Ortega vs.

Court of Appeals, 245 SCRA 529

Under the case of Ortega v. Court of Appeals, “The birth and life of a partnership at will
is predicated on the mutual desire and consent of the partners. The right to choose with
whom a person wishes to associate himself is the foundation and essence of
partnership.” xxx “Its continued existence is, in turn, dependent on the mutual resolve,
along with each partner’s capability to give it, and the absence of a cause for dissolution
provided by law itself. Verily, any one of the partners may, at his sole pleasure, dictate
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 at will.”
Facts: On December 19, 1980, respondent Misa associated himself together, as senior
partner with petitioners Ortega, del Castillo, Jr., and Bacorro, as junior partners. On Feb.
17, 1988, respondent Misa wrote a letter stating that he is withdrawing and retiring from
the firm and asking for a meeting with the petitioners to discuss the mechanics of the
liquidation. On June 30, 1988, petitioner filed a petition to the Commission’s Securities
Investigation and Clearing Department for the formal dissolution and liquidation of the
partnership. On March 31, 1989, the hearing officer rendered a decision ruling that the
withdrawal of the petitioner has not dissolved the partnership. On appeal, the SEC en
banc reversed the decision and was affirmed by the Court of Appeals. Hence, this
petition.
Issue: Whether or not the Court of Appeals has erred (mistaken) in holding that the
partnership is a partnership at will
and whether or not the Court of Appeals has erred (mistaken) in holding that the
withdrawal of private respondent dissolved the partnership regardless of his good or
bad faith
Held: No. The SC upheld the ruling of the CA regarding the nature of the partnership.
The SC further stated that a partnership that does not fix its term is a partnership at will.
The birth and life of a partnership at will is predicated on the mutual desire and consent
of the partners. The right to choose with whom a person wishes to associate himself is
the very foundation and essence of that partnership. Its continued existence is
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.
ARTICLE 1830- CAUSES OF DISSOLUTION

Martinez vs. Ong Pong, 14 Phil. 726

FACTS: Pedro Martinez (plaintiff) delivered Php.1,500.00 to Ong Pong Co and Ong Lay
(defendants). Said amount was reflected in a private instrument where the Martinez and
defendants agreed that they are to invest the amount in a store, the profits or losses of
which we are to divide with the former, in equal shares. The store business was a failure
and the plaintiff demanded from the defendants either to render an accounting of the
partnership as agreed to, or to refund him the Php.1,500.00. Ong Pong Co alleged in
his defense that his co-defendant Ong Lay, now deceased, was the one who managed
the business. He also alleged that nothing had resulted from the business venture save
the loss of the capital of Php.1,500.00, to which the plaintiff agreed.
ISSUE: Up to what extent are partners liable?
HELD: The partners are liable jointly. The defendants acted as administrators and as
such, they were obliged to render an accounting of the business. Since both failed in
this aspect, they are obliged to return the capital. Article 1688 of the Civil Code (Article
1796 of the New Civil Code) which provides that the partnership is liable to every
partner for the amounts he may have disbursed on account of the same and for the
proper interest does not apply to the case at bar since no other money than the one
contributed by the plaintiff was involved. The court ruled that Ong Pong Co should pay
Pedro Martinez the sum of Php.750.00 with the legal interest thereon, being liable jointly

