AGAD V.

MABATO
23 SCRA 1223
DOCTRINE: Where a partnership was formed "to operate a fishpond", not to "engage in a
fishpond business", and the partners contributed P1,000.00 each as their share, Art. 1773 of the
Civil Code does not apply, it appearing that neither a fishpond nor a real right thereto was
contributed to the partnership or become a part of the capital thereof, even if a fishpond or a real
right thereto could become part of its assets.

FACTS: Agad claims that he and Mabato are partners to a fishpond business as evidenced by a
public instrument. Plaintiff contributed Php 1,000.00 as capital for the business with the right to
receive 50% of the profits, while Defendant is the one who handled the funds and rendered
yearly accounts of the operations of the partnership. Though in the years of 1957 to 1963,
despite repeated demands of plaintiff, defendant failed to render the accounts and refused to
pay petitioner his share in the profits. Hence, this prompted plaintiff to file a complaint for the
recovery of Php 14,000.00 as his share in the profits from the said years as well as Php
1,000.00 for attorney’s fees and the dissolution of the partnership. Nonetheless, defendant
contended that there was actually no partnership that existed because the contract was not
perfected by reason of plaintiff’s failure to pay his contribution. Subsequently, defendant filed a
Motion to Dismiss on the ground that the complaint states no cause of action and that the court
has no jurisdiction over the subject matter. The motion was granted, upon which it relied on the
theory that the contract of partnership is under Art. 1773 of the Civil Code is void “because an
inventory of the fishpond referred in said instrument had not been attached thereto.”

ISSUE: Whether Art. 1773 as a basis for the dismissal of the complaint is valid.

RULING: No. the application of Art. 1773 of the Civil Code as the basis for the dismissal of the
complaint is invalid, because the partnership was established "to operate a fishpond", not to
"engage in a fishpond business. Neither said fishpond nor a real right thereto was contributed to
the partnership or became part of the capital thereof, even if a fishpond or a real right thereto
could become part of its assets. Thus, because their contribution to the capital of the
partnership was Php 1,000.00 each there need not be an inventory.

TUASON V. BOLAÑOS
95 Phil. 106
DOCTRINE: There is nothing against one corporation being represented by another person,
natural or juridical, in a suit in court, for the true rule is that "although a corporation has no
power to enter into a partnership, it may nevertheless enter into a joint venture with another
where the nature of that venture is in line with the business authorized by its charter."
(Wyoming-Indiana Oil Gas Co. v. Weston, 80 A.L.R., 1043, citing 2 Fletcher Cyc. E. 1082.)

FACTS: Tuason is the registered owner of a parcel of land located in barrio Tatalon, Quezon
City. Plaintiff as represented by its managing partner Gregorio Araneta, Inc., filed a complaint for
the recovery of possession of property, which was amended three times because of new facts
that showed up from the data of the surveyor, against Bolaños. Defendant sets up prescription
as a defense. After the trial, the court rendered a decision in favor of the plaintiff and ordered
defendant to restore the possession of the land to the plaintiff. Thus, defendant was prompted to
appeal the decision rendered by the Court of First Instance (RTC). The defendant in his
assignment of errors contends that the suit should be brought by the real party in interest and
Araneta cannot act as managing partner for plaintiff on the theory that it is illegal for two
corporations to enter into a partnership.

ISSUE: Whether a corporation as a party to a suit can be represented by another person.

RULING: Yes. What the Rules of Court require is that an action be brought in the name of, but
not necessarily by, the real party in interest. (Section 2, Rule 2). Also, the contention that
Gregorio Araneta, Inc. cannot act as managing partner for plaintiff on the theory that it is illegal
for two corporations to enter into a partnership is without merit, for the true rule is that "though a
corporation has no power to enter into a partnership, it may nevertheless enter into a joint
venture with another where the nature of that venture is in line with the business authorized by
its charter." (Wyoming-Indiana Oil Gas Co. v. Weston, 80 A. L. R., 1043, citing 2 Fletcher Cyc. of
Corp., 1082.) Hence, the representation is valid because it is within the corporate business of
the co-venturers.

