PARTNERSHIP

I. General Articles 1767 to 1783

Commissioner of Internal Revenue v. Suter and Court of Tax Appeals

A universal partnership requires either that the object of 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.

Where marriage of partners does not make the company a single proprietorship: The capital contributions of partners were separately owned and contributes by them before their marriage; and after they were joined in wedlock, such contributions remained their respective separate property under the Spanish Civil Code.

In the Matter of the Petition for Authority to Continue Use of Firm Name Sycip, Salazar, etc./Ozaeta, Romulo, etc.

Partnership has distinct and separate personality from that of its partners: The basic tenet of the Spanish and Philippine law is that the partnership has a juridical personality of its own, distinct and separate from that of its partners, the bypassing of the existence of the limited partnership as a taxpayer can only be done by ignoring or disregarding clear statutory mandates and basic principles of our law.

Names in a firm name of a partnership must either be those living partners and, in the case of non-partners, should be living persons who can subjected to liability.

Partnership for the practice of law: A partnership for the practice of law cannot be likened to partnerships formed by other professionals or for business. For one thing, the law on accountancy specifically allows the use of a trade name in connection with the practice of accountancy. A partnership for the practice of law is not a legal entity. It is a mere relationship or association for a particular purpose. It is not a partnership formed for the purpose of carrying on trade or business or of holding property." Thus, it has been stated that "the use of a nom de plume, assumed or trade name in law practice is improper.

"The right to practice law is not a natural or constitutional right but is in the nature of a privilege or franchise. It is limited to persons of good moral character with special qualifications duly ascertained and certified. The right does not only presuppose in its possessor integrity, legal standing and attainment, but also the exercise of a special privilege, highly personal and partaking of the nature of a public trust.

Ortega v. Court of Appeals

A partnership that does not fix its term is a partnership at will.

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 partners capability to give it, and the absence of a cause for dissolution provided by the law itself. 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 but that it can result in a liability for damages.

The presence of a period for its specific duration or the statement of a particular purpose for its creation cannot prevent the dissolution of the partnership: The presence of a period for its specific duration or the statement of a particular purpose for its creation cannot prevent the dissolution of the partnership by an act or will of a

partner. Among partners, mutual agency arises and the doctrine of delectus personae allows them to have the power, although not necessarily the right, to dissolve the partnership. An unjustified dissolution by the partner can subject him to a possible action for damages.

It would not be right to let any of the partners remain in the partnership under such an atmosphere of animosity: It would not be right to let any of the partners remain in the partnership under such an atmosphere of animosity. For as long as the reason for withdrawal of a partner is not contrary to the dictates of justice and fairness, nor for the purpose of unduly visiting harm and damage upon the partnership, bad faith cannot be said to characterize the act. Bad faith, in the context here used, is no different from its normal concept of conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity.

Campus Rueda & Co. v. Pacific Commercial & Co

Limited partnership; act of bankruptcy: In the Philippines, a limited partnership duly organized in accordance with law has a personality distinct from that of its members; and if it commits an act of bankruptcy, such as failing for more than thirty days to pay debts amounting to P1,000 or more, it may be adjudged insolvent on the petition of three of its creditors although its members may not be insolvent.

Vargas & Co. vs. Chan

A partnership, duly organized and registered under the laws of the Philippine Islands, is a legal entity capable of suing and of being sued in the company name.

In bringing an action against such a company it is not necessary to make the partners composing said company parties defendant.

The service of summons on such a company is made in pursuance of paragraph 1, section 396, of the Code of Civil Procedure by delivering a copy thereof to the president or other head of the corporation, secretary, cashier, or managing agent thereof.

The certificate of service by the sheriff is prima facie evidence of the facts set out in such certificate; and where such certificate shows that service of summons in an action against a partnership duly organized and registered under the laws of the Philippine Islands was made by serving a copy thereof on a person therein named and described as the managing agent of the company, it is prima facie evidence of the fact that the person on whom the summons was served was in fact the managing agent of the company.

Ngo Tian Tek vs. Phil. Education Co.

CONTRACTS BINDING ON UNDISCLOSED PRINCIPAL.Contracts entered into by a factor of a commercial establishment known to belong to a well-known enterprise or association, shall be understood as made for the account of the owner of such enterprise or association, even when the factor has not so stated at the time of executing the same, provided that such contracts involve objects comprised in the line and business of the establishment.

LACK OF RECORDED POWER NOT PREJUDICIAL TO THIRD PERSONS.The circumstance that a f actor does not have a recorded power of attorney will not operate to prejudice third persons.

