bus org assign

7/27/2019 Bus Org Assign

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Gregorio Ortega, Tomas del Castillo, Jr. and Benjamin Bacorro v. CA, SEC and Joaquin Misa

G.R. No. 109248 July 3, 1995

Vitug, J.

Facts:

Ortega, then a senior partner in the law firm Bito, Misa, and Lozada withdrew in said firm.

He filed with SEC a petition for dissolution and liquidation of partnership.

SEC en banc ruled that withdrawal of Misa from the firm had dissolved the partnership.

Reason: since it is partnership at will, the law firm could be dissolved by any partner atanytime, such as

by withdrawal therefrom, regardless of good faith or bad faith, since nopartner can be forced to continuein the partnership against his will.

Issue:

1. WON the partnership of Bito, Misa & Lozada (now Bito, Lozada, Ortega & Castillo)is a partnership at

will;

2. WON the withdrawal of Misa dissolved the partnership regardlessof his good or bad faith;

Held:

1. Yes. The partnership agreement of the firm provides that [t]he partnership shallcontinue so long as

mutually satisfactory and upon the death or legal incapacity of one of the partners, shall be continued by

the surviving partners.

2. Yes. Any one of the partners may, at his sole pleasure, dictate a dissolution of the partnership at will

(e.g. by way of withdrawal of a partner). He must, however, act in good faith, not that the attendance of

bad faith can prevent the dissolution of the partnership but that it can result in a liability for damages.

ANTONIA TORRES assisted by her husband, ANGELO TORRES; andEMETERIA BARING,

petitioners, vs.

COURT OF APPEALS and MANUELTORRES,

respondents.


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FACTS:

This is a petition for Review on Certiorari for the decision of the Court of Appeals affirming the decision

of the Trial Court in favour of herein respondent anddenying reconsideration.Sisters Antonia Torres and

Emeteria Baring, petitioners, entered into a

"joint venture agreement"

with Respondent Manuel Torres for the development of aparcel of land into a subdivision. They executed

a Deed of Sale covering the saidparcel of land in favor of respondent, who then had it registered in his

name. Bymortgaging the property, respondent obtained from Equitable Bank a loan of P40,000 which

was to be used for the development of the subdivision.

All three of them also agreed to share the proceeds from the sale of the subdivided lots

.

The project did not push through, and the land was subsequently foreclosed by thebank.Respondent used

the loan to implement the Agreement, among others are: effectthe survey and subdivision of the lots;

approval of the subdivision project with LapuLapu City Council; advertisement in the local newspaper;

construction of roads,curbs and gutters; and construction of 6 low cost housing units.Respondent claimed

that the subdivision project failed, however, becausepetitioners and their relatives had separately caused

the annotations of adverseclaims on the title to the land, which eventually scared away prospective

buyers.Despite his requests, petitioners refused to cause the clearing of the claims, therebyforcing him to

give up on the project.Petitioners filed with the RTC a civil action against respondent. RTC ruled in

favourof respondent and which was later affirmed by CA. Hence, this Petition.

ISSUE:

WON, the CA erred in concluding that the agreement entered betweenpetitioners and respondent was that

of a joint venture/partnership.

HELD:

Art. 1767. By the contract of partnership two or more persons bindthemselves to contribute money,

property, or industry to a common fund, with theintention of dividing the profits among themselves.

Under the parties Agreement, petitioners would contribute property to thepartnership in the form of land

which was to be developed into a subdivision; whilerespondent would give, in addition to his industry,


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the amount needed for generalexpenses and other costs. Furthermore, the income from the said project

would bedivided according to the stipulated percentage. Clearly, the contract manifested theintention of

the parties to form a partnership.

It should be stressed that the parties implemented the contract. Thus, petitionerstransferred the title to the

land to facilitate its use in the name of the respondent.On the other hand, respondent caused the subject

land to be mortgaged, theproceeds of which were used for the survey and the subdivision of the land and

soon. Respondent's actions clearly contradict petitioners' contention that he made nocontribution to the

partnership. Under Article 1767 of the Civil Code, a partner maycontribute not only money or property,

but also industry.Moreover, petitioners contend that they cannot be bound by the contract.Art. 1315.

Contracts are perfected by mere consent, and from that moment theparties are bound not only to the

fulfillment of what has been expressly stipulatedbut also to all the consequences which, according to their

nature, may be in keepingwith good faith, usage and law.It is undisputed that petitioners are educated and

are thus presumed to haveunderstood the terms of the contract they voluntarily signed. If it was not

inconsonance with their expectations, they should have objected to it and insisted onthe provisions they

wanted.Courts are not authorized to extricate parties from the necessary consequences of their acts, and

the fact that the contractual stipulations may turn out to befinancially disadvantageous will not relieve

parties thereto of their obligations. Theycannot now disavow the relationship formed from such

agreement due to theirsupposed misunderstanding of its terms.Lastly, claiming that respondent was solely

responsible for the failure of thesubdivision project, petitioners maintain that he should be made to pay

damagesequivalent to 60 percent of the value of the property, which was their share in theprofits under

the Joint Venture Agreement.We are not persuaded. True, the Court of Appeals HELD that petitioners'

acts werenot the cause of the failure of the project. But it also ruled that neither wasrespondent

responsible therefor. In imputing the blame solely to him, petitionersfailed to give any reason why we

should disregard the factual findings of theappellate court relieving him of fault. Accordingly, we find no

reversible error in theCA's ruling that petitioners are not entitled to damages.

