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INSTANCES WHEN A
PARTNERSHIP WAS FORMED

I: NATURE & ATTRIBUTES OF THE PARTNERSHIP

CIVIL PARTNERSHIPS
Not pursued in
mercantile manner
Not habitual
It is the perfection of contract of
partnership w/c under the old
Civil Code brought about the
separate juridical personality of a
civil partnership
Civil partners - primarily but only
jointly liable (pro rata)

COMMERCIAL PARTNERSHIP
In pursuit of
industry or commerce
Habituality
Registration
was
the
key
element
for
coming
into
existence of a commercial
partnership
Commercial
partners
were
solidarily liable for partnership
debts albeit in a subsidiary
manner

Commercial Partnership
If it fails to register its articles of partnership in the mercantile
registry, it does not become a juridical person nor does it
have any personality distinct from the personality of the
individuals who composed it
Both the partnership & the separate partners thereof may be
joined in 1 action, but the private property of the partners
cannot be taken in payment of the partnership debts until
the common property of the firm has been exhausted
While unregistered commercial partnerships & associations
have no juridical entity, and as such cannot maintain an
action in the partnership name or in the name of 1 or more
of the members on behalf of his associates, nevertheless
the individual members may sue jointly as individuals, and
persons dealing w/ them in their joint capacity will not be
permitted to deny their right to do so
Elements of a Partnership
1. meeting of minds
2. agreement to contribute money, property or industry to a
common fund
3. intent to divide the profits & losses among the contracting
parties
Verbal Partnership
valid & may be proven by competent evidence
intention of the parties to form a partnership may be gathered
from the facts & ascertained from their language & conduct
Note: there must be a clear intent to form a partnership, the
existence of a juridical personality different from the individual
partners, & the freedom of]p each party to transfer or assign the
whole property

when the heirs agreed after

partition of the estate, to use
common properties & income
as a common fund w/ the
intention of making profit for
them in proportion to their
shares in the inheritance
when 15 people contributed
money to buy a sweepstake
ticket w/ the intention to divide
the prize w/c they may win
where father & son purchased
a lot & building & had it
administered
by
an
administrator & divided equally
the net income
where 3 sisters bought pieces
of real property w/ every
intention to lease them out &
derive rentals therefrom
receipt by a person of a share
of the profits of a business,
EXCEPT:

instalment payment of debt or

interest thereof
wages of an employee
rent to a landlord
annuity
to
a
widow
or
representative
of
deceased
partner
consideration
of
sale
of
goodwill or other property

As to
object

Rule on Partnership Name: The continuation of the business under

a firm name w/c includes the name of a deceased partners has been
denied when it comes to a law partnership
Rationale:
1. it contravenes the provisions of Art. 1815 and 1825, w/c
impose liability on a person whose name is included in the
firm name, w/c cannot cover a deceased person who can no
longer be subject to any liability
2. public relations value of the use of an old firm name can
tend to create undue advantages & disadvantages in the
practice of the profession
3. Art. 1840 covers dissolution and winding up scenarios and
cannot be taken to mean to cover firms that are intended as
going concerns, and cover more commercial partnership
4. when it comes to other professions, there is a legislative
authority for them to use in their firm names those of
deceased partners

As to
Duration

As to
liability of
partners

INSTANCES WHEN A
PARTNERSHIP WAS NOT
FORMED
persons not partners to each
other are not partners as to
3rd persons
co-ownership
or
copossession does not itself
establish a partnership even
when profits are shared
sharing of gross returns
when land purchased w/ the
funds contributed by the
parties & thereafter divided
equally among them
when 4 brothers & sisters
acquired lots w/ the original
purpose to divide the lots for
residential purposes, & later
they found it not feasible to
build their residences on the
lots because of the high cost
of construction, they had no
choice but to resell the same
to dissolve the co-ownership
an exclusive agent to develop
a parcel of land who is
entitled to receive a 20%
commission on the gross
sales, cannot claim to be a
partner to the venture simply
on the basis that he made
personal advances for the
expenses incurred in the devt
since the amounts were never
considered contributions to
the business

KINDS OF PARTNERSHIPS
Universal
- object is vague & indefinite
- contemplates a general business w/ some degree of
continuity
- deemed a universal partnership when articles do not
specify the partnerships nature
- persons who are prohibited from giving each other
any donation or advantage cannot enter into a
universal partnership
Particular
- limited & well-defined
- confined to an undertaking of a single, temporary,
or ad hoc nature
W/ a fixed term - one w/c the term for w/c the
partnership is to exist is fixed or agreed upon
For a particular undertaking - 1 formed for a
particular undertaking
At will - one w/c no time is specified & is not formed
for a particular undertaking or venture & w/c may be
terminated at any time by mutual agreement of the
partners, or by will of any 1 partner alone
General - one consisting of general partners who are
liable pro rata & subsidiarily sometimes solidarily w/
their separate property for partnership debts
Limited - one formed by 2 or more persons having
as members one or more general partnerships and
one or more limited partners, the latter not being
personally liable for the obligations of the partnership

Essential Characteristics of a Partnership

1. a contractual relationship
2. informal/consensual & weak juridical personality
3. delectus personarium

SIENNA A. FLORES
PARTNERSHIP

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4.
5.

mutual agency
no limited liability for partners

partners
Governing law civil code

Multi-Level Existence or Legal Relationships in a Partnership

Setting
1. is primarily a contractual relationship
2. is a juridical person
3. is a medium of doing business
4. constitutes a business enterprise
PARTNERSHIP
The
partnership
has
a
separate juridical personality
from the partners
Composed of at least 2 or
more partners

PARTNERSHIP
All members are principals &
agents for each other
Partners are co-owners of
specific partnership property

