Aniceto G. Saludo, Jr. vs. Philippine National Bank

ANICETO G. SALUDO, JR. vs.
PHILIPPINE NATIONAL BANK
G.R. No. 193138
Facts:
SAFA Law Office entered into a Contract of Lease with PNB. When the Contract
of Lease expired, SAFA Law Office continued to occupy the leased premises but were
remiss in paying its monthly rental obligations. Consequently, PNB sent a demand letter
for SAFA Law Office to pay its outstanding unpaid rents. SAFA Law Office then asked
PNB to review and discuss its billings, evaluate the improvements in the area and agree
on a compensatory sum to be applied to the unpaid rents. Saludo, in his capacity as
managing partner of SAFA Law Office, filed a complaintfor accounting and/or
recomputation of unpaid rentals and damages against PNB in relation to the Contract of
Lease. PNB filed its answer. By way of compulsory counterclaim, it sought payment
from SAFA Law Office in the sum of money representing overdue rentals. PNB argued
that as a matter of right and equity, it can claim that amount from SAFA Law Office in
solidum with Saludo. Saludo filed his motion to dismiss counterclaims, mainly arguing
that SAFA Law Office is neither a legal entity nor party litigant. As it is only a
relationship or association of lawyers in the practice of law and a single proprietorship
which may only be sued through its owner or proprietor, no valid counterclaims may be
asserted against it. Saludo asserts that SAFA Law Office is a sole proprietorship on the
basis of the Memorandum of Understanding (MOU) executed by the partners of the firm.
ISSUE:
Whether or not the SAFA Law Office is a sole proprietorship.
RULING:
No. SAFA Law Office is a partnership and not a sole proprietorship. Article 1767
of the Civil Code provides that by a contract of partnership, two or more persons bind
themselves to contribute money, property, or industry to a common fund, with the
intention of dividing the profits among themselves. Two or more persons may also form a
partnership for the exercise of a profession. Under Article 1771, 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. Article 1784, on the other
hand, provides that a partnership begins from the moment of the execution of the
contract, unless it is otherwise stipulated.
Here, absent evidence of an earlier agreement, SAFA Law Office was constituted
as a partnership at the time its partners signed the Articles of Partnershipwherein they
bound themselves to establish a partnership for the practice of law, contribute capital and
industry for the purpose, and receive compensation and benefits in the course of its
operation. The opening paragraph of the Articles of Partnership reveals the unequivocal
intention of its signatories to form a partnership. This MOU, however, does not serve to
convert SAFA Law Office into a sole proprietorship. As discussed, SAFA Law Office
was manifestly established as a partnership based on the Articles of Partnership. The
MOU, from its tenor, reinforces this fact. It did not change the nature of the organization
of SAFA Law Office but only excused the industrial partners from liability.
The law, in its wisdom, recognized the possibility that partners in a partnership
may decide to place a limit on their individual accountability. Consequently, to protect
third persons dealing with the partnership, the law provides a rule, embodied in Article
1816 of the Civil Code, which states:
Art. 1816. All partners, including industrial ones, shall be liable pro rata with all
their property and after all the partnership assets have been exhausted, for the contract
which may be entered into in the name and for the account of the partnership, under its
signature and by a person authorized to act for the partnership. However, any partner may
enter into a separate obligation to perform a partnership contract.
The foregoing provision does not prevent partners from agreeing to limit their
liability, but such agreement may only be valid as among them. Thus, Article 1817 of the
Civil Code provides:
Art. 1817. Any stipulation against the liability laid down in the preceding article
shall be void, except as among the partners.
Considering that the MOU is sanctioned by the law on partnership, it cannot
change the nature of a duly-constituted partnership. Hence, we cannot sustain Saludo’s
position that SAFA Law Office is a sole proprietorship. Having that settled SAFA Law
Office is a partnership, we hold that it acquired juridical personality by operation of law.
The perfection and validity of a contract of partnership brings about the creation of a
juridical person separate and distinct from the individuals comprising the partnership.
Thus, Article 1768 of the Civil Code provides:
Art. 1768. The partnership has a juridical personality separate and distinct from
that of each of the partners, even in case of failure to comply with the requirements of
Article 1772, first paragraph.

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Aniceto G. Saludo, Jr. vs. Philippine National Bank

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ANICETO G. SALUDO, JR. vs.

PHILIPPINE NATIONAL BANK

G.R. No. 193138

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