PARTIES; PARTNERSHIP; DEATH OF A PARTNER.A case will not be dismissed because of the death of a partner, where the partnership, possessing a personality distinct from any of the partners, is sued.

Ang Pue & Co. vs. Sec. of Commerce and Industry

To organize not absolute right.To organize a corporation or partnership that could claim a juridical personality of its own and transact business as such, is not a matter of absolute right but a privilege which may be enjoyed only under such terms as the state may deem necessary to impose

Only Filipinos may engage in retail business; Rep. Act 1180 applicable to existing partnership.The State through Congress had the right to enact Republic Act No. 1180 providing that only Filipinos may engage in the retail business and such provision was intended to apply to partnership owned by foreigners already existing at the time of its enactment giving them the right to continue engaging in their retail business until the expiration of their term of life

Amendment of articles of partnership to extend term after enactment of the law.The agreement in the articles of partnership to extend the term of its life is not a property right and it must be deemed subject to the law existing at the time when the partners came to agree regarding the extension. In the case at bar, when the partners amended the articles of partnership, the provisions of Republic Act 1180 were already in force, and there can be not the slightest doubt that the right claimed by appellants to extend the original term of their partnership to another five years would be in violation of the clear intent and purpose of said Act

Ona vs. Commissioner of Internal Revenue

When co-ownership converted to co-partnership.For tax purposes, the co-ownership of inherited properties is automatically converted into an unregistered partnership the moment the said common properties and/or the incomes derived therefrom are used as a common fund with intent to produce profits for the heirs in proportion to their respective shares in the inheritance as determined in a project partition either duly executed in an extra-judicial settlement or approved by the court in the corresponding testate or intestate proceeding. The reason is simple. From the moment of such partition, the heirs are entitled already to their respective definite shares of the estate and the incomes thereof, for each of them to manage and dispose of as exclusively his own without the intervention of the other heirs, and, accordingly, he becomes liable individually for all taxes in connection therewith. If after such partition, he allows his share to be held in common with his co-heirs under a single management to be used with the intent of making profit thereby in proportion to his share, there can be no doubt that, even if no document or instrument were executed for the purpose, for tax purposes, at least, an unregistered partnership is formed.

Partnerships considered corporation for tax purposes.For purposes of the tax on corporations, the National Internal Revenue Code, includes partnershipswith the exception only of duly registered general co-partnershipswithin the purview of the term corporation.

When income derived from inherited properties deemed part of partnership income.The income derived from inherited properties may be considered as individual income of the respective heirs only so long as the inheritance or estate is not distributed or, at least, partitioned, but the moment their respective known shares are used as part of the common assets of the heirs to be used in making profits, it is but proper that the income of such shares should be considered as part of the taxable income of an unregistered partnership.

Effect on unregistered partnership profits of individual income tax paid.The partnership profits distributable to the partners should be reduced by the amounts of income tax assessed against the partnership. Consequently, each of the petioners in his individual capacity overpaid his income tax for the years in question. But as the individual income tax liabilities of petitioners are not in issue in the instant proceeding, it is not proper for the Court to pass upon the same.

Where right to refund of overpaid individual income tax has prescribed.A taxpayer who did not pay the tax due on the income from an unregistered partnership, of which he is a partner, due to an erroneous belief that no partnership, but only a co-ownership, existed between him and his co-heirs, and who due to the payment of the individual income tax corresponding to his share in the unregistered partnership profits, on the balance,

overpaid his income tax has the right to be reimbursed what he has erroneously paid. However, the law is very clear that the claim and action for such reimbursement are subject to the bar of prescription.

Gatchalian vs. Collector of Internal Revenue

PARTNERSHIP OF A CIVIL NATURE; COMMUNITY OF PROPERTY; SWEEPSTAKES; INCOME TAX.According to the stipulated facts the plaintiffs organized a partnership of a civil nature because each of them put up money to buy a sweepstakes ticket for the sole purpose of dividing equally the prize which they may win, as they did in fact in the amount of P50,000 (article 1665, Civil Code). The partnership was not only formed, but upon the organization thereof and the winning of the prize, J. G. personally appeared in the office of the Philippine Charity Sweepstakes, in his capacity as co-partner, as such collected the prize, the office issued the check for ?50,000 in favor of J. G. and company, and the said partner, in the same capacity, collected the check. All these circumstances repel the idea that the plaintiffs organized and formed a community of property only. Having organized and constituted a partnership of a civil nature, the said entity is the one bound to pay the income tax which the defendant collected under the aforesaid section 10 (a) of Act No. 2833, as amended by section 2 of Act No. 3761. There is no merit in plaintiffs' contention that the tax should be prorated among them and paid individually, resulting in their exemption from the tax.