Litton vs. Hill & Ceron, 67 Phil. 509

Facts: This is a petition to review on certiorari the decision of the Court of Appeals. On
February 14, 1934, Litton sold and delivered to Carlos Ceron, who is one of the
managing partners of Hill & Ceron, a certain number of mining claims, and by virtue of
said transaction, Ceron delivered to plaintiff a document (receipt) acknowledging that he
received from Litton certain share certificates of Big Wedge Mining Company totaling
P1870. Ceron paid to the plaintiff the sum of P1,150 leaving an unpaid balance of P720,
and unable to collect this sum either from Hill & Ceron OR from its surety Visayan
Surety & Insurance Corporation, Litton filed a complaint in the Court of First Instance of
Manila against the said defendants for the recovery of the said balance. The lower
court, after trial, ordered Ceron personally to pay the amount claimed and absolved
(declared free from guilt) the partnership Hill & Ceron, Robert Hill and the Visayan
Surety & Insurance Corporation. On appeal to the CA, the latter (CA) affirmed the
decision of the lower court, having reached the conclusion that Ceron did not intend to
represent and did not act for the firm Hill & Ceron in the transaction involved in this
litigation.
Certiorari- formal request/order by which a higher court reviews a decision of a lower
court.
Issue: WON Ceron’s act binds the partnership.
Held: Yes, we reach the conclusion that the transaction made by Ceron with the plaintiff
should be understood in law as effected by Hill & Ceron and binding upon it. In the first
place, it is an admitted fact by Robert Hill when he testified at the trial that he and
Ceron, during the partnership, had the same power to buy and sell; that in said
partnership Hill as well as Ceron made the transaction as partners in equal parts; that
on the date of the transaction, February 14, 1934, the partnership between Hill and
Ceron was in existence. According to the articles of co-partnership of ‘Hill & Ceron,’ a
written contract of the firm can only be signed by one of the partners if the other partner
consented. Without the consent of one partner, the other cannot bind the firm by a
written contract. Now, assuming for the moment that Ceron attempted to represent the
firm in this contract with the plaintiff (the plaintiff conceded that the firm name was not
mentioned at that time), the latter has failed to prove that Hill had consented to such
contract. Also, 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 is represented by one of the managing
partners. The respondent argues in its brief that even admitting that one of the partners
could not, in his individual capacity, engage in a transaction similar to that in which the
partnership is engaged without binding the latter, nevertheless there is no law which
prohibits a partner in the stock brokerage business for engaging in other transactions
different from those of the partnership, as it happens in the present case, because the
transaction made by Ceron is a mere personal loan, and this argument, so it is said, is
corroborated (supported) by the Court of Appeals. We do not find this alleged
corroboration because the only finding of fact made by the Court of Appeals is to the
effect that the transaction made by Ceron with the plaintiff was in his individual capacity.
The appealed decision is reversed and the defendants are ordered to pay to the
plaintiff, jointly and severally(solidary), the sum of P720, with legal interest, from the
date of the filing of the complaint, minus the commission of one-half per cent (½%) from
the original price of P1,870, with the costs to the respondents. So ordered.

EUGENIA LICHAUCO ET AL., PLAINTIFFS AND APPELLANTS, VS. FAUSTINO

LICHAUCO, DEFENDANT AND APPELLANT 33 Phil. 350, January 31, 1916
DOCTRINE: "It is elementary that no lawful liquidation and distribution of capital and
assets of any company can ever take place except upon dissolution thereof."
FACTS: F. Lichauco Hermanos” partnership was duly organized by a notarial
instrument on October 1901 to do a business of rice cleaning through a buy and sell
scheme of “palay” and rice. The rice mill was installed in Dagupan, Pangasinan. The
provisions in the article of the association though not recorded in the mercantile registry
are as follows:
1. It is required that as to dissolution, there has to be consent and agreement of two-
thirds (2/3) of the partners; that incase a partner dies, the minor or incapacitated heirs
shall be represented by their legal representative OR the shares of the deceased
partner can be liquidated if two-thirds of the surviving partners agree;
2. that Don Faustino Lichauco, herein defendant will manage and direct the business
and shall be domiciled in Manila; The business started with a capital of Php 100,000
consisting of Php 60,000 as contribution from the defendant through the machinery in
the mill and the rest of the capital by the plaintiffs. The business lasted until 1904. It was
called off by the defendant when it was no longer profitable thereby dismantling and
selling the machinery which he contributed without any accounting to his associates.
Thus, this action was instituted eight (8) years later since 1905 when plaintiffs, Mariano
Limjap and Eugenia Lichauco had been demanding rendition of accounts and return of
share from their investments. Since the time the business did not operate, defendant
Faustino Lichauco had in his possession Php 20,000, a cash balance on hand over and
above all claims of indebtedness including income from the sales of his machineries.
Sometime around 1906 or 1907, as shown by record, Faustino informed some of his
associates of the bankruptcy of the business. An account was demanded from him by
counsel showing an amount of Php 634.64 as the balance to the credit of the enterprise.
Six (6) months later at the trial, he admitted that there exists a balance of Php 23,131.53
and that the amount by the trial judge as due by him on account of the venture was
P29,549.99. For his defense, he explained that the balance of Php 634. 64 was
communicated to the plaintiffs by mail without his knowledge. On this matter, the court
has given the defendant the benefit of doubt. The court interprets his statement as to
the bankruptcy of the enterprise as not intended to be understood as an assertion that
there was no balance due the partners, but merely that the enterprise had not paid, and
that the losses of operation had exceeded the profits. The defendant also contends that
the trial court erred (mistaken) in applying the provision of the contract particularly on
the required vote of two-thirds of the partners. The plaintiffs, on the otherhand alleged in
their complaint and the defendant admitted in his answer that the contract was one of a
"sociedad de cuentas en participacion" (joint account partnership) of which the
defendant was gestor (manager). In his brief on appeal, however, counsel for defendant
intimates that under article 241 of the Commercial Code, the adoption in the articles of
partnership of a firm name deprived the parties of the rights and privileges secured to
those interested in cuentas en participacion under the provisions of the Commercial
Code. Hence, this complaint was filed to effect a proper accounting of the partner’s
shares from their investments.
ISSUE:
1. Whether the voting requirement of two-thirds of the partners a valid stipulation for the
dissolution of the partnership?
2. Whether the adoption in the articles of partnership of a firm name deprived the parties
of the rights and privileges?