WHEREFORE, the Petition is hereby DENIED and the challenged Decision AFFIRMED.Costs against

petitioners.

Bourn vs. Carman, 7 Phil 168

Facts: Plaintiff seeks to recover the sum of money balance due on a contract for the sawing of lumber for

the lumber yard of Lo-chim-Lim. The latter entered into a contract acting in hid own name and to


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personally pay the work. The plaintiff, however, brought the action to the inclusion of the defendants

because at the time of the contract they were joint proprietor and operators.

Issue: What is the real legal nature of the participation of the appellants?

Held: The partnership between Lim and the defendants was formed by verbal agreement only. There was

no showing that it was reduced into writing nor recorded in public instruments and no corporate name

between them. It does not appear that there is a mutual agreement between the parties. The accidental

partnership of cuentas en participacion was in effect. Therefore, the claim of the plaintiff must fail.

Binglangawa vs. Constantino, 109 Phil 168

Facts: Petitioners were the owners of parcel of land. They appoint the respondent as their exclusive agent

to develop and sell the area. As compensation, the respondent shall receive a commission and percentage

for the collection. There was a breached of contract of agency on the part of petitioners rendering the

respondent to file a complaint to pay the respondent of the unpaid balances. Petitioners promised to pay

their liability and the respondent consented to the settlement but to no avail. While the case was pending,

respondent filed with the ROD notice of lis pendens; involving rights and interest and claims for services

and damages. The ROD requested the petitioners to surrender the owners copy of CTC. When petitioners

registered the absolute deed of sale in favor of Santos, the ROD made the annotations of lis pendens. The

petitioners sought for the cancellation of the lis pendens which te lower courts granted. The courts ruled

that the action of respondent is purely a claim of money. The respondents contends that the commission

and collection made by him, as well as the advancements, converted him into partner.

Issue: Is the respondent a partner?

Held: No. Respondent was only an appointed agent. In fact he expressly said in his complaint that the

petitioners were indebted to him for the unpaid balance and consented to the settlement. The advances

made by the respondent were never considered as contribution to make him a partner. In fact, after the

liquidation at the time of the termination of the agency, the whole balance was considered petitioners

debts which appellant consented.

U.S. vs. Mhun, 6 Phil 164


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Facts: a contract between Nicolas Carranceja and Muhn was entered into making the latter the agent to

buy products. Muhn admitted that he was indedted to the estate of the deceased and promise to pay. No

payment was made and so the representativeof the estate filed a case of estafa. Muhn contends that he is a

partner.

Issue: Is the respondent a partner?

Held: No. Muhn was only an agent of Nicolas. The money that was furnished to the defendant for the

purpose of carrying on the business was the money of Nicolas, and did not become the money of

defendant as soon as it was furnished to him. The fact that the money was charged to the defendant and

other articles cannot change the essential character of the contract.

Pioneer Insurance vs. Court of Appeals, 175 scra 668

Facts: Jacob S. Lim was engaged in the airline business as owner-operator of Southern Air Lines (SAL) a

single proprietorship. One time, Japan Domestic Airlines (JDA) and Lim entered into and executed a

sales contract for the sale and purchase of two (2) DC-3A Type aircrafts and one (1) set of necessary

spare parts for the total agreed price of US $109,000.00 to be paid in installments. Pioneer Insurance and

Surety Corporation as surety executed and issued its Surety Bond in favor of JDA, in behalf of its

principal, Lim, for the balance price of the aircrafts and spare parts.

It appears that Border Machinery and Heavy Equipment Company, Inc. (Bormaheco), Francisco and

Modesto Cervantes (Cervanteses) and Constancio Maglana (respondents in both petitions) contributed

some funds used in the purchase of the above aircrafts and spare parts. The funds were supposed to be

their contributions to a new corporation proposed by Lim to expand his airline business. During these

transactions, Lim executed two(2) separate indemnity agreements in favor of Pioneer, one signed by

Maglana and the other jointly signed by Lim for SAL, Bormaheco and the Cervanteses. On June 10,

1965, Lim doing business under the name and style of SAL executed in favor of Pioneer as deed of

chattel mortgage as security for the latter's suretyship in favor of the former. It was stipulated therein that

Lim transfer and convey to the surety the two aircrafts.

Lim in an undertaking promised to incorporate his airline in accordance with their agreement and

proceeded to acquire the planes on his own account. Since then, Lim has refused, failed and still refuses

to set up the corporation or return the money of Maglana and the others upon demand.

Lim defaulted on his subsequent installment payments prompting JDA to request payments from the

surety, Pioneer. Pioneer then filed a petition for the extrajudicial foreclosure of the said chattel mortgage.


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Pioneer filed an action for judicial foreclosure with an application for a writ of preliminary attachment

against Lim and respondents, Cervanteses, Bormaheco and Maglana.

After trial on the merits, a decision was rendered holding Lim liable to pay Pioneer but dismissed

Pioneer's complaint against all other defendants.

Issues:

1. Was the failure to incorporate in effect created a de facto partnership which would allow petitioner to

be reimbursed from the losses incurred?

2. What legal rules govern the relationship of co- investors Jacob S. Lim, Bormacheco, Fransico,

Cervantes and Maglana whose agreement was to do business as a Corporation but failed to do so?

Ruling: No. The Supreme Court held that no de facto partnership was created among the parties which

would entitle the petitioner to a reimbursement of the supposed losses of the proposed corporation.

In some cases, it is ordinarily held that persons who attempt, but fail, to form a corporation and who carry

on business under the corporate name occupy the position of partners inter se (Lynch v. Perryman, 119 P.

