pay him.
CIA MARITIMA V. MUNOZ
Our conclusion is upon this branch of the case that neither on principle nor on authority
FACTS: can the industrial partner be relieved from liability to third persons for the debts of the
partnership.
 The defendants Francisco Muñoz, Emilio Muñoz, and Rafael Naval formed on
ordinary general mercantile partnership under the name of Francisco Muñoz
& Sons for the purpose of carrying on the mercantile business in the Province
of Albay which had formerly been carried on by Francisco Muñoz.
 In the articles of partnership:
o It is expressly stated that they have agreed to form, and do form, an
ordinary, general mercantile partnership.
o The object of the partnership, as stated in the fourth paragraph of the
articles, is a purely mercantile one and all the requirements of the
Code of Commerce in reference to such partnership were complied
with.
o The articles of partnership were recorded in the mercantile registry
in the Province of Albay.
 Rafael Naval was entitled by the articles of agreement to a fixed salary of
P2,500 as long as he was in charge of the branch office established at Ligao
 The argument of the appellees seems to be that, because no yearly or monthly
salary was assigned to Emilio Muñoz, he contributed nothing to the
partnership and received nothing from it.

Emilio Muñoz was, therefore, a general partner, and the important question in the case
is whether, as such general partner, he is liable to third persons for the obligations
contracted by the partnership, or whether he relieved from such liability, either because
he is an industrial partner or because he was so relieved by the express terms of the
articles of partnership.

ISSUE:

Whether, as such general partner, Muñoz is liable to third persons for the obligations
contracted by the partnership

RULING:

Yes, Muñoz is liable to third persons even if he is an industrial partner.

The Supreme Court held that in limited partnership, the Code of Commerce recognizes
a difference between general and special partners, but in a general partnership there
is no such distinction — all the members are general partners. The fact that some may
be industrial and some capitalist partners does not make the members of either of these
classes alone such general partners.

Our construction of the article is that it relates exclusively to the settlement of the
partnership affairs among the partners themselves and has nothing to do with the
liability of the partners to third persons; that each one of the industrial partners is liable
to third persons for the debts of the firm; that if he has paid such debts out of his private
property during the life of the partnership, when its affairs are settled he is entitled to
NG YA V. SUGBU COMMERCIAL RULING:

FACTS:

ISSUE:

WON Sugbu Commercial should not be held liable because Pow Sun Gee, as the one
who received the payments and issued receipts to Ng Ya, is not authorized to do so
BACHRACH V. LA PROTECTORA
FACTS:
 Nicolas Segundo, Antonio Adiarte, Ignacio Flores and Modesto Serrano
(defendants) formed a civil partnership, called "La Protectora," for the purpose
of engaging in the business of transporting passengers and freight at Laoag,
Ilocos Norte.
 Marcelo Barba, acting as manager, negotiated for the purchase of 2
automobile trucks from E. M. Bachrach for P16,500. Barba paid P3,000 in
cash and for the balance executed promissory notes.
 One of these promissory notes was signed in the following manner:
these trucks was in conformity with the tenor of this document. The promissory notes
constitute the obligation exclusively of "La Protectora" and of Marcelo Barba; and they
do not in any sense constitute an obligation directly binding on the four appellants. Their
liability is based on the fact that they are members of the civil partnership and as such
are liable for its debts
There is no proof in the record showing what the agreement, if any, was made with
regard to the form of management. Under these circumstances it is declared in article
1695 of the Civil Code that all the partners are considered agents of the
partnership. Barba therefore must be held to have had authority to incur these
expenses. But in addition to this he is shown to have been in fact the president or
manager, and there can be no doubt that he had actual authority to incur this obligation.

“P.P La Protectora,
By Marcelo Barba
Marcelo Barba”

 The other 2 notes were signed in the same way but the word “by” was omitted.
It was obvious that in signing the notes, Barba intended to bind both the
partnership and himself.
 The defendants executed a document in which they declared that they were
members of La Protectora and that they had granted to its president full
authority to contract for the purchase of the 2 automobiles. The document
was delivered by Barba to Bachrach at the time the vehicles were purchased.
 Barba incurred a debt amounting to P2,617.57 and Bachrach foreclosed a
chattel mortgage on the trucks but there was still balance.
 To recover the balance, action was instituted against the defendants.
o Judgment was rendered against the defendants.

ISSUE:

Whether or not Barba had authority to incur expenses for the partnership

RULING:

Yes.

Under Art 1804, every partner may associate another person with him in his share. All
partners are considered agents of the partnership. Barba must be held to have
authority to incur these expenses.

He is shown to have been in fact the president/manager, and there can be no doubt
that he had actual authority to incur obligation.

The business conducted under the name of "La Protectora" was evidently that of a civil
partnership; and the liability of the partners to this association must be determined
under the provisions of the Civil Code. The authority of Marcelo Barba to bind the
partnership, in the purchase of the trucks, is fully established by the document executed
by the four appellants upon June 12, 1913. The transaction by which Barba secured
GOQUIOLAY V. SYCIP
FACTS:
 Tan Sin An and Goquiolay entered into a general commercial partnership
under the partnership name “Tan Sin An and Antonio Goquiolay” for the
purpose of dealing in real estate.
o The agreement lodged upon Tan Sin An the sole management of the
partnership affairs.
 The lifetime of the partnership was fixed at 10 years and the Articles of Co-
partnership stipulated that in the event of death of any of the partners
before the expiration of the term, the partnership will not be dissolved
but will be continued by the heirs or assigns of the deceased partner.
o But the partnership could be dissolved upon mutual agreement in
writing of the partners.
o Goquiolay executed a GPA in favor of Tan Sin An.
 The plaintiff partnership purchased 3 parcels of land which was mortgaged to
“La Urbana” as payment of P25,000.
o Another 46 parcels of land were purchased by Tan Sin An in his
individual capacity which he assumed payment of a mortgage debt
for P35K.
o A downpayment and the amortization were advanced by Yutivo and
Co.
o The two obligations were consolidated in an instrument executed by
the partnership and Tan Sin An, whereby the entire 49 lots were
mortgaged in favor of “Banco Hipotecario.”