RULING:
1. No. The provisions of paragraph 10 of the articles of partnership prohibiting the
dissolution of the association under review, except by the consent and
agreement of two-thirds of its partners, denied the right to a less number of the
partners to effect a dissolution of the partnership through judicial intervention or
otherwise; but it in no wise limited or restricted the rights of the individual
partners in the event the dissolution of the association was effected, not by any
act of theirs, but by the express mandate of statutory law. It would be absurd and
unreasonable to hold that such an association could never be dissolved and
liquidated without the consent and agreement of two-thirds of its partners,
notwithstanding that it had lost all its capital, or had become bankrupt, or that the
enterprise for which it had been organized had been concluded or utterly
abandoned.
It cannot be said, as contended by the defendant, that the court had no
power to decree a distribution either in whole or in part of the capital or assets of
the association before dissolution can be effected, being contrary to the
stipulation of the contract. The Commercial Code cannot be contradicted. It
expressly prescribes that the duty of the defendant to liquidate the affairs of the
enterprise and to account to his associates promptly upon the dissolution of the
association in the year 1904.

2. No. The inclusion of a firm name is immaterial. Whatever effect the inclusion or
omission of a firm name in the articles of partnership may have had as to third persons
dealing with the partnership, the court is of opinion that as between the associates
themselves, their mutual rights, duties and obligations may properly be determined
upon the authority of article 1670 of the Civil Code by the provisions of the Commercial
Code touching partnerships, the form of which in all other respects, the partners have
adopted in their articles of partnership.

Idos vs. Court of Appeals, 296 SCRA 194

Plaintiff: Alarilla Defendant: Idos
Facts: In 1985, Eddie Alarilla and Irma Idos formed a partnership which they decided to
terminate after a year. To pay Alarilla’s share of the asset, Idos issued 4 postdated
checks. Alarilla was able to encash the first, second and fourth checks but the third was
dishonored for insufficiency of funds. He demanded payment but Idos failed to pay. She
claimed that the checks were issued as assurance of Alarilla’s share in the assets of the
partnership and that it was supposed to be deposited until the stocks were sold. He filed
an information for violation of BP blg. 22 against Idos in which she was found guilty by
the trial court.
Issue: Did the court confused and merged into one the legal concepts of dissolution,
liquidation and termination of a partnership?
Ruling: The partners agreement to terminate the partnership did not automatically
dissolve the partnership. They were in the process of winding-up when the check in
question was issued. The best evidence of the existence of the partnership, which was
not yet terminated were the unsold goods and uncollected receivables which were
presented to the trial court. Article 1829 of the Civil Code provides that “on dissolution,
the partnership is not terminated but continues until the winding-up of partnership affairs
is completed. Since the partnership has not been terminated, Idos and Alarilla remained
co-partners. The check was issued by petitioner (Alarilla) to respondent (Idos) as would
a partner to another and NOT AS A PAYMENT BY DEBTOR TO CREDITOR. Thus,
absent the first element of the complained offense, the act is not punishable by the
statute.

LIM TANHU v. HON. JOSE R. RAMOLETE

FACTS:
Tan alleged that she is the widow of Tee Hoon Lim Po Chuan, who was a partner in the
commercial partnership, Glory Commercial Company with Antonio Lim Tanhu and
Alfonso Ng Sua.

Defendant Antonio Lim Tanhu, Alfonso Leonardo Ng Sua, Lim Teck Chuan, and Eng
Chong Leonardo, through fraud and machination, took actual and active management
of the partnership and although Tee Hoon Lim Po Chuan was the manager of Glory
Commercial Company, defendants managed to use the funds of the partnership to
purchase lands and buildings in the cities of Cebu, Lapulapu, Mandaue, and the
municipalities of Talisay and Minglanilla.

She alleged in her complaint that after the death of Tee Hoon Lim Po Chuan, the
defendants, without liquidation, continued the business of Glory Commercial Company,
by purportedly organizing a corporation known as the Glory Commercial Company,
Incorporated and sometime in the month of November, 1967, defendants, particularly
Antonio Lim Tanhu, by means of fraud deceit, and misrepresentations did then and
there, induce and convince her to execute a quitclaim of all her rights and interests, in
the assets of the partnership of Glory Commercial Company.