ARBES, ET AL V. POLISTICO, ET AL.,

G.R. No. 31057
FACTS: This is an action to bring about liquidation of the funds and property of the association
called "Turnuhan Polistico & Co." The plaintiffs were members or shareholders, and the
defendants were designated as president-treasurer, directors and secretary of said association.
This case is brought for 2nd time. In the 1st one, the court court held then that in an action
against the officers of a voluntary association to wind up its affairs and enforce an accounting for
money and property in their possessions, it is not necessary that all members of the association
be made parties to the action. The court appointed commissioner of Insular Auditor's Office, to
examine all the books, documents, and accounts of "Turnuhan Polistico & Co.," and to receive
whatever evidence. Commissioner's report show a balance of P24, 607.80 cash on hand.
Despite defendant’s objection to the report, the trial court rendered judgment holding said
association is unlawful. And sentenced defendants jointly and severally to return the amount
and documents to the plaintiffs and members of the association.

The Appellant alleged that the association being unlawful, some charitable institution to whom
the partnership funds may be ordered to be turned over, should be included, as a party
defendant. Referring to article 1666 of the Civil Code, which provides: “A partnership must have
a lawful object, and must be established for the common benefit of the partners. When the
dissolution of an unlawful partnership is decreed, the profits shall be given to charitable
institutions of the domicile of the partnership, or, in default of such, to those of the province.”

ISSUE: Whether or not charitable institution is a necessary party to this case.

RULING:No. No charitable institution is a necessary party in the present case of determination
of the rights of the parties. The action which may arise from said article, in the case of unlawful
partnership, is that for the recovery of the amounts paid by the member from those in charge of
the administration of said partnership, and it is not necessary for the said parties to base their
action to the existence of the partnership, but on the fact that of having contributed some money
to the partnership capital. And hence, the charitable institution of the domicile of the partnership,
and in the default thereof, those of the province are not necessary parties in this case.

The article cited above permits no action for the purpose of obtaining the earnings made by the
unlawful partnership, during its existence as result of the business in which it was engaged,
because for the purpose, as Manresa remarks, the partner will have to base his action upon the
partnership contract, which is to annul and without legal existence by reason of its unlawful
object; and it is self evident that what does not exist cannot be a cause of action. Hence,
paragraph 2 of the same article provides that when the dissolution of the unlawful partnership is
decreed, the profits cannot inure to the benefit of the partners, but must be given to some
charitable institution.The profits are so applied, and not the contributions, because this would be
an excessive and unjust sanction for, as we have seen, there is no reason, in such a case, for
depriving the partner of the portion of the capital that he contributed, the circumstances of the
two cases being entirely different.

FERNANDEZ VS. DELA ROSA

1Phil 671
Facts: On the part of plaintiff Fernandez, he claims that he entered into a verbal agreement with
defendant De la Rosa to form a partnership for the purchase of cascoes with the undertaking
that the defendant will buy the cascoes and that each partner will furnish such amount as he
could, while the profits will be divided proportionately. Plaintiff furnished P300 for casco No.
1515 and P825 for casco No. 2089, both of which were placed under the name of the defendant
only. In April 1900, the parties undertook to draw up articles of their partnership for the purpose
of embodying it in an authentic document. The agreement however did not materialize because
defendant proposed articles which were materially different from their verbal agreement,
and he was also unwilling to include casco No. 2089 in the partnership. Because the cascoes
were under the management of the defendant, the plaintiff demanded an accounting over it to
which the defendant refused claiming that no partnership existed between them.

De la Rosa, on the other hand, admits that he desired to form a partnership with the plaintiff but
denies that any agreement was ever consummated. Moreover, he denied receiving any money
furnished by plaintiff for casco No. 1515, but claims that he merely borrowed the P300 on his
individual account from the bakery business in which plaintiff was a copartner. And as for the
P825 furnished by the plaintiff, the defendant claims that it was actually for casco No. 1515 and
not for casco No. 2089. He also added that the repairs made on the two cascoes were
exclusively borne by him, and that he returned a sum of P1,125 to plaintiff with an express
reservation on his part of all his rights as a partner.