SOLE PROPRIETORSHIP
The business entity legally has no
separate existence from its owner
The owner has no partners

BUSINESS TRUST
Trustee is only a principal & is not an
agent
Beneficiary has equitable ownership
of property while trustee owns legal
title to such property

PARTNERSHIP
Has a firm name
Has
a
separate
juridical
personality
Generally relates to a continuing
business of various transactions
of a certain kind

PARTNERSHIP
Created by mere agreement of
the parties
At least 2 partners
Commencement
of
juridical
personality is from the moment
of execution of contract of
partnership
Partnership may exercise any
power authorized by partners
provided not contrary to morals,
good customs, etc
When management not agreed
upon, every partner is an agent
Partner can sue co-partner who
mismanages
Right of succession
General
partners
are
liable
personally & subsidiarily for
partnership debts to 3rd persons
Partner cannot transfer his
interests
so
as
to
make
transferee a partner w/o consent
of others
It may exist for any period of
time stipulated by the partners
Limited partnership required to
add the word Ltd. to its firm
name
May be dissolved at any time by
the will of any or all of the

SIENNA A. FLORES
PARTNERSHIP

JOINT VENTURE
No firm name
No legal personality
Usually limited
transaction

to

single

CORPORATION
Created by law or operation of
law
At least 5 incorporators
Commencement
of
juridical
personality from the date of
issuance
of
certificate
of
incorporation by SEC
A corporation can only exercise
powers expressly granted by
law or implied from those
granted or incident to its
existence
Power to manage vested in
board of directors or trustees
Suit against member of board
of directors or trustees who
mismanages must be in the
name of the corporation
No right of succession
Stockholders are liable only to
extent of the shares subscribed
by them
Stockholder has generally the
right to transfer his shares w/o
prior consent of the other
stockholders
It may exist for a maximum of
50 years, extendible for another
50
The corp. may adopt any firm
name provided it is not the
same
or
similar
to
any
registered firm name
Can only be dissolved w/ the
consent of the State

Governing
code

law

corporation

II: PARTNERSHIP AS A CONTRACTUAL RELATIONSHIP

Characteristics of the Contract of Partnership
1. nominate
2. principal
3. consensual
4. onerous
5. commutative
6. bilateral
7. reciprocal
8. preparatory
9. progressive
GR: a partnership is consensual & no form is required for its validity
Exceptions:
1. when capital is P3000 or more
a. it shall appear in a public instrument
b. w/c must recorded in the Office of the Securities &
Exchange Commission
2. when real property is contributed
a. an inventory should be made
b. w/c must be signed by the parties
c.
and attached to a public instrument
d. otherwise the contract of partnership is void
3. limited partnership
a. the parties must sign & swear to a certificate
b. file for record the certificate in the Office of the
Securities & Exchange Commission
Partnership Objective
1. must have a lawful object or purpose
2. must be established for the benefit or interest of the
partners
Overpowering Doctrine of Delectus Personae
membership requires the consent of all
each person must be granted the right to choose w/ whom he
will be associated with
assignment of a partner of his share does not make the
assignee a partner
existence of the partnership is closely-tied to the particular
contractual relationship of the partners
among partners, mutual agency arises
each partner has the power to dissolve the partnership

III: PARTNERSHIP AS A JURIDICAL PERSON

Consequences as a Juridical Person
1. power to enter into contracts & incur obligations
2. may acquire properties in its own name
3. may sue & be sued in its firm name
4. has a domicile place where their legal representation is
established or where they exercise their principal functions
5. taxable as a corporate taxpayer
6. a partnership may be declared insolvent even if its partners
are not
7. the partners cannot be sued personally under a contract
entered into in the name of the partnership, unless it is
shown that he legal fiction is being used for a fraudulent,
unfair or illegal purpose
8. where partners liability for a partnership debt is secondary
or subsidiary, their right of excusion is deemed already
satisfied where at the time the judgment is executed
against the partnership they are unable to show that there
are still partnership assets, or when a writ of execution
against the partnership has been returned not fully satisfied

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IV: THE PARTNERS & THE PARTNERSHIP

GENERAL
LIMITED
INDUSTRIAL
CAPITALIST
OSTENSIBLE
NOMINAL

DORMANT
ORIGINAL
INCOMING
MANAGING
LIQUIDATING
RETIRING
SURVIVING
CONTINUING

KINDS OF PARTNERS
One whose liability to 3rd persons extends to his
separate property
- real partner
One whose liability to 3rd persons is limited to his
capital contribution
- special partner
One who contributes only his industry or personal
service
One who contributes money or property to a
common fund
One who takes active part & known to the public as
a partner
One who is not really a partner but is liable as a
partner for the protection of innocent 3 rd persons.
He is one represented as being a partner but who
is not so between the partners.
- partner by estoppel/partner by implication
One who does not take active part in the business
& is not known or held out as a partner
- sleeping partner
One who is a member of the partnership from the
time of its organization
A person lately or about to be taken into an
existing partnership as a member
One who manages the affairs or business of the
partnership
One who takes charge of the winding up of
partnership affairs upon dissolution
One withdrawn from the partnership
One who remains after a partnership has been
dissolved by the death of any partner
One who continues the business of a partnership
after it has been dissolved by reason of the
admission of a new partner, or the retirement,
death or expulsion of 1 ore more partners

Obligations as of Partners
1. as to their contributions
every partner is a debtor for what he may have
promised to contribute
bound for warranty in case of eviction
liable for the fruits thereof
a.