229, 29 Okl. 615, Ann. Cas. 1913A 1065).

However, inLondon Assur. Corp. v. Drennen, Minn., 6 S.Ct. 442, 116 U.S. 461, 472, 29 L.Ed. 688, such

a relation does not necessarily exist, for ordinarily persons cannot be made to assume the relation of

partners, as between themselves, when their purpose is that no partnership shall existand it should be

implied only when necessary to do justice between the parties; thus, one who takes no part except to

subscribe for stock in a proposed corporation which is never legally formed does not become a partner

with other subscribers who engage in business under the name of the pretended corporation, so as to be

liable as such in an action for settlement of the alleged partnership and contribution (Ward v. Brigham,

127 Mass. 24).

In the instant case, it was found during trial that the petitioner received the amount of P151,000.00

representing the participation of Bormaheco and Atty. Constancio B. Maglana in the ownership of the

subject airplanes and spare parts. The record shows that defendant Maglana gave P75,000.00 to petitioner

Jacob Lim thru the Cervanteses in order to incorporate his airline in accordance with their agreement and

proceeded to acquire the planes on his own account. However, petitioner denied their claims of such.

Doctrinal pronouncement in Pioneer Insurance: When parties come together intending to form a

Corporation, but failed to do so, then the Following Rules may apply:


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(a) Parties who had intended to participate or actually participated in the business affairs of the proposed

corporation would be considered as partners under a de factopartnership, and would be liable as such in

an action for settlement of partnership obligations;

-While-

(b) Parties who took no part except to subscribe to shares of stock in a proposed corporation, do not

become partners with other subscribers who engaged in business under the name of the pretended

corporation, and are not liable for action for settlement of the alleged partnership contribution.

Lim Tong Lim vs. Philippine Fishing, 317 SCRA 728

Facts:

On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter Yao entered into a Contract

for the purchase of fishing nets of various sizes from the Philippine Fishing Gear Industries, Inc. (herein

respondent). They claimed that they were engaged in a business venture with Petitioner Lim Tong Lim,

who however was not a signatory to the agreement. The buyers, however, failed to pay for the fishing nets

and the floats; hence, private respondents filed a collection suit against Chua, Yao and Petitioner Lim

Tong Lim with a prayer for a writ of preliminary attachment. The suit was brought against the three in

their capacities as general partners, on the allegation that "Ocean Quest Fishing Corporation" was a

nonexistent corporation.

On November 18, 1992, the trial court rendered its Decision, ruling that Philippine Fishing Gear

Industries was entitled to the Writ of Attachment and that Chua, Yao and Lim, as general partners, were

jointly liable to pay respondent. It ruled that a partnership among Lim, Chua and Yao was formed based

on a compromised agreement providing that after selling their 4 vessels and the nets they will divide the

excess into three (3).

Lim appealed asserting that no partnership existed among them. He disclaims any direct participation in

the purchase of the nets, alleging that the negotiations were conducted by Chua and Yao only, and that he

has not even met the representatives of the respondent company, invoking the doctrine of Corporation by

estoppel.

Issue:

1.Was there a Contract of Partnership formed between, Lim, Chua and Yao?

2. What is the Doctrine of Corporation by estoppel? Will it apply in this case?


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Ruling:

1. Yes, there was a partnership formed. The Supreme Court held that under Art. 1767 of the Civil Code

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.

In the case at bar, from the factual findings of both lower courts, it is clear that Chua, Yao and Lim had

decided to engage in a fishing business, which they started by buying boats worth P3.35 million, financed

by a loan secured from Jesus Lim who was petitioner's brother. In their Compromise Agreement, they

subsequently revealed their intention to pay the loan with the proceeds of the sale of the boats, and to

divide equally among them the excess or loss. Moreover, it is clear that the partnership extended not only

to the purchase of the boat, but also to that of the nets and the floats.

2. Sec. 21 of the Corporation Code of the Philippines provides:

Sec. 21. Corporation by estoppel. All persons who assume to act as a corporation knowing it to be

without authority to do so shall be liable as general partners for all debts, liabilities and damages incurred

or arising as a result thereof:Provided however, That when any such ostensible corporation is sued on any

transaction entered by it as a corporation or on any tort committed by it as such, it shall not be allowed to

use as a defense its lack of corporate personality.

Although, petitioner insists that the doctrine of corporation by estoppel only applies to those who dealt in

the name of the ostensible corporation (Ocean Quest Fishing Corp.) should be held liable. Since his name

does not appear on any of the contracts and since he never directly transacted with the respondent

corporation, ergo, he cannot be held liable.

The Supreme Court in applying the doctrine of Corporation by estoppel held that The doctrine of

corporation by estoppel may apply to the alleged corporation and to a third party.

In the first instance, an unincorporated association, which represented itself to be a corporation, will be

estopped from denying its corporate capacity in a suit against it by a third person who relied in good faith

on such representation.

On the other hand, a third party who, knowing an association to be unincorporated, nonetheless treated it

as a corporation and received benefits from it, may be barred from denying its corporate existence in a

suit brought against the alleged corporation. In such case, all those who benefited from the transaction

made by the ostensible corporation, despite knowledge of its legal defects, may be held liable for

contracts they impliedly assented to or took advantage of.


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In the case at bar, petitioner as considered to be a third party who, benefited from the use of the nets

found inside F/B Lourdes, the boat which has earlier been proven to be an asset of the partnership.

