1. We will have a long quiz next Wednesday (March 4, 2014).

2. The types of examination are: DEFINITIONS, DISTINCTIONS, ILLUSTRATIONS and ESSAY.

3. You arrange this reviewer of yours, according to the type of examinations, for your own convenience.

4. we are in a hurry to finish the syllabus/coverage of the partnership. Several vacations are the reasons.

PARTNERSHIP

I. DEFINITIONS:

Article 1767. 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.

Two or more persons may also form a partnership for the exercise of a profession. (1665a)

Case: Lim Tong Lim versus Philippine Fishing Gear Industries, Inc., G.R. No. 136448, November 3, 1999

Facts: On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter Yao entered into a Contract dated February 7, 1990, 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 total price of the nets amounted to P532,045. Four hundred pieces of floats worth P68,000 were also sold to the Corporation.

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. 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 as shown by a Certification from the Securities and Exchange Commission.

Defendants filed an Answer, after which he was deemed to have waived his right to cross-examine witnesses and to present evidence on his behalf, because of his failure to appear in subsequent hearings.

Issue: Whether by their acts, Lim, Chua and Yao could be deemed to have entered into a partnership.

Ruling: Yes, they entered into a partnership.

There existed a partnership among Chua, Yao and him, pursuant to Article 1767 of the Civil Code which provides:

Art. 1767 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.

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. The boats, the purchase and the repair of which were financed with borrowed money, fell under the term "common fund" under Article 1767. The contribution to such fund need not be cash or fixed assets; it could be an intangible like credit or industry.

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. The fishing nets and the floats, both essential to fishing, were obviously acquired in furtherance of their business.

Case: Lourdes Navarro and Menardo Navarro vs. COURT OF APPEALS, Regional Trial Court of Bacolod City, Branch 52, Sixth Judicial Region and Spouses OLIVIA V. YANSON AND RICARDO B. YANSON, respondents. G.R. No. 101847 May 27, 1993

Facts: Private respondent Olivia V. Yanson and Petitioner Lourdes Navarro were engaged in the business of Air Freight Service Agency. Pursuant to the Agreement which they entered, they agreed to operate the said Agency. It is the Private Respondent Olivia Yanson who supplies the necessary equipment and money used in the operation of the agency. Her brother in the person of Atty. Rodolfo Villaflores was the manager thereof while petitioner Lourdes Navarro was the Cashier. In compliance to her obligation as stated in their agreement, private respondent brought into their business certain chattels or movables or personal properties. However, those personal properties remain to be registered in her name. Among the provisions stipulated in their agreement is the equal sharing of whatever proceeds realized from their business; However, sometime on July 23, 1976, private respondent Olivia V. Yanson, in order for her to recovery the above mentioned personal properties which she brought into their business, filed a complaint against petitioner Lourdes Navarro for "Delivery of Personal Properties With Damages and with an application for a writ of replevin. Private respondents' application for a writ of replevin was later approved/granted by the trial court. For her defense, petitioner Navarro argue that she and private respondent Yanson actually formed a verbal partnership which was engaged in the business of Air Freight Service Agency. She contended that the decision sustaining the writ of replevin is void since the properties belonging to the partnership do not actually belong to any of the parties until the final disposition and winding up of the partnership.Issue: Whether or not a partnership existed between the parties.

RULING: No partnership is formed.

Article 1767 of the New Civil Code defines the contract of partnership:

Art. 1767. 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 proceeds among themselves.

In the case at bar, no proof that a partnership, whether oral or written had been constituted. In fact, those movables brought by the plaintiff for the use in the operation of the business remain registered in her name.

While there may have been co-ownership or co-possession of some items and/or any sharing of proceeds by way of advances received by both plaintiff and the defendant, these are not indicative and supportive of the existence of any partnership between them.

Art. 1769 par. 2 provides: Co-ownership or co-possession does not of itself establish a partnership, whether such co-owners or co-possessors do or do not share any profits made by the use of the property

There being no partnership that existed, any dissolution, liquidation or winding up is beside the point.