 Tan Sin An died leaving his widow, Kong Chai Pin and four minor children.
The widow subsequently became the administratrix of the estate.
 Repeated demands were made by Banco Hipotecario on the partnership and
on Tan Sin An.
 Defendant Sing Yee, upon request of defendant Yutivo Sons, paid the
remaining balance of the mortgage debt, the mortgage was cancelled.
 Yutivo Sons and Sing Yee filed their claim in the intestate proceedings of Tan
Sin An for advances, interest and taxes paid in amortizing and discharging
their obligations to “La Urbana” and “Banco Hipotecario.”
 Kong Chai Pin filed a petition with the probate court for authority to sell all the
49 parcels of land.
o She then sold it to Sycip and Lee in consideration of P37K and of the
vendees assuming payment of the claims filed by Yutivo Sons and
Sing Yee.
 Later, Sycip and Lee executed in favor of Insular Development a deed of
transfer covering the 49 parcels of land.
 Hence, the contractual stipulation actually contemplated that the heirs would
 When Goquiolay learned about the sale to Sycip and Lee, he filed a petition
in the intestate proceedings 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.
o Probate court annulled the sale executed by the administratrix w/
respect to the 60% interest of Goquiolay over the properties
Administratrix appealed.

 The decision of probate court was set aside for failure to include the
indispensable parties. New pleadings were filed.
 The second amended complaint prays for the annulment of the sale in favor
of Sycip and Lee and their subsequent conveyance to Insular Development.
 The complaint was dismissed by the lower court hence this appeal.
ISSUE:
Whether or not the lower court erred in holding that the widow succeeded her husband
Tan Sin An in the sole management of the partnership upon Tan’s death
RULING:
No.
Kong Chai Pin (widow of Tan Sin An) became a mere general partner.
By seeking authority to manage partnership property, Tan Sin An’s widow showed that
she desired to be considered a general partner.
By authorizing the widow to manage partnership property (which a limited partner could
not be authorized to do), Goqulay recognized her as such partner, and is now in
estoppel to deny her position as a general partner, with authority to administer and
alienate partnership property.
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 assignees. It
certainly could not be continued if it were to be converted from a general partnership
into 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.
The heirs, in other words, cannot be compelled to become general partners against
their wishes. But because they are not so compellable, it does not legitimately follow
that they may not voluntarily choose to become general partners, waiving the protective
mantle of the general laws of succession. And in the latter event, it is pointless to
discuss the legality of any conversion of a limited partner into a general one. The heir
never was a limited partner, but chose to be, and became, a general partner right
at the start.
become general partners rather than limited ones.

FUE LEUNG V. IAC
FACTS:
 Sun Wah Panciteria 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.
 Lower court ruled in favor of the private respondent.
 Petitioner appealed the trial court's amended decision. However, the
questioned decision was further modified and affirmed by the appellate court.
 Both the trial court and the appellate court declared that the private petitioner
is a partner and is entitled to a share of the annual profits of the restaurant.
 Hence, an appeal to the SC.
o The petitioner argues that private respondent extended 'financial
assistance' to herein petitioner at the time of the establishment of the
Sun Wah Panciteria, in return of which private respondent allegedly
will receive a share in the profits of the restaurant.
o It was, therefore, error for the Appellate Court to interpret or construe
'financial assistance' to mean the contribution of capital by a partner
to a partnership.
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 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.
There shall be a liquidation and winding up of partnership affairs, return of capital, and
other incidents of dissolution because the continuation of the partnership has become
inequitable.
The decision of the respondent court is AFFIRMED with a MODIFICATION that as
indicated above, the partnership of the parties is ordered dissolved.

ISSUE:

WON the private respondent is a partner of the petitioner in the establishment of Sun
Wah Panciteria

RULING:

Yes.
In essence, 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.
o These allegations 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
LEOPOLDO CRIADO VS GUTIERREZ – HERMANOS
Placido Gutierrez de Celis (37%), Miguel Gutierrez de Celis (37%), Miguel
Alonzo (16%), Daniel Perez (5%), and Leopoldo Criado (5%) formed a
partnership called Gutierrez Hermanos.
Perez and Criado were the industrialist partners while the other three are the
capitalist partners which was subsequently dissolved and liquidated in 1903.
independent private act, unconnected with the mercantile operations of
the firm of Gutierrez Hermanos,
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.

Before dissolution, Miguel Alonzo, formerly one of the general partners and
manager of the firm of Gutierrez Hermanos, has an obligation to pay Leopoldo
Criado, the sum P1,100 by reason of the contract of loan executed by the
former to the latter.

And to 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 Leopoldo 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 Alfonso, 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 Alfonso 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.

RTC:, judgment was rendered dismissing LEOPOLDO’S first cause of action

Issue: Whether or not the act of the partner Alonzo will hold the
partnership obliged to pay the sum involved?

Ruling:
NO. Even on the supposition that at the time of his death the debtor Miguel
Alfonso 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