Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No.

L-16318 October 21, 1921

PANG LIM and BENITO GALVEZ, plaintiffs-appellees, vs. LO SENG, defendant-appellant. Cohn, Fisher and DeWitt for appellant. No appearance for appellees.

STREET, J.: For several years prior to June 1, 1916, two of the litigating parties herein, namely, Lo Seng and Pang Lim, Chinese residents of the City of Manila, were partners, under the firm name of Lo Seng and Co., in the business of running a distillery, known as "El Progreso," in the Municipality of Paombong, in the Province of Bulacan. The land on which said distillery is located as well as the buildings and improvements originally used in the business were, at the time to which reference is now made, the property of another Chinaman, who resides in Hongkong, named Lo Yao, who, in September, 1911, leased the same to the firm of Lo Seng and Co. for the term of three years. Upon the expiration of this lease a new written contract, in the making of which Lo Yao was represented by one Lo Shui as attorney in fact, became effective whereby the lease was extended for fifteen years. The reason why the contract was made for so long a period of time appears to have been that the Bureau of Internal Revenue had required sundry expensive improvements to be made in the

distillery, and it was agreed that these improvements should be effected at the expense of the lessees. In conformity with this understanding many thousands of pesos were expended by Lo Seng and Co., and later by Lo Seng alone, in enlarging and improving the plant. Among the provisions contained in said lease we note the following: Know all men by these presents: xxx xxx xxx

1. That I, Lo Shui, as attorney in fact in charge of the properties of Mr. Lo Yao of Hongkong, cede by way of lease for fifteen years more said distillery "El Progreso" to Messrs. Pang Lim and Lo Seng (doing business under the firm name of Lo Seng and Co.), after the termination of the previous contract, because of the fact that they are required, by the Bureau of Internal Revenue, to rearrange, alter and clean up the distillery. 2. That all the improvements and betterments which they may introduce, such as machinery, apparatus, tanks, pumps, boilers and buildings which the business may require, shall be, after the termination of the fifteen years of lease, for the benefit of Mr. Lo Yao, my principal, the buildings being considered as improvements. 3. That the monthly rent of said distillery is P200, as agreed upon in the previous contract of September 11, 1911, acknowledged before the notary public D. Vicente Santos; and all modifications and repairs which may be needed shall be paid for by Messrs. Pang Lim and Lo Seng. We, Pang Lim and Lo Seng, as partners in said distillery "El Progreso," which we are at present conducting, hereby accept this contract in each and all its parts, said contract to be effective upon the termination of the contract of September 11, 1911. Neither the original contract of lease nor the agreement extending the same was inscribed in the property registry, for the reason that the estate which is the subject of the lease has never at any time been so inscribed.

On June 1, 1916, Pang Lim sold all his interest in the distillery to his partner Lo Seng, thus placing the latter in the position of sole owner; and on June 28, 1918, Lo Shui, again acting as attorney in fact of Lo Yao, executed and acknowledged before a notary public a deed purporting to convey to Pang Lim and another Chinaman named Benito Galvez, the entire distillery plant including the land used in connection therewith. As in case of the lease this document also was never recorded in the registry of property. Thereafter Pang Lim and Benito Galvez demanded possession from Lo Seng, but the latter refused to yield; and the present action of unlawful detainer was thereupon initiated by Pang Lim and Benito Galvez in the court of the justice of the peace of Paombong to recover possession of the premises. From the decision of the justice of the peace the case was appealed to the Court of First Instance, where judgment was rendered for the plaintiffs; and the defendant thereupon appealed to the Supreme Court. The case for the plaintiffs is rested exclusively on the provisions of article 1571 of the Civil Code, which reads in part as follows: ART. 1571. The purchaser of a leased estate shall be entitled to terminate any lease in force at the time of making the sale, unless the contrary is stipulated, and subject to the provisions of the Mortgage Law. In considering this provision it may be premised that a contract of lease is personally binding on all who participate in it regardless of whether it is recorded or not, though of course the unrecorded lease creates no real charge upon the land to which it relates. The Mortgage Law was devised for the protection of third parties, or those who have not participated in the contracts which are by that law required to be registered; and none of its provisions with reference to leases interpose any obstacle whatever to the giving of full effect to the personal obligations incident to such contracts, so far as concerns the immediate parties thereto. This is rudimentary, and the law appears to be so understood by all commentators, there being, so far as we are aware, no authority suggesting the contrary. Thus, in the commentaries of the authors Galindo and Escosura, on the Mortgage Law, we find the following pertinent observation: "The Mortgage Law is enacted in aid of and in respect to third persons only; it does not affect the relations between the contracting parties, nor their capacity to contract. Any question affecting the former will be determined by the dispositions of the special law [i.e., the Mortgage Law], while any question affecting the latter will be determined by the general law." (Galindo y Escosura, Comentarios a la Legislacion Hipotecaria, vol. I, p. 461.) Although it is thus manifest that, under the Mortgage Law, as regards the personal obligations expressed therein, the lease in question was from the beginning, and has remained, binding upon all the parties thereto among whom is to be numbered Pang Lim,

then a member of the firm of Lo Seng and Co. this does not really solve the problem now before us, which is, whether the plaintiffs herein, as purchasers of the estate, are at liberty to terminate the lease, assuming that it was originally binding upon all parties participating in it. Upon this point the plaintiffs are undoubtedly supported, prima facie, by the letter of article 1571 of the Civil Code; and the position of the defendant derives no assistance from the mere circumstance that the lease was admittedly binding as between the parties thereto. 1awph!l.net The words "subject to the provisions of the Mortgage Law," contained in article 1571, express a qualification which evidently has reference to the familiar proposition that recorded instruments are effective against third persons from the date of registration (CoTiongco vs. Co-Guia, 1 Phil., 210); from whence it follows that a recorded lease must be respected by any purchaser of the estate whomsoever. But there is nothing in the Mortgage Law which, so far as we now see, would prevent a purchaser from exercising the precise power conferred in article 1571 of the Civil Code, namely, of terminating any lease which is unrecorded; nothing in that law that can be considered as arresting the force of article 1571 as applied to the lease now before us. Article 1549 of the Civil Code has also been cited by the attorneys for the appellant as supplying authority for the proposition that the lease in question cannot be terminated by one who, like Pang Lim, has taken part in the contract. That provision is practically identical in terms with the first paragraph of article 23 of the Mortgage Law, being to the effect that unrecorded leases shall be of no effect as against third persons; and the same observation will suffice to dispose of it that was made by us above in discussing the Mortgage Law, namely, that while it recognizes the fact that an unrecorded lease is binding on all persons who participate therein, this does not determine the question whether, admitting the lease to be so binding, it can be terminated by the plaintiffs under article 1571. Having thus disposed of the considerations which arise in relation with the Mortgage Law, as well as article 1549 of the Civil Coded all of which, as we have seen, are undecisive we are brought to consider the aspect of the case which seems to us conclusive. This is found in the circumstance that the plaintiff Pang Lim has occupied a double role in the transactions which gave rise to this litigation, namely, first, as one of the lessees; and secondly, as one of the purchasers now seeking to terminate the lease. These two positions are essentially antagonistic and incompatible. Every competent person is by law bond to maintain in all good faith the integrity of his own