Article 1768. The partnership has a juridical personality separate and distinct from that of each of the partners, even in case of failure to comply with the requirements of article 1772, first paragraph. (n)

Case: LUZVIMINDA J. VILLAREAL, DIOGENES VILLAREAL and CARMELITO JOSE,petitioners,versus DONALDO EFREN C. RAMIREZ and Spouses CESAR G. RAMIREZ JR. and CARMELITA C. RAMIREZ, respondents. G.R. No. 144214, July 14, 2003

Facts: On July 25, 1984, Luzviminda J. Villareal, Carmelito Jose and Jesus Jose formed a partnership with a capital of P750,000 for the operation of a restaurant and catering business under the name "Aquarius Food House and Catering Services."Villareal was appointed general manager and Carmelito Jose, operations manager.Respondent Donaldo Efren C. Ramirez joined as a partner in the business on September 5, 1984. His capital contribution of P250,000 was paid by his parents, Respondents Cesar and Carmelita Ramirez.After Jesus Jose withdrew from the partnership in January 1987, his capital contribution of P250,000 was refunded to him in cash by agreement of the partners.In the same month, without prior knowledge of respondents, petitioners closed down the restaurant, allegedly because of increased rental. The restaurant furniture and equipment were deposited in the respondents' house for storage.On March 1, 1987, respondent spouses wrote petitioners, saying that they were no longer interested in continuing their partnership or in reopening the restaurant, and that they were accepting the latter's offer to return their capital contribution.On October 13, 1987, Carmelita Ramirez wrote another letter informing petitioners of the deterioration of the restaurant furniture and equipment stored in their house. She also reiterated the request for the return of their one-third share in the equity of the partnership. The repeated oral and written requests were, however, left unheeded.Before the Regional Trial Court (RTC) of Makati, Branch 59, respondents subsequently filed a Complaintdated November 10, 1987, for the collection of a sum of money from petitioners.

In their Answer, petitioners/defendants contended that respondents had expressed a desire to withdraw from the partnership and had called for its dissolution under Articles 1830 and 1831 of the Civil Code; that respondents had been paid, upon the turnover to them of furniture and equipment worth over P400,000; and that the latter had no right to demand a return of their equity because their share, together with the rest of the capital of the partnership, had been spent as a result of irreversible business losses.

Issues:

Whether petitioners are liable to respondents for the latter's share in the partnership.

Ruling:

The respondents have no right to demand from petitioners the return of their equity share. Petitioners did not personally hold its equity or assets. "The partnership has a juridical personality separate and distinct from that of each of the partners."(Art. 1768 of the Civil Code). Since the capital was contributed to the partnership, not to petitioners, it is the partnership that must refund the equity of the retiring partners. (Magdusa v. Albaran, 115 Phil. 511, June 30, 1962).

Since it is the partnership, as a separate and distinct entity, that must refund the shares of the partners, the amount to be refunded is necessarily limited to its total resources. In other words, it can only pay out what it has in its coffers, which consists of all its assets. However, before the partners can be paid their shares, the creditors of the partnership must first be compensated.After all the creditors have been paid, whatever is left of the partnership assets becomes available for the payment of the partners' shares.

II. ENUMERATIONS:

The following facts do not establish that a person is a partner:

1. Giving orders and directions to his subordinates.So long, therefore, that an employees position is higher in rank, it is not unusual that he orders around those lower in rank.

2. Ordering materials from supplier. This is so, even a messenger or other trusted employee, over whom confidence is reposed by the owner, can order materials from suppliers.

3. Although Tan Eng Kee, together with his family, lived in the lumber compound and this privilege was not accorded to other employees, the undisputed fact remains thatTan Eng Kee is the brother of Tan Eng Lay, but they are not partners.4. Tan Eng Kee was quarrelling with Tan Eng Lay in connection with the pricing of stocks, this does not adequately prove the existence of a partnership.

There is sharing of profits and losses but no partnership is formed:

1. Persons who contribute property or funds for a common enterprise and agree to share the gross returns of that enterprise in proportion to their contribution, but who severally retain the title to their respective contribution, are not thereby rendered partners.

2. Where plaintiff, his brother, and another agreed to become owners of a single tract of realty, holding as tenants in common, and to divide the profits of disposing of it, the brother and the other not being entitled to share in plaintiffs commission, no partnership existed as between the three parties, whatever their relation may have been as to third parties.

3. The common ownership of property does not itself create a partnership between the owners, though they may use it for the purpose of making gains; and they may, without becoming partners, agree among themselves as to the management, and use of such property and the application of the proceeds therefrom.

4. The sharing of returns does not in itself establish a partnership whether or not the persons sharing therein have a joint or common right or interest in the property. There must be a clear intent to form a partnership, the existence of a juridical personality different from the individual partners, and the freedom of each party to transfer or assign the whole property.5. The two isolated transactions whereby they purchased properties and sold the same a few years thereafter did not thereby make them partners. Under the circumstances, they cannot be considered to have formed an unregistered partnership which is thereby liable for corporate income tax, as the respondent commissioner proposes.