Sardane vs. Court of Appeals

While receipt of a share in then profits of the business is a prima facie evidence that the person receiving the same is a partner, no such inference shall be drawn if such profits were received in payment of his wages as an employee.As manager of the basnig Sardaco, naturally some degree of control over the operations and maintenance thereof had to be exercised by herein petitioner. The fact that he had received 50% of the net profits does not conclusively establish that he was a partner of the private respondent herein. Article 1769(4) of the Civil Code is explicit that while the receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business, 110 such inference shall be drawn if such profits were received in payment as wages of an employee. Furthermore, herein petitioner had no voice in the management of the affairs of the basnig. Under similar facts, this Court in the early case of Fortis vs. Gutierrez Hermanos, in denying the claim of the plaintiff therein that he was a partner in the business of the defendant, declared: "This contention cannot be sustained. It was a mere contract of employment. The plaintiff had no voice nor vote in the management of the affairs of the company. The fact that the compensation received by him was to be determined with reference to the profits made by the defendant in their business did not in any sense make him a partner therein. x x x.

Deluao vs. Casteel

Validity of contract of partnership to exploit a fishpond pending its award and a contract of partnership to divide the fishpond after such award.A contract of partnership to exploit a fishpond pending its award to any qualified party or applicant is valid, but a contract of partnership to divide the fishpond after such award is illegal. Act 4003, known as the Fishery Act, prohibits the holder of a fishpond permit (,the permittee) from transferring or subletting the fishpond granted to him without the previous consent or approval of the Secretary of Agriculture and Natural Resources.

Partnership; Dissolution; Case at bar.Art. 1830(3) of the Civil Code enumerates, as one of the causes for the dissolution of a partnership, "x x x any event which makes it unlawful for the business of the partnership to be carried on or for the members to carry it on in partnership." In the case at bar, the approval of the appellant's fishpond application by the decisions in DANR Cases 353 and 353-B brought to the fore several provisions of law which made the continuation of the partnership unlawful and therefore caused its ipso facto dissolution. Inasmuch as the erstwhile partners articulated in the aforecited letters their respective resolutions not to share the fishpond with each otherin direct violation of the undertaking for which they have established their partnershipeach must be deemed to have expressly withdrawn from the partnership, thereby causing its

dissolution pursuant to Art. 1830(2) of the Civil Code which provides, inter alia, that dissolution is caused "by the express will of any partner at any time.

Kiel vs. Estate of Sabert

PROOF OF PARTNERSHIP; DECLARATIONS AND ADMISSIONS.The declarations of one partner, not made in the presence of his copartner, are not competent to prove the existence of a partnership between them as against such other partner. The existence of a partnership cannot be established by general reputation, rumor, or hearsay.

INTENTION OF PARTIES TO GOVERN.The intention of the parties, as gathered from the facts and as ascertained from their language and conduct, should be sought out and then given effect.

CASE AT BAR.Held: That, applying the tests as to the existence of a partnership, competent evidence exists establishing the verbal partnership formed by Kiel and Sabert, and that Kiel has a legal right to ask for an accounting with reference to the improvements and personal property on the land as of the date upon which he left the plantation in the hands of Sabert as trustee.

Jo Chung Cang vs. Pacific Commercial Co.

MERCANTILE LAW; CONTRACTS; PARTNERSHIP; INSTANT CASE.Held: That the mercantile establishment which operated under the name of Teck Seing & Co., Ltd., and which was constituted by the document set forth in the decision, is not a corporation, nor a cuenta en participacin (joint account association), nor a sociedad annma, nor a sociedad en comandita (limited partnership), nor a de facto commercial association, but is a general partnership.

LIMITED PARTNERSHIP.Those who seek to avail themselves of the protection of laws permitting the creation of limited partnerships must show a substantially full compliance with such laws. A limited partnership that has not complied with the law of its creation is not considered a limited partnership at all, but a general partnership in which all the members are liable.

To establish a limited partnership, there must be, at least, one general partner and the name of at least one of the general partners must appear in the firm name. (Code of Commerce, arts. 122 [2], 146, 148.)

DEFECTS IN THE ORGANIZATION; FIRM NAME; ARTICLE 126 OF THE CODE OF COMMERCE, CONSTRUED.Article 126 of the Code of Commerce requires the general copartnership to transact business under the name of all its members, or of several of them, or of one only. The object of the article is manifestly to protect the public against imposition and fraud.