Technically, it is true that petitioner did not directly act on behalf of the corporation. However, having

reaped the benefits of the contract entered into by persons with whom he previously had an existing

relationship, he is deemed to be part of said association and is covered by the scope of the doctrine of

corporation by estoppel.

CIR vs. Suter

Facts:

Suter, Spirig and Carlson agreed to form a limited partnership in a business engaged in importation,

marketing, distribution and operations of automatic phonographs, radios, television sets and amusement

machines.

Later on, Suter and Spirig got married.

Thereafter, Carlson sold his share to Suter and Spirig.

Ever since, the couple had been filing a separate income return for the limited partnership, in which the

CIR had expressed no objection.

In the CIRs assessment in 1959, it determined that there was discrepancy on the income return of the

spouses and the limited partnership.

Upon learning of such determination, partner-spouses protested against the assessment and requested for

its cancelation.

Issues:

1. Whether or not the subsequent marriage between the parties and the sale of Carlsons share to them had

made the partnership into a universal one.

Held:

1. The partnership between the spouses was not a universal partnership, but a particular one.

A universal partnership requires either that the object of the association be all the present property of the

partners, as contributed by them to the common fund, or else all that the partners may acquire by their

industry or work during the existence of the partnership.


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In the instant case, each of them contributed a fixed sum of money, which they separately owned before

their marriage. Their subsequent union had made those contributions to be part of their respective

separate and exclusive property.

Also, the partnership between the spouses is not one contemplated under Article 1677, which was one

prohibited to enter by the parties.

E. S. LYONS vs. C. W. ROSENSTOCK,

FACTS:

Henry W. Elser was engaged in buying, selling, and administering real estate. E. S. Lyons joined with

him, the profits being shared by the two in equal parts.

In buying the San Juan Estate, he obtained a loan of P50,000 to complete the amount needed for the first

payment. The lender insisted that he should procure the signature of the Fidelity & Surety Co. on the note

to be given for said loan. Elser mortgaged to the Fidelity & Surety Co. the property owned by himself and

Lyons on Carriedo Street to secure the liability thus assumed by it.

ISSUE: Whether there was a general relation of partnership.

HELD: NO. There was clearly no general relation of partnership, under article 1678 of the Civil Code. It

is clear that Elser, in buying the San Juan Estate, was not acting for any partnership composed of himself

and Lyons, and the law cannot be distorted into a proposition which would make Lyons a participant in

this deal contrary to his express determination.

Ortega vs. Court of Appeals

Facts:

Misa, a senior partner in the Bito, Misa & Lozada law firm, wrote a letter to his associates that he will be

withdrawing and retiring from the firm.

Later, he filed a petition for dissolution and liquidation of partnership in the SEC.

The respondent-appellees (Misas associates) filed an opposition of such petition for dissolution.

The hearing officer did not grant the petition.

However, upon appeal on SEC, it was reversed;


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The CA affirmed the decision of SEC in toto.

Issue:

Whether or not the partnership of Bito, Misa & Lozada is a partnership at will.

Held: Yes, it is a partnership at will.

A partnership that does not fix its term is a partnership at will. In the partnership agreement between the

parties, it does not provide for a specified period or undertaking. The duration clause simply stated the

continuance of the partnership.

The Court stated that the birth and life of a partnership at will is predicated on the mutual desire and

consent of the partners. The right to choose with whom a person wishes to associate himself is the very

foundation and essence of that partnership. Its continued existence is, in turn, dependent on the constancy

of that mutual resolve, along with each partner's capability to give it, and the absence of a cause for

dissolution provided by the law itself.

Thus, a partner may ask for the dissolution of the partnership at will, provided that he is acting in good

faith.

LIM TONG LIM VS PHIL FISHING GEAR

FACTS:

On behalf of Ocean Fishing Corporation, Antonio Chua & Peter Yao entered into a Contract for the

purchase of fishing nets from the respondent. They claimed that they were engaged in a business venture

w/ Lim Tong Lim (petitioner), who however was not a signatory to the agreement.

They failed to pay the fishing nets and the floats; hence, Philippine Fishing Gear filed a collection suit

against Chua, Yao and Lim Tong Lim. The Suit was brought against the three in their capacities as

general partners, on the allegation that Ocean Quest was a non-existent corporation as shown by aCertification from the Securities and Exchange Commission.

ISSUE: Whether a general partnership is formed between Chua, Yao and Lim. YES

RULING:


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Given the preceding facts, it is clear that there was, among petitioner, Chua and Yao, a partnership

engaged in the fishing business. They purchased the boats, which constituted the main assets of the

partnership, and they agreed that the proceeds from the sales and operations thereof would be divided

among them.

Lim, Chua and Yao decided to form a corporation. Although it was never legally formed for unknown

reasons, this fact alone does not preclude the liabilities of the three as contracting parties in representation

of it. Clearly, under the law on estoppel, those acting on behalf of a corporation and those benefited by it,

knowing it to be without valid existence, are held liable as general partners.

J. M. TUASON & CO., INC., represented by it Managing PARTNER,GREGORIA ARANETA,

INC.,

plaintiff-appellee,-versus-

QUIRINO BOLAOS,

defendant-appellant.

FACTS: This was an action to recover possession of a parcel of land where theplaintiff was represented

by a corporation.

Issue: WON the case should be dismissed on the ground that the case was notbrought by the real property

in interest

Held:No.

there is nothing to the contention that the present action is not brought bythe real party in interest, that is,

by J. M. Tuason and Co., Inc. What the Rulesof Court require is that an action be brought

in the name of,

but notnecessarily

by

, the real party in interest. (Section 2, Rule 2.)