How to determine the existence of a partnership ? (Note: Requisites are not the answers)

Answer: In order to determine a partnership there must be:

(a) An intent to form the same;

(b) generally participating in both profits and losses;

(c) and such a community of interest, as far as third persons are concerned as enables each party to make contract, manage the business, and dispose of the whole property.-Municipal Paving Co. vs. Herring 150 P. 1067, 50 III 470.) (Id.)

Effects of an unlawful partnership:

Answer: 1. The contract is void from the very beginning. No need for judicial decree to dissolve illegal partnership. 2. The properties shall be confiscated in favor of the government3.The instruments or tools and proceeds of the crime shall be forfeited in favor of the government (Art. 45, RPC)

Case: Mauricio Agad versus Severino Mabato and Mabato and Agad Company, G.R. No. L-24193, June 28, 1968, En banc

Facts: Mauricio Agad and defendant Severino Mabato pursuant to a public instrument are partners in a fishpond business. 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 operations of the partnership; and that, despite repeated demands, Mabato had failed and refused to render accounts for the years 1957 to 1963, Agad prayed in his complaint against Mabato and Mabato & Agad Company, 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.

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

Issue: Whether or not "immovable property or real rights" have beencontributedto the partnership under consideration.

Answer/Ruling: The operation of the fishpond was the purpose of the partnership. Neither said fishpond nor a real right thereto was contributed to the partnership or became part of the capital thereof. That the capital of the said partnership is Two Thousand (P2,000.00) Pesos Philippine Currency only. The One Thousand (P1,000.00) pesos has been contributed by Severino Mabato and the other One Thousand (P1,000.00) Pesos has been contributed by Mauricio Agad. Hence, there is no need for an inventory of the fishpond referred to in Article 1773:

A contract of partnership is void, whenever immovable property is contributed thereto, if an inventory of said property is not made, signed by the parties, and attached to the public instrument.

Article 1772. Every contract of partnership having a capital of three thousand pesos or more, in money or property, shall appear in a public instrument, which must be recorded in the Office of the Securities and Exchange Commission.

Failure to comply with the requirements of the preceding paragraph shall not affect the liability of the partnership and the members thereof to third persons. (n)

To be considered a juridical personality, a partnership must fulfill what requisites?

Answer:

(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.

3. It may be constituted in any form; a public instrument is necessary only where immovable property or real rights are contributed thereto.This implies that since a contract of partnership is consensual, an oral contract of partnership is as good as a written one. Where no immovable property or real rights are involved, what matters is that the parties have complied with the requisites of a partnership.The fact that there appears to be no record in the Securities and Exchange Commission of a public instrument embodying the partnership agreement pursuant to Article 1772 of the Civil Codedid not cause the nullification of the partnership.The pertinent provision of the Civil Code on the matter states:Article 1773. A contract of partnership is void, whenever immovable property is contributed thereto, if an inventory of said property is not made, signed by the parties, and attached to the public instrument. (1668a)

NOTES

Article 1773 was intended primarily to protect third persons.In the case at bar it does not involve third parties who may be prejudiced. (Antonia Torres versus Court of Appeals and Manuel Torres, G.R. No. 134559, December 9, 1999)

Case: Antonia Torres versus Court of Appeals and Manuel Torres, G.R. No. 134559, December 9, 1999

Facts: Sisters Antonia Torres and Emeteria Baring, herein petitioners, entered into a "joint venture agreement" with Respondent Manuel Torres for the development of a parcel of land into a subdivision. Pursuant to the contract, they executed a Deed of Sale covering the said parcel of land in favor of respondent, who then had it registered in his name. By mortgaging the property, respondent obtained from Equitable Bank a loan of P40,000 which, under the Joint Venture Agreement, 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 the bank.

According to petitioners, the project failed because of "respondent's lack of funds or means and skills." They add that respondent used the loan not for the development of the subdivision, but in furtherance of his own company, Universal Umbrella Company.

On the other hand, respondent alleged that he used the loan to implement the Agreement. With the said amount, he was able to effect the survey and the subdivision of the lots. He secured the Lapu Lapu City Council's approval of the subdivision project which he advertised in a local newspaper. He also caused the construction of roads, curbs and gutters. Likewise, he entered into a contract with an engineering firm for the building of sixty low-cost housing units and actually even set up a model house on one of the subdivision lots. He did all of these for a total expense of P85,000.