obligations; and no less certainly is he bound to respect the rights of any person whom he has placed in his own shoes as regards any contract previously entered into by himself. While yet a partner in the firm of Lo Seng and Co., Pang Lim participated in the creation of this lease, and when he sold out his interest in that firm to Lo Seng this operated as a transfer to Lo Seng of Pang Lim's interest in the firm assets, including the lease; and Pang Lim cannot now be permitted, in the guise of a purchaser of the estate, to destroy an interest derived from himself, and for which he has received full value. The bad faith of the plaintiffs in seeking to deprive the defendant of this lease is strikingly revealed in the circumstance that prior to the acquisition of this property Pang Lim had been partner with Lo Seng and Benito Galvez an employee. Both therefore had been in relations of confidence with Lo Seng and in that position had acquired knowledge of the possibilities of the property and possibly an experience which would have enabled them, in case they had acquired possession, to exploit the distillery with profit. On account of his status as partner in the firm of Lo Seng and Co., Pang Lim knew that the original lease had been extended for fifteen years; and he knew the extent of valuable improvements that had been made thereon. Certainly, as observed in the appellant's brief, it would be shocking to the moral sense if the condition of the law were found to be such that Pang Lim, after profiting by the sale of his interest in a business, worthless without the lease, could intervene as purchaser of the property and confiscate for his own benefit the property which he had sold for a valuable consideration to Lo Seng. The sense of justice recoils before the mere possibility of such eventuality. Above all other persons in business relations, partners are required to exhibit towards each other the highest degree of good faith. In fact the relation between partners is essentially fiduciary, each being considered in law, as he is in fact, the confidential agent of the other. It is therefore accepted as fundamental in equity jurisprudence that one partner cannot, to the detriment of another, apply exclusively to his own benefit the results of the knowledge and information gained in the character of partner. Thus, it has been held that if one partner obtains in his own name and for his own benefit the renewal of a lease on property used by the firm, to commence at a date subsequent to the expiration of the firm's lease, the partner obtaining the renewal is held to be a constructive trustee of the firm as to such lease. (20 R. C. L., 878-882.) And this rule has even been applied to a renewal taken in the name of one partner after the dissolution of the firm and pending its liquidation. (16 R. C. L., 906; Knapp vs. Reed, 88 Neb., 754; 32 L. R. A. [N. S.], 869; Mitchell vs. Reed 61 N. Y., 123; 19 Am. Rep., 252.)

An additional consideration showing that the position of the plaintiff Pang Lim in this case is untenable is deducible from articles 1461 and 1474 of the Civil Code, which declare that every person who sells anything is bound to deliver and warrant the subject-matter of the sale and is responsible to the vendee for the legal and lawful possession of the thing sold. The pertinence of these provisions to the case now under consideration is undeniable, for among the assets of the partnership which Pang Lim transferred to Lo Seng, upon selling out his interest in the firm to the latter, was this very lease; and while it cannot be supposed that the obligation to warrant recognized in the articles cited would nullify article 1571, if the latter article had actually conferred on the plaintiffs the right to terminate this lease, nevertheless said articles (1461, 1474), in relation with other considerations, reveal the basis of an estoppel which in our opinion precludes Pang Lim from setting up his interest as purchaser of the estate to the detriment of Lo Seng. It will not escape observation that the doctrine thus applied is analogous to the doctrine recognized in courts of common law under the head of estoppel by deed, in accordance with which it is held that if a person, having no title to land, conveys the same to another by some one or another of the recognized modes of conveyance at common law, any title afterwards acquired by the vendor will pass to the purchaser; and the vendor is estopped as against such purchaser from asserting such after-acquired title. The indenture of lease, it may be further noted, was recognized as one of the modes of conveyance at common law which created this estoppel. (8 R. C. L., 1058, 1059.) From what has been said it is clear that Pang Lim, having been a participant in the contract of lease now in question, is not in a position to terminate it: and this is a fatal obstacle to the maintenance of the action of unlawful detainer by him. Moreover, it is fatal to the maintenance of the action brought jointly by Pang Lim and Benito Galvez. The reason is that in the action of unlawful detainer, under section 80 of the Code of Civil Procedure, the only question that can be adjudicated is the right to possession; and in order to maintain the action, in the form in which it is here presented, the proof must show that occupant's possession is unlawful, i. e., that he is unlawfully withholding possession after the determination of the right to hold possession. In the case before us quite the contrary appears; for, even admitting that Pang Lim and Benito Galvez have purchased the estate from Lo Yao, the original landlord, they are, as between themselves, in the position of tenants in common or owners pro indiviso, according to the proportion of their respective contribution to the purchase price. But it is well recognized that one tenant in common cannot maintain a possessory action against his cotenant, since one is as much entitled to have possession as the other. The remedy is ordinarily by an action for partition. (Cornista vs. Ticson, 27 Phil., 80.) It follows that as Lo Seng is vested with the possessory right as against Pang Lim, he cannot be ousted either by Pang Lim or Benito Galvez. Having lawful possession as against one cotenant, he is entitled to retain it against both. Furthermore, it is obvious that partition

proceedings could not be maintained at the instance of Benito Galvez as against Lo Seng, since partition can only be effected where the partitioners are cotenants, that is, have an interest of an identical character as among themselves. (30 Cyc., 178-180.) The practical result is that both Pang Lim and Benito Galvez are bound to respect Lo Seng's lease, at least in so far as the present action is concerned. We have assumed in the course of the preceding discussion that the deed of sale under which the plaintiffs acquired the right of Lo Yao, the owner of the fee, is competent proof in behalf of the plaintiffs. It is, however, earnestly insisted by the attorney for Lo Seng that this document, having never been recorded in the property registry, cannot under article 389 of the Mortgage Law, be used in court against him because as to said instrument he is a third party. The important question thus raised is not absolutely necessary to the decision of this case, and we are inclined to pass it without decision, not only because the question does not seem to have been ventilated in the Court of First Instance but for the further reason that we have not had the benefit of any written brief in this case in behalf of the appellees. The judgment appealed from will be reversed, and the defendant will be absolved from the complaint. It is so ordered, without express adjudication as to costs. ---------------------------------------Petition for Authority to Continue Use of the Firm Name Sycip, Salazar, etc. and In the Matter of the Petition for Authority to Continue Use of the Firm Name Ozaeta, Romulo, etc., petitioners [1979] Petitioners pray that they may be allowed to continue including the names of their deceased partners in their firm names. In the case of Sycip, Salazar, they wish to continue using the name of deceased partner Atty. Alexander Sycip while on the part of Ozaeta, they wish to continue using the name of Atty. Herminio Ozaeta. Bases of petitions: 1. CC Art. 1840: Using a deceased partners name as part of the partnership/business name shall not itself make the individual property of the