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The complaint is signed by the law firm of Araneta and Araneta, "counsel forplaintiff" and commences

with the statement "comes now plaintiff, throughits undersigned counsel." It is true that the complaint

also states that theplaintiff is "represented herein by its Managing Partner Gregorio Araneta,Inc.", another

corporation

There is nothing against one corporation being represented byanother person, natural or juridical, in a suit

in court.

The contention that Gregorio Araneta Inc. cannot act as managingpartner for plaintiff on the theory that it

is illegal for twocorporations to enter into a partnership is without merit, for the truerule is that though a

corporation has no power into a partnership, itmay nevertheless enter into a joint venture with another

where thenature of that venture is in line with the business authorized by itscharter.

NOTE: Point of the case is about joint ventures being treated separately frompartnerships.

Tuason

does not explain why there was a difference in treatment of corporate involvement in partnerships as

compared to that when it come to jointventures.

Manuel Torres, Jr. vs Court of Appeals

278 SCRA 793Business Organization Corporation LawTransfer of Shares of Stocks Corporate

Records

Judge Manuel Torres, Jr. owns about 81% of the capital stocks of Tormil Realty & Development

Corporation (TRDC). TRDC is a small family owned corporation and other stockholders thereof include

Judge Torres nieces and nephews. However, even though Judge Torres owns the majority of TRDC andwas also the president thereof, he is only entitled to one vote among the 9-seat Board of Directors, hence,

his vote can be easily overridden by minority stockholders. So in 1987, before the regular election of

TRDC officers, Judge Torres assigned one share (qualifying share) each to 5 outsiders for the purpose

of qualifying them to be elected as directors in the board and thereby strengthen Judge Torres power over

other family members.


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However, the said assignment of shares were not recorded by the corporate secretary, Ma. Christina

Carlos (niece) in the stock and transfer book of TRDC. When the validity of said assignments were

questioned, Judge Torres ratiocinated that it is impractical for him to order Carlos to make the entries

because Carlos is one of his opposition. So what Judge Torres did was to make the entries himself

because he was keeping the stock and transfer book. He further ratiocinated that he can do what a mere

secretary can do because in the first place, he is the president.

Since the other family members were against the inclusion of the five outsiders, they refused to take part

in the election. Judge Torres and his five assignees then decided to conduct the election among

themselves considering that the 6 of them constitute a quorum.

ISSUE: Whether or not the inclusion of the five outsiders are valid. Whether or not the subsequent

election is valid.

HELD: No. The assignment of the shares of stocks did not comply with procedural requirements. It did

not comply with the by laws of TRDC nor did it comply with Section 74 of the Corporation Code.

Section 74 provides that the stock and transfer book should be kept at the principal office of the

corporation. Here, it was Judge Torres who was keeping it and was bringing it with him. Further, his

excuse of not ordering the secretary to make the entries is flimsy. The proper procedure is to order the

secretary to make the entry of said assignment in the book, and if she refuses, Judge Torres can come to

court and compel her to make the entry. There are judicial remedies for this. Needless to say, the

subsequent election is invalid because the assignment of shares is invalid by reason of procedural

infirmity. The Supreme Court also emphasized: all corporations, big or small, must abide by the

provisions of the Corporation Code. Being a simple family corporation is not an exemption. Such

corporations cannot have rules and practices other than those established by law.

ANGELES v. SECRETARY OF JUSTICE

(July 29, 2005)


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Oscar Angeles and Emerita Angeles,

petitioners, v.

The Hon. Secretary of Justice and Felino Mercado,

respondents

DOCTRINE:

The purpose of registration of the contract of partnership with the SEC is to giv

e notice to third parties. Failure to register the contract of partnership does not a

ffect the liability of the partnership and of the partners to third persons, nor doe

s it affect the partnerships juridical personality. A partnership may exist even if t

he partners do not use the words partner or partnership.

NATURE:

Special civil action. Certiorari.

PONENTE:

Carpio,

J.

FACTS:

Angeles spouses filed a criminal complaint for estafa against Mercado, their brother

-in-law

oClaimed that Mercado convinced them to enter into a contract of antichresis, to l

ast for 5 years, covering 8 parcels of land planted with fruit-

bearing lanzones trees in Nagcarlan, Laguna and owned by Juan Sanzo parties ag

reed that Mercado would administer the ands and complete the necessary paperwork


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o

After 3 years, the Angeles spouses asked for an accounting from Mercado, and th

ey claim that only after this demand for an accounting did thy discover that Mer

cado had put the contract of antichresis over the subject land under Mercado and

his spouses names

Mercado denied the Angeles spouses allegations

o

Claimed that there exists an

industrial partnership,

colloquially known as

sosyo industrial,

between him and his spouse as industrial partners and the Angeles spouses as fina

nciers, and that this had existed since 1991, before the contract of antichresis over

the subject land

o

Mercado used his and his spouses earnings as part of the capital in the business

transactions which he entered into in behalf of the Angeles spouses. It was thei

r practice to enter into business transactions with other people under the name of


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Mercado because the Angeles spouses did not want to be identified as the finan

ciers

o

Attached bank receipts showing deposits in behalf of Emerita Angeles and contracts

under his name for the Angeles spouses

During the barangay conciliation proceedings, Oscar Angeles stated that there was a

written

sosyo industrial

agreement: capital would come from the Angeles spouses while the profit would

be divided evenly between Mercado and the Angeles spouses

Provincial Prosecution Office:

first recommended the filing of a criminal information for estafa, but after Mercado

filed his counter-

affidavit and moved for reconsideration, issued an amended resolution dismissing the

complaint

Angeles spouses appealed to Sec. of Justice, saying that the document evidencing t

he contract of antichresis executed in the name of the Mercado spouses, instead o