Respondent claimed that the subdivision project failed, however, because petitioners and their relatives had separately caused the annotations of adverse claims on the title to the land, which eventually scared away prospective buyers. Despite his requests, petitioners refused to cause the clearing of the claims, thereby forcing him to give up on the project.5

Subsequently, petitioners filed a criminal case for estafa against respondent and his wife, who were however acquitted. Thereafter, they filed the present civil case which, upon respondent's motion, was later dismissed by the trial court in an Order dated September 6, 1982. On appeal, however, the appellate court remanded the case for further proceedings. Thereafter, the RTC issued its assailed Decision, which was affirmed by the CA.

Hence, this Petition.

Issue:1. Whether or not a partnership is void.

Ruling/Answer: The partnership is not void.

Art. 1773. A contract of partnership is void, whenever immovable property is contributed thereto, if an inventory of said property is not made, signed by the parties, and attached to the public instrument.

The Supreme Court clarify, Article 1773 was intended primarily to protect third persons. Thus, the contract is declared void by the law when no such inventory is made." The case at bar does not involve third parties who may be prejudiced.

Petitioners contention that the Joint Venture Agreement/partnership is void because there is no consideration for the sale of the land is not correct. The Joint Venture Agreement clearly states that the consideration for the sale was the expectation of profits from the subdivision project. Its first stipulation states that petitioners did not actually receive payment for the parcel of land sold to respondent. Consideration, more properly denominated ascause, can take different forms, such as the prestation or promise of a thing or service by another.

Kinds of partnership as to liability:

1. General partnership The member are all general partners (no limited partners). All the members are liable even beyond their contribution to the partnership.

2. Limited partnership The memebrrs are one or more general partners and one or more limited partners. Only the general partners (not limited partners) are liable beyond their contribution to the partnership. This is so, because a limited partner does not take part in the control of the partnership/business.

Distintions between:

Art. 1779. Universal Partnership of All Present Property.

1. The property which belonged to each of the partners at the time of the constitution of the partnership becomes the property of all the partners/partnership. In other words, ownership is transferred to the partnership.

2. All profits derived from the contributed property shall belong to the partnership. Other profits to be acquired by the partner from donation, legacy, or inheritance may belong also to the partnership, if it was agreed upon.Art. 1780. Universal Partnership of Profits

1. Property which may posses at the time of the celebration of the contract shall continue to pertain exclusively to each partner. In other words, usufruct only is contributed to the partnership.

2. All profits acquired or may acquire by the partners thru their industry or work and during the existence of the partnership shall belong to the partnership.

Article 1782. Persons who are prohibited from giving each other any donation or advantage cannot enter into universal partnership. (1677)

Case: Commissioner of Internal Revenue vs. William J. Suter and C.A. February 28, 1969,G.R. No. L-25532, En Banc

Facts: William J. Suter Morcoin Co., Ltd. was formed. Respondent William J. Suter is the general partner, and Julia Spirig and Gustav Carlson as the limited partners. After the partnership was formed general partner Suter and limited partner Spirig got married. Limitedd partner Carlson sold his share in the partnership to Suter and his wife. The limited partnership had been filing its income tax returns as a corporation, without objection by the herein petitioner, Commissioner of Internal Revenue, until in 1959 when the latter, in an assessment, consolidated the income of the firm and the individual incomes of the partners-spouses Suter and Spirig resulting in a determination of a deficiency income tax against respondent Suter in the amount of P2,678.06 for 1954 and P4,567.00 for 1955.The theory of the petitioner, Commissioner of Internal Revenue, is that the marriage of Suter and Spirig and their subsequent acquisition of the interests of remaining partner Carlson in the partnership dissolved the limited partnership,Respondent Suter protested the assessment, and requested its cancellation and withdrawal, as not in accordance with law, but his request was denied. Unable to secure a reconsideration, he appealed to the Court of Tax Appeals, which court, after trial, rendered a decision, reversing that of the Commissioner of Internal Revenue.

Issue: Whether or not the partnership was dissolved after the marriage of the partners, respondent William J. Suter and Julia Spirig Suter and the subsequent sale to them by the remaining limited partner, Gustav Carlson, of his share in the partnership

Answer/Ruling: We find the Commissioner's appeal unmeritorious.

The petitioner-appellant has evidently failed to observe the fact that William J. Suter "Morcoin" Co., Ltd. wasnot a universalpartnership, but aparticular one.

It follows that William J. Suter "Morcoin" Co., Ltd. was not a partnership that spouses were forbidden to enter by Article 1677 of the Civil Code of 1889.