Article 126 of the Code of Commerce was intended more for the protection of the creditors than of the partners themselves. A distinction can be drawn between the right of the alleged partnership to institute action when failing to live up to the provisions of the law, or even the rights of the partners as among themselves, and the right of a third person to hold responsible a general partnership which merely lacks a firm name, in order to make it a partnership de jure. The law should be construed as rendering contracts made in violation of it unlawful and unenforceable at the instance of the offending party only, but not as designed to take away the rights of innocent parties who may have dealt with the offenders in ignorance of their having violated the law.

The civil law and the common law alike point to a difference between the rights of the partners who have failed to comply with the law and the rights of third persons who have dealt with the partnership.

According to the Spanish civil law, defects in the organization cannot affect relations with third persons. Contracts entered into by commercial associations defectively organized are valid when they are voluntarily executed by the parties, if the only controversy relates to whether or not they complied with the agreement.

FAILURE OF REGISTRY, EFFECT.While the failure to register in the commercial registry necessarily precludes the members from enforcing rights acquired by them against third persons, such failure cannot prejudice the rights of third persons. (Decisions of the supreme court of Spain of December 6, 1887, January 25, 1888, November 10, 1890, and January 26, 1900.)

BANKRUPTCY AND INSOLVENCY; LIABILITY OF PARTNERSHIP AND PARTNERS.If a firm be insolvent, but one or more partners thereof are solvent, the creditors may proceed both against the firm and against the solvent partner or partners, first exhausting the assets of the firm before seizing the property of the partners. [Jo Chung Cang vs. Pacific Commercial Co., 45 Phil. 142(1923)]

Agad vs. Mabolo & Agad & Co.

How partnership may be constituted.A partnership may be constituted in any form, except where immovable property or real rights are contributed thereto, in which case a public instrument shall be necessary (Art. 1771, Civil Code). A contract of partnership is void, whenever immovable property is contributed thereto, if inventory of said property is not made, signed by the parties, and attached to the public instrument (Art. 1773, Id.).

Aurbach vs. Sanitary Wares

A corporation cannot enter into a partnership contract but may engage in a joint venture with others.The ASI Groups argument is correct within the context of Section 24 of the Corporation Code. The point of query, however, is whether or not that provision is applicable to a joint venture with clearly defined agreements: The legal concept of a joint venture is of common law origin. It has no precise legal definition, but it has been generally understood to mean an organization formed for some temporary purpose. It is in fact hardly distinguishable from the partnership, since their elements are similarcommunity of interest in the business, sharing of profits and losses, and a mutual right of control. The main distinction cited by most opinions in common law jurisdictions is that the partnership contemplates a general business with some degree of continuity, while the joint venture is formed for the execution of a single transaction, and is thus of a temporary nature. This observation is not entirely accurate in this jurisdiction, since under the Civil Code, a partnership may be particular or universal, and a particular partnership may have for its object a specific undertaking. (Art. 1783, Civil Code). It would seem therefore that under Philippine law, a joint venture is a form of partnership and should thus be governed by the law of partnerships. The Supreme Court has however recognized a distinction between these two business forms, and has held that although a corporation cannot enter into a partnership contract, it may however engage in a joint venture with others. Moreover, the usual rules as regards the construction and operations of contracts generally apply to a contract of a joint venture.

II. Obligations of the Partners among Themselves Articles 1784 to 1809

Lozano vs. Depakakibo

DISPOSAL BY CONTRIBUTING PARTIES NOT ALLOWED.An equipment which was contributed by one of the partners to the partnership becomes the property of the partnership and as such cannot be disposed of by the party contributing the same without the consent or approval of the partnership or of the other partner (Clemente vs. Galvan, 67 Phil., 565).

FURNISHING CURRENT TO FRANCHISE HOLDER WlTHOUT APPROVAL OF PUBLIC SERVICE COMMISSION; PARTNERSHIP NOT VOID AB INITIO.The act of the partnership in furnishing electric current to the franchise holder without the previous approval of the Public Service Commission, does not per se make the contract of partnership null and void' from the beginning.

Uy vs. Puzon

Damages; A partner in a construction venture who failed to stand by his commitment to the partnership will be ordered to reimburse to his co-partner whatever the latter invested and spent for the projects of the venture.Since the defendant-appellant was at fault, the trial court properly ordered him to reimburse the plaintiff-appellee whatever amount the latter had invested in or spent for the partnership on account of the construction projects.

