Bus Org CAse Digest

Download as docx, pdf, or txt
Download as docx, pdf, or txt
You are on page 1of 18

TAI TONG CHUACHE & CO v.

INSURANCE COMMISSION and TRAVELLERS


MULTI-INDEMNITY CORPORATION

February 29, 1988

FACTS –

Complainants Palomo acquired a parcel of land and a building located in Davao City.
They assumed the mortgage of the building in favor of SSS, which building was insured
with respondent SSS Accredited Group of Insurers for P25K.

- On April 19, 1975, Azucena Palomo obtained a P100K loan from Tai Tong Chuache
Inc. (TTCC) and executed a mortgage over the land and the building in favor of Tai
Tong Chuache & Co. as security of payment. On April 25, 1975, Arsenio Chua,
representative of TTCC insured the latter's interest with Travellers Multi-Indemnity
Corporation (Travellers) for P100K (P70K for bldg and P30K for the contents thereof)

- On June 11, 1975, Pedro Palomo secured a Fire Insurance Policy, covering the
building for P50K with respondent Zenith Insurance Corporation (ZIC). Another Fire
Insurance Policy was later procured from respondent Philippine British Assurance
Company (PBAC), covering the same building for P50K and contents thereof for P70K.
On July 31, 1975, the building and the contents were totally razed by fire.

- Based on the computation of the loss, including the Travellers, respondents, ZIC,
PBAC, and SSS paid their corresponding shares of the loss. Complainants were paid
the following: P41,546.79 by PBAC, P11,877.14 by ZIC, and P5,936.57 by SSS.
Demand was made from respondent Travellers for its share in the loss but was refused.
Hence, complainants demanded from the other 3 respondents the balance of each
share in the loss based on the computation excluding Travellers Multi-Indemnity in the
amount of P30,894.31 (P5,732.79-ZIC: P22,294.62, PBAC: and P2,866.90, SSS) but
was refused, hence, this action.

ISSUE:

WON petitioner Tai Tong has insurable interest in the said policy.

YES.

RATO:

- First, respondent insurance commission based its findings on mere inference.


Respondent Insurance Commission absolved respondent insurance company from
liability on the basis of the certification issued by the then CFI, that in a certain civil
action against the Palomos, Arsenio Lopez Chua stands as the complainant and not Tai
Tong Chuache. From said evidence respondent commission inferred that the credit
extended by herein petitioner to the Palomos secured by the insured property must
have been paid. Such is a glaring error which this Court cannot sanction.

- Second, it has been held in a long line of cases that when the creditor is in possession
of the document of credit, he need not prove non-payment for it is presumed. The
validity of the insurance policy taken by petitioner was not assailed by private
respondent. Moreover, petitioner's claim that the loan extended to the Palomos has not
yet been paid was corroborated by Azucena Palomo who testified that they are still
indebted to herein petitioner. So at the time of the fire, petitioner as mortgagee still had
insurable interest therein.

- And third, petitioner's declaration that Arsenio Lopez Chua acts as the managing
partner of the partnership was corroborated by respondent insurance company. Thus
Chua as the managing partner of the partnership may execute all acts of administration
including the right to sue debtors of the partnership in case of their failure to pay their
obligations when it became due and demandable. Or at the least, Chua being a partner
of petitioner Tai Tong Chuache & Company is an agent of the partnership. Being an
agent, it is understood that he acted for and in behalf of the firm. Disposition: Appealed
decision SET ASIDE and ANOTHER judgment is rendered order private respondent
Travellers to pay petitioner the face value of Fire Insurance Policy in the amount of
P100K. Costs against said private respondent.