deceased partner liable for any debts contracted by such person or partnership. 2. Other professions allow such (accountancy & engineering). No fundamental policy thats offended by doing so at least where firm name has acquired the characteristics of a trade name. 3. Canons of Professional Ethics (adopted by the American Bar Association) are not transgressed, Canon 33 of w/c provides that such be allowed when permissible by local custom, is not unethical, but care should be taken that no imposition/deception is practiced through this use. 4. No possibility of imposition/deception since the deaths of their deceased partners were well-publicized in all newspapers of general circulation for several days. Their stationeries use new letterheads indicating the years when the deceased partners were connected w/the firm. Petitioners will notify leading national & international law directories re: deaths of the deceased partners. 5. Such is not prohibited by local customs. No custom/usage recognizes that the name of a law firm identifies the individual members of the firm. 6. Such is allowed by US courts & accepted in most countries of the world. Issue: WON petitioners should be allowed to continue using the names of their deceased partners in their firm names. NO. Ratio: 1. Deen Case: Cebu-based law firm was advised to desist from including in their firm designation the name of a partner who has long been dead. 2. Register of Deeds of Manila vs. China Banking Corp.: involved the law firm of Perkins & Ponce Enrile w/c continued using the name of Atty. Perkins who was already deceased. Law firm raised arguments similar to those raised by petitioners in this case. Court upheld ruling in Deen case explaining that in view of the personal & confidential nature of the relations between atty & client & high standards demanded

in the canons of professional ethics, practice of using deceased partners name in the firm name cannot be allowed since even in a remote degree it could give rise to the possibility of deception. 3. Allowing such would go against CC Art. 1815 w/c provides that Those who, not being members of the partnership, include their names in the firm name, shall be subject to the liability of a partner. Provision simply means that names in a firm name of a partnership must either be those of living partners or in the case of nonpartners, should be living persons who can be subjected to liability. 4. Canon 34, Canons of Professional Ethics prohibits an agreement wherein the widow & heirs of a deceased lawyer will receive a percentage, gross/net, of fees received from future business of deceased lawyers former clients there being no lawyer & service involved. In the same manner, the widow/heirs of a deceased lawyer cant be held liable for the transactions entered into by deceased lawyers former partners. 5. It can create undue advantages & disadvantages. Unfair to new lawyers who are starting from scratch while advantageous for a lawyer who joins an old firm & rides on firms reputation established by deceased partners. 6. CC Art. 1840 involves exemption from liability contemplating a hold-over situation in cases of dissolved partnerships or when one partner dies and the other partners continue the business. It deals more w/commercial partnerships rather than a professional one. Commercial partnerships allow succeeding partners to continue using the name of the deceased partner in the firm name since such name is a partnership asset inseparable from the good will of the firm. Whereas in a professional partnership, the reputation of w/c depends on the individual skill of the members & it has no good will to be distributed as a firm asset on its dissolution. 7. Partnership for the practice of law cant be likened to partnerships formed by other professionals or for business. Law on accountancy specifically allows use of a trade name in connection w/the practice of accountancy. Note that a partnership for law practice is not a legal entity nor a partnership formed to carry on trade/business/hold

property. Its a mere relationship or association for a particular purpose. Remember law is profession, its different from trade/business. Rt to practice law is not a natural/constitutional right but is in the nature of a privilege or franchise. It presupposes integrity, legal standing, attainment, exercise of a special privilege, highly personal & partaking of the nature of a public trust in its possessor. 8. Cited Canon 33 only provides that it does not consider as unethical the continued use of the name of a deceased partner & allows such only when its permissible by local custom. We dont have a local custom allowing/permitting such. But remember that in our country, firm names identify the more active and/or more senior members/partners of the law firm. Decision cited H.S. Drinker who said that use of deceased partners name is proper when sustained by local custom & not where by custom this purports to identify the active members. And considering our idea of firm names in this country, the use of a deceased partners name can lead to deception upon the public. 9. US Courts allow such because its sanctioned by their customs. Not so in our jurisdiction where theres no local custom sanctioning the practice. Besides, Courts take no judicial notice of custom, it must be proved as a fact, according to the rules of evidence. Juridical custom w/c can supplement statutory law or be applied in the absence of such statute is different from social custom. Also, we have the Deen & Perkins cases. Theyre part of our legal system & no custom/practice to the contrary, even if proven, can prevail. The practice of law is not like an ordinary money-making trade. Being a profession, its practiced in a spirit of public service. A member of a profession doesnt regard himself as in competition w/his professional brethren. Hes not bartering his services. His service is often rendered for no equivalent/for a trifling equivalent & its his pride to do what he does in a way worthy of his profession even if done w/no expectation of reward. Holding: Petitions denied. Petitioners advised to drop the names SYCIP and OZAETA from their respective firm names but names may be included in the listing of individuals who

have been partners in their firms indicating the years during w/c they served as such. Fernando, Certification: Didnt participate because hes related by affinity to one of the senior partners of Sycip, Salzar. He wishes to invite attention to last part of the dispositive portion. He believes its a happy compromise. Aquino, dissenting: He believes that petitions should be granted on the condition that they indicate in their letterheads that the deceased partners are dead or the period when they served as partners. Its obvious that they want to do this to retain the clients who had customarily sought the legal services of deceased partners & to benefit from the goodwill attached to these names. He believes that these are legitimate motivations. -------------------------------In the matter of the Petition for Authority To Continue use of the firm name Ozaeta, Romulo, etc. F: 2 separate petitions were filed by the surviving partners of Atty. Alexander Sycip and the surviving partners of Herminiano Ozaeta, praying that they be allowed to continue using, in the name of their firms, the names of partners who passed away. Arguments: 1. Under the law, a partnership is not prohibited from continuing its business under a firm name which includes the name of the deceased partner.( Art. 1840 of the Civil Code ) 2. In regulating other professions, such

as accountancy and engineering, the legislature has authorized the adoption of firm names without any restriction as to the use, in such firm name, of the deceased partner. 3. The Canons of Professional Ethics are not transgressed because as adopted by American Bar Association: the continued use of the name of a deceased or former partner when permissible by local custom is not unethical, but care should be taken that no imposition or deception is practiced through this use. 4. The deaths of the partners were wellpublicized. 5. No local custom prohibits the continued use of the partners name in a professional firms name. 6. The continued use of the deceased partners name in the firm name of law partnerships has been consistently allowed by US Courts. I: W/N the names of the deceased partners should be allowed to continue in use in the firm name. H: Art. 1815. Every partnership shall operate under a firm name, which

may or may not include the name of one or more of the partners. Those who, not being members of the partnership, include their names in the firm name, shall be subject to the liability of a partner. (partners should be living persons who can be subjected to liability) Art. 1840 treats more of a commercial partnership with a good will to protect rather than a professional partnership, with no sealable good will but whose reputation depends on the personal qualifications of its individual members. The partnership for the practice of law cannot be likened to partnerships formed by other professionals or for business. The practice of law is also a special privilege, highly personal and partaking of the nature of a public trust. Firm names, under local customs, identify the more active and more senior members or partners of the law firm.