2.

when contributions in goods

i. appraisal in the manner prescribed
ii. in absence of stipulation, appraisal made
by experts chosen & according to the
current prices
iii. not fungible risk borne by partner who
owns them
iv. fungible risk borne by the partnership
b. when sum of money
i. liable for interests & damages in case he
fails to do so
c.
presumption as to percentage capital
i. contribute equal shares to the capital
d. additional contribution, in case of imminent loss
i. partner who refuses to contribute
additional shares shall be obliged to sell
his interest to the other partners
(exception: industrial partner)
on recovery of demandable sum

SIENNA A. FLORES
PARTNERSHIP

3.

4.

a partner authorized to manage

collects a demandable sum owned to him in his
own name
from a person who owed the partnership another
sum demandable
the sum collected shall be applied to the 2 credits
in proportion to their amounts
even though he gave a receipt for his credit only

on receiving partnership credit

a partner who received his share of partnership
credit
when others have not collected theirs
and the debtor becomes insolvent
the partner is obliged to bring to the partnership
the capital he received
on third persons

Obligations of Partnership to the Partners

1. for amounts disbursed for the partnership
a. the amounts the partner may have disbursed on
behalf of the partnership
b. the corresponding interest from the time the
expenses are made
c.
for obligations he may have contracted in good
faith in the interest of the partnership business
d. for risks in consequence of its management
2. formal accounting of partnership affairs
a. if he is wrongfully excluded from the partnership
business or possession of its property by his copartners
b. if the right exists under the terms of an agreement
c.
every partner must account to the partnership for
any benefit & hold as trustee for it any profits
derived by him w/o the consent of the other
partners from any transaction connected w/ the
formation, conduct, or liquidation of the
partnership or from any use by him of its property
d. whenever other circumstances render it just &
reasonable
Mutual Agency

a presumption exists that each partner is an authorized

agent for the firm & that he has authority to bind it carrying
on the partnership transaction

in the absence of contractual stipulation, all partners shall

be considered agents and whatever any one of them may
do alone shall bind the partnership

every partner is an agent of the partnership for the purpose

of its business, and the act of every partner for apparently
carrying on in the usual way the business of the partnership
binds the partnership
- exception: the partner so acting has in fact no authority to
act for the partnership in the particular matter, and the
person w/ whom he is dealing has knowledge of the fact
that he has no authority

a partner has authority to purchase goods, hire employees

of the partnership, as well as dismiss them
Mutual Obligation of Partners: full information & accounting to
other partners
Specified Powers of Partners
1. can dispose of partnership property even when in
partnership name
2. admission or representation made by any partner
concerning partnership affairs is evidence against the
partnership
3. notice to any partner of any matter relating to partnership
affairs is notice to the partnership
4. wrongful act or omission of any partner acting for
partnership affairs makes the partnership liable
5. partnership bound to make good losses for acts or
misapplications of partners

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2.

3.
Fiduciary Duties
1. duty of diligence for damages caused to the business
2. duty to account full accounting to the partnership for
partnership transactions
3. duty of loyalty
a. industrial partner cannot engage in any form of
business
b. capitalist partner prohibited from engaging in
competitive business or in similar partnership
business
i. violation: profits will be brought to the
common fund
ii. exception: the partnership permits him
to do so
Property Rights of Partners
1. rights to specific partnership property
a. equal right to possess but for partnership purpose
only
b. not assignable
c.
not subject to attachment or execution
d. not subject to legal support
e. remedy of partners separate credit
2. right to participate in management
a. GR: Every partner is an agent of the partnership
for the purpose of the business. The act of every
partner for apparently carrying on in the usual
way of business binds the partnership.
b. Exception: the partner acting has no authority to
act for the partnership in the particular matter,
and the person w/ whom he is dealing w/ has
knowledge of the fact that he has no such
authority
3. interest in the partnership venture
a. right to dispose of such interest
b. right of partners creditors to execute upon it
4. participation in profits & losses
a. a stipulation excluding a partner from ay share in
the profits or losses is void
b. distribution of profits & losses
i. in conformity w/ the agreement
ii. if only share in profits has been agreed
upon, share in losses will be in the same
proportion
iii. in the absence of stipulation, the share
shall be in proportion to what he may
have contributed (industrial partner is
not liable for losses & shall receive share
in the profits as may be just & equitable)
c.
when 3rd party designated to share
i. such designation may be impugned only
when it is manifestly inequitable
Other Proprietary Rights
1. access to partnership books & records
2. right to formal accounting
3. right to reimbursement for advances & indemnification for
risks
4. right to dissolve the partnership
Partners Unlimited Liability
1. all partners are liable pro rata w/ all their properties & after
partnership assets have been exhausted, for partnership
debts

SIENNA A. FLORES
PARTNERSHIP

4.
5.

all partners are liable solidarily w/ the partnership for

everything chargeable to the partnership when caused by
the wrongful act or omission of nay partner acting in the
ordinary course of business of the partnership or w/
authority from the other partners & for partners act or
misapplication of properties
a newly admitted partner into an existing partnership is
liable for all the obligations of the partnership arising before
his admission but out of partnership property shares
partnership creditors are preferred to those of each of he
partners as regards the partnership property
upon dissolution of the partnership, the partners shall
contribute the amounts necessary to satisfy the partnership
liabilities
V: DISSOLUTION, WINDING UP, & TERMINATION

Effects of Dissolution
1. as to the relationship of the partners
a. the withdrawing partners have no cause of action
to demand the return of their equity from the
other partners
b. it is the partnership that must refund the equity of
the retiring partners

c.

2.