19. LITTON V. HILL & CERON

G.R. No. 45624 April 25, 1939

FACTS:

On February 14, 1934, George Litton, the plaintiff, sold anddelivered to Carlos
Ceron, one of the managing partners of Hill &Ceron, a certain number of
mining claims. Then, defendant CarlosCeron delivered to Litton a document
evidencing the fact that Ceron ofHill & Ceron company received from Litton
17,000 shares of BigWedge Mining Company, sold at P0.11 per share or total of
P1,870.Ceron paid to Litton P1,150, leaving an unpaid balance ofP720.
Unable to collect this sum from both Hill & Ceron and its surety,Visayan Surety &
Insurance Corporation, Litton filed a complaint in theCourt of First Instance of Manila
against the said defendants for therecovery of the said balance. The court ordered
Ceron personally to pay the amount andabsolved the partnership Hill & Ceron,
Robert Hill and the VisayanSurety & Insurance Corporation. CA affirmed RTC, ruling
that Cerondid not intend to represent and did not act for the firm Hill & Ceron inthe
transaction involved in this litigation.
ISSUE:

W/N Ceron represented the firm Hill & Ceron in buying somemining claims from Litton.

HELD:

YES. The Court ruled that the transaction made by Ceron withLitton should be
understood as effected by Hill & Ceron and bindingupon it. Primarily, Robert Hill
admitted when he testified at the trial thefollowing: a) that he and Ceron, during the
partnership, had the samepower to buy and sell; b) that in said partnership Hill as well
as Ceronmade the transaction as partners in equal parts; c) that on the date ofthe
transaction, the partnership between Hill and Ceron was inexistenceIn its
decision, the CA said that the 6th paragraph of the articlesof copartnership of Hill &
Ceron provides that the management of thebusiness affairs of the copartnership
shall be entrusted to bothcopartners, who shall jointly administer the
business affairs of thecopartnership. A written contract of the firm can only be
signed by oneof the partners if the other partner consented. Now, assuming
thatCeron attempted to represent the firm in this contract with the Litton,the latter has
failed to prove that Hill had consented to such contract.It follows from the sixth
paragraph of the articles of partnershipof Hill & Ceron that the management of the
business of the partnershiphas been entrusted to both partners thereof, but the
Supreme Courtdissented from the view of the CA that for one of the partners tobind the
partnership the consent of the other is necessary. Thirdpersons, like the plaintiff,
are not bound in entering into acontract with any of the two partners, to ascertain
whether or notthis partner with whom the transaction is made has the consent ofthe
other partner. The public need not make inquires as to theagreements had
between the partners. Its knowledge is enough thatit is contracting with the partnership,
which is represented by oneof the managing partners. There is a general
presumption thateach individual partner is an authorized agent for the firm and thathe
has authority to bind the firm in carrying on the partnershiptransactions. Furthermore,
2nd paragraph of the articles of partnership of Hill& Ceron provides that the purpose or
object of the copartnership is toengage in the business of brokerage in general. With
that, none of thetwo partners, under article 130 of the Code of Commerce, may
legallyengage in the business of brokerage in general as stock
brokers,security brokers and other activities pertaining to the business of
thepartnership. Ceron, therefore, could not have entered into thcontract of sale
of shares with Litton as a private individual, butonly as a managing partner of Hill &
Ceron.The appealed decision is reversed and the defendants areordered to
pay to the plaintiff, jointly and severally, the sum of P720,with legal interest.
RESOLUTION OF MOTION FOR RECONSIDERATION OF THE CASE

July 13, 1939

FACTS:Robert Hill, one of the defendants sentenced in the decision topay to the
plaintiff, filed a motion for reconsideration, insisting that theappellant had not
established that Carlos Ceron, another of thedefendants, had the consent of his
copartner, Hill, to enter with theappellant into the contract whose breach gave rise to the
complaint. Hesaid that it being stipulated in the articles of partnership that Hill andCeron
would, as managers, have the management of the business ofthe partnership, then
Ceron could not ignore the fact that the consentof the Hill was necessary for the validity
of the contract. And, therebeing no evidence that said consent had been obtained, the
complaintto compel compliance with the said contract had to be, as it must be infact, a
procedural failure.