 The possibility of deception upon the public, real, or consequential, where the name of a deceased partner continues to be used cannot be ruled out. NB: Rule 3.02 of the CPR approved and promulgated by the SC on June 21,1988 in effect abandoned the ruling in the Sycip case. (see Art. 1815 Civil Code) -----------------------------------------------------PETITION FOR AUTHORITY TO CONTINUE USE OF THE FIRM NAME "SYCIP, SALAZAR, FELICIANO, HERNANDEZ & CASTILLO." Inasmuch as "Sycip, Salazar, Feliciano, Hernandez and Castillo" and "Ozaeta, Romulo, De Leon, Mabanta and Reyes" are partnerships, the use in their partnership names of the names of deceased partners will run counter to Article 1815 of the Civil Code which provides: hq Art. 1815. Every partnership shall operate under a firm name, which may or may not include the name of one or more of the partners. Those who, not being members of the partnership, include their names in the firm name, shall be subject to the liability, of a partner. It is clearly tacit in the above provision that names in a firm name of a partnership must either be those of living partners and. in the case

of non-partners, should be living persons who can be subjected to liability. In fact, Article 1825 of the Civil Code prohibits a third person from including his name in the firm name under pain of assuming the liability of a partner. The heirs of a deceased partner in a law firm cannot be held liable as the old members to the creditors of a firm particularly where they are non-lawyers. Thus, Canon 34 of the Canons of Professional Ethics "prohibits an agreement for the payment to the widow and heirs of a deceased lawyer of a percentage, either gross or net, of the fees received from the future business of the deceased lawyer's clients, both because the recipients of such division are not lawyers and because such payments will not represent service or responsibility on the part of the recipient. " Accordingly, neither the widow nor the heirs can be held liable for transactions entered into after the death of their lawyer-predecessor. There being no benefits accruing, there ran be no corresponding liability. Prescinding the law, there could be practical objections to allowing the use by law firms of the names of deceased partners. The public relations value of the use of an old firm name can tend to create undue advantages and disadvantages in the practice of the profession. An able lawyer without connections will have to make a name for himself starting from scratch. Another able lawyer, who can join an old firm, can initially ride on that old firm's reputation established by deceased partners.

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G.R. No. L-11840 December 10, 1963 ANTONIO C. GOQUIOLAY, ET AL., plaintiffs-appellants, vs. WASHINGTON Z. SYCIP, ET AL., defendants-appellees. Facts: Tan Sin An and Goquiolay entered into a general commercial partnership under the partnership name Tan Sin An and Antonio Goquiolay for the purpose of dealing in real estate. The agreement lodged upon Tan Sin An the sole management of the partnership affairs. The lifetime of the partnership was fixed at ten years and the Articles of Copartnership stipulated that in the event of death of any of the partners before the expiration of the term, the partnership will not be dissolved but will be continued by the heirs or assigns of the deceased partner. The plaintiff partnership purchased 3 parcels of land which was mortgaged to La Urbana. Another 46 parcels of land were purchased by Tan Sin An in his individual capacity which he assumed payment of a mortgage debt for P35K. The downpayment and the amortization were advanced by Yutivo and Co. Tan Sin An died leaving his widow, Kong Chai Pin. The widow subsequently became the administratrix of the estate. Yutivo Sons and Sing Yee filed their claim in the intestate proceedings of Tan Sin An for advances, interest and taxes paid in amortizing and discharging their obligations to La Urbana. Kong Chai Pin filed a petition with the probate court for authority to sell all the 49 parcels of land. She then sold it to

Sycip and Lee in consideration of P37K and of the vendees assuming payment of the claims filed by Yutivo Sons and Sing Yee. When Goquiolay learned about the sale to Sycip and Lee, he filed apetition in the intestate proceedings to set aside the order of the probate court approving the sale in so far as his interest over the parcels of land sold was concerned. Probate court annulled the sale executed by the administratrix w/respect to the 60% interest of Goquiolay over the properties. Administratrix appealed. Decision was set aside, hence this petition. Issues: 1)Did the lower court err in holding that the widow succeeded her husband Tan Sin An in the sole management of the partnership upon Tans death? Yes 2)WON the consent of the other partners was necessary to perfectthe sale of the partnership properties to Sycip and Lee? No. Held: 1) Yes. While in the Articles of Co-Partnership and the power of attorney executed by Goquiolay conferred upon Tan the exclusive management of the business, such power premised as it is upon trust and confidence, was a mere personal right that terminated upon Tans demise. The provision in the articles stating that in the event of death of any one of the partners within the 10 year term of the partnership, the deceased partner shall be represented by his heirs could not have referred to the managerial right given to Tan. The heirs of the deceased, by never repudiating or refusing to be bound

under the said provision in the articles became individual partners with Goquiolay upon Tans demise. This is sanctioned under Article 222 under the Code of Commerce. 2)No. Strangers dealing with a partnership have the right to assume,in the absence of restrictive clauses in the copartnership agreement that every general partner has power to bind the partnership specially those acting with ostensible authority. Also, inspite of the provision of Art 129 of the Code of Commerce to the effect that if the management of the general partnership has not been limited by special agreement to any of the members, all shall have the power to take part in the direction and management of the common business, and the members present shall come to an agreement for all contracts or obligations which may concern the association, such obligation is one imposed by law on the partners among themselves, that does not necessarily affect the validity of the acts of a partner while acting within the scope of the ordinary course of business of the partnership as regards third persons without notice. The latter may rightfully assume that th econtracting partner was duly authorized to contract for and in behalf of the firm and that he would not ordinarily act to the prejudice of his co-partners.Also, the records fail to disclose that Goquiolay made any opposition to the sale of the partnership realty to Sycip and Lee. On the contrary, it appears that he only interposed his objections after the deed of conveyance was executed and approved by the probate court, and

consequently, his opposition came too late to be effetive. -------------------------------------------------------------------------