3.
4.

before the partners can be paid their shares, the

creditors of the partnership must 1 st be
compensated
on the partnership itself
a. the partnership continues until the winding up of
partnership affairs is completed
b. the partnership is entitled to be heard in matters
affecting its existence as well as the appointment
of a receiver
on authority of the partners
a. dissolution terminates all authority of any partner
to act for the partnership
on the liabilities of the partners
a. the dissolution of the partnership does not itself
the existing liability of any partner
b. the individual property of a deceased partner shall
be liable for all obligations of the partnership
incurred while he was a partner, but subject to the
prior payment of his separate debts

Types/Causes of Dissolution
1. Non-judicial Dissolution
a. w/o violation of partnership agreement
i. expiration of term or undertaking
ii. by the express will of a partner in a
partnership at will
iii. mutual assent of the partners
iv. expulsion of a partner pursuant to an
agreement granting such right

b.

2.

in contravention of agreement - he will be liable

for damages w/c may be deducted from his
partnership account, & he loses his right to windup
c.
by operation of law
i. supervening illegality
ii. loss of specific thing contributed
iii. death, insolvency or civil interdiction of a
partner
Judicial Dissolution the courts have dissolved a
partnership w/o formal application when the continuation of
the partnership has become inequitable

Winding up of Partnership Business Enterprise

The right to accounting does not prescribe during the life of

the partnership, & that prescription beings to run only upon
the dissolution of the partnership & final accounting is done

A partners share cannot be returned w/o 1 st dissolving &

liquidating the partnership, for the return is dependent on

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the discharge of the creditors, whose claim enjoys

preference over those of the partners
The managing partner cannot e held personally liable for
the payment of the partners shares, for he does not hold
them except as a manager of or trustee for the partnership
It is the partnership that must refund their shares to the
retiring partners

GR: when a partner retires/withdraws from the partnership, he is

entitled to the payment of what may be due him after the liquidation
Exception: no liquidation is necessary where there was already a
settlement or an agreement as to what the retiring partner shall
receive, and the latter was in fact reimbursed pursuant to the
agreement
VI: LIMITED PARTNERSHIP
Requirements for Formation
1. formed by 2 or more persons
2. members composed of 1 or more general partners & 1 or
more limited partners
3. the limited partners are not bound by the obligations of the
partnership
Sworn Certificate of Limited Partnership filed w/ SEC
1. partnership name added the word limited
2. character & location of the business
3. on the partners
a. name & residence of each general & limited
partners being respectively designated
b. amount/description of contributions, and details of
future contributions of any to be made by limited
partners, and when contributions returned
c.
shares of profits, & compensation by way of
income of limited partners
d. right of substitution or assignment by limited
partners
e. admission of additional limited partners
f.
priority rights over other limited partners
g. right of remaining general partners to continue
business upon death, retirement, civil interdiction,
insanity or insolvency of a general partner
h. right of limited partners to demand/receive
property other than cash in return for his
contribution
Doctrine of Substantial Compliance: Substantial, rather than
strict, compliance in good faith w/ the legal requirements is all that is
necessary for formation of a limited partnership; otherwise, when
there is not even substantial compliance, the partnership becomes a
general partnership as far as 3rd persons are concerned
Effects of failure to comply w/ Registration Requirements
a limited partnership that does not comply w/ the registration
requirements shall be treated as a general partnership in
w/c all the members are liable for partnership debts

CASE DOCTRINES
I: NATURE & ATTRIBUTES OF THE PARTNERSHIP
EVANGELISTA, ET AL. VS. COLLECTOR OF INTERNAL REVENUE
The essential elements of a partnership are two, namely:
o
An agreement to contribute money, property or
industry to a common fund
o
Intent to divide the profits among the contracting
parties
Corporations strictly speaking are distinct & different from
partnerships. When our Internal Revenue Code includes
partnerships among the entities subject to the tax on
corporations, it must allude to organizations w/c are not
necessarily partnerships in the technical sense.
Sec. 24 of the Internal Revenue Code exempts from the tax
imposed upon corporations duly registered general
partnerships w/c constitute precisely 1 of the most typical
forms of partnerships in this jurisdiction.
Section 84(b) of the Internal Revenue Code states that the
term 'corporation' includes partnerships, no matter how
created or organized, joint-stock companies, joint accounts
(cuentas en participacion), associations or insurance
companies, but does not include duly registered general
copartnerships.
Pursuant to said section 84(b), the term "corporation"
includes, among other, joint accounts, and "associations,"
none of which has a legal personality of its own independent
of that of its members. For purposes of the tax on
corporations, our National Internal Revenue Code includes
these partnerships.
YULO VS. YANG CHIAO SENG
Where one of the parties to a contract does not contribute the
capital he is supposed to contribute to a common fund, does
no furnish any help or intervention in the management of
the business subject of the contract; does not demand from
the other party an accounting of the express & earnings of
the business; & is absolutely silent w/ respect to any of the
acts that a partner should have done, but, on the other
hand, receives a fixed monthly sum from the other part,
there can be no other conclusion than the contract between
the parties is 1 of lease & not partnership.
ESTANISLAO, JR. VS. CA
There is no merit in the contention that because the
stipulation cancelling and superseding the previous joint
affidavit, whatever partnership agreement there was in said
previous agreement had thereby been abrogated.
There is no doubt that the parties hereto formed a partnership
when they bound themselves to contribute money in a
common fund w/ the intention of dividing the profits among
themselves. The sole dealership by the petitioner & the
issuance of all government permits & licenses in the name
of petitioner was in compliance w/ the afore-stated policy of
SHELL and the understanding of the parties of having only 1
dealer of the SHELL products.