ISSUE:

1. W/N the consent of Hill was necessary for the validity of the contract entered into
between Ceron and Litton.

2. W/N the lack of consent of a partner/s (Hill) would annul a contract entered into by
another partner (Ceron).

HELD: 1. NO. The stipulation in the articles of partnership that any of the two managing
partners may contract and sign in the name of the partnership with the
consent of the other, creates an obligation between the two partners, which
consists in asking the other's consent before contracting for the partnership. This
obligation of course is not imposed upon a third person who contracts with
the partnership; it is not necessary for the third person to ascertain if the managing
partner with whom he contracts has previously obtained the consent of the
other. A third person may and has a right to presume that the partner with whom he
contracts has, in the ordinary and natural course of business, the consent of his
copartner. This finds support in the legal presumption that the ordinary course of
business has been followed, and that the law has been obeyed. Therefore,
unless the contrary is shown, the presumption subsists. If we are to
interpret the articles of partnership in question by holding that it is the obligation of
the third person to inquire whether the managing copartner of the one with whom he
contracts has given his consent to said contract, would operate tohinder business
transactions. 2. NO. If Ceron stated to the appellant that he had the consent of Hill,and
if it turns out later that he did not have such consent, this would not annul the contract.
Article 130 of the Code of Commerce, provides that when, not only without the consent,
but even it is against the will of any of the managing partners, a contract is entered into
with a third person who acts in good faith, and the transaction is of the kind of
business in which the partnership is engaged, as in the present case,said contract shall
not be annulled, without prejudice to the liability of the guilty partner. This provision
is to protect a third person who contracts with one of the managing partners of
the partnership, thus avoiding fraud and deceit to which he may easily fall a victim
without this protection which the Code of Commerce wisely provides. The motion for
reconsideration is DENIED

LITTON vs. HILL & CERON

Facts:

 The plaintiff sold and delivered to Carlos Ceron, who is one of the managing partners
of Hill & Ceron, a certain number of mining claims.

 Both partners have the management of the business of the partnership, and that
either may contract and sign for the partnership with the consent of the other. Ceron did
not obtain Hill’s consent for the purchase of the mining claims.

 Litton was unable to collect the balance from Hill & Ceron or from its surety.

 The trial court held Ceron personally liable for the unpaid amount. The partnership Hill
& Ceron, Robert Hill (the partner of Ceron), and the surety were absolved.

 CA affirmed, saying that Ceron did not intend to represent and did not act for the
partnership Hill & Ceron.

Issue: who should prove that the consent of the other partner is needed when entering
into a contract with third persons?

Issue: is the partnership liable?

Held:

Yes. Under article 226 of the Code of Commerce, the dissolution of a commercial
association shall not cause any prejudice to third parties until it has been recorded in
the commercial registry. (See also Cardell vs. Mañeru, 14 Phil., 368.) The Supreme
Court of Spain held that the dissolution of a partnership by the will of the partners which
is not registered in the commercial registry, does not prejudice third persons.Third
persons, like the plaintiff, are not bound in entering into a contract with any of the two
partners, to ascertain whether or not this partner with whom the transaction is made has
the consent of the other partner. The public need not make inquiries as to the
agreements had between the partners. Its knowledge is enough that it is contracting
with the partnership which isrepresented by one of the managing partners.There is a
general presumption that each individual partner is an authorized agent for the firm and
that he has authority to bind the firm in carrying on the partnership transactions. (Mills
vs. Riggle, 112 Pac., 617.)The presumption is sufficient to permit third persons to hold
the firm liable on transactions entered into by one of members of the firm acting
apparently in its behalf and within the scope of his authority. (Le Roy vs.Johnson, 7 U.
S. [Law. ed.], 391.)The kind of business in which the partnership Hill & Ceron is to
engage being thus determined, none of the two partners, under article 130 of the Code
of Commerce, may legally engage in thebusiness of brokerage in general as stock
brokers, security brokers and other activities pertaining to the business of the
partnership. Ceron, therefore, could not have entered into the contract of sale of shares
with Litton as a private individual, but as a managing partner of Hill & Ceron.Even if
Ceron had not obtained the consent of Hill for the said transaction, it is not enough
ground to annul the contract entered by Ceron and Litton.Under the Article 130 of the
Code of Commerce, when, not only without the consent but against the will of any of the
managing partners, a contract is entered into with a third person who acts in good faith,
and the transaction is of the kind of business in which the partnership is engaged, as in
the present case, said contract shall not be annulled, without prejudice to the liability of
the guilty partner.

