Topic Partnership - Management & Association Digested by: Monica Geller

Title of Case M. TEAGUE, plaintiff-appellant vs. H. Case No. & Date of • G.R. No. 30286
MARTIN, J. T. MADDY and L.H. Promulgation • September 12, 1929
GOLUCKE, defendants-appellees
Ponente J. Johns Court En Banc
Plaintiff/Appellant M. Teague Defendant/Appellee H. Martin, J. T. Maddy and L.H. Golucke
Doctrine (Syllabus)
• WHEN PARTNER MUST ACCOUNT.—Where one party to a partnership, without any authority, takes and uses the money of the firm in
the purchase of property which he acquired and had registered in his own name, in a suit for the dissolution of the partnership, he will be
required to account to his partners for the money which he used in such purchase.
• WHEN PARTNERSHIP SHOULD ACCOUNT.—Where it appears that such partnership had the use and benefit of such property, it will be
required to account to the owner for the reasonable value of its use.
Facts
• Plaintiff alleges that about December 23, 1926, he and the defendants formed a partnership for the operation of a fish business and
similar commercial transactions, which by mutual contest was called "Malangpaya Fish Co," with a capital of P35,000, of which
plaintiff paid P25,000, the defendant Martin P5,000, P2,500, and Golucke P2,500.
• That as such partnership, they agreed to share in the profits and losses of the business in proportion to the amount of capital which each
contributed.
• That the plaintiff was named the general manager to take charge of the business, with full power to do and perform all acts necessary to
carry out of the purposes of the partnership.
• That there was no agreement as to the duration of the partnership.
• That plaintiff wants to dissolve it, but that the defendants refused to do so.
• A statement marked Exhibit A, which purports to be a cash book, is made a part of the complaint. That the partnership purchased and now
owns a lighter called Lapu-Lapu, and a motorship called Barracuda, and other properties.
• That the lighter and the motorship are in the possession of the defendants who are making use of them, to the damage and prejudice of the
plaintiff, for any damage which plaintiff may sustain.
• That it is for the best interest of the parties to have a receiver appointed pending this litigation, to take possession of the properties, and
he prays that the Philippine Trust Company be appointed receiver, and for judgment dissolving the partnership, with costs.
• Each of the defendants filed a separate answer, but the same nature, in which they admit that about December 10, 1926, the plaintiff and
the defendants formed a partnership for the purpose of the equipment of the Manila Fish Co., Inc., and the conduct of a fish
business.
• That the terms of the partnership were never evidenced by a truth and in fact, the partnership was formed under a written plan, of
which each member received a copy and to which all agreed.
• That by its terms the amount of the capital was P45,000, of which the plaintiff agreed to contribute P35,000. That P20,000 of the capital
was to be used for the purchase of the equipment of the Manila Fish Co., Inc. and the balance placed to the checking account of the new
company.
• It is then alleged that "the new owners agree to duties as follows:
A. Capt. Maddy will have charger of the Barracuda and the navigating of the same. Salary P300 per month.
B. Mr. Martin will have charge of the southern station, cold stores, commissary and procuring fish. Salary P300 per month.
C. Mr. Teague will have charge of selling fish in Manila and purchasing supplies. No salary until business is on paying basis,
then the same as Maddy or Martin.
• The principal office shall be in Manila, each party doing any business shall keep books showing plainly all transactions, the books shall
be available at all time for inspections of any member of the partnership.
• Defendant Martin specifically denies the "plaintiff was named general manager of the partnership," and alleged "that all the duties and
powers of the said plaintiff were specifically set forth in the above quoted written agreement and that no further or additional powers
were ever given the said plaintiff."
• But he admits the purchase of the motorship Barracuda, by the partnership. He denies that Exhibit A is a true or correct statement of the
cash received and paid out by or on behalf of the partnership, or that the partnership over purchased or that it now owns the lighter Lapu-
Lapu, "And/ or any other properties" as mentioned in said ninth paragraph, except such motorship and a smoke in the house," or that the
defendants are making use of any of the properties of the partnership, to the damage and prejudice of the plaintiff.
• The lower court ruled in favor of the defendant. It held “that the partnership, existing among the parties in this suit, is hereby declared
dissolved; that all the existing properties of the said partnership are ordered to be sold at public auction; and that all the proceeds and
other unexpended funds of the partnership be used, first, to pay he P529.48 tax to the Government of the Philippine Islands; second, to
pay debts owing to third persons; third, to reimburse the partners for their advances and salaries due; and lastly, to return to the partners
the amounts they contributed to the capital of the association and any other remaining such to be distributed proportionately among them
as profits:
A. That the plaintiff immediately render a true and proper account of all the money due to and received by him for the partnership.
B. That the barge Lapu-Lapu as well as the Ford truck No. T-3019 and adding machine belong exclusively to the plaintiff, M. Teague,
but the said plaintiff must return to and reimburse the partnership the sum of P14,032.26 taken from its funds for the purchase and
equipment of the said barge Lapu-Lapu; and also to return the sum of P1,230 and P228 used for buying the Ford truck and adding
machine, respectively.
C. That the sum of P,1512.03 be paid to the defendant, J. T. Maddy, and the sum of P615.49 be paid to defendant, H. Martin, for their
advances and their unpaid salaries, with legal interest from October 27, 1927, until paid; that the plaintiff pay the costs of this
action.”

