PARTNERSHIP

I. Contract of Partnership

LIM TONG LIM vs. PHILIPPINE FISHING GEAR INDUSTRIES, INC., G.R. NO.136448, November 3, 1999

A partnership may be deemed to exist among parties who agree to borrowmoney to pursue a business and to divide the profits or losses that may arisetherefrom, even if it is shown that they have not contributed any capital of theirown to a "common fund." Their contribution may be in the form of credit orindustry, not necessarily cash or fixed assets.

ROSARIO U. YULO vs. YANG CHIAO SENG, G.R. NO. L-12541, August 28,1959

The following are the requisites of partnership: (1) two or more persons whobind themselves to contribute money, property, or industry to a common fund;(2) intention on the part of the partners to divide the profits among themselves.(Art. 1767, Civil Code.).

HEIRS OF TAN ENG KEE vs .COURT OF APPEALS and BENGUET LUMBERCOMPANYG.R. NO. 126881; October 3, 2000

In determining whether a partnership exists, these rules shall apply:

(1) Except as provided by Article 1825, persons who are not partners as to eachother are not partners as to third persons;(2) Co-ownership or co-possession does not of itself establish a partnership,whether such co-owners or co-possessors do or do not share any profits madeby the use of the property;(3) The sharing of gross returns does not of itself establish a partnership,whether or not the persons sharing them have a joint or common right orinterest in any property which the returns are derived;(4) The receipt by a person of a share of the profits of a business is a primafacie evidence that he is a partner in the business, but no such inference shallbe drawn if such profits were received in payment:

(a) As a debt by installment or otherwise;(b) As wages of an employee or rent to a landlord;(c) As an annuity to a widow or representative of a deceased partner;(d) As interest on a loan, though the amount of payment vary with the profits ofthe business;(e) As the consideration for the sale of a goodwill of a business or otherproperty by installments or otherwise.

II. Rights and Obligations of Partnership

ALFREDO N. AGUILA, JR vs. COURT OF APPEALS and FELICIDAD S. VDA.DE ABROGAR, G.R. NO. 127347, November 25, 1999

Under Art. 1768 of the Civil Code, a partnership “has a juridical personalityseparate and distinct from that of each of the partners.” The partners cannotbe held liable for the obligations of the partnership unless it is shown that thelegal fiction of a different juridical personality is being used for fraudulent,unfair, or illegal purposes, hence it is the partnership, not its officers or agents,which should be impleaded in any litigation involving property registered in itsname, violation of this rule will result in the dismissal of the complaint.

Villareal vs. Ramirez, G.R. NO. 144214. July 14, 2003

Since it is the partnership, as a separate and distinct entity, that must refundthe shares of the partners, the amount to be refunded is necessarily limited toits total resources. In other words, it can only pay out what it has in its coffers,which consists of all its assets. However, before the partners can be paid theirshares, the creditors of the partnership must first be compensated. After all thecreditors have been paid, whatever is left of the partnership assets becomesavailable for the payment of the partners’ shares.

Angeles vs. Secretary of Justice, G.R. NO. 142612, July 29, 2005

The Angeles spouses’ position that there is no partnership because of the lackof a public instrument indicating the same and a lack of registration with theSecurities and Exchange Commission (“SEC”) holds no water for the followingreasons: first, the Angeles spouses contributed money to the partnership andnot immovable property; and second, mere failure to register the contract ofpartnership with the SEC does not invalidate a contract that has the essentialrequisites of a partnership. The purpose of registration of the contract ofpartnership is to give notice to third parties. Failure to register the contract ofpartnership does not affect the liability of the partnership and of the partnersto third persons. Neither does such failure to register affect the partnership’sjuridical personality. A partnership may exist even if the partners do not usethe words “partner” or “partnership.”

Ortega vs. CA, G.R. NO. 109248, July 3, 1995

The right to choose with whom a person wishes to associate himself is the veryfoundation and essence of that partnership. Its continued existence is, in turn,dependent on the constancy of that mutual resolve, along with each partner'scapability to give it, and the absence of a cause for dissolution provided by thelaw itself. Verily, any one of the partners may, at his sole pleasure, dictate adissolution of the partnership at will. He must, however, act in good faith, notthat the attendance of bad faith can prevent the dissolution of the

partnership but that it can result in a liability for damages. Amongpartners, mutual agency arises and the doctrine of delectus personae allowsthem to have the power, although not necessarily the right, to dissolve thepartnership. An unjustified dissolution by the partner can subject him to apossible action for damages.