Issue: Whether or not a partnership existed between the parties. Yes.

RULING: The essential points upon which the minds of the parties must meet in a contract of
partnership are 1) mutual contribution and 2) joint interest in the profits.

The fact that the defendant received money furnished by the plaintiff for the purpose of using it
to purchase the cascoes establishes the first element of the partnership, mutual contribution to a
common stock. For the second element, the fact that the formation of partnership had been a
subject of negotiation between them,even before the purchase of the first casco, and that both
parties intended to purchase the cascoes in common satisfies the requirement that there should
be an intention on the part of both parties to share the profits. With these, a complete and
perfect contract of partnership was entered into by the parties.It must be noted however that this
partnership was subject to a suspensive condition which is the execution of a written agreement
regarding the distribution of profits, character of partnership, etc. But since the defendant
actually purchased the cascoes, it would seem that the partnership already existed. And as
furthermore provided by the Civil Code, a written agreement was not necessary in order to give
efficacy to the verbal

agreement of the partnership because the contributions of the partners to the partnership were
not in the form
of immovables.

ISSUE: Whether or not the partnership was terminated when the defendant returned the P1,125
to plaintiff.

RULING: No. During trial, the court was able to prove that plaintiff actually furnished some
amount for the repair of the cascoes and that it was presumed that a profit has been obtained
by the defendant prior to the return of the money. With these, the return of theP1,125 fell short
of the amount which the plaintiff has actually contributed to the partnership. For these
reasons, the acceptance by the plaintiff of the amount returned by the defendant did not have
the effect of terminating the legal existence of the partnership by converting it into a societas
leonina.The court also proved that there was no intention on the part of the plaintiff, in accepting
the money, to relinquish his rights as a partner. On the contrary he notified defendant that he
waived none of his rights in the partnership. Also the lack of recognition on the part of the
defendant of the plaintiff’s right in the partnership property and in the profits does not give the
former the right to force a dissolution upon the later upon the terms which the plaintiff is
unwilling to accept. A partnership therefore existed between the two and cascoes No. 1515 and
2089 are partnership properties.

Torres vs Court of Appeals

320 SCRA 428
FACTS: In 1969, sisters Antonia Torres and Emeteria Baring entered into a joint venture
agreement with Manuel Torres. Under the agreement, the sisters agreed to execute a deed of
sale in favor Manuel over a parcel of land, the sisters received no cash payment from Manuel
but the promise of profits (60% for the sisters and 40% for Manuel) – said parcel of land is to be
developed as a subdivision.Manuel then had the title of the land transferred in his name and he
subsequently mortgaged the property. He used the proceeds from the mortgage to start building
roads, curbs and gutters. Manuel also contracted an engineering firm for the building of housing
units. But due to adverse claims in the land, prospective buyers were scared off and the
subdivision project eventually failed.

The sisters then filed a civil case against Manuel for damages equivalent to 60% of the value of
the property, which according to the sisters, is what’s due them as per the contract.The lower
court ruled in favor of Manuel and the Court of Appeals affirmed the lower court.The sisters then
appealed before the Supreme Court where they argued that there is no partnership between
them and Manuel because the joint venture agreement is void.

ISSUE: Whether or not there exists a partnership.

RULING: Yes. The joint venture agreement the sisters entered into with Manuel is a partnership
agreement whereby they agreed to contribute property (their land) which was to be developed
as a subdivision. While on the other hand, though Manuel did not contribute capital, he is an
industrial partner for his contribution for general expenses and other costs. Furthermore, the
income from the said project would be divided according to the stipulated percentage (60-40).
Clearly, the contract manifested the intention of the parties to form a partnership. Further still,
the sisters cannot invoke their right to the 60% value of the property and at the same time deny
the same contract which entitles them to it.

At any rate, the failure of the partnership cannot be blamed on the sisters, nor can it be blamed
to Manuel (the sisters on their appeal did not show evidence as to Manuel’s fault in the failure of
the partnership). The sisters must then bear their loss (which is 60%). Manuel does not bear the
loss of the other 40% because as an industrial partner he is exempt from losses.