Indemnification for damages includes losses suffered and profits obligee failed to obtain.Regarding the award of P200,000.00 as his share in the unrealized profits of the partnership, the appellant contends that the findings of the trial court that the amount of P400,000.00 as reasonable profits of the partnership venture is without any basis and is not supported by the evidence. The appellant maintains that the lower court, in making its determination, did not take into consideration the great risks involved in business operations involving as it does the completion of the projects within a definite period of time, in the face of adverse and often unpredictable circumstances, as well as the fact that the appellee, who was in charge of the projects in the field, contributed in a large measure to the failure of the partnership to realize such profits by his field management. This argument must be overruled in the light of the law and evidence on the matter. Under Article 2200 of the Civil Code, indemnification for damages shall comprehend not only the value of the loss suffered, but also that of the profits which the obligee failed to obtain. In other words lucrum cessans is also a basis for indemnification.

U.S. vs. Clarin

ACT NOT CONSTITUTING ESTAFA.The failure on the part of the industrial partners to return to the capitalist partner the capital brought into the partnership by the latter is not an act constituting the crime of estafa, as defined in No. 5 of article 535 of the Penal Code.

Martinez vs. Ong Pong Co.

PARTNERSHIP; LIABILITY OF MANAGING PARTNERS.Where two persons receive from another a sum of money for the establishment of a business, and agree to share with the latter the profits or losses that may result therefrom, the said two persons, as the apparent administrators of the partnership, acted as agents for the capitalist partner under the provisions of article 1695, rule 1, of the Civil Code, and by virtue thereof are bound to fulfill the contract which implies the management of the business.

Ramnani vs. Court of Appeals

Partnership; We have here a situation where two brothers engaged in a business venture, with one furnishing the capital, and the other contributing his industry and talent. Justice and equity dictate that the two share equally the fruit of their joint investment and efforts.Nevertheless, under the peculiar circumstances of this case and despite the fact that Choithram, et al., have committed acts which demonstrate their bad faith and scheme to defraud spouses Ishwar and Sonya of their rightful share in the properties in litigation, the Court cannot ignore the fact that Choithram must have been motivated by a strong conviction that as the industrial partner in the acquisition of said assets he has as much claim to said properties as Ishwar, the capitalist partner in the joint venture. The scenario is clear. Spouses Ishwar supplied the capital of $150,000.00 for the business. They entrusted the money to Choithram to invest in a profitable business venture in the Philippines. For this purpose they appointed Choithram as their attorney-in-fact. Choithram in turn decided to invest in the real estate business. He bought the two (2) parcels of land in question from Ortigas as attorney-in-fact of Ishwar. Instead of paying for the lots in cash, he paid in installments and used the balance of the capital entrusted to him, plus a loan, to build two buildings. Although the buildings were burned later, Choithram was able to build two other buildings on the property. He rented them out and collected the rentals. Through the industry and genius of Choithram, Ishwars property was developed and improved into what it is nowa valuable asset worth millions of pesos. As of the last estimate in 1985, while the case was pending before the trial court, the market value of the properties is no less than P22,304,000.00. It should be worth much more today. We have a situation where two brothers engaged in a business venture. One furnished the capital, the other contributed his industry and talent. Justice and equity dictate that the two share equally the fruit of their joint investment and efforts. Perhaps this Solomonic solution may pave the way towards their reconciliation. Both would stand to gain. No one would end up the loser. After all, blood is thicker than water.

Moran, Jr. vs. Court of Appeals

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

Essence of partnership is that partners share in profits and losses.Being a contract of partnership, each partner must share in the profits and losses of the venture. That is the essence of a partnership. And even with an assurance made by one of the partners that they would earn a huge amount of profits, in the absence of fraud, the other partner cannot claim a right to recover the highly speculative profits. It is a rare business venture guaranteed to give 100% profits. In this case, on an investment of P15,000.00, the respondent was supposed to earn a guaranteed P1,000.00 a month for eight months and around P142,500.00 on 95,000 posters costing P2.00 each but 2,000 of which were sold at P5.00 each. The fantastic nature of expected profits is obvious. We have to take various factors into account. The failure of the Commission on Elections to proclaim all the 320 candidates of the Constitutional Convention on time was a major factor. The petitioner used his best business judgment and felt that it would be a losing venture to go on with the printing of the agreed 95,000 copies of the posters. Hidden risks in any business venture have to be considered.

Teague vs. Martin,

WHEN PARTNER MUST ACCOUNT.Where one party to a partnership, without any authority, takes and uses the money of the firm in the purchase of property which he acquired and had registered in his own name, in a suit for the dissolution of the partnership, he will be required to account to his partners for the money which he used in such purchase.

WHEN PARTNERSHIP SHOULD ACCOUNT.Where it appears that such partnership had the use and benefit of such property, it will be required to account to the owner for the reasonable value of its use.