III. Rights and Obligations of Partners Among Themselves

Liwanag vs. CA, G.R. NO. 114398, October 24, 1997

Petitioner was charged with the crime of estafa and advances the theory thatthe intention of the parties was to enter into a contract of partnership, whereinRosales (private complainant for Estafa) would contribute the funds while shewould buy and sell the cigarettes, and later divide the profits between them But even assuming that a contract of partnership was indeed entered into byand between the parties, SC ruled that when money or property have beenreceived by a partner for a specific purpose (such as that obtaining in theinstant case) and he later misappropriated it, such partner is guilty of estafa.

Moran, Jr. vs. CA, G.R. NO. L-59956, October 31, 1984

The rule is, when a partner who has undertaken to contribute a sum of moneyfails to do so, he becomes a debtor of the partnership for whatever he may havepromised to contribute (Art. 1786, Civil Code) and for interests and damagesfrom the time he should have complied with his obligation (Art. 1788, CivilCode). Thus in Uy v. Puzon (79 SCRA 598), which interpreted Art. 2200 of theCivil Code of the Philippines, we allowed a total of P200,000.00 compensatorydamages in favor of the appellee because the appellant therein was remiss inhis obligations as a partner and as prime contractor of the constructionprojects in question.

Tai Tong Chuache & Co. vs. Insurance Commission, G.R. NO. L-55397February 29, 1988

Petitioner being a partnership may sue and be sued in its name or by its dulyauthorized representative. Thus, Chua as the managing partner of thepartnership may execute all acts of administration including the right to suedebtors of the partnership in case of their failure to pay their obligations whenit became due and demandable.

Catalan vs. Gatchalian, G.R. NO. L-11648, April 22, 1959

Catalan and Gatchalian as partners mortgaged two lots together with theimprovements thereon to secure a credit. Catalan redeemed the property andhe contends that title should be cancelled and a new one must be issued in hisname. Under Article 1807 of the NCC every partner becomes a trustee for his

co-partner with regard to any benefits or profits derived from his act as apartner. Consequently, when Catalan redeemed the properties in question, hebecame a trustee and held the same in trust for his co partner Gatchalian,subject to his right to demand from the latter his contribution to the amount ofredemption.

Evangelista & Co. vs. Abad Santos, G.R. NO. L-31684 June 28, 1973

Respondent industrial partner has the right to demand for a formal accountingand to receive her share in the net profit that may result from such anaccounting.

IV. Obligations of Partnership, Partners to Third Persons

ISLAND SALES, INC. vs. UNITED PIONEERS GENERAL CONSTRUCTIONCOMPANY, G.R. NO. L-22493, July 31, 1975

Defendant company, a general partnership purchased from the plaintiff a motorvehicle on an installment basis with the condition that failure to pay any ofsaid installments as they fall due would render the whole unpaid balanceimmediately due and demandable. Having failed to receive the installment, theplaintiff sued the defendant company for the unpaid balance with Benjamin C.Daco, Daniel A. Guizona, Noel C. Sim, Romulo B. Lumauig, and AugustoPalisoc were included as co-defendants in their capacity as general partners ofthe defendant company. In this case, there were five (5) general partners whenthe promissory note in question was executed for and in behalf of thepartnership. Since the liability of the partners is pro rata, the liability of theappellant Benjamin C. Daco shall be limited to only one-fifth of the obligationsof the defendant company. The fact that the complaint against the defendantRomulo B. Lumauig was dismissed, upon motion of the plaintiff, does notunmake the said Lumauig as a general partner in the defendant company. Inso moving to dismiss the complaint, the plaintiff merely condoned Lumauig'sindividual liability to the plaintiff.

ELMO MUÑASQUE vs. COURT OF APPEALS, G.R. NO. L-39780, November11, 1985

There is a general presumption that each individual partner is an authorizedagent for the firm and that he has authority to bind the firm in carrying on thepartnership transactions. The presumption is sufficient to permit third personsto hold the firm liable on transactions entered into by one of members of thefirm acting apparently in its behalf and within the scope of his authority.

ANTONIO C. GOQUIOLAY, ET AL. vs. WASHINGTON Z. SYCIP, ET AL, G.R.NO. L-11840, December 10, 1963

Where the partnership business is to deal in merchandise and goods, i.e.,movable property, the sale of its real property (immovables) is not within theordinary powers of a partner, because it is not in line with the normal businessof the firm. But where the express and avowed purpose of the partnership is tobuy and sell real estate (as in the present case), the immovables thus acquiredby the firm from part of its stock-in-trade, and the sale thereof is in pursuanceof partnership purposes, hence within the ordinary powers of the partner.