Benjamin Yu v. National Labor Relations Commission & Jade Mountain ProductsCo. Ltd., Willy Co, Rhodora Bendal, Lea Bendal, Chiu Shian Jeng and Chen Ho-Fu G.R. No. 97212 June 30, 1993 Feliciano, J. Facts: Yu ex-Assistant General Manager of the marble quarrying and export business operatedby a registered partnership called Jade Mountain Products Co. Ltd. partnership was originally organized with Bendals as general partners and Chin Shian Jeng,Chen Ho-Fu and Yu Chang as limited partners; partnership business consisted of exploitinga marble deposit in Bulacan Yu, as Assistant General Manager, had a monthly salary of 4000. Yu, however, actually r e c e i v e d o n l y h a l f o f h i s s t i p u l a t e d s a l a r y , s i n c e h e h a d a c c e p t e d t h e p r o m i s e o f t h e partners that the balance would be paid when the firm shall have secured additional operating funds from abroad. Yu actually managed the operations and finances of thebusiness; he had overall supervision of the workers at the marble quarry in Bulacan andtook charge of the preparation of papers relating to the exportation of the firms products. general partners Bendals sold and transferred their interests in the partnership to Co andEmmanuel Zapanta

partnership was constituted solely by Co and Zapanta; it continued to use the old firm name of Jade Mountain Yu dismissed by the new partners Issues: 1 . W O N t h e p a r t n e r s h i p w h i c h h a d h i r e d Y u a s A s s t . G e n . M a n a g e r h a d b e e n extinguished and replaced by a new partnership composed of Co and Zapanta; 2. if indeed anew partnership had come into existence, WON Yu could nonetheless assert his rights underhis employment contract with the old partnership as against the new partnership Held: 1. Yes. Changes in the membership of the partnership resulted in the dissolution of the old partnership which had hired Yu and the emergence of a new partnership composedof Co and Zapanta. Legal bases: Art. 1828. The dissolution of a partnership is the change in the relation of the p a r t n e r s c a u s e d b y a n y p a r t n e r c e a s i n g t o b e a s s o c i a t e d i n t h e c a r r y i n g o n a s distinguished from the winding up of the business. Art. 1830. Dissolution is caused:(1) without violation of the agreement between the partners;(b) by the express will of any partner, who must act in good faith, when no definite termor particular undertaking is specified;(2) in contravention of the agreement between the partners, where the circumstances donot permit a dissolution under any other provision of this article, by the express will of anypartner at any time; N o w i n d i n g u p o f a f f a i r s i n t h i s c a s e a s c o n t e m p l a t e d i n A r t . 1 8 2 9 : o n d i s s o l u t i o n t h e partnership is not terminated, but continues until the winding up of partnership affairs iscompleted t h e n e w p a r t n e r s h i p s i m p l y t o o k o v e r t h e b u s i n e s s e n t e r p r i s e o w n e d b y t h e o l d partnership, a n d c o n t i n u e d u s i n g t h e o l d n a m e o f J a d e M o u n t a i n P r o d u c t s C o m p a n y Limited, without winding up the business

affairs of the old partnership, paying off its debts,liquidating and distributing its net assets, and then re-assembling the said assets or mostof them and opening a new business enterprise 2. Yes. the new partnership is liable for the debts of the old partnership Legal basis: Art. 1840 (see codal)

Yu is entitled to enforce his claim for unpaid salaries, as well as other claims relating to hisemployment with the previous partnership, against the new partnership But Yu is not entitled to reinstatement. Reason: new partnership was entitled to appointand hire a new gen. or asst. gen. manager to run the affairs of the business enterprise take over. An asst. gen. manager belongs to the most senior ranks of management and anew partnership is entitled to appoint a top manager of its own choice and confidence. Thenon-retention of Yu did not constitute unlawful termination. The new partnership had itsown new General Manager, Co, the principal new owner himself. Yus old position thusbecame superfluous or redundant. Yu is entitled to separation pay at the rate of one months pay for each year of service thathe had rendered to the old partnership, a fraction of at least 6 months being considered asa whole year --------------------------------Dissolution of Partnership; Receivership SY vs. COURT OF APPEALS G.R. No. 94285, August 31, 1999 Facts: Sy Yong Hu & Sons is a partnership. In September, 1977, Keng Sian, Sy Yong

Hus common-law wife sued the partnership for the reconveyance of of its properties and the fruits thereof. During the pendency of the suit, one of the partners. Marciano Sy, filed a petition against his partners with the SEC asking that he be appointed managing partner to replace Jose Sy who earlier died. SC hearing officer Sison dismissed the petition and declared the partnership dissolved and named one of the remaining partners as the managing partner. The SEC en banc affirmed Sisons decision, ordering the distribution and partition of partnership assets. However, before the same can be implemented, Keng Sians children with Sy Yong Hu were allowed by the SEC to intervene. The intervenors contend that their civil suit against the partnership is still pending and that no petition for distribution should be commenced. SEC Hearing Officer Tongco who replaced Sison placed the partnership under receivership thereby preventing the partition and distribution of partnership assets. This was affirmed by the SEC en banc. The remaining partners of the firm appealed. The CA ultimately affirmed the Tongco ruling. Issue: Is the preservation of the partnership assets through receivership inconsistent with the earlier decision declaring the partnerships dissolution? Held: The Sison decision declaring the partnerships dissolution did not pose any obstacle to the hearing officer to issue orders not inconsistent therewith. From the time the dissolution is ordered until the actual termination of the partnership the SEC retained jurisdiction to adjudicate all incidents relative thereto. Thus, the Tongco order cannot be said to have varied the final order of dissolution. Neither did it suspend the dissolution of the partnership. It only suspended the partition and distribution of the partnership assets. Further, the dissolution of a partnership is the change in relation of the parties caused by any partner ceasing to be associated in the carrying on, as might be distinguished from the winding up, of its business. Upon its dissolution, the partnership continues and its legal personality is retained until the complete winding up of its business culminating in its

termination. The dissolution of the partnership did not mean that the juridical entity was immediately terminated and that the distribution of the assets to its partners should perfunctorily follow. On the contrary, the dissolution simply effected a change in the relationship among the partners. The partnership, although dissolved, continues to exist until its termination, at which time the winding up of its affairs should have been completed and the net partnership assets are partitioned and distributed to the partners. -----------------------------------------------------------------------------------------G.R. No. L-10040 January 31, 1916 EUGENIA LICHAUCO, ET AL., plaintiffs-appellants, vs. FAUSTINO LICHAUCO, defendant-appellant. Facts: This action was brought by two of the partners of an enterprise of which the defendant was manager (gestor), to secure an accounting of its affairs, and the payment to the plaintiffs of their respective shares of capital and profits. A notarial instrument was executed in Manila, by the terms of which a partnership was duly organized for the purpose of carrying on a rice-cleaning business at Dagupan, and for the purchase and sale of palay and rice. The articles of association, which were not recorded in the mercantile registry, contain, among others, the following provisions: 2. The association will be named F. Lichauco Hermanos and will be domiciled in the center of its operations, that is, in the pueblo of Dagupan, Province of Pangasinan. 3. The association cannot be dissolved except by the