The appellant's view, that by the marriage of both partners the company became a single proprietorship, is equally erroneous. The capital contributions of partners William J. Suter and Julia Spirig were separately owned and contributed by thembeforetheir marriage; and after they were joined in wedlock, such contributions remained their respective separate property under the Spanish Civil Code (Article 1396).

FOR THE FOREGOING REASONS, the decision under review is hereby affirmed.

No costs.

CHAPTER 2Obligations of the Partners

Doctrine ofdelectus personae(the selection or choice of the person) this doctrine is respecting the right of a person to choose a partner whom he likes to be associated with.

Case: GREGORIO F. ORTEGA, TOMAS O. DEL CASTILLO, JR., and BENJAMIN T. BACORRO,petitioners,vs. HON. COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION and JOAQUIN L. MISA, respondents, G.R.. No. 109248 July 3, 1995

Facts: The law firm of ROSS, LAWRENCE, SELPH and CARRASCOSO was duly registered in the Mercantile Registry on 4 January 1937 and reconstituted with the Securities and Exchange Commission on 4 August 1948. The SEC records show that there were several subsequent amendments to the articles of partnership on 18 September 1958, to change the firm [name] to ROSS, SELPH and CARRASCOSO; on 6 July 1965 . . . to ROSS, SELPH, SALCEDO, DEL ROSARIO, BITO & MISA; on 18 April 1972 to SALCEDO, DEL ROSARIO, BITO, MISA & LOZADA; on 4 December 1972 to SALCEDO, DEL ROSARIO, BITO, MISA & LOZADA; on 11 March 1977 to DEL ROSARIO, BITO, MISA & LOZADA; on 7 June 1977 to BITO, MISA & LOZADA; on 19 December 1980, [Joaquin L. Misa] appellees Jesus B. Bito and Mariano M. Lozada associated themselves together, as senior partners with respondents-appellees Gregorio F. Ortega, Tomas O. del Castillo, Jr., and Benjamin Bacorro, as junior partners.

On February 17, 1988, respondent Atty. Misa wrote the following:

I am withdrawing and retiring from the firm of Bito, Misa and Lozada, effective at the end of this month.

"I trust that the accountants will be instructed to make the proper liquidation of my participation in the firm."

Issue: Can respondent Misa withdraw from the partnership?

Answer/ Ruling: Yes, he can withdraw.

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. Verily, any one of the partners may, at his sole pleasure, dictate a dissolution of the partnership at will. He must, however, act in good faith, not that the attendance of bad faith can prevent the dissolution of the partnership ( Art. 1830 (1) (b) Civil Code), but that it can result in a liability for damages(Art. 19, Civil Code).

In passing, neither would the presence of a period for its specific duration or the statement of a particular purpose for its creation prevent the dissolution of any partnership by an act or will of a partner. Among partners,mutual agency arises and the doctrine ofdelectus personae(the selection or choice of the person) allows them to have thepower, although not necessarily theright, to dissolve the partnership. An unjustified dissolution by the partner can subject him to a possible action for damages.

Explain the limitations on industrial partner. Give the reason for limitations:

Answer: As a rule, an industrial partner cannot engage in business for himself. Except if the partnership permits him to do so. (Reason: an industrial partner contributed nothing in the formation of the partnership, except his future labor or industry. Also, an industrial partner must focus on his contribution to the partnership for a better chance of success of the firm. That if he engaged in business for himself, it is not remote that the partnership will suffer great loss).

If the industrial partner engaged in business for himself, the capitalist partners may exercise the following options:

1. Exclude the industrial partner from the partnership, plus damages, or2. Avail by the partnership the benefits which the industrial partner may have obtained in violation of this law, plus damages.

It is not disputed that the provision against the industrial partner engaging in business for himself seeks to prevent any conflict of interest between the industrial partner and the partnership, and to insure faithful compliance by said partner.

Facts: Pedro Larin delivered to Pedro Tarug P172, in order that the latter, in company with Eusebio Clarin and Carlos de Guzman, might buy and sell mangoes, and, believing that he could make some money in this business, the said Larin made an agreement with the three men by which the profits were to be divided equally between him and them.

Pedro Tarug, Eusebio Clarin, and Carlos de Guzman did in fact trade in mangoes and obtained P203 from the business, but did not comply with the terms of the contract by delivering to Larin his half of the profits; neither did they render him any account of the capital.

Larin charged them with the crime ofestafa, but the provincial fiscal filed an information only against Eusebio Clarin in which he accused him of appropriating to himself not only the P172 but also the share of the profits that belonged to Larin, amounting to P15.50.