J. TIOSEJO INVESTMENT CORP. vs. Ang, G.R. NO. 174149, September 8,2010

Petitioner cannot avoid liability by claiming that it was not in any way privy tothe Contracts to Sell executed by PPGI and respondents. As correctly arguedby the respondent, a joint venture is considered in this jurisdiction as a form ofpartnership and is, accordingly, governed by the law of partnerships and underArticle 1824 of the Civil Code of the Philippines, all partners are solidarily liablewith the partnership for everything chargeable to the partnership, includingloss or injury caused to a third person or penalties incurred due to anywrongful act or omission of any partner acting in the ordinary course of thebusiness of the partnership or with the authority of his co-partners.

V. Dissolution

PRIMELINK PROPERTIES AND DEVELOPMENT CORPORATION vs.LAZATIN-MAGAT, et.al, G.R. NO. 167379, June 27, 2006

On dissolution, the partnership is not terminated but continues until thewinding up of partnership affairs is completed. Winding up means theadministration of the assets of the partnership for the purpose of terminatingthe business and discharging the obligations of the partnership.

MARJORIE TOCAO vs. COURT OF APPEALS, G.R. NO. 127405, October 4,2000

An unjustified dissolution by a partner can subject him to action for damagesbecause by the mutual agency that arises in a partnership, the doctrineof delectus personae allows the partners to have the power, although notnecessarily the right to dissolve the partnership.

VI. Limited Partnership

COMMISSIONER OF INTERNAL REVENUE vs. WILLIAM J. SUTER, G.R. NO.L-25532, February 28, 1969

A limited partnership, named "William J. Suter 'Morcoin' Co., Ltd.," was formedon 30 September 1947 by herein respondent William J. Suter as the generalpartner, and Julia Spirig and Gustav Carlson, as the limited partners. The

thesis that the limited partnership, William J. Suter "Morcoin" Co., Ltd., hasbeen dissolved by operation of law because of the marriage of the only generalpartner, William J. Suter to the originally limited partner, Julia Spirig one yearafter the partnership was organized is not tenable. The subsequent marriage ofthe partners does not operate to dissolve it, such marriage not being one of thecauses provided for that purpose either by the Spanish Civil Code or the Codeof Commerce. The appellant's view, that by the marriage of both partners thecompany became a single proprietorship, is equally erroneous. The capitalcontributions of partners William J. Suter and Julia Spirig were separatelyowned and contributed by them before their marriage; and after they werejoined in wedlock, such contributions remained their respective separateproperty under the Spanish Civil Code.

AGENCY

I.Definition of Agency

Country Bankers Insurance Corp.. vs. Keppel Cebu Shipyard, June 18,2012, G.R. NO. 166044

In a contract of agency, a person, the agent, binds himself to represent another,the principal, with the latter’s consent or authority. Thus, agency is based onrepresentation, where the agent acts for and in behalf of the principal onmatters within the scope of the authority conferred upon him. Such “acts havethe same legal effect as if they were personally done by the principal. By thislegal fiction of representation, the actual or legal absence of the principal isconverted into his legal or juridical presence.

Lintoja vs. Eternit Corp., G.R. NO. 144805, June 8, 2006

It bears stressing that in an agent-principal relationship, the personality of theprincipal is extended through the facility of the agent. In so doing, the agent,by legal fiction, becomes the principal, authorized to perform all acts which thelatter would have him do. Such a relationship can only be effected with theconsent of the principal, which must not, in any way, be compelled by law or byany court.

Eurotech Industrial Technologies, Inc. Cuizon, G.R. NO. 167552, April 23,2007

In a contract of agency, a person binds himself to render some service or to dosomething in representation or on behalf of another with the latter’s consent.The underlying principle of the contract of agency is to accomplish results byusing the services of others – to do a great variety of things like selling, buying,manufacturing, and transporting. Its purpose is to extend the personality ofthe principal or the party for whom another acts and from whom he or shederives the authority to act. It is said that the basis of agency isrepresentation, that is, the agent acts for and on behalf of the principal onmatters within the scope of his authority and said acts have the same legaleffect as if they were personally executed by the principal. By this legal fiction,the actual or real absence of the principal is converted into his legal or juridicalpresence – qui facit per alium facit per se. The elements of the contract ofagency are: (1) consent, express or implied, of the parties to establish therelationship; (2) the object is the execution of a juridical act in relation to athird person; (3) the agent acts as a representative and not for himself; (4) theagent acts within the scope of his authority.