consent and agreement of two-thirds of its partners and in the event of the death of any of the latter, the heirs of the deceased, if they be minors or otherwise incapacitated, shall be represented in the association by their legal representatives or if two-thirds of the surviving partners agree thereto, the participation of the deceased partner may be liquidated. The business thus organized was carried on until when it was found to be unprofitable and discontinued by the defendant manager (gestor); and thereafter, the machinery of the rice mil was dismantled by his orders, and offered for sale. No accounting ever was made to his associates by the defendant until this action was instituted , although it appears that, Mariano Limjap, one of the participants in the venture, demanded a rendition of accounts; and that Eugenia Lichauco, one of the plaintiffs in this action, made repeated unsuccessful demands for the return of her Whether or not the change of partners in a partnership shall affect its obligations over the third person. Or, simply stated, whether or not the new partners shall be liable to the obligation incurred by the old partners with regard to third persons. Held: NO. The applicable law in this connection of which the NLRC seemed quite unaware is found in the Civil Code provisions relating to partnerships. Article 1828 of the Civil Code provides as follows: Art. 1828. The dissolution of a partnership is the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on as distinguished from the winding

up of the business. In the case at bar, just about all of the partners had sold their partnership interests (amounting to 82% of the total partnership interest) to Mr. Willy Co and Emmanuel Zapanta. The record does not show what happened to the remaining 18% of the original partnership interest. The acquisition of 82% of the partnership interest by new partners, coupled with the retirement or withdrawal of the partners who had originally owned such 82% interest, was enough to constitute a new partnership. The occurrence of events which precipitate the legal consequence of dissolution of a partnership do not, however, automatically result in the termination of the legal personality of the old partnership. Article 1829 of the Civil Code states that: [o]n dissolution the partnership is not terminated, but continues until the winding up of partnership affairs is completed. In the ordinary course of events, the legal personality of the expiring partnership persists for the limited purpose of winding up and closing of the affairs of the partnership. In the case at bar, it is important to underscore the fact that the business of the old partnership was simply continued by the new partners, without the old partnership undergoing the procedures relating to dissolution and winding up of its business affairs. In other words, the new partnership simply took over the business enterprise owned by the preceeding partnership, and continued using the old name of Jade Mountain Products Company Limited, without winding up the business affairs of the old partnership, paying off its debts, liquidating and distributing its

net assets, and then re-assembling the said assets or most of them and opening a new business enterprise. There were, no doubt, powerful tax considerations which underlay such an informal approach to business on the part of the retiring and the incoming partners. It is not, however, necessary to inquire into such matters. What is important for present purposes is that, under the above described situation, not only the retiring partners (Rhodora Bendal, et al.) but also the new partnership itself which continued the business of the old, dissolved, one, are liable for the debts of the preceding partnership. In Singson, et al. v. Isabela Saw Mill, et al, 8 the Court held that under facts very similar to those in the case at bar, a withdrawing partner remains liable to a third party creditor of the old partnership. 9 The liability of the new partnership, upon the other hand, in the set of circumstances obtaining in the case at bar, is established in Article 1840 of the Civil Code. HENCEFORTH: [the] petitioner Benjamin Yu is entitled to interest at the legal rate of six percent (6%) per annum on the amount of unpaid wages, and of his separation pay, computed from the date of promulgation of the award of the Labor Arbiter. ----------------------------------------------Singson vs. Isabela Sawmill GRN L- 27343 February 28, 1979

Fernadez, J Facts: Isabela Sawmill was formed by partners Saldajeno, Lon and Timoteo. Withdraw from the partnership and after dissolution, L and T continued the business still under the name Isbel Sawmill. The partnership is indebted to various creditors and that Sheriff sold the assets of Isabela Sawmill to s and was subsequently sold to a separate company. Issue: Whether or not Isabela Sawmill ceased to be a partnership and that creditors could no longer demand payment. Ruling: On dissolution, the partnership is not terminated but continues until the winding up of the business. It does not appear that the withdrawal of S from the partnership was published in the newspapers. The Apelles and the public had a right to expect the public had a right to expect that whatever credit they extended to L & T doing business. In the name of the partnership could be enforced against the partnership of said partnership. The judicial foreclosure of the chattel mortrage executed in the favor of S did not relieve her from liability to the creditors of the partnership. It may be presumed S acted in good faith, the Apelles also acted in good faith in extending credit to they partnership. Where one of the two innocent persons must suffer, that persons must suffer, that person who gave occasion for the damages to be caused must bear the consequences. ---------------------------Magdusa v. Albaran et al.June 30, 1962Principle: Dissolution or liquidation should happen first before retiring partners could ask for theircapital shares to be returned. Rationale: Outside creditors must be paid first before the members of the partnership.

Facts:1. This is an appeal from a decision of CA reversing the judgment of CFI, ordering appellant Gregorio Magdusa to pay to appellees, by way of refund of their shares as partners.2. CA found that appellant and appellees together with other persons had verbally formed apartnership de facto, for the sale of general merchandise in Surigao.a. Appellant contributed P2,000.00 as capital.b. Others contributed their labor.c. Condition: 25% of net profits would be added to the original capital; 75% of net profits would be divided among members in proportion to the length of service of each.3. Appellees later on wanted to withdraw from the partnership.a. Appellant made a computation to determine the value of the partners shares.4. Appellees made demands upon appellant for payment but appellant refused.5. Appellees filed an initial complaint.a. Appellant denied existence of partnership. He claimed that appellees were merely hiemployees.b. CFI: Dismissed the complaint.c. CA reversed.i.

Not an action for dissolution of a partnership and winding up its affairs but an actionfor the recovery of a sum of money with Gregorio Magdusa (managing partner) asthe principal defendant. That the liability is personal to Gregorio Magdusa thus thejudgment therefore should be against his sole interest, not against the partnership.Issue: WON appellees, as retiring partners, are entitled to the return of their capital share?Held: No. CA decision is reversed and the action ordered dismissed, without prejudice to a properproceeding for the dissolution and liquidation of the common enterprise.Ratio: CA decision cannot be sustained because a partners share cannot be returned without first dissolving and liquidating the partnership. o For the return is dependent on the discharge of the creditors, whose claims enjoypreference over those of the partnership. Meaning: satisfy first the obligation with (outside) creditors beforemembers of the partnership. Unless a proper accounting and liquidation of the partnership affairs is first had, the capitalshares of the appellees, as retiring partners cannot be repaid. o For the firms outside creditors have preference over the assets of theenterprise. Appellant (petitioner) cannot be held liable in his personal capacity for the payment of thepartners shares for he does not hold them except as manager of, or trustee for, thepartnership. o

The partnership must refund their shares to the retiring partners. -----------------------------Bonnevie vs. HernandezFacts: Plaintiffs with other associates formed a syndicate or secret partnership for the purpose of acquiringthe plants, franchises and other properties of the Manila Electric Co. hereinafter called theMeralco.

No formal articles were drawn for it was the purpose of the members to incorporate once the dealhad been consummated.