SIENNA A. FLORES
PARTNERSHIP

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IN THE MATTER OF THE PETITION FOR AUTHORITY TO

CONTINUE USING FIRM NAMES
Names in a firm name of a partnership must be those of living
partners, and in the case of non-partners, should be living
persons who can be subjected to liability.
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. 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 can be no corresponding liability.
Art. 1840 refers to commercial partnership w/ goodwill, not
professional partnerships. Goodwill cannot arise in a
professional partnership.
A partnership for the practice of law cannot be likened to
partnerships formed by other professionals or for business.
A partnership for the practice of law is not a legal entity. It
is a mere relationship or association for a particular
purpose. It is not a partnership formed for the purpose of
carrying on a trade or business or of holding property.
In the Philippines, no local custom permits or allows the
continued use of a deceased or former partners name in
the firm names of law partnerships. Firm names, under our
custom, identify the more active and/or more senior
members or partners of the law firm.
The possibility of deception upon the pubic, real or
consequential, where the name of a deceased partner
continues to be used cannot be ruled out.
BASTIDA VS. MENZI & CO.
The relationship established between defendant corporation &
the plaintiff by their contract was not that of partners, but
that of employer & employee, whereby the plaintiff was to
receive 35% of the net profits of the fertilizer business of
the defendant corporation in compensation for his services
of supervising the mixing of fertilizers.
In the case at bar, there was no common fund, a fund
belonging to the parties as joint owners or partners. Instead
of receiving a only fixed salary, the plaintiff received a small
percentage w/c is 35% of the net profits for his services.
The defendant advanced him P300 a month on account of
his participation in the profits. No provision was made for
reimbursing the defendant in case there should be no net
profits at the end of the year. It is now well settled that the
old rule that sharing profits as profits made one a partner is
overthrown.
ONA VS. CIR
For tax purposes, the co-ownership of inherited properties is
automatically converted into an unregistered partnership
the moment the said common properties and/or the
incomes derived therefrom are used as a common fund w/
intent to produce profits for the heirs in proportion to their
respective shares in the inheritance as determined in a
project partition either duly executed in an extrajudicial
settlement or approved by the court in the corresponding
testate or intestate proceeding.
The income derived from inherited properties may be
considered as individual income of the respective heirs only
so long as the inheritance or estate is not distributed, or at
least, partitioned, but the moment their respective known
shares are used as part of the common assets of the heirs
to be used in making profits, it is but proper that the
income of such shares be considered as part of the taxable
income of an unregistered partnership.
LYONS VS. ROSENSTOCK
The fact that 1 of 2 co-owners subjects their joint property to
a contingent liability w/c results in no damage does not
create a trust in favour of the other, and the liability thereby
incurred must be determined in conformity w/ the principles
of the civil law properly applicable to the case.

SIENNA A. FLORES
PARTNERSHIP

In the case at bar, no partnership existed. If an actual relation

of partnership had existed in the money used then the case
would have been different & Lyons would have interest on
the Estate and be able to recover the shares of stocks &
dividends. However, there was no partnership between Elser
& Lyons, the most that can be said is that Elser & Lyons had
been co-participants in various transactions in real estate.
In those transactions, it can be said that they were
partners. However, it must be remembered that it was in
each case a particular partnership.
II: PARTNERSHIP AS A CONTRACTUAL RELATIONSHIP
FERNANDEZ VS. DELA ROSA
Where the fact is established that parties have mutually
contributed to the purchase of a common stock, under
circumstances w/c afford no different explanation of their
object, it must be deduced that they intended a joint
interest in the profits therefore.
Where parties fail to agree upon articles of copartnership and
some of the contributions of 1 partner, less than all, are
returned to him & accepted w/ an express reservation of his
rights as partner, the partnership is not dissolved nor does
he waive his right to an accounting of the profits.
The essential points upon w/c the minds of the parties must
meet in a contract of partnership are:
o
mutual contribution to a common stock
o
A joint interest in the profits
In the case at bar, the execution of a written agreement was
not necessary in order to give efficacy to the verbal contract
of partnership as a civil contract, the contributions of the
partners not having been in the form of immovables or
rights in immovables.
WOODHOUSE VS. HALILI
Halili may not be compelled against his will to carry out the
agreement nor execute the partnership papers. Halili has an
obligation to do, not to give. The law recognizes the
individuals freedom to do an act he has promised to do, or
not to do, as he pleases. It is a very personal act, of w/c
courts may not compel compliance, as it is considered an
act of violence to do so.
ROJAS VS. MAGLANA
Under Art. 1830, par.2 of the CC, even if there is a specified
term, one partner can cause its dissolution by expressly
withdrawing even before the expiration of the period, with
or without justifiable cause. Of course, if the cause is not
justified or no cause was given, the withdrawing partner is
liable for damages but in no case can he be compelled to
remain in the firm. With his withdrawal, the number of
members is decreased, hence the dissolution.
A party who has undertaken to contribute a sum of money
fails to do so he becomes a debtor of the partnership for
whatever he promised to contribute.
ORTEGA VS. CA
A partnership that does not fix its term is a partnership at will.
The birth & life of a partnership at will is predicated on the
mutual desire & consent of the partners. The right to choose
with whom a person wishes to associate himself is the very
foundation and essence of that partnership. Its continued
existence is, in turn, dependent on the constancy of that
mutual resolve, along with each partner's capability to give
it, and the absence of a cause for dissolution provided by
the law itself. Verily, any one of the partners may, at his
sole pleasure, dictate a dissolution of the partnership at will.
He must, however, act in good faith, not that the
attendance of bad faith can prevent the dissolution of the
partnership, but that it can result in a liability for damages.
Neither would the presence of a period for its specific duration
or the statement of a particular purpose for its creation