Machuca vs. Chuidian

COPARTNERSHIP; LIQUIDATION.Where the articles of copartnership provide that upon liquidation the claims of outside persons shall first be satisfied before those of the partners, the assignment of a partner's interest pending liquidation is the assignment of a future interest which can not be enforced until the termination of the liquidation.

Fue Leung vs. Intermediate Appellate Court

Partnership; Prescription; The right to demand an accounting exists as long as the partnership exists.Regarding the prescriptive period within which the private respondent may demand an accounting, Articles 1806, 1807 and 1809 show that the right to demand an accounting exists as long as the partnership exists. Prescription begins to run only upon the dissolution of the partnership when the final accounting is done.

Dissolution of Partnerships; The Court may order the dissolution of the partnership in question because its continuation has become inequitable.Considering the facts of this case, the Court may decree a dissolution of the partnership under Article 1831 of the Civil Code which, in part, provides: Art. 1831. On application by or for a partner the court shall decree a dissolution whenever: x x x x x x xxx "(3) A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the business; (4) A partner willfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable to carry on the business in partnership with him; xxx xxx xxx (6) Other circumstances render a dissolution equitable. There shall be a liquidation and winding up of partnership affairs, return of capital, and other incidents of dissolution because the continuation of the partnership has become inequitable.

Ornum vs. Lasala

When Statement of Accounts is Deemed Approved.Held: That the last and final statement of accounts quoted in the deci-sion had been approved by the respond-ents. This approval resulted, by virtue of the letter of Father Mariano Lasala of July 19, 1932, from the failure of the res-pondents to object to the statement and from their promise to sign the same as soon as they received their shares as shown in said statement. After such shares had been paid by the petitioners and accepted by the respondents without any reservation, the approval of the state-ment of accounts was virtually confirmed and its signing thereby became a mere formality to be complied with by the res-pondents exclusively. Their refusal to sign, after receiving their shares, amounted to a waiver of that formality in favor of the petitioners who had already performed their obligation.

Approval of Statement of Accounts Precludes Right to Further Liquidation.This approval precludes any right on the part of the respondents to a further liquidation, unless the latter can show that there was fraud, deceit, error or mistake in said approval. The Court of Appeals did not make any finding that there was fraud, and on the matter of error or mistake, its pronouncement that the evidence tends to prove that there were mistakes in the petitioners' state-ments of accounts, without specifying the mistakes, merely intimates, in the opinion of this court, a suspicion and is not such a positive and unmistakable finding of fact as to justify a revision, especially because the Court of Appeals has relied on the bare allegations of the parties. Even ad-mitting that, as alleged by the petitioners in the counterclaim, they overpaid the respondents in the sum of P575.12, this error is essentially fatal to the latter's theory that they are entitled to more than what the statement of accounts shows, and is therefore not the kind of error that calls for another accounting which will serve the purpose of the respondents' suit. Moreover, as the petitioners did not ap-peal from the decision of the Court of First Instance of Manila, they have aban-doned such allegation in the Court of Appeals.

III. Property Rights of a Partner Articles 1810 - 1814

Clemente vs. Galvan

POSSESSION; CONSTRUCTIVE POSSESSlON.From the facts stated in the decision of the court, it is clear that plaintiff could not obtain possession of the machines in question. The constructive possession deducible from the fact that he had control of the keys to the place where the machines were found (Ylaya Street Nos. 705-707), as they had been delivered to him by the receiver, does not help him any because the lower court suspended the effects of the order whereby the keys were delivered to him a few days after its issuance; and thereafter revoked it entirely in the appealed decision.

ACTUAL POSSESSION.Furthermore, when he attempted to take material possession of the machines, the defendant did not allow him to do so. Consequently, if he did not have material possession of the said machines, he could not in any manner mortgage them. While it is true that the deed of mortgage Exhibit B was annotated in the registry of property, it is no less true that the machines to which it refers are not the same as those in question because the latter are on Ylaya Street Nos. 705-707 and the former are on Singalong- Street No. 1163.

Leyte-Samar-Sales and K. Tomassi vs. S. Cea and O. Castrilla

Partner is not Creditor of the Partnership.The partner of a partnership is not a creditor of such partnership for the amount of his share.

Remedy of owner of property Wrongfully Sold.The remedy of the owner of a property wrongfully sold is to claim the property and not the proceeds of the sale.

Want of Necessary and Indespensable Parties; Effect of.A valid judgment cannot be rendered where there is a want of necessary parties, and a court cannot properly adjudicate matters involved in a suit when necessary and in-dispensable parties to the proceedings are not before it.