Thereafter, in the year 1968-69, the defendants who had earlier promised to liquidate
the aforesaid properties and assets in favor, among others of plaintiff and until the
middle of the year 1970 when the plaintiff formally demanded from the defendants the
accounting of real and personal properties of the Glory Commercial Company,
defendants refused and stated that they would not give the share of the plaintiff.

ISSUE:
Whether Tan has a right over the liquidated properties of the partnership

HELD:
No, Tan has no right over the liquidated properties of the partnership
1. Tan Put cannot be considered as a legal party in interest because she was unable to
prove, that her marriage was valid and subsisting. There was no marriage contract
shown nor evidence to support that such a marriage existed.
2. An agreement with Tee Hoon was shown and signed by Tan Put that she received
P40,000 for her subsistence when they terminated their relationship of common-law
marriage and promised not to interfere with each other's affairs.
3. In the light of all these circumstances, we find no alternative but to hold that plaintiff
Tan Put's allegation that she is the widow of Tee Hoon Lim Po Chuan has not been
satisfactorily established and that, on the contrary, the evidence on record convincingly
shows that her relation with said deceased was that of a common-law wife.
Furthermore, all her claims against the company and its surviving partners as well as
those against the estate of the deceased have already been settled and paid.

LIWANAG v. CA
FACTS:
Petitioner Carmen Liwanag and a certain Thelma Tabligan went to the house of
complainant Isidora Rosales (Rosales) and asked her to join them in the business of
buying and selling cigarettes. Convinced of the feasibility of the venture, Rosales readily
agreed. Under their agreement, Rosales would give the money needed to buy the
cigarettes while Liwanag and Tabligan would act as her agents, with a corresponding
40% commission to her if the goods are sold; otherwise the money would be returned to
Rosales. Consequently, Rosales gave several cash advances to Liwanag and Tabligan
amounting to P633,650.00

Alarmed that Liwanag was no longer visiting her regarding their business and believing
that the amounts she advanced were being misappropriated, Rosales filed a case of
estafa against Liwanag.

Liwanag advances the theory that the intention of the parties was to enter into a
contract of partnership, wherein Rosales would contribute the funds while she would
buy and sell the cigarettes, and later divide the profits between them. She also argues
that the transaction can also be interpreted as a simple loan, with Rosales lending to
her the amount stated on an installment basis. RTC found Liwanag guilty for the crime
of estafa. The Court of Appeals affirmed the lower court’s decision

ISSUE:
Whether Liwanag can be acquitted from the crime of estafa because she and
Rosales formed a partnership

HELD:
No, Liwanag could not be acquitted from the crime of estafa.

The Supreme Court held that Estafa is a crime committed by a person who
defrauds another causing him to suffer damages, by means of unfaithfulness or abuse
of confidence, or of false pretenses or fraudulent acts.

In the case at hand, even assuming that a contract of partnership was indeed
entered into by and between the parties, we have ruled that when money or property
have been received by a partner for a specific purpose (such as that obtaining in the
instant case) and he later misappropriated it, such partner is guilty of estafa.
Even assuming that a PAR contract was indeed entered into by and between the
parties, when money and property have been received by a partner for a specific
purpose and he later misappropriated it, such partner is guilty of ESTAFA.
 In a contract of loan, once the money is received by the debtor, ownership over
the same is transferred. Being the owner, the borrower can dispose of it for whatever
purpose he may deem proper.