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f the Angeles spouses, and that such document alone proves Mercados misappropria

tion of their P210, 000

Sec. of Justice:

dismissed the appeal

o

Angeles spouses failed to show sufficient proof that Mercado deliberately deceived t

hem in the transaction

o

Mercado satisfactorily explained that the Angeles spouses do not want to be reveale

d as the financiers

o

Under the circumstances, it was more likely that the Angeles spouses knew from

the very start that the questioned document was not really in their names

o

A partnership truly existed between the Angeles spouses and Mercado, which was

clear from the fact that they contributed money to a common fund and divided t

he profits among themselves.


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o

Angeles spouses acknowledged their joint business venture in the barangay conciliatio

n proceedings although they assailed the manner the business was conducted

o

Although the legal formalities for the formation were not adhered to, the partnershi

p relationship was evident.

o

There is no estafa where money is delivered by a partner to his co-

partner on the latters representation that the amount shall be applied to the busin

ess of their partnership. In case of the money received, the co-

partners liability is civil in nature

ISSUES/HELD:

1.

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

peal - No 2.

W/N a partnership existed between Mercado and the Angeles spouses - Yes 3.

W/N there was misappropriation by Mercado No


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RATIO/RULING:

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

abuse of discretion when he dismissed their appeal. Moreover, they committed a pr

ocedural error when they failed to file a motion for reconsideration of the Sec. o

f Justices resolution, which is already enough reason to dismiss the case. 2. A

ngeles spouses allege that they had no partnership with Mercado, relying on Arts.

1771 to 1773 of the Civil Code.

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

a public instrument indicating the same and a lack of registration with the SEC

holds no water

o

The Angeles spouses contributed money to the partnership and not immovable prope

rty

o

Mere failure to register the contract of partnership with the SEC does not invalida

te a contract that has the essential requisites of a partnership. The purpose of re

gistration is to give notice to third parties.

Failure to register does not affect the liability of the partnership and of the partn

ers to third persons, nor does it affect the partnerships juridical personality


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The Angeles spouses admit to facts that prove the existence of a partnership

o

A contract showing a

sosyo industrial

or industrial partnership

o

Contribution of money & industry to a common fund

o

Division of profits between the Angeles spouses and Mercado 3. Mercado satisfact

orily explained that the Angeles spouses do not want to be revealed as the finan

ciers, thus the document which was in the name of Mercado and his spouse fail

to convince that there was deceit or false representation that induced the Angeles

spouses to part with their money

Even the RTC of Sta. Cruz, Laguna, which handled the civil case filed by the

Angeles spouses against Mercado and Leo Cerayban stated that it was the practice

to have the contracts secured in Mercados name as the Angeles spouses fear b

eing kidnapped by the NPA or being questioned by the BIR as Oscar Angeles


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was working with the government. Accounting of the proceeds is not a proper

subject for the present case.

DISPOSITION:

Petition for certiorari dismissed. Decision of Sec. of Justice affirmed.

ROJAS VS. MAGLANA

FACTS:

Maglana and Rojas executed their Articles of Co-partnership called Eastcoast DevelopmentEnterpises

which had an indefinite term of existenceand was registered with the SEC and had a TimberLicense. One

of the EDEs purposes was to apply orsecure timber and/or private forest lands and tooperate, develop

and promote such forests rightsand concessions. M shall manage the business affairswhile R shall be the

logging superintendent. Allprofits and losses shall be divided share and sharealike between them.Later on,

the two availed the services of Pahamotangas industrial partner and executed another articles of co-

partnership with the latter. The purpose of thissecond partnership was to hold and secure renewalof timber

license and the term of which was fixed to30 years.Still later on, the three executed a conditional sale of

interest in the partnership wherein M and R shallpurchase the interest, share and participation in

thepartnership of P. It was also agreed that afterpayment of such including amount of loan securedby P in

favor of the partnership, the two shall becomeowners of all equipment contributed by P. After this,the two

continued the partnership without anywritten agreement or reconstitution of their articlesof

partnership.Subsequently, R entered into a managementcontract with CMS Estate Inc. M wrote him re:

hiscontribution to the capital investments as well as hisduties as logging superintendent. R replied that

hewill not be able to comply with both. M then told Rthat the latters share will just be 20% of the

netprofits. Such was the sharing from 1957 to 1959without complaint or dispute. R took funds from

thepartnership more than his contribution. M notified Rthat he dissolved the partnership. R filed an

actionagainst M for the recovery of properties andaccounting of the partnership and damages.

CFI:

the partnership of M and R is after P retired isone of de facto and at will; the sharing of profits andlosses

is on the basis of actual contributions; there isno evidence these properties were acquired by the

partnership funds thus it should not belong to it;neither is entitled to damages; the letter of M ineffect

dissolved the partnership; sale of forestconcession is valid and binding and should beconsidered as Ms

contribution; R must pay or turnover to the partnership the profits he received fromCMS and pay his


23/33

personal account to the partnership;M must be paid 85k which he shouldve received butwas not paid to

him and must be considered as hiscontribution.

ISSUE:

what is the nature of the partnership andlegal relationship of M-R after P retired from thesecond

partnership? May M unilaterally dissolve thepartnership?