Dan Fue Leung v. IAC and Leung Yiu (1989)

Gutierrez, Jr.,

J. Leung Yui is claiming his share in the business of Dan Fue, saying he is a partner of
the business. Dan Fue says he is not, and even if he is, he is prescribed from claiming
his share.

 Sun Wah Panciteria, a restaurant, was established in Manila. It was registered as a


single proprietorship and its licenses and permits were issued to Dan Fue Leung as the
sole proprietor.

 Respondent Leung Yiu claims that Sun Wah Panciteria was actually a partnership
and that he was one of the partners having contributed P4,000 to its initial
establishment.

o Evidenced by receipt wherein the Dan Fue acknowledged acceptance of the P4,000.
o Witnesses So Sia and Antonio Ah Heng corroborated the testimony of Leung Yiu to
the effect that they were both present when the receipt was signed by Dan Fue.
o Leung Yiu received from Dan Fue P12,000 covered by Fue’s Equitable Banking
Check from the profits of the operation of the restaurant.

 Dan Fue denies receipt of P4,000 from Laung Yiu.

o Says he did not receive any contribution at the time he started the Panciteria.

o He used his savings from his salaries as capital in establishing the Panciteria.

o He presented various government licenses and permits showing the Sun Wah
Panciteria was and still is a single proprietorship solely owned and operated by himself
alone.

 TC ruled in favor of Respondent Leung Yiu.

 IAC affirmed. o Both TC and IAC found that the Leung Yiu is a partner of the
petitioner in the setting up and operations of the panciteria and the Leung Yiu invested
in the business as a partner.

 Petitioner Dan Fue:

o The complaint avers that Leung Yiu extended 'financial assistance' to him at the time
of the establishment of the Panciteria. And in return, Leung Yiu will receive a share in
the profits of the restaurant.

o The same complaint did not claim that Leung Yiu is a partner of the business. It was,
therefore, an error for the TC and IAC to interpret 'financial assistance' to mean the
contribution of capital by a partner to a partnership

Issue/Held: W/n there was a partnership between them ---

YES Ratio:

 Leung Yiu alleged that when the Panciteria was established, he gave P4,000 with
the understanding that he would be entitled to 22% of the annual profit .

 This makes them partners in the establishment of Sun Wah Panciteria because NCC
1767 provides that "By the contract of partnership two or more persons bind themselves
to contribute money, property or industry to a common fund, with the intention of
dividing the profits among themselves".

Given its ordinary meaning, “financial assistance” is the giving out of money to another
without the expectation of any returns.
 It connotes an ex gratia dole out in favor of someone driven into a state of destitution.
 But this circumstance under which the P4,000 was given to the Dan Fue does not
apply (bec Leung Yiu is entitled to 22%)

Dan Fue raises prescription. He argues: IAC erred in not resolving the issue of
prescription in his favor. SC disagrees.

 The alleged receipt is dated October 1, 1955 and the complaint was filed only on July
13, 1978 or after 22 years. From October 1, 1955 to July 13, 1978, no written demands
were ever made by Leung Yiu.

 His argument is based on NCC 1144 (which says that the ffg actions must be
brought within 10 yrs: upon written contract, obligation created by law, upon judgment)
in relation to NCC 1155 (prescription is interrupted when they are filed before the court,
written extra judicial demand by creditor, & written acknowledgment of debt by debtor)

They are partners in Sun Wah Panciteria.

 The requisites of a partnership are

1. Two or more persons bind themselves to contribute money, property, or industry to a


common fund; and

2. Intention on the part of the partners to divide the profits among themselves have
been established.

 If excellent relations exist among the partners and all the partners are more
interested in seeing the firm grow rather than get immediate returns, a deferment of
sharing in the profits is perfectly plausible.

 It would be incorrect to state that if a partner does not assert his rights anytime within
10 years from the start of operations, such rights are irretrievably lost. NCC 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.

The resolution of the IAC ordering the payment of Dan Fue’s obligation shows that it
continues until fully paid. The question now arises as to whether or not the payment of a
share of profits shall continue into the future with no fixed ending date.