Pedro Tarug and Carlos de Guzman appeared in the case as witnesses and assumed that the facts presented concerned the defendant and themselves together.

If you are a judge, how will you decide a case?

Answer/Ruling: 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 is formed, which is called partnership.

When Larin put the P172 into the partnership which he formed with Tarug, Clarin, and Guzman, he invested his capital in the risks or benefits of the business of the purchase and sale of mangoes, and, even though he had reserved the capital and conveyed only the usufruct of his money, it would not devolve upon of his three partners to return his capital to him, but upon the partnership of which he himself formed part, or if it were to be done by one of the three specifically, it would be Tarug, who, according to the evidence, was the person who received the money directly from Larin.

The P172 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 forestafa, 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.

Why Industrial partner is exempted from losses?

Answer: According to Manresa, while capitalist partners can withdraw their capital, the industrial partner cannot withdraw any labor or industry he had already exerted. Moreover, in a certain sense, he already has shared in the losses in that, if the partnership shows no profit, this means that he has labored in vain.

Case: Taitong Chuachie & Co. vs. The Insurance Commission and Travellers Mult-Indemnity Corporation,, G.R. No. L-55397, February 29, 1988

Facts: On April 19, 1975, Azucena Palomo obtained a loan from Tai Tong Chuache Inc.in the amount of P100,000.00. To secure the payment of the loan, a mortgage was executed over the land and the building in favor of Tai Tong Chuache & Co. On April 25, 1975, Arsenio Chua,representative of Thai Tong Chuache & Co.insured the latter's interest with Travellers Multi-Indemnity Corporation for P100,000.00 (P70,000.00 for the building and P30,000.00 for the contents thereof.

On July 31, 1975, the building and the contents were totally razed by fire.

Demand was made from respondent Travellers Multi-Indemnity for its share in the loss but the same was refused.

Issue: Whether or not Arsenio Lopez Chua can act for and on behalf of the partnership.

Ruling: Arsenio Lopez Chua can act for and on behalf of the partnership.

Public respondent pointed out that the action must be brought in the name of the real party in interest. The public respondent, however, forgot that the petitioner being a partnership may sue and be sued in its name or by its duly authorized representative. The fact that Arsenio Lopez Chua is the representative of petitioner is not questioned. Petitioner's declaration that Arsenio Lopez Chua acts as the managing partner of the partnership was corroborated by respondent insurance company.Thus Chua as the managing partner of the partnership may execute all acts of administrationincluding the right to sue debtors of the partnership in case of their failure to pay their obligations when it became due and demandable. Or at the very least, Chua being a partner of petitioner Tai Tong Chuache & Company is an agent of the partnership. Being an agent, it is understood that he acted for and in behalf of the firm.Public respondent's allegation that the civil case filed by Arsenio Chua was in his capacity as personal creditor of spouses Palomo has no basis.

Article 1802. In case it should have been stipulated that none of the managing partners shall act without the consent of the others, the concurrence of all shall be necessary for the validity of the acts, and the absence or disability of any one of them cannot be alleged, unless there is imminent danger of grave or irreparable injury to the partnership. (1694)

A. What is the reason/s of the law.

Answer: The reason or purpose behind these legal provisions is no other than to protect a third person who contracts with one of the managing partners of the partnership, thus avoiding fraud and deceit to which he may easily fall a victim without this protection.

B. Give an exact example of the above provisions of the law.

Answer: Illustration: Three (3) managing partners in a partnership. The two managers required their employees to render overtime work, although it is not a company practice ever since, in order to keep safe the business plant from the incoming strong typhoon. The other partner cannot give his consent since his whereabouts is unknown and cannot be reached thru a cellular phone. In this situation the act of the two managing partners is valid. The purpose of the act is to save the partnership business plant from the imminent danger of grave or irreparable injury.

The Unanimous Concurrence of the Managing Partners is required in this Article. If one of the managing partners did not give his consent to a particular act, that act shall not be valid, The absence or the disability of one who did not give his consent cannot be alleged to insist the validity of the said act. But the act may be valid if the purpose of which is to save the partnership from the imminent danger of grave or irreparable injury to the partnership.

Rules to be followed in the management of the partnership.

1. Follow the agreement.

2. In the absence of the agreement, all the partners shall be considered agents of the partnership. Any partner partner, therefore shall bind the partnership

3. But no partner can make important alteration in the immovable property of the partnership, without the consent of other partners Even if the alteration is may be useful to the partnership, no partner can make alteration without the consent of other partners.