-7-

prevent the dissolution of any partnership by an at or will of

a partner. Among partners, mutual agency arises and the
doctrine of delectus personae allows them to have the
power, although not necessarily the right, to dissolve the
partnership. An unjustified dissolution by the partner can
subject him to a possible action for damages.
The dissolution of a partnership is the change in the 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, the 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.
It would not be right to let any of the partners remain in the
partnership under such an atmosphere of animosity.
Indeed, for as long as the reason for withdrawal of a
partner is not contrary to the dictates of justice and
fairness, nor for the purpose of unduly visiting harm &
damage upon the partnership, bad faith cannot be said to
characterize the act.
III: PARTNERSHIP AS A JURIDICAL PERSON

Those who act or purport to act as the representatives or

agents of an ostensible corporate entity who is proven to be
legally inexistent do so w/o authority and at their own risk.
The doctrine of corporation by estoppel may apply to the
alleged corporation & to a 3rd party. An unincorporated
association, w/c represents itself to be a corporation, will be
estopped from denying its corporate capacity in a suit
against it by a 3 rd person who relies in good faith on such
representation.
A 3rd party who, knowing an association to be unincorporated,
nonetheless treated it as a corporation & received benefits
from it, may be barred from denying its corporate existence
in a suit brought against the alleged corporation.
Those acting on behalf of a corporation & those benefited by
it, knowing it to be w/o valid existence, are held liable as
general partners.
A person who has reaped the benefits of a contract entered
into by persons w/ whom he previously had an existing
relationship is deemed to be part of said association and is
covered by the scope of the doctrine of corporation by
estoppel.

ANGELES VS. SEC. OF JUSTICE

Mere failure to register the contract of partnership w/ the
Securities and Exchange Commission does not invalidate a
contract that has the essential requisites of partnership. A
partnership may exist even if the partners do not use the
words partner or partnership.
The purpose of registration of the contract of partnership is to
give notice to 3rd parties. Failure to register the contract of
partnership does not affect the liability of the partnership
and of the partners to 3rd persons.
Neither does such failure to register affect the partnerships
juridical personality.

CAMPOS RUEDA & CO VS. PACIFIC COMMERCIAL & CO.

In the Philippines, a limited partnership duly organized in
accordance w/ law has a personality distinct from that of its
members; and if it commits an act of bankruptcy, such as
that of failing for more than 30 days to pay debts
amounting to P1000 or more, it may be adjudged insolvent
on the petition of 3 of its creditors although its members
may not be insolvent.
The liability of the limited partners for the obligations and
losses of the partnership is limited to the amounts paid or
promised to be paid into the common fund except when a
limited partner should have included his name or consented
to its inclusion in the firm name.
US, on the other hand, provides that a partnership has no
separate juridical personality from its partners and unless
ALL partners are insolvent a partnership is solvent.

TORRES VS. CA
Art. 1773 was intended primarily to protect third persons. The
case at bar does not involve third parties who may be
prejudiced, thus it is not applicable.
Failure to prepare an inventory of the immovable property is
contributed, in spite of Art. 1773 declaring the partnership
void, would not render the partnership void when:
o
No 3rd party is involved since Art. 1773 was
intended for the protection of 3rd parties
o
The partners have made a claim on the
partnership agreement
Petitioners themselves invoke the allegedly void contract as
basis for their claim that respondent should pay them 60%
of the value of the property. They cannot in 1 breath deny
the contract & in another recognize it, depending on what
momentarily suits their purpose.
PIONEER INSURANCE VS. CA
Persons who attempt but fail to form a corporation and who
carry on business under the corporate name occupy the
position of partners inter se.
Such a relationship does not necessarily exist however for
ordinarily persons cannot be made to assume the relation of
partners as between themselves when their purpose is that
no partnership shall exist.
No de facto partnership was created among the parties w/c
would entitle the petitioner to a reimbursement of the
supposed losses of the proposed corporation.
LIM TONG LIM VS. PHIL. FISHING GEAR INDUSTRIES
A partnership may be deemed to exist among partners who
agree to borrow money to pursue a business and to divide
the profits or losses that may arise therefrom, even if it is
shown that they have not contributed any capital of their
own to a common fund as their contribution to such fund
could be an intangible like credit or industry.

SIENNA A. FLORES
PARTNERSHIP

AGUILA JR. VS. CA

A partnership has a juridical personality separate & distinct
from that of each of the partners it is the partnership, not
its officers or agents w/c should be impleaded in any
litigation involving property registered in its name. a
violation of this rule will result in the dismissal of the
complaint.
The partners cannot be held liable for the obligation of the
partnership unless it is shown that the legal fiction of a
different juridical personality is being used for fraudulent,
unfair, or illegal purpose.
IV: PARTNERSHIP AS A BUSINESS ENTERPRISE
US VS. CLARIN
The failure on the part of the industrial partners to return to
the capitalist partner the capital brought into the
partnership by the latter is not an act constituting the crime
of estafa.
VILLAREAL VS. RAMIREZ
Since the capital was contributed to the partnership, not to
the partners, it is the partnership w/c must refund the
equity of the retiring partners.
Since it is the partnership that must refund the shares of the
partners, the amount to be refunded is necessarily limited
to its total resources. It can only pay out what it has in its
coffers, w/c consists of all its assets.
Before the partners can be paid their shares, the creditors of
the partnership must 1st 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.

-8-

We cannot sustain the underlying idea that the capital

contribution at the beginning of the partnership remains
intact, unimpaired & available for distribution or return to
the partners. In the pursuit of a partnership business, its
capital is either increased by profits earned or decreased by
losses sustained. It does not remain static & unaffected by
the changing fortunes of the business.
V: THE PARTNERS & THE PARTNERSHIP
EVANGELISTA & CO VS. ABAD SANTOS
The version that Estrella merely as a profit sharer is
discredited not only by the aforesaid documentary evidence
brought forward by Estrella, but also by the fact that over a
period of over 8 years the other partners did nothing to
correct the alleged false agreement of the parties. It is thus
reasonable to suppose that, had Estrella not filed the
present action, the other partners would not have advanced
this obvious afterthought that the Co-partnership
agreement does not express the true intent & agreement of
the parties.