PANG LIM VS. LOSENG

SUMMARY
This case was about partnership of Pang Lim and Lo Seng. A business partner in the
firm of Lo Seng and Co. of El Progreso, which is distillery business in Bulacan. The land
were the business located and improvement happened was a property of Lo Yao and he
leased it to the firm for three-year period. After the expiration of the lease, they signed
new contract and the lease renewed for another Fifteen years. The issue arises when
Pang Lim-sold his whole. investment in the distillery to his business associate Lo Seng,
making him the sole owner. Following that, Pang Lim and Benito Galvez wanted to have
a possession-in the business but Lo Seng refused and as a result Lim and Galvez filed
a case to reclaim control of the premises. The plaintiffs' bad faith in attempting to evict
the defendant from this lease is highlighted. Partners, more than anyone else in a
business relationship, are expected to demonstrate good faith with one another.
In conclusion, after Pang Lim sold his interest, he doesn't have the right to the business
of partnership anymore including the lease. Lo Seng has, the, possessory right over
Pang Lim and cannot be deposed by either Pang Lim of Benito Galvez He is entitled to
keep possession of the property against both if he has legitimate possession against
one. Therefore, the defendant will be cleared of the charges.
Issue 1: Termination of Lease by Purchaser of Estate
A lessee who purchases the leased premises from the landlord cannot exercise the
right to terminate the lease.
Article 1571 of the Civil-Code grants the right. to terminate a lease to the purchaser of a
leased estate.
As the vendor of the leasehold, Pang Lim is bound to respect the rights of his own
vendee (Lo Seng).
Issue 2: Possession Valid Against One Co-owner Valid Against All
A person in lawful possession of a leasehold estate and who has the lawful right to
retain. possession against one co-owner cannot be dispossessed in an action of
unlawful detainer jointly instituted by the co-owners:
- Having lawful possession against one co-owner entitles the person to retain it against
both.
Art. 1806
Decision
1. Pang Lim and Lo Seng were partners in a distillery business.
2. Lo Yao leased the distillery to the firm of Lo Seng & Co. or three years, which was
later extended for fifteen years.
3. Pang Lim sold his interest in the distillery to Lo Seng, making him the sole owner.
4. Lo Shui, acting as attorney in fact for Lo Yao; conveyed the distillery, to Pang Lim and
Benito Galvez.
5. Pang Lim and Benito Galvez demanded. possession from Lo Seng, but he refused.
6. Pang Lim and Benito Galvez initiated an 'action of unlawful detainer to recover
possession.
7. The plaintiffs relied on article 1571 of the Civil Code to terminate the lease.
8. The court found that Pang. Lim, as a participant in the lease, cannot terminate it 'as å
purchaser of the estate.
9. Pang Lim's role as both a lessee and a purchaser is incompatible and goes against
the principle of good faith.
10. Partners are required to exhibit the highest. degree of good faith towards each
other.
11. Pang Lim's attempt to terminate the lease and confiscate the property for his own
benefit is morally wrong.
12. Pang Lim's position as a participant in the lease prevents him from terminating it and
maintaining the action of unlawful detainer. 13. Lo Seng, as the possessor of the estate,
cannot
be ousted by Pang Lim or Benito Galvez: 14. The remedy for Pang Lim and Benito
Galvez is an action for partition, not unlawful detainer.
15. The court did not decide on the admissibility or of the deed of sale as it was not
necessary for the decision.
16. The judgment is reversed, and the defendant (Lo Seng) Is absolved from the
complaint.

Pioneer Insurance vs. CA Art. 1825.

SUMMARY:
Lim, as owner-operator of Southern Airlines (SAL) bought aircrafts from Japan Domestic
Airlines (JDA). A surety bond was executed by Pioneer Insurance Land Surety Corp.
(Pioneer) in favor of JDA, in behalf of Lim. Indemnity agreements were also executed in
favor of Pioneer, whereby the indemnitors bound themselves to jointly and severally
indemnify Pioneer against all damages, losses, etc. that it may incur as a surety. These
indemnitors also contributed. funds for the purchase of said aircrafts based on the
misrepresentation of Lim that they will form a new corporation to expand his business.
In addition to the indemnification agreements, Lim also executed a 'chattel mortgage on
the aircraft's purchased in favor of Pioneer as security. Lim eventually failed to pay.
Pioneer paid on his behalf. Thus, the mortgage was foreclosed. Pioneer also applied for
a writ of preliminary attachment against Lim and the indemnitors. It appears, however,
that Pioneer had already collected the proceeds of the reinsurance on its bond in favor
of JDA. The indemnitors, on the other hand, filed cross-claims against Lim, alleging that
they were not privies to the • contracts signed by Lim. They also sought to recover the
amounts advanced by them for the purchase of the aircraft.
ISSUE: Were Lim and the indemnitors liable to Pioneer Insurance & Surety Co.?
HELD- NO. As regards the issue of subrogation, the SC dismissed the case filed by
Pioneer against Lim and the indemnitors given that it was established that it had
already. collected the proceeds of the reinsurance on its bond in favor JDA. In favor
JDA. In this case, the Court held that the real- party-in-interest is Pioneer's reinsurer,
having been subrogated to the latter's rights upon its payment to Pioneer; Pioneer, thus,
had no cause of action against the respondents. It is clear from the records that.
Pioneer sued in its own name and not as an attorney-in-fact of the reinsurer.
HELD: An insurer who has already collected proceeds from its reinsurer can no longer
be subrogated to the rights of the insured. It is instead the reinsurer that may be
subrogated as such.