4. If the refusal of consent by the other partners is manifestly prejudicial to the interest of the partnership, a willing partner can get a relief from the court

Article 1807. Every partner must account to the partnership for any benefit, and hold as trustee for it any profits derived by him without the consent of the other partners from any transaction connected with the formation, conduct, or liquidation of the partnership or from any use by him of its property. (n)

Case: Tuazon & San Pedro vs. Gavina Zamora & Sons, G.R. No. 39, May 19, 1903, En Banc Facts: In February, 1898, Tuason entered into the contract with Don Juan Feliciano. The contract was for the construction of a house. He did not mention in the contract that it was made on behalf of the firm of Tuason & San Pedro.

San Pedro makes this protest with respect to the delivery of the house, and wants it on behalf of the firm of "Tuason & San Pedro," On August 25, 1900, partnership Tuason & San Pedro brought an action against partner Tuazon to recover the price of the house built. Tuazon questioned the right of the plaintiff/partnership to sue him

Issue: Whether or not a partnership can maintain an action in its own behalf upon a contract entered into by one of the partners in the latters name.

Ruling: Although Tuason may have operated in his own name, it certainly was not with his own private funds. He used partnership funds. Accordingly, partner Tuazon who received the payment for the construction of the house should be accounted by him to the partnership. Tuazon is a mere trustee of the partnership insofar as the payment/benefits he received from Don Juan Feliciano-owner the house. Definitely, a partnership can maintain an action against one of its partners on the ground that the partnership has a juridical personality separate and distinct from that of each of the partners.

Prohibitions against the capitalist partners and consequences of violations:

1. They cannot engaged for their own account in any business that is of the same business of the present partnership ( there is a sort of conflict of interest), except the articles of partnership allowed them to engaged in the same business.

2. If they violate, they shall bring to the partnerships common fund any profits accruing to them from their transaction, and shall personally bear all the losses.

SECTION 2Property Rights of a Partner

What are the property rights of a partner: Answer:

(1) His rights in specific partnership property;(2) His interest in the partnership; and(3) His right to participate in the management

Case: Roger V. Navarro versus Hon. Jose L. Escobido and Karen Go, doing business under the name Kargo Enterprises, G.R. No. 153788, November 27, 2009

Facts: Respondent Karen T. Go doing business under the trade name KARGO ENTERPRISES filed two complaints before the RTC for replevin and/or sum of money with damages against Navarro. In these complaints, Karen Go prayed that the RTC issue writs of replevin for the seizure of two (2) motor vehicles in Navarros possession.

In his Answers, Navarro alleged as a special affirmative defense that the two complaints stated no cause of action, since Karen Go was not a real party in interest to recover the two motor vehicles. Karen Go was not a party to the Lease Agreements with Option to Purchase the actionable document.

Issue: Whether or not Karen Go can maintain an action recovery of the co-owned property without including the other co-owner.

Answer/ Ruling: Karen Go is the real party-in-interest. The other co-owners are not indispensable parties, since the suit is presumed to have been filed for the benefit of all co-owners.

The central factor in appreciating the issues presented in this case is the business name Kargo Enterprises. The name appears in the title of the Complaint where the plaintiff was identified as "KAREN T. GO doing business under the name KARGO ENTERPRISES,"

Article 124 of the Family Code, on the administration of the conjugal property, provides:

Art. 124.The administration and enjoyment of the conjugal partnership property shall belong to both spouses jointly.In case of disagreement, the husbands decision shall prevail, subject to recourse to the court by the wife for proper remedy, which must be availed of within five years from the date of the contract implementing such decision.

This provision, by its terms, allows either Karen or Glenn Go to speak and act with authority in managing their conjugal property,i.e.,Kargo Enterprises. No need therefore, for one to obtain the consent of the other before performing an act of administration..

Either of the spouses Go, therefore, may bring an action against Navarro to recover possession of the Kargo Enterprises-leased vehicles which they co-own.

Three (3) ways to name a partnership:

1. To write/include all the names of the partners in the partnerships name;2. To write/include some of the names of the partners in the partnerships name;3. To write/include the names of others who are not partners in the partnership. (There are partners who are adopting/using the name of other people because the latters name has a goodwill already).

A person who allowed and consented to use his in the partnerships name although he is not a partner shasll be liable to the liability of a partner. The legal basis are: the express provison of the law (Article 1815) and pursuant also to the doctrine of estoppels.