 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:

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;

(6) Other circumstances render a dissolution equitable. SC orders 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. Petition
dismissed.

EMNACE v. COURT OF APPEALS

FACTS:

Petitioner Emilio Emnace, Vicente Tabanao and Jacinto Divinagracia were partners in a
business known as Ma. Nelma Fishing Industry. In 1986, they decided to dissolve their
partnership and executed an agreement of partition and distribution of the partnership
properties among them, consequent to Jacinto Divinagracia's withdrawal from the
partnership. When petitioner failed to comply with the terms of the agreement and also
on his promise to turn over to Tabanao's heirs the deceased's 1/3 share in the total
assets of the partnership, amounting to P30,000,000.00, respondents, Tabanao's heirs,
filed an action for accounting, payment of shares, division of assets and damages
against petitioner. Petitioner filed a motion to dismiss the complaint and argued that the
trial court did not acquire jurisdiction over the action because the prescribed docket fee
was not paid considering the huge amount involved in the claim. The trial court,
however, noted that a request for accounting was made in order that the exact value of
the partnership may be ascertained and, thus, the correct docket fee may be paid.
Petitioner questioned the order of dismissal through a petition for certiorari before the
Court of Appeals. The appellate court rendered the assailed decision dismissing the
petition for certiorari, upon a finding that no grave abuse of discretion amounting to lack
or excess of jurisdiction was committed by the trial court in issuing the questioned
orders denying petitioner's motions to dismiss.

ISSUE:

WON the partnership was terminated due to prescription


HELD:

NO.Petitioner contends that the trial court should have dismissed the complaint on the
ground of prescription, arguing that respondents' action prescribed four (4) years after it
accrued in 1986. The trial court and the Court of Appeals gave scant consideration to
petitioner's hollow arguments, and rightly so. The three (3) final stages of a partnership
are: (1) dissolution; (2) winding-up; and (3) termination. The partnership, although
dissolved, continues to exist and its legal personality is retained, at which time it
completes the winding up of its affairs, including the partitioning and distribution of the
net partnership assets to the partners. For as long as the partnership exists, any of the
partners may demand an accounting of the partnership's business. Prescription of the
said right starts to run only upon the dissolution of the partnership when the final
accounting is done. Contrary to petitioner's protestations that respondents' right to
inquire into the business affairs of the partnership accrued in 1986, prescribing four (4)
years thereafter, prescription had not even begun to run in the absence of a final
accounting. Article 1842 of the Civil Code provides: The right to an account of his
interest shall accrue to any partner, or his legal representative as against the winding up
partners or the surviving partners or the person or partnership continuing the business,
at the date of dissolution, in the absence of any agreement to the contrary. Applied in
relation to Articles 1807 and 1809, which also deal with the duty to account, the above-
cited provision states that the right to demand an accounting accrues at the date of
dissolution in the absence of any agreement to the contrary. When a final accounting is
made, it is only then that prescription begins to run. In the case at bar, no final
accounting has been made, and that is precisely what respondents are seeking in their
action before the trial court, since petitioner has failed or refused to render an
accounting of the partnership's business and assets. Hence, the said action is not
barred by prescription.

Applied to the instant case, respondents have a specific claim — 1/3 of the
value of all the partnership assets — but they did not allege a specific amount. They did,
however, estimate the partnership's total assets to be worth Thirty Million Pesos
(P30,000,000.00), in a letter addressed to petitioner. Respondents cannot now say that
they are unable to make an estimate, for the said letter and the admissions therein form
part of the records of this case. They cannot avoid paying the initial docket fees by
conveniently omitting the said amount in their amended complaint. This estimate can be
made the basis for the initial docket fees that respondents should pay. Even if it were
later established that the amount proved was less or more than the amount alleged or
estimated, Rule 141, Section 5(a) of the Rules of Court specifically provides that the
court may refund the excess or exact additional fees should the initial payment be
insufficient. It is clear that it is only the difference between the amount finally awarded
and the fees paid upon filing of this complaint that is subject to adjustment and which
may be subjected to a lien.