LITTON VS. HIL & CERON

The dissolution of a commercial association shall not cause
any prejudice to 3rd parties until it has been recorded in the
commercial registry.
When, not only w/o the consent but against the will of any of
the managing partners, a contract is entered into w/ a 3 rd
person who acts in good faith, & the transaction is of the
kind of business in w/c the partnership is engaged, said
contract shall not be annulled, w/o prejudice to the liability
of the guilty party.
The stipulation in the articles of partnership state that any of
the two managing partners may contract & sign in the name
of the partnership w/ the consent of the other, undoubtedly
creates an obligation between the 2 partners, w/c consists
in asking the other's consent before contracting for the
partnership. This obligation of course is not imposed upon a
3rd person who contracts with the partnership. Neither is it
necessary for the third person to ascertain if the managing
partner w/ whom he contracts has previously obtained the
consent of the other. A 3rd person who contracts w/ a
partner may presume that the Partner has consent of copartner.
GOQUIOLAY VS. SYCIP
The right of exclusive management conferred upon Tan Sin
An, being premised upon trust & confidence, was a mere
personal right that terminated upon Tans demise.
The provision in the Articles of Co-Partnership stating that in
the event of death of any 1 of the partners w/in 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 Sin An; more appropriately it
relates t the succession in the propriety interest of each
partner.
As to w/n the consent of the partners was necessary to perfect
the sale of the partnership properties, the Court believes
that it is not. Strangers dealing w/ a partnership have the
right to assume that every general partner has power to
bind the partnership.
VII: DISSOLUTION, WINDING UP, & TERMINATION
IDOS VS. CA
The 3 final stages of a partnership are the following:
o
Dissolution the change in the relation of the
partners caused by any partner ceasing to be
associated in the carrying on of the business; It is

SIENNA A. FLORES
PARTNERSHIP

o
o

that point of time the time the partners cease to

carry on the business together.
Winding up the process of settling business
affairs of dissolution
Termination - the point in time after all the
partnership affairs have been wound up

CLAUDIO VS. ZANDUETA

Neither did they include said association as a party despite the
fact that their principal purpose is to obtain the dissolution
of the same. The association, as a party affected thereby, is
entitled to be heard in the case, in matters affecting its
existence as well as the appointment of a receiver applied
for. It is also of no avail to allege that it has no legal
personality or existence.
SINGSON VS. ISABELA SAWMILL
It is true that the dissolution of a partnership is caused by any
partner ceasing to be associated in the carrying on of the
business. However, on dissolution, the partnership is not
terminated but continuous until the winding up to the
business.
A partners who had withdrawn from the partnership is relieved
form partnership liability only when there is liquidation of
assets of partnership & his withdarawal had been published.
Where a former partner entered into an agreement w/ the
remaining partners to continue the business of the
partnership, & 3rd parties were misled into believing that
they are dealing w/ the same old partnership, that partner
who withdrew is still liable to partnership liabilities.
YU VS. NLRC
The legal effect of the changes in the membership of the
partnership was the dissolution of the old partnership.
The occurrence of events w/c precipitate the legal
consequence of dissolution of a partnership do not
automatically result in the termination of the legal
personality of the old partnership.
The legal personality of the expiring partnership persists for
the limited purpose of winding up & closing of the affairs of
the partnership.
From the facts of the case, since there were no winding up or
liquidation of assets that happened, the business of the old
partnership was only continued by the new partnership. The
new partnership simply took over the old partnership. Under
such situation, not only retiring partners but also the new
partnership w/c continued the business of the old one, are
liable for the debts of the preceding partnership.
A withdrawing partner remains liable to a 3rd party creditor of
the old partnership.
The new partnership is entitled to appoint and hire a new
general or assistant general manager to run the affairs of
the business enterprise taken over.
VIII: LIMITED PARTNERSHIP
CIR VS. SUTER
A universal partnership requires either that the object of the
association be all the present property of the partners, as
contributed by them to the common fund, or else all that
the partners may acquire by their industry or work during
the existence of the partnership.
In the case at bar, respondent company was not such a
universal partnership, since the contributions of the
partners were fixed sums of money & neither one of them
was an industrial partner. It follows that respondent
company was not a partnership that spouse were forbidden
to enter by Art. 1677 of the CC of 1889. Nor could the
subsequent marriage of the partners operate to dissolve it,
such marriage not being one of the causes provided for that
purpose either by the Spanish Civil Code or the Code of
Commerce.