Article 1816. All partners, including industrial ones, shall be liable pro rata with all their property and after all the partnership assets have been exhausted, for the contracts which may be entered into in the name and for the account of the partnership, under its signature and by a person authorized to act for the partnership. However, any partner may enter into a separate obligation to perform a partnership contract. (n)

NOTES

For the purpose of determining the profit that should go to an industrial partner (who shares in the profits but is not liable for the losses), the gross income from all the transactions carried on by the firm must be added together, and from this sum must be subtracted the expenses or the losses sustained in the business. Only in the difference representing the net profits does the industrial partner share. But if, on the contrary, the losses exceed the income, the industrial partner does not share in the losses.(Criado v. Gutierrez Hermanos, 37 Phil. 883, 894-895, March 23, 1918; andMoran Jr. v. Court of Appeals, 133 SCRA 88, 96, October 31, 1984). [cited in the case of Fernando Santos vs. Spouses Arsenio and Nieves Reyes, G.R. No. 135813, October 25, 2001)

This Article 1816 if third person are involved/affected should be read together with Article 1822, 1823 and 1824 to determine exactly the liability of the partners/partnership. For quick evaluation hereto reproduced Article 1824:

Article 1824. All partners are liable solidarily with the partnership for everything chargeable to the partnership under articles 1822 and 1823. (n)

In the following case there were five (5) general partners when the promissory note in question was executed for and in behalf of the partnership. Since the liability of the partners is pro rata, the liability of the appellant Benjamin C. Daco shall be limited to only one-fifth (1/5) of the obligations of the defendant company:

Case: ISLAND SALES, INC.versus UNITED PIONEERS GENERAL CONSTRUCTION COMPANY, ET. AL. BENJAMIN C. DACO, defendant-appellant,G.R. No. L-22493 July 31, 1975Facts: On April 22, 1961, the defendant company, a general partnership duly registered under the laws of the Philippines, purchased from the plaintiff a motor vehicle on the installment basis and for this purpose executed a promissory note for P9,440.00, payable in twelve (12) equal monthly installments of P786.63, the first installment payable on or before May 22, 1961 and the subsequent installments on the 22nd day of every month thereafter, until fully paid, with the condition that failure to pay any of said installments as they fall due would render the whole unpaid balance immediately due and demandable.

Having failed to receive the installment due on July 22, 1961, the plaintiff sued the defendant company. Benjamin C. Daco, Daniel A. Guizona, Noel C. Sim, Romulo B. Lumauig, and Augusto Palisoc were included as co-defendants in their capacity as general partners of the defendant company.

Daniel A. Guizona failed to file an answer and was consequently declared in default.

Subsequently, on motion of the plaintiff, the complaint was dismissed insofar as the defendant Romulo B. Lumauig is concerned.

When the case was called for hearing, the defendants and their counsels failed to appear notwithstanding the notices sent to them. Consequently, the trial court authorized the plaintiff to present its evidenceex-parte after which the trial court rendered the decision appealed from.

The defendants Benjamin C. Daco and Noel C. Sim moved to reconsider the decision claiming that since there are five (5) general partners, the joint and subsidiary liability of each partner should not exceed one-fifth (1/5) of the obligations of the defendant company. But the trial court denied the said motion notwithstanding the conformity of the plaintiff to limit the liability of the defendants Daco and Sim to only one-fifth (1/5) of the obligations of the defendant company.Hence, this appeal.

Issue: Whether or not the dismissal of the complaint to favor one of the general partners of a partnership increases the joint and subsidiary liability of each of the remaining partners for the obligations of the partnership. Rule on the issue.

Ruling: It does not increase. The fact that the complaint against one of the general partners was dismissed, upon motion of the plaintiff, does not unmake a general partner in the defendant company. In so moving to dismiss the complaint, the plaintiff merely condoned the individual liability to the plaintiff.

To illustrate, if there are five (5) general partners, the liability of the partners is pro rata, and that is limited to one-fifth (1/5) of the obligations. Accordingly, a plaintiff can recover a four-fifth (4/5) only of the total obligations because he condoned the other one-fifth proportion

What are the things that a partner cannot do without the authority from the other partners?

(1) Assign the partnership property in trust for creditors or on the assignee's promise to pay the debts of the partnership;

(2) Dispose of the good-will of the business;

(3) Do any other act which would make it impossible to carry on the ordinary business of a partnership;

(4) Confess a judgment;

(5) Enter into a compromise concerning a partnership claim or liability;

(6) Submit a partnership claim or liability to arbitration;

(7) Renounce a claim of the partnership.

MARCH 11, 2015= Article 1819

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