3B 2019-2020: StratPlan for Prelims

 Issue 1: Whether it is proper to dissolve the partnership and to liquidate its assets.
Issue 2: Whether the appellant M. Teague was the manager of the unregistered partnership Malangpaya Fish Company.
Issue 3: Whether the appellant had no authority to buy the Lapu-Lapu, the Ford truck and the adding machine without the consent of
his copartners, for in accordance with article 131 of the Code of Commerce the managing partner of a partnership can make
purchases for the partnership without the knowledge and/or consent of his copartners.
Issue 4: Whether appellant's claim for salary and expenses incurred by him for and in connection with the partnership's business is
meritorious.
Ruling 1 YES. By their respective pleadings, all parties agreed that there was a partnership between them, which appears at
one time to have done a good business. In legal effect, plaintiff asked for its dissolution and the appointment of a receiver
pendente lite. The defendants did not object to the dissolution of the partnership, but prayed for an accounting with the
plaintiff. It was upon such issues that the evidence was taken and the case tried. Hence, there is no merit in the first in the
first assignment of error.
Ruling 2 NO. The duties of each partners were specified and defined in the "plans for formation of a limited partnership". It
will thus be noted that the powers and duties of Maddy Martin, and the plaintiff are specifically defined, and that each of
them was more or less the general manager in his particular part of the business. That is to say, that Maddy's power and duties
are confined and limited to the charge of the Barracuda and its navigation, and Martin's to the southern station, cold stores,
commissary and procuring fish, and that plaintiff's powers and duties are confined and limited to "selling fish in Manila and
the purchase of supplies." In the selling of fish, plaintiff received a substantial amount of money which he deposited to the
credit of the company signed by him as manager, but it appears that was a requirement which the bank made in the ordinary
course of business, as to who was authorized to sign checks for the partnership; otherwise, it would not cash the checks.
Ruling 3 YES. Without making a detailed analysis of the evidence, we agree with the trial court that the Lapu-Lapu, the Ford
truck, and the adding machine were purchased by the plaintiff and paid for out of the funds of the partnership, and that by
his own actions and conduct, and the taking of the title in his own name, he is now estopped to claim or assert that they are
not his property or that they are the property of the company. Again, under his powers and duties as specified in the tentative,
unsigned written agreement, his authority was confined and limited to the "selling of fish in Manila and the purchase of
supplies." It must be conceded that, standing alone, the power to sell fish and purchase supplies does not carry with it or
imply the authority to purchase the Lapu-Lapu, or the Ford truck, or the adding machine. From which it must follow that he
had no authority to purchase the lighter Lapu-Lapu, the Ford truck, or the adding machine, as neither of them can be construed
as supplies for the partnership business.
Ruling 4 NO. While it is true that the tentative agreement was never personally signed by any member of the firm, the trial
court found as a fact, and that finding is sustained by the evidence, that this unsigned agreement was acted upon and accepted
by all parties as the basis of the partnership. It was upon that theory that the lower court allowed the defendants Maddy and
Martin a salary of P300 per month and the money which each of them paid out and advanced in the discharged of their
respective duties, and denied any salary to the plaintiff, for the simple reason that the business was never on a paying basis.

Plaintiff's case was tried on the theory that the partnership was the owner of the property in question, and no claim
was made for the use of the Lapu-Lapu, and it appears that P14,032.26 of the partnership money was used in its purchase,
overhauling, expenses and repairs. That in truth and in fact the partnership had the use and benefit of the Lapu-Lapu in its
business from sometime in May until the receiver was appointed on November 11, 1927, or a period of about six months,
and that the partnership has never paid anything for its use. it is true that there is no testimony as to the value of such use, but
the cost of the Lapu-Lapu and the time of its use and the purpose for which it was used, all appear in the record. For such
reason, in the interest of justice, plaintiff should be compensated for the reasonable value of the time which the partnership
made use of the Lapu-Lapu. All things considered, we are of the opinion that P2,000 is a reasonable, amount which the
plaintiff should receive for its use.
Dispositive In all things and respects, the judgment of the lower court as to the merits is affirmed, with the modification only
Portion that P2,000 shall be deducted from the amount of the judgment which was awarded against the plaintiff, such deduction to
be made for and on account of such use of the Lapu-Lapu by the partnership, with costs against the appellant. So ordered.
Keywords • General manager
• Plans for formation of a limited partnership
Note

3B 2019-2020: StratPlan for Prelims