SC:

There was no intention to dissolve the firstpartnership upon the constitution of the second aseverything

else was the same except for the fact thatthey took in an industrial partner: they pursued thesame

purposes, the capital contributions call for thesame amounts, all subsequent renewals of TimberLicense

were secured in favor of the first partnership,all businesses were carried out under the registeredarticles.M

and R agreed to purchase the interest, share andparticipation of P and after, they became owners of the

equipment contributed by P. Both consideredthemselves as partners as per their letters. It is not

apartnership de facto or at will as it was existing andduly registered. The letter of M dissolving

thepartnership is in effect a notice of withdrawal andmay be done by expressly withdrawing even

beforeexpiration of the period with or without justifiablecause. As to the liquidation of the partnership it

shallbe divided share and share alike after anaccounting has been made.R is not entitled to any profits

as he failed to give theamount he had undertaken to contribute thus, hadbecome a debtor of the

partnership.M cannot be liable for damages as R abandoned thepartnership thru his acts and also took

funds in anamount more than his contribution.

AGAD v. MABATO

(June 28, 1968)

DOCTRINE:

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 ne

cessary. A contract of partnership is void, whenever immovable property is contribut

ed thereto, if inventory of said property is not made, signed by the parties, and

attached to the public instrument.

NATURE:


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Appeal, taken by plaintiff Mauricio Agad, from an order of dismissal of the Court

of First Instance of Davao, we are called upon to determine the applicability of

Article 1773 of our Civil Code to the contract of partnership on which the co

mplaint herein is based.

PONENTE:

Concepcion,

C.J.

FACTS:

-

Plaintiff alleges that he and defendant Severino Mabato are

pursuant to a public instrument dated August 29, 1952 "

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 who handled the partnership funds, had yearly rendered accounts of the op

erations of the partnership; and that, despite repeated demands, Mabato had failed a

nd refused to render accounts

for the years 1957 to 1963.


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-

Agad prayed in his complaint against Mabato and Mabato & Agad Company, filed

on June 9, 1964, that

judgment be rendered sentencing Mabato to pay him (Agad) the sum of P14,000,

as his share in the profits of the partnership

for the period from 1957 to 1963, in addition to P1,000 as attorney's fees, and

ordering the dissolution of the partnership, as well as the winding up of its af

fairs by a receiver to be appointed.

-

In his answer,

Mabato admitted the formal allegations of the complaint and denied the existence o

f said partnership, upon the ground that the contract therefor had not been perfect

ed,

despite the execution of Annex "A", because Agad had allegedly failed to give

his P1,000 contribution to the partnership capital. Mabato prayed, therefore, that the

complaint be dismissed; that Annex "A" be declared void

ab initio

; and that Agad be sentenced to pay actual, moral and exemplary damages, as w

ell as attorney's fees.

-


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Mabato filed a motion to dismiss, upon the ground that the complaint states no

cause of action and that the lower court had no jurisdiction over the subject mat

ter of the case

, because it involves principally the determination of rights over public lands. After

due hearing, the court issued the order appealed from, granting the motion to di

smiss the complaint for failure to state a cause of action. This conclusion was pr

edicated 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.

ISSUES:

The issue hinges on whether or not "immovable property or real rights" have bee

n

contributed

to the partnership under consideration.

HELD: NO.

(Mabato alleged and the lower court held that the answer should be in the affir

mative, because "it is really inconceivable how a partnership engaged in the

fishpond business

could exist without said fishpond property (being) contributed to the partnership." Bu

t...)

RATIO/RULING:

-


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The Court

said that it should be noted, however, that, as stated in

Annex "A" the partnership was established "to

operate

a fishpond", not to "engage in a fishpond business".

Moreover, none of the partners contributed either a fishpond or a real right to

any fishpond. Their contributions were limited to the sum of P1,000 each.

-

The operation of the fishpond mentioned in Annex "A" was the purpose of the

partnership. Neither said fishpond nor a real right thereto was contributed to the p

artnership or became part of the capital thereof, even if a fishpond or a real ri

ght thereto could become part of its assets.

-

DISPOSITION:

WHEREFORE, we find that said Article 1773 of the Civil Code is not in point

and that, the order appealed from should be, as it is hereby set aside and thecase remanded to the lower court for further proceedings, with the costs of this

instance against defendant-appellee, Severino Mabato. It is so ordered

LITONJUA v. LITONJUA

(Dec 13, 2005)


28/33

DOCTRINE:

A Partnership must be in a public document if: 1)

Immoveable Property and Real Rights contributed to it. a.

If it involves immoveable property, inventory of such is needed signed by the par

tners. (else VOID) 2)

It involves capital P 3,000 (must be filed in the SEC)

NATURE:

Petition for review on certiorari

PONENTE:

Garcia,

J.

FACTS:

Aurelio (Petitioner) and Eduardo Litonjua are brothers. Aurelio alleges that he had

a partnership with his brother Eduardo evidenced by a private memorandum (unsig

ned) executed by Eduardo which said he was giving 10% of the equity or 1 m

illion pesos, and that they would work together in maintaining the family business.

A third person Yang was also alleged to be a member in the joint venture a

nd partnership. Here Aurelio files for an action of Specific Performance against

his partners, to render an accounting and give him his share of the profits.

ISSUES:


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W/N there is a Valid Partnership?

HELD:

No, the contract was void or at most unenforceable.