JO CHUNG CANG VS PACIFIC COMMERCIAL CO., 45 PHIL. 142

Facts:

• Following the presentation of an application to be adjudged an insolvent by the


"Sociedad Mercantil, Teck Seing & Co., Ltd.," the creditors, the Pacific Commercial
Company, Piñol & Company, Riu Hermanos, and W. H. Anderson & Company, filed a
motion in which the Court was prayed to enter an order: "(A) Declaring the individual
partners as described in paragraph 5 parties to this proceeding; (B) to require each of
said partners to file an inventory of his property in the manner required by section 51 of
Act No. 1956; and (C) that each of said partners be adjudicated insolvent debtors in this
proceeding."

• The trial judge first granted the motion, but, subsequently, on opposition being
renewed, denied it. It is from this last order that an appeal was taken in accordance with
section 82 of the Insolvency Law.

Issue: WON the partnership contract created a limited partnership.

Ruling:

• No.

• The contract created was not a limited partnership but a general partnership
even if “Ltd.” was used in the firm’s name to avoid liability for possible losses.

• The general rule is, that 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 the least one of the general partners must appear in the firm name.
(Code of Commerce, arts. 122 [2], 146, 148.) But NEITHER of these requirements have
been fulfilled.
• Article 125 of the Code of Commerce provides that the articles of general
copartnership must estate the names, surnames, and domiciles of the partners; the firm
name; the names, and surnames of the partners to whom the management of the firm
and the use of its signature is instrusted; the capital; the duration of the copartnership;
and the amounts which, in a proper case, are to be given to each managing partner
annually for his private expenses, while the succeeding article of the Code provides that
the general copartnership must transact business under the name of all its members, of
several of them, or of one only. Turning to the document before us, it will be noted that
all of the requirements of the Code have been met, with the sole EXCEPTION of that
relating to the composition of the firm name.

• What is said in Article 126 of the Code of Commerce relating to the general
copartnership transacting business under the name of all its members or of several of
them or of one only, is wisely included in our commercial law for the protection of the
creditors than of the partners themselves.

• The one object of the act is manifestly to protect the public against imposition
and fraud, prohibiting persons from concealing their identity by doing business under an
assumed name, making it unlawful to use other than their real names in transacting
business without a public record of who they are.

• On the question of whether the fact that the firm name "Teck Seing & Co., Ltd."
does not contain the name of all or any of the partners as prescribed by the Code of
Commerce prevents the creation of a general partnership, Professor Jose A. Espiritu,
as amicus curiæ, states:

…If they intend to do a thing which in law constitutes a partnership, they are partners,
although their purpose was to avoid the creation of such relation. Here, the intention of
the persons making up Teck Seing & co., Ltd. was to establish a partnership which they
erroneously denominated a limited partnership. If this was their purpose, all subterfuges
resorted to in order to evade liability for possible losses, while assuming their enjoyment
of the advantages to be derived from the relation, must be disregarded. The partners
who have disguised their identity under a designation distinct from that of any of the
members of the firm should be penalized, and not the creditors who presumably have
dealt with the partnership in good faith.

• Articles 127 and 237 of the Code of Commerce make all the members of the
general copartnership liable personally and in solidum with all their property for the
results of the transactions made in the name and for the account of the partnership.
Section 51 of the Insolvency Law, likewise, makes all the property of the partnership
and also all the separate property of each of the partners liable. In other words, 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.

• The court reach the conclusion that the contract of partnership found in the
document hereinbefore quoted established a general partnership or, to be more exact, a
partnership as this word is used in the Insolvency Law.

• Wherefore, the order appealed from is reversed, and the record shall be returned
to the court of origin for further proceedings pursuant to the motion presented by the
creditors, in conformity with the provisions of the Insolvency Law.

LA COMPAÑIA MARITIMA v. MUÑOZ

G.R. No. L-3704; December 12, 1907

Ponente: J. Willard

FACTS:

On the 31st day of March, 1905, the defendants Francisco Muñoz, Emilio Muñoz, and
Rafael Naval formed on ordinary general mercantile partnership under the name of
Francisco Muñoz & Sons for the purpose of carrying on the mercantile business in the
Province of Albay which had formerly been carried on by Francisco Muñoz.