Negotiation for the purchase was commenced, but as it made no headway, defendant was taken inas a member of the partnership so that he could push the deal through, and to that end he wasgiven the necessary power of attorney.

Using partnership funds, defendant was able to buy the Meralco properties.

Although defendant was the one named vendee in the deed of sale, there is no question that thetransaction was in penalty made for the partnership so that the latter assumed control of thebusiness the day following the sale About the latter half of the following month the members of the partnership proceeded with theformation of the proposed corporation, apportioning among themselves its shares of stock inproportion to their respective contributions to the capital of the partnership and their individualefforts in bringing about the acquisition of the Meralco properties. But before the incorporation, judge Reyes and the plaintiffs withdrew from the partnership for thereason that the business was not going well, and, as admitted by both parties, the partnership wasthen dissolved. In accordance with the terms of the resolution, the withdrawing partners Following the dissolution of the partnership, the members who preferred to remain in the businesswent ahead with the formation of the corporation, taking in new associates as stockholders. And defendant, on his part, in fulfillment of his trust, made a formal assignment of the Meralcoproperties to the treasurer of the corporation, giving them a book value of P365,000, in return forwhich the corporation issued, to the various subscribers to its capital stock, shares of stock of thetotal face value of P225,000 and assumed the obligation of paying what was still due the Meralco onthe purchase price. Two years from their withdrawal from the partnership, when the corporate business was already ina prosperous condition, plaintiffs brought the present suit against Jaime Hernandez, claiming a sharein the profit the latter is supposed to have made from the assignment of the Meralco properties tothe corporation, estimated by plaintiffs to be P225,000 and their share of it to be P115,312.50.

Defendant's answer denies that he has made any profit out of the assignment in question andalleges that in any event plaintiffs, after their withdrawal from the partnership, ceased to have anyfurther interest in the subsequent transactions of the remaining members. Issues:1. WON the partnership had realized profit out of the Meralco properties made by the defendant tothe corporation. No. 2. If there was indeed a profit, WON the plaintiffs are entitled for their share out of such profit. No. Held: 1. No. the profit alleged to have been realized from the assignment of the Meralco properties to thenew corporation, the Bicol Electric Company, is more apparent than real. It is true that the value setfor those properties in the deed of assignment was P365,000 when the acquisition price was onlyP122,000. But one should not jump to the conclusion that a profit, consisting of the differencebetween the two sums was really made out of the transaction, for the assignment was not made forcash but in payment for subscriptions to shares of stock in the assignee, and while those shares hada total face value of P225,000, this is not necessarily their real worth. 2. No. Assuming that the assignment actually brought profit to the partnership, it is hard to see howdefendant could be made to answer for plaintiffs' alleged share thereof.In the case at bar, the defendant did not receive the consideration for the assignment for, as alreadystated, the assignment was made in payment for

subscriptions of various persons to the capitalstock of the new corporation.Plaintiffs, in order to give color of legality to their claim against defendant, maintain that the lattershould be held liable for damages caused to them, consisting of the loss of their share of the profits,due to defendant's failure properly to perform his duty as a liquidator of the dissolved partnership,this on the theory that as managing partner of the partnership, it was defendant's duty to liquidateits affairs upon its dissolutions.However, it does not appear that plaintiffs have ever asked for a liquidation, and as will presently beexplained no liquidation was called for because when plaintiffs withdrew from the partnership theunderstanding was that after they had been reimbursed their investment, they were no longer tohave any further interest in the partnership or its assets and liabilities.As a general rule, when a partner retires from the firm, he is entitled to the payment of what may bedue him after a liquidation. But certainly no liquidation is necessary where there is already asettlement or an agreement as to what the retiring partner shall receive.In the instant case, it appears that a settlement was agreed upon on the very day the partnershipwas dissolved. For when plaintiffs and Judge Jaime Reyes withdrew from the partnership on that daythey did so as agreed to by all the partners, subject to the only condition that they were to be repaidtheir contributions or investments within three days from said date. And this condition was fulfilledwhen on the following day they were reimbursed the respective amounts due them pursuant to theagreement.The SC therefore, found that, the acceptance by the withdrawing partners, including the plaintiffs,of their investment in the instant case was understood and intended by all the parties as a finalsettlement of whatever rights or claim the withdrawing partners might have in the dissolvedpartnership. Such being the case they are now precluded from claiming any share in the allegedprofits, should there be any, at the time of the dissolution. -------------------------------------Primelink Properties and Development Corporation vs Ma. Clarita Lazatin-Magat Business Organization Partnership, Agency, Trust Dissolution and Winding Up Joint Venture Agreement Rights of Innocent Party In 1994, Primelink Properties and the Lazatin siblings entered into a joint venture agreement whereby the Lazatins shall contribute a huge parcel of land and Primelink shall develop the same into a subdivision. For 4 years however, Primelink failed to develop the said land. So in 1998, the Lazatins filed a complaint to rescind the joint venture agreement with prayer for preliminary injunction. In said case, Primelink was declared in default or failing to file an answer and for asking multiple motions for extension. The trial court eventually ruled in favor of the Lazatins and it ordered Primelink to return the possession of said land to the Lazatins as well as some improvements which Primelink had so far over the property without the Lazatins paying for said improvements. This decision was

affirmed by the Court of Appeals. Primelink is now assailing the order; that turning over improvements to the Lazatins without reimbursement is unjust; that the Lazatins did not ask the properties to be placed under their possession but they merely asked for rescission. ISSUE: Whether or not the improvements made by Primelink should also be turned over under the possession of the Lazatins. HELD: Yes. In the first place, even though the Lazatins did specifically pray for possession the same (placing of improvements under their possession) is incidental in the relief they prayed for. They are therefore entitled possession over the parcel of land plus the improvements made thereon made by Primelink. In this jurisdiction, joint ventures are governed by the laws of partnership. Under the laws of partnership, when a partnership is dissolved, as in this case when the trial court rescinded the joint venture agreement, the innocent party has the right to wind up the partnership affairs. With the rescission of the JVA on account of petitioners fraudulent acts, all authority of any partner to act for the partnership is terminated except so far as may be necessary to wind up the partnership affairs or to complete transactions begun but not yet finished. On dissolution, the partnership is not terminated but continues until the winding up of partnership affairs iscompleted. Winding up means the administration of the assets of the partnership for the purpose of terminating the business and discharging the obligations of the partnership. It must be stressed, too, that although the Lazatins acquired possession of the lands and the improvements thereon, the said lands and improvements remained partnership property, subject to the rights and obligations of the parties, inter se, of the creditors and of third parties and subject to the outcome of the settlement of the accounts between the parties, absent any agreement of the parties in their JVA to the contrary (here no agreement in the JVA as to winding up). Until the partnership accounts are determined, it cannot be ascertained how much any of the parties is entitled to, if at all. ---------------------------------------Primelink v Lopez (G.R. No. 167379 June 27, 2006)