IV. Obligations of the Partners to Third Persons Articles 1815 to 1827

Phil. National Bank vs. Lo

ASSOCIATIONS; GENERAL PARTNERSHIPS; LIABILITY.The anomalous adoption of a firm name by the defendant partners cannot be set up by them as a defense so as to evade a liability contracted by them, inasmuch as such anomaly does not affect the liability of the general partners to third persons under article 127 of the Code of Commerce.

The object of article 126 of the Code of Commerce in requiring a general partnership to transact business under the name of all its members, of several of them, or of one only, is to protect the public from imposition and fraud. The provision of said article 126 is for the protection of the creditors rather than of the partners themselves. The doctrine formerly enunciated by this court is that the law must be construed as rendering contracts made in violation of it, unlawful and unenforceable only as between the partners and at the instance of the infringer, but not in the sense of depriving innocent parties of their rights, who may have dealt with the guilty parties in ignorance of the latter's having violated the law; and that contracts entered into by mercantile associations defectively organized are valid when voluntarily executed by the parties and the only question is whether or not they complied with the agreement. (Jo Chung Cang vs. Pacific Commercial Co., 45 Phil., 142.)

Appellants' contention that such parts of their property as are not included in the partnership assets cannot be levied upon for the payment of the partnership obligations, except after the partnership property has been exhausted is untenable, for the partnership property described in the mortgage no longer existed at the time of the filing of the herein complaint, nor has its existence been proved, nor was it offered to the plaintiff for sale. Hence article 237 of the Code of Commerce invoked by the appellants can in no way be applicable to this case.

All the members of a general partnership, be they managing partners of the same or not, shall be personally and solidarily liable with all their property for the results of the transactions made in the name and for the account of the partnership, under the signature of the latter and by a person authorized to use it.

Co-Pitco vs. Yulo

CIVIL PARTNERSHIP.Each member of a civil partnership is not bound to pay all the debts of the concern, but simply his pro rata, share.

A partnership formed to operate a sugar plantation is a civil and not a mercantile partnership.

Island Sales, Inc. vs. United Pioneers Gen. Construction Co.

Condonation by creditor of share in partnerships debt of one partner does not increase pro rata liability of other partners.In the instant case, there were five general partners when the promissory note in question was executed for and in behalf of the partnerships. Since the liability of the partners in pro rata, the liability of the appellant Benjamin C. Daco shall be limited to only 1/5 of the obligations of the defendant company. The fact that the complaint against the defendant Romulo B. Lumauig was dismissed, upon motion of the plaintiff, does not unmake the said Lumauig as a general partner in the defendant company. In so moving to dismiss the complaint, the plaintiff merely condoned Lumauigs individual liability to the plaintiff.

Compania Maritima vs. Muoz

Partnership; Industrial Partners.In an ordinary general mercan- tile partnership the industrial partners are liable to third parties for the debts and obligations of the partnership.

Salary to Partner.The mere payment of a salary to one of the partners of a concern and the subsequent discontinuance of such salary does not destroy the interest of the partner nor relieve him from partnership liability.

Action; Joinder.Both the partnership and the separate partners thereof may be joined in one action, but the private property of the latter can not be taken in payment of the firm debts until the common property of the concern is exhausted. (Art. 237, Code of Commerce.)

Dietrich vs. Freeman

CIVIL PARTNERSHIP; CONTRACT OF SERVICES; LIABILITY OF PARTNERS.In the case of a civil partnership, the liability of the partners is determined by the provisions of the Civil Code, and when a contract of services is entered into between an employee and the manager, in the firm name, the partners composing the firm are liable pro rata for the damages arising out of such contract.

Santiago Syjuco, Inc. vs. Castro

Doctrine of Estoppel to preclude any attempt to avoid the mortgage as allegedly unauthorized.If, therefore, the respondent partnership was inescapably chargeable with knowledge of the mortgage executed by all the partners thereof, its silence and failure to impugn said mortgage within a reasonable time, let alone a space of more than seventeen years, brought into play the doctrine of estoppel to preclude any attempt to avoid the mortgage as allegedly unauthorized.

Estoppel may arise from silence.The principles of equitable estoppel, sometimes called estoppel in pais, are made part of our law by Art. 1432 of the Civil Code. Coming under this class is estoppel by silence, which obtains here and as to which it has been held that: x x x an estoppel may arise from silence as well as from words. Estoppel by silence arises where a person, who by force of circumstances is under a duty to another to speak, refrains from doing so and thereby leads the other to believe in the existence of a state of facts in reliance on which he acts to his prejudice. Silence may support an estoppel whether the failure to speak is intentional or negligent. Inaction or silence may under some circumstances amount to a misrepresentation and concealment of the facts, so as to raise an equitable estoppel. When the silence is of such a character and under such circumstances that it would become a fraud on the other party to permit the party who has kept silent to deny what his silence has induced the other to believe and act on, it will operate as an estoppel. This doctrine rests on the principle that if one maintains silence, when in conscience he ought to speak, equity will debar him from speaking when in conscience he ought to remain silent. He who remains silent when he ought to speak cannot be heard to speak when he should be silent.