-9-

The partnership has a juridical personality of its own, distinct

& separate from that of its partners, the bypassing of the
existence of the limited partnership as a taxpayer can only
be done by ignoring or disregarding clear statutory
mandates & basic principles of our law.
The limited partnerships separate individuality makes it
impossible to equate its income w/ that of the component
members.
That the income of the limited partnership is actually or
constructively the income of the spouses and forms part of
the conjugal partnership of gains is not wholly correct. The
fruits of the wifes paraphernal become conjugal only hen no
longer needed to defray the expenses for the administration
& preservation of the paraphernal capital of the wife.
What is taxable is income of both spouses, not the conjugal
partnership.
The difference in tax rates between the income of the limited
partnership being consolidated w/, and when split from the
income of the spouse, is not justification for requiring
consolidation; the revenue code does not authorize it, and
even bars it by requiring the limited partnership to pay tax
on its own income.
JO CHUNG CANG VS. PACIFIC COMMERCIAL CO
Those who seek to avail themselves of the protection of laws
permitting the creation of limited partnerships must show a
substantially full compliance w/ such laws. A limited
partnership that has not complied w/ the law of its creation
is not considered a limited partnership at all, but a general
partnership in w/c all the members are liable.
To establish a limited partnership, there must be, at least, 1
general partner & the name of at least 1 of the general
partners must appear in the firm name.
Art. 126 of the Code of Commerce requires the general
copartnership to transact business under the name of all its
members, or of several of them, or of only one. The object
of the article is manifestly to protect the public against
imposition and fraud.
While the failure to register in the commercial registry
necessarily precludes the members from enforcing rights
acquired by them against 3rd persons, such failure cannot
prejudice the rights of 3rd persons.
The legal intention deducible from the acts of the parties
controls in determining the existence of a partnership. If
they intend to do a thing w/c in law constitutes a
partnership, they are partners, although their purpose was
to avoid the creation of such relation.
If a firm be insolvent, but 1 or more partners are solvent, the
creditors may proceed against the firm & against the
solvent partner/s, 1st exhausting the assets of the firm
before seizing the property of the partners.
IX: JOINT VENTURES
INFO. TECHNOLOGY FOUNDATION OF THE PHIL. VS. COMELEC
A joint venture is an association of persons or companies
jointly undertaking some commercial enterprise; generally
all contribute assets & share risks. It requires a community
of interest in the performance of the subject matter, a right
to direct & govern the policy in connection therewith, and a
duty w/c may be altered by agreement to share both in
profit & losses.
AURBACH VS. SANITARY WARE MNFG CORP.
The rule is that whether the parties to a particular contract
have thereby established among themselves a joint venture
or some other relation depends upon their actual intention
w/c is determined in accordance w/ the rules governing the
interpretation & construction of contracts.
A corporation cannot enter into a partnership but may engage
in a joint venture w/ others.
JG SUMMIT HOLDINGS INC. VS. CA

SIENNA A. FLORES
PARTNERSHIP

The joint venture between the Philippine Government and

KAWASAKI is in the nature of a partnership w/c, unlike an
ordinary corporation, is based on delectus personae. No one
can become a member of the partnership association w/o
the consent of all the other associates.
In the case at bar, the non-selling party is given the right of 1 st
refusal to have a preferential right to buy or to refuse the
selling party shares. The right of 1 st refusal is meant to
protect the original or remaining joint venturer/s or
shareholder/s from the entry of 3rd persons who are not
acceptable as co-venturere/s or co-shareholder/s.
The parties agreed to preserve their respective interests in the
partnership via the right of first refusal given to each. It is a
partnership based on delectus personae (choice of persons).
The right of first refusal was made in order that the other
party may still exercise control.
The right of 1st refusal thus ensures that the parties are given
control over who may become a new partner in substitution
of or in addition to the original parties. Should the selling
partner decide to dispose of all its shares, the non-selling
partner may acquire all theses shares & terminate the
partnership. No person or corporation can be compelled to
remain or to continue the partnership.
While the right of 1st refusal protects the non-selling partner
from the entry of 3rd persons, it cannot also deprive the
other partner the right to sell its shares to 3 rd persons if,
under the same offer, it does not buy the shares.

LITONJUA JR. VS. LITONJUA SR.

A joint venture is hardly distinguishable from, and may be
likened to a particular partnership since their elements are
similar community of interest in the business, sharing of
profits & losses, and a mutual right of control. Being a form
of partnership, a joint venture is generally governed by the
law on partnership. Being a form of partnership, a joint
venture is generally governed by the laws on partnership.
PHILEX MINING CORPORATION VS. CIR
The strongest indication that petitioner was a partner in is the
fact that it would receive 50% of the net profits as
compensation under par. 12 of the agreement. The
entirety of the parties contractual stipulations simply leads
to no other conclusion than that petitioners compensation
is actually its share in the income of the joint venture.
The tax court correctly noted that Philex was not an employee
of Baguio Gold who will be paid wages pursuant to an
employer-employee relationship. Philex was the manager of
the project & had put substantial sums into the venture in
order to ensure its viability and profitability. By pegging its
compensation to profits, Philex also stood not to be
remunerated in case the mine had no income. It is hard to
believe that Philex would take the risk of not being paid at
all for its services, if it were truly just an ordinary
employee.
HEIRS OF TAN ENG KEE VS. CA
A joint adventure (an American concept similar to our joint
accounts) is a sort of formal partnership, w/ no firm name
and no legal personality. In a joint account, the participating
merchants can transact business under their own name, &
can be individually liable therefore. Usually, but not
necessarily a joint adventure is limited to a single
transaction, although the business of pursuing to a
successful termination may continue for a no. of years.
A partnership generally relates to a continuing business of
various transactions of a certain kind.
A co-ownership/co-possession is not an indicium of the
existence of a partnership.
The essence of a partnership is that the partners share in the
profits & losses. A demand for periodic accounting is
evidence of a partnership.

- 10 -

PRIMELINK PROPERTIES & DEVT CORP. VS. LAZATIN-MAGAT

On dissolution, the partnership is not terminate but continues
until the winding up of partnership affairs is completed.
Winding up means the administration of the assets of the
partnership for the purpose of terminating the business &
discharging the obligations of the partnership.
Unless otherwise agreed, the parties who have not wrongfully
dissolved the partnership have the right to wind up the
partnership affairs.
Until the partnership accounts are determined, it cannot be
ascertained how much any of the parties is entitled to, if at
all.

SIENNA A. FLORES
PARTNERSHIP