II. Powers

III. Express vs. Implies Agency

Lintoja vs. Eternit Corp., G.R. NO. 144805, June 8, 2006

An agency may be expressed or implied from the act of the principal, from hissilence or lack of action, or his failure to repudiate the agency knowing thatanother person is acting on his behalf without authority. Acceptance by theagent may be expressed, or implied from his acts which carry out the agency,or from his silence or inaction according to the circumstances. Agency may beoral unless the law requires a specific form. However, to create or convey realrights over immovable property, a special power of attorney is necessary. Thus,when a sale of a piece of land or any portion thereof is through an agent, theauthority of the latter shall be in writing, otherwise, the sale shall be void.

IV. Agency by Estoppel

Naguiat vs. Court of Appeals, G.R. NO. 118375, October 3, 2003

The Court of Appeals recognized the existence of an “agency by estoppels citingArticle 1873 of the Civil Code. Apparently, it considered that at the very least,as a consequence of the interaction between Naguiat and Ruebenfeldt, Queañogot the impression that Ruebenfeldt was the agent of Naguiat, but Naguiat didnothing to correct Queaño’s impression. In that situation, the rule isclear. One who clothes another with apparent authority as his agent, andholds him out to the public as such, cannot be permitted to deny the authorityof such person to act as his agent, to the prejudice of innocent third partiesdealing with such person in good faith, and in the honest belief that he is what

he appears to be. The Court of Appeals is correct in invoking the said rule onagency by estoppel.

V. General vs. Special Agency

Siasat vs. Intermediate Appellate Court, G.R. NO. L-67889, October 10,1985

A general agent is one authorized to do all acts pertaining to a business of acertain kind or at a particular place, or all acts pertaining to a business of aparticular class or series. He has usually authority either expressly conferredin general terms or in effect made general by the usages, customs or nature ofthe business which he is authorized to transact. An agent, therefore, who isempowered to transact all the business of his principal of a particular kind orin a particular place, would, for this reason, be ordinarily deemed a generalagent. A special agent is one authorized to do some particular act or to actupon some particular occasion, acts usually in accordance with specificinstructions or under limitations necessarily implied from the nature of the actto be done

VI. Agency Couched in General Terms

Veloso vs. Court of Appeals, G.R. NO. 102737, August 21, 1996

There was no need to execute a separate and special power of attorney sincethe general power of attorney had expressly authorized the agent or attorney infact the power to sell the subject property. The special power of attorney canbe included in the general power when it is specified therein the act ortransaction for which the special power is required. Whether the instrument bedenominated as “general power of attorney” or “special power of attorney,” whatmatters is the extent of the power or powers contemplated upon the agent orattorney in fact. If the power is couched in general terms, then such powercannot go beyond acts of administration. However, where the power to sell isspecific, it not being merely implied, much less couched in general terms, therecannot be any doubt that the attorney in fact may execute a valid sale. Aninstrument may be captioned as “special power of attorney” but if the powersgranted are couched in general terms without mentioning any specific power tosell or mortgage or to do other specific acts of strict dominion, then in that caseonly acts of administration may be deemed conferred

VII. Agency Requiring Special Power of Attorney

Orbeta vs. Sendiong, G.R. NO. 155236, July 8, 2005

A special power of attorney simply refers to a clear mandate specificallyauthorizing the performance of a specific power and of express acts subsumed

therein, and there is a specific authority given to Mae Sendiong to sign hername in behalf of Paul Sendiong in contracts and agreements and to institutesuits in behalf of her father. Neither would the fact that the document iscaptioned “General Power of Attorney” militate against its construction asgranting specific powers to the agent pertaining to the petition for annulment ofjudgment she instituted in behalf of her father. As Justice Paras has noted, ageneral power of attorney may include a special power if such special power ismentioned or referred to in the general power.

Country Bankers Insurance Corp. vs. Keppel Cebu Shipyard, June 18,2012, G.R. NO. 166044

Our law mandates an agent to act within the scope of his authority. The scopeof an agent’s authority is what appears in the written terms of the power ofattorney granted upon him. Under Article 1878(11) of the Civil Code, a specialpower of attorney is necessary to obligate the principal as a guarantor orsurety.

Mercado vs. Allied Banking Corpporation, G.R. NO. 171460, July 24, 2007

Equally relevant is the rule that a power of attorney must be strictly construedand pursued. The instrument will be held to grant only those powers whichare specified therein, and the agent may neither go beyond nor deviate from thepower of attorney. Where powers and duties are specified and defined in aninstrument, all such powers and duties are limited and are confined to thosewhich are specified and defined, and all other powers and duties are excluded.This is but in accord with the disinclination of courts to enlarge the authorityG.R.anted beyond the powers expressly given and those which incidentally flowor derive therefrom as being usual and reasonably necessary and proper forthe performance of such express powers.

Angeles vs. Philippines National Railways, G.R