In the articles of partnership, it is expressly stated that they have agreed to form, and do
form, an ordinary, general mercantile partnership. The object of the partnership, as
stated in the fourth paragraph of the articles, is a purely mercantile one and all the
requirements of the Code of Commerce in reference to such partnership were complied
with. The articles of partnership were recorded in the mercantile registry in the Province
of Albay.

Rafael Naval was entitled by the articles of agreement to a fixed salary of P2,500 as
long as he was in charge of the branch office established at Ligao

The argument of the appellees seems to be that, because no yearly or monthly salary
was assigned to Emilio Muñoz, he contributed nothing to the partnership and received
nothing from it.

ISSUE:

Whether Muñoz is liable to third person even if he is an industrial partner


HELD:

Yes, Muñoz is liable to third persons even if he is an industrial partner.

The Supreme Court held that in limited partnership, the Code of Commerce recognizes
a difference between general and special partners, but in a general partnership there is
no such distinction — all the members are general partners. The fact that some may be
industrial and some capitalist partners does not make the members of either of these
classes alone such general partners.

Our construction of the article is that it relates exclusively to the settlement of the
partnership affairs among the partners themselves and has nothing to do with the
liability of the partners to third persons; that each one of the industrial partners is liable
to third persons for the debts of the firm; that if he has paid such debts out of his private
property during the life of the partnership, when its affairs are settled he is entitled to
credit for the amount so paid, and if it results that there is not enough property in the
partnership to pay him, then the capitalist partners must pay him.

Our conclusion is upon this branch of the case that neither on principle nor on authority
can the industrial partner be relieved from liability to third persons for the debts of the
partnership.

.R. No. L-39780 November 11, 1985

ELMO MUÑASQUE, petitioner,vs. COURT OF APPEALS,CELESTINO GALAN


TROPICAL COMMERCIAL

COMPANY and RAMON PONS, respondents.

GUTTIERREZ, JR., J.:

Facts:

Munasque (petitioner) entered into a partnership with Galan under the registered
name\“Galan and Associates” as Contractor. They entered into a written contract with
respondent Tropical for remodeling the latter’s Cebu branch building. Under the
contract, the project totaled 25,000 to be paid in installments; 7, 000 upon signing and
6, 000 every 15 working days.
Tropical made the first payment by check in the name of Munasque. Munasque
indorsed the check in favor of Galan to enable Galan to deposit it in the bank and pay
for the materials and labor used in the project. However, Galan allegedly spent P6,
183.37 for his personal use. When the second check came, Munasque refused to
indorse it again to Galan.

Galan informed Tropical of the misunderstanding between him and Munasque as


partners. Hence upon second payment, Tropical changed the name of the payee on the
second check from Munasque to “Galan and Associates” which enabled Galan to
encash the second check.

Meanwhile, the construction was continued through Munasque’s sole efforts by


incurring debts from various suppliers. The construction work was finished ahead of
schedule with the total expenditure reaching P 34, 000 (note yung contract nila 25k
lang).

Munasque filed a complaint for payment of sum of money and damages against Galan,
Tropical, and Tropical’s Cebu branch manager Pons. Cebu Southern Hardware
Company and Blue Diamond Glass Palace intervened in the case for the credit which
they extended to the partnership of Munasque and Galan for the construction project.

Both trial court and Court of Appeals absolved respondents Tropical and its Cebu
manager, Pons, from any liability. TC held Galvan and Munasque “jointly and severally”
liable to its creditors which decision was modified by CA and held them “jointly” liable.

Issues:

Whether the obligation of Munasque and Galan is joint or solidary?

Held:

Solidary. While it is true that under Article 1816 of CC, “All partners, including industrial
ones, shall be liable pro rate with all their property and after all the partnership assets
have been exhausted, for the contracts which may be entered into the name and for
account of the partnership, under its signature and by a person authorized to act for the
partnership. xxx”, this provision should be construed together with Article 1824 which
provides that:

“All partners are liable solidarily with the partnership for everything chargeable to the
partnership under Articles 1822 and 1823.” While the liability of the partners are merely
joint in transactions entered into by the partnership, a third person who transacted with
said partnership can hold the partners solidarily liable for the whole obligation if the case
of the third person falls under Articles 1822 and 1823.
The obligation is solidary because the law protects him, who in good faith relied upon
the authority of a partner, whether such authority is real or apparent.