FACTS: Primelink Properties and Development Corporation (Primelink for brevity) isa domestic corporation engaged in real estate development. Rafaelito W. Lopez isits President and Chief Executive Officer.3Ma. Clara T. Lazatin-Magat and her brothers, are co -owners of two (2) adjoiningparcels of landlocated in Tagaytay City and covered by Transfer Certificate of Title(TCT) No. T-108484 of the Register of Deeds of Tagaytay City.O n M a r c h 1 0 , 1 9 9 4 , t h e L a z a t i n s a n d Primelink, represented by Lopez, in hiscapacity as President, entered into a Joint Venture Agreemen t 5 ( J V A ) f o r t h e development of the aforementioned property into a residential subdivision to beknown as "Tagaytay Garden Villas." Under the JVA, the Lazatin siblings obligedthemselves to contribute the two parcels of land as their share in the joint venture.F o r i t s p a r t , P r i m e l i n k u n d e r t o o k t o c o n t r i b u t e m o n e y , l a b o r , p e r s o n n e l , m a c h i n e r i e s , e q u i p m e n t , c o n t r a c t o r s p o o l , m a r k e t i n g a c t i v i t i e s , m a n a g e r i a l expertise and other needed resources to develop the property and construct thereinthe units for sale to the public.In a Letter13 dated April 10, 1997, the Lazatins, through counsel, demanded thatP r i m e l i n k c o m p l y w i t h i t s o b l i g a t i o n s u n d e r t h e J V A , o t h e r w i s e t h e a p p r o p r i a t e action would be filed against it to protect their rights and interests. This impelled the officers of Primelink to meet with the Lazatins and enabled the latter to reviewi t s b u s i n e s s r e c o r d s / p a p e r s . I n a n o t h e r L e t t e r 1 4 d a t e d O c t o b e r 2 2 , 1 9 9 7 , t h e Lazatins informed Primelink that they had decided to rescind the JVA effective uponits receipt of the said letter. The Lazatins demanded that Primelink cease and desistfrom further developing the property. Trial court rendered a decision rescinding the Joint Venture Agreement executedbetween the plaintiffs and the defendants; immediately restoring to the plaintiffspossession of the subject parcels of land; ordering the defendants to render an accounting of all income generated as well as expenses incurred and disbursementmade in connection with the project. CA affirmed trial courts decision rulingthat, under Philippine law, a joint venture is a form of partnership and is to be governedby the laws of partnership. ISSUE: WON trial court erred in rescinding the JVA between the parties HELD: SC affirmed appellate courts decision.Ratio Decidendi: As a general rule, the relation of the parties in joint ventures isg o v e r n e d b y t h e i r a g r e e m e n t . W h e n t h e a g r e e m e n t i s s i l e n t o n a n y p a r t i c u l a r ISSUE, the general principles

of partnership may be resorted to. The legal conceptof a joint venture is of common law origin. It has no precise legal definition, but ithas been generally understood to mean an organization formed for some temporaryPage 7 of 22 purpose. It is, in fact, hardly distinguishable from the partnership, since elementsare similar community of interest in the business, sharing of profits and losses, a n d a m u t u a l r i g h t o f c o n t r o l . T h e m a i n d i s t i n c t i o n c i t e d b y m o s t o p i n i o n s i n common law jurisdictions is that the partnership contemplates a general businesswith some degree of continuity, while the joint venture is formed for the executionof 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 maybe particular or universal, and a particular partnership may have for its object aspec ific undertaking. It would seem therefore that, under Philippine law, a jointv e n t u r e i s a f o r m o f p a r t n e r s h i p a n d s h o u l d t h u s b e g o v e r n e d b y t h e l a w s o f partnership. The Supreme Court has, however, recognized a distinction between these two business forms, and has HELD that although a corporation cannot enterinto a partnership contract, it may, however, engage in a joint venture with others.W h e n t h e R T C r e s c i n d e d t h e J V A o n c o m p l a i n t o f r e s p o n d e n t s b a s e d o n t h e evidence on record that petitioners willfully and persistently committed a breach of t h e J V A , t h e c o u r t t h e r e b y d i s s o l v e d / c a n c e l l e d t h e p a r t n e r s h i p . 5 4 W i t h t h e rescission of the JVA on account of petitioners fraudulent acts, all authority of anypartner to act for the partnership is terminated except so far as may be necessaryto wind up the partnership affairs or to complete transactions begun but not yet finished.55 On dissolution, the partnership is not terminated but continues until thew i n d i n g u p o f p a r t n e r s h i p a f f a i r s i s c o m p l e t e d . 5 6 W i n d i n g u p m e a n s t h e administr ation of the assets of the partnership for the purpose of terminating the business and discharging the obligations of the partnership. ----------------------------------------Villareal vs Ramirez

A share in a partnership can be returned only after the completion of the latters dissolution, liquidation and winding up of the business. Facts: 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 Ramirez joined as a partner on September 5, 1984 with a capital contribution of P250,000 which was paid by his parents, Respondents Cesar and Carmelita Ramirez. Jesus Jose withdrew from the partnership and 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 latters offer to return their capital contribution. Respondent 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 onethird share in the equity of the partnership. The repeated oral and written requests were, however, left unheeded. Respondents filed before the RTC for the collection of a sum of money from petitioners. Petitioners contended that respondents had expressed a desire to withdraw from the partnership and had called for its dissolution under Articles 1830 and 1831; 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. In their Reply, respondents alleged that had not received any regular report or accounting from the latter, who had solely managed the business. Respondents also alleged that they expected the equipment and the furniture stored in their house to be removed by petitioners as soon as the latter found a better location for the restaurant. RTC 17 ruled that the parties had voluntarily entered into a partnership, which could be dissolved at any time. Petitioners clearly intended to dissolve it when they stopped operating the restaurant. Hence, the trial court rendered a judgment in favor of respondents and ordering the petitioners to pay jointly and severally. Issue: WON petitioners are liable to respondents for the latters share in the partnership Held: The Petition has merit. Both the trial and the appellate courts found that a partnership had indeed existed, and that it was dissolved on March 1, 1987. They found that the dissolution took place when respondents informed petitioners of the intention to discontinue. Respondents consequently demanded from petitioners the return of their one-third equity in the partnership. We hold that respondents have no right to demand from petitioners the return of their equity share. Except as managers of the partnership, 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. Since the capital was contributed to the partnership, not to petitioners, it is the partnership that must refund the equity of the retiring 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. Evidently, in the present case, the exact amount of refund equivalent to respondents one-third share in the partnership cannot be determined until all the partnership assets will have been liquidated. ------------------------------------------VILLAREAL V. RAMIREZ GR 144214, JULY 14, 2003 1. Since the capital was contributed to the partnership, not to partners themselves as individuals, it is the partnership that must refund the equity of the retiring partners. 2. Before the partners can be paid their shares, the creditors of the partnership must first becompensated.