Liwanag and Reyes vs. Workmens Compensation Commission

WORKMEN'S COMPENSATION; SOLIDARY LIABILITY OF BUSINESS PARTNERS.Although the Workmen's Compensation Act does not contain any provision expressly declaring that the obligation of business partners arising from compensable injury or death of an employee should be solidary, however, there are other provisions of law from which it could be gathered that their liability must be solidary. Arts. 1711 and 1712 of the New Civil Code and Section 2 of the Workmen's Compensation Act, reasonably indicate that in compensation cases, the liability of business partners should be solidary. If the responsibility of the partners were to be merely joint and not solidary, and one of them happens to be insolvent, the amount awarded to the

dependents of the deceased employee would only be partially satisfied, which is evidently contrary to the intent and purpose of the law to give full protection to the employee.

STATUTORY CONSTRUCTION; LIBERAL CONSTRUCTION OF WORKMEN'S COMPENSATION LAWS.Workmen's Compensation laws should be construed fairly, reasonably and liberally in favor of and for the benefit of the employee and his dependents. All doubts as to right of compensation should be resolved in his favor, and the law should be interpreted to promote its purpose.

McDonald vs. National City Bank of New York

PARTNERSHIP; UNREGISTERED PARTNERSHIP; PERSONS COMPOSING IT ARE PARTNERS; ASSOCIATION is PARTNERSHIP.While an uregistered commercial partnership has no juridical personality, nevertheless, where two or more persons, attempt to create a partnership failing to comply with all the legal formalities, the law considers them as partners and the association is a partnership in so far as it is favorable to third persons, by reason of the equitable principle of estoppel.

"De Facto" EXISTENCE; DOMICILE AS TO THIRD PERSONS.If the law recognizes a defectively organized partnership as de facto as far as third persons are concerned, for purposes of its de facto existence it should have such attribute of a partnership as domicile. Although it has no legal standing, it is a partnership de facto and the general provisions of the code applicable to all partnership apply to it.

Pioneer Insurance & Security Corporation vs. Court of Appeals

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.While it has been held that as between themselves the rights of the stockholders in a defectively incorporated association should be governed by the supposed charter and the laws of the state relating thereto and not by the rules governing partners, 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. Thus, where persons associate themselves together under articles to purchase property to carry on a business, and their organization is so defective as to come short of creating a corporation within the statute, they become in legal effect partners inter se, and their rights as members of the company to the property acquired by the company will be recognized.

Such a relation does not necessarily exist however for ordinarily persons cannot be made to assume the relation of partners as between themselves when their purpose is that no partnership shall exist.However, 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 exist (London Assur. Corp. v. Drennen, Minn., 6 S.Ct. 442, 116 U. S. 461, 472, 29 L.Ed. 688), and 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). A partnership relation between certain stockholders and other stockholders, who were also directors, will not be implied in the absence of an agreement,

Same; Same; Same; Same; Petitioner never had the intention to form a corporation with the respondents despite his representations to them.It is therefore clear that the petitioner never had the intention to form a corporation with the respondents despite his representations to them. This gives credence to the cross-claims of the respondents to the effect that they were induced and lured by the petitioner to make contributions to a proposed corporation which was never formed because the petitioner reneged on their agreement.

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.Applying therefore the principles of law earlier cited to the facts of the case, necessarily, 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. The record shows that the petitioner was acting on his own and not in behalf of his other would-be incorporators in transacting the sale of the airplanes and spare parts.

Viuda de Chan vs. Pen

INSOLVENCY; LIABILITY OF THE PARTNERS.Where a partnership, as such, has no visible assets, the partners individually must, jointly and severally, respond for its debts (Code of Commerce, art. 127).

PARTNERSHIP AND SEPARATE PARTNERS JOINED IN THE SAME ACTION.Both the partnership and the separate partners thereof may be joined in the same action, though, the private property of the partners cannot be taken in payment of the partnership debts until the common property of the concern is exhausted.

PARTNERSHIP ADJUDGED BANKRUPT IN NAME OF OSTENSIBLE PARTNER.A partnership may be adjudged bankrupt in the name of an ostensible partner when such name is the name under which the partnership did business.