Tropical had every reason to believe that a partnership existed between Munasque and
Galan and no fault or error can be imputed against it for making payments to “Galan
and Associates” because as far as it was concerned, Galan was a true partner with real
authority to transact in behalf of the partnership it was dealing with (because in the first
place they entered into a duly registered partnership name and secondly, Munasque
endorsed the first check payment to Galan). This is even more true in the cases of the
intervenors who supplied materials on credit to the partnership. Thus, it is but fair that
the consequences of any wrongful act committed by any of the partners therein should
be answered solidarily by all the partners and the partnership as a whole.

However, as between Munasque and Galan, Galan must reimburse Munasque for the
payments made to the intervenors as it was satisfactorily established that Galan acted
in bad faith in his dealings with Munasque as a partner.

SANTIAGO SYJUCO, INC v. CASTRO

G.R. No. 70403; July 7, 1989

Ponente: J. Narvasa

FACTS:

Back in November 1964, the Lims, borrowed from petitioner Santiago Syjuco,
Inc., the sum of P800,000.00. The loan was given on the security of a first mortgage on
property registered in the names of said borrowers as owners in common under
Transfer Certificates of Title Numbered 75413 and 75415 of the Registry of Deeds of
Manila. Thereafter additional loans on the same security were obtained by the Lims
from Syjuco, so that as of May 8, 1967, the aggregate of the loans stood at
P2,460,000.00, exclusive of interest, and the security had been augmented by bringing
into the mortgage other property, also registered as owned pro indiviso by the Lims
under two titles: TCT Nos. 75416 and 75418 of the Manila Registry.
On November 8, 1967, the Lims failed to pay it despite demands therefore; that
Syjuco consequently caused extra-judicial proceedings for the foreclosure of the
mortgage to be commenced by the Sheriff of Manila; and that the latter scheduled the
auction sale of the mortgaged property on December 27, 1968.

The attempt to foreclose triggered off a legal battle that has dragged on for more than
twenty years now, fought through five (5) cases in the trial courts, two (2) in the Court
of Appeals, and three (3) more in the Supreme Court.

One of the complaints filed by the Lims was filed not in their individual names, but
in the name of a partnership of which they themselves were the only partners: "Heirs of
Hugo Lim." The complaint advocated the theory that the mortgage which they, together
with their mother, had individually constituted (and thereafter amended during the period
from 1964 to 1967) over lands standing in their names in the Property Registry as
owners pro indiviso, in fact no longer belonged to them at that time, having been earlier
deeded over by them to the partnership, "Heirs of Hugo Lim," more precisely, on March
30, 1959, hence, said mortgage was void because executed by them without authority
from the partnership.

ISSUE:

Whether the mortgage executed by the Lims be attributable to their partnership

HELD:

Yes, the mortgage executed by the Lims is attributable to their partnership.

The Supreme Court held that the legal fiction of a separate juridical personality and
existence will not shield it from the conclusion of having such knowledge which naturally
and irresistibly flows from the undenied facts. It would violate all precepts of reason,
ordinary experience and common sense to propose that a partnership, as such, cannot
be held accountable with knowledge of matters commonly known to all the partners or
of acts in which all of the latter, without exception, have taken part, where such matters
or acts affect property claimed as its own by said partnership.

The silence and failure of the partnership 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.

There is no reason to distinguish between the Lims, as individuals, and the partnership
itself, since the former constituted the entire membership of the latter. In other words,
despite the concealment of the existence of the partnership, for all intents and purposes
and consistently with the Lims' own theory, it was that partnership which was the real
party in interest in all the actions; it was actually represented in said actions by all the
individual members thereof, and consequently, those members' acts, declarations and
omissions cannot be deemed to be simply the individual acts of said members, but in
fact and in law, those of the partnership.

You might also like