RATIO/RULING:

The supposed contract of partnership was evidenced by a private memorandum (unsi

gned), in which Eduardo expressed his desire to train his brother, and promising

him a 10% share or 1 million pesos.

The supposed contract is void, for being contrary to Articles 1771, 1772, and 177

3 of the Civil Code. The memorandum, on its face, contains typewritten entries, p

ersonal in tone, but is unsigned and undated. As an unsigned document, there can

be no quibbling that 1) The memorandum does not meet the public instrume

ntation requirements exacted under Article 1771 of the Civil Code. 2) Moreover,

being unsigned and doubtless referring to a partnership involving more than P3,00

0.00 in money or property, The Memorandum cannot be presented for notarization,

let alone registered with the Securities and Exchange Commission (SEC), as called

for under the Article 1772 of the Code. 3) And inasmuch as the inventory r

equirement under the succeeding Article 1773 goes into the matter of validity when

immovable property is contributed to the partnership, the next logical point of in

quiry turns on the nature of petitioners contribution, if any, to the supposed partn

ership. Petitioner, then goes on to allege that, assuming arguendo, that the contract

was not one of partnership that the same actually established an innominate contr

act and was a source of actionable rights. Court ruled even as a innominate cont

ract, it would be void as in violation of the statute of frauds. (Being its perfor

mance was to be done 1 year after perfection of the contract.)

DISPOSITION:


30/33

Petition is

DENIED

ruling of the CA

AFFIRMED

JO CHUNG CANG vs. PACIFIC COMMERCIAL Co.

Facts:

In an insolvency proceedings of petitioner-establishment, Sociedad Mercantil, Teck Seing &Co., Ltd.,

creditors, Pacific Commercial and othersfiled a motion with the Court to declare the individualpartners

parties to the proceeding, for each to file aninventory, and for each to be adjudicated asinsolvent debtors.

Issue:

What is the nature of the mercantileestablishment, Teck Seing & Co., Ltd.?

Held

: The contract of partnership established ageneral partnership.By process of elimination, Teck Seing &

Co., Ltd. Isnot a corporation nor an accidental partnership (jointaccount association). To establish a

limited partnership, there must be, atleast, one general partner and the name of at leastone of the general

partners must appear in the firmname. This requirement has not been fulfilled. Thosewho seek to avail

themselves of the protection of laws permitting the creation of limited partnershipsmust the show a

substantially full compliance withsuch laws. It must be noted that all the requirementsof the Code have

been met w/ the sole exception of that relating to the composition of the firm name. The legal intention

deducible from the acts of theparties controls in determining the existence of apartnership. If they intend

to do a thing w/c in lawconstitutes a partnership, they are partners althoughtheir very purpose was to

avoid the creation of suchrelation. Here the intention of the persons makingup, Teck Seing & Co., Ltd.

Was to establishpartnership w/c they erroneously denominated as alimited partnership.

Hung-Man Yoc v. Kieng-chiong- Seng

Arellano, J.

, 1906


31/33

Facts:

Chua-Che Co, Yu Yec-Pin, and Ang Chu Keng were partners of Kiong-Tiao-Eng, under the firm name

Kiong-Chiong-Seng.

It was a mercantile partnership organized for engaging in commercial pursuits, specifically, importation

of goodsfor sale here at a profit.

Such organization was not evidenced by any public document as required by Art. 119 of the Code of

Commerce,nor was it registered as required by Art. 17 of the said code. It was merely recorded in the

Internal Revenueoffice and not in the Mercantile Registry.

The agent Yu Yec Pin himself and some of his so-called partners have merely noted in the books of

thepartnership, the capital which each had contributed.

The name was considered as the designation of the partnership and was not proved to be the firm name.

The CFI of Manila rendered a judgment for a sum of money against each and all of the defendant partners

for7,962.14 pesos. Chu-Che-Co is the only one who appealed questioning his liability.

Issue

: Whether or not Chu-Che-Co can be held liable to pay the amount together with the other defendants.

Held:

No. He is absolved. Chu-Che-Co has incurred no liability and cannot be held individually responsible for

thepayment of the plaintiffs claims.

Ratio:


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Firm Name:

o

Kieng-Chiong-Seng cannot be the firm name of a general partnership.

o

Firm names should contain the names of all the partners, or at least one of them to be, followed in

twolatter cases by the words and company.

o

In this case, none of the four names appear in the firm name.

o

Neither can it be considered as the firm name of a limited partnership; this should contain the

samerequisites as the firm name of a general partnership, and in addition thereto the word limited.

o

Anonymous partnerships (corporations) do not require a firm name or signature; a designation

adequate,for the object or objects of the business to which it is dedicated, is sufficient; however

The alleged partnership never had any legal existence nor has it acquired any juridical personality in the

acts andcontracts executed and made by it.

It is a partnership

de facto

and the liability arising from the obligations it contracted with third parties must beenforceable against

someone despite its lack of juridical personality.


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The general provisions applicable to all partnerships in Art. 120 shall be applied:

The persons in charge of the management of the association who do not comply with the requirements of

recording the articles of general partnership in the public instrument and registration in the

MercantileRegister shall be responsible together with the persons not members of the association with

whom theymay have transacted business in the name of the same.

Chu-Che-Co was not in charge of the management of the association nor did he contract with the

plaintiffs.

The agent of the partnership, being the person who made all the contracts of the partnership; also Kieng-

Tiao-Eng are the ones liable to plaintiffs.

(wla ko Compania vs Reyes. Mag basa sko.

E follow lang nko. S.A.L.T.8.4)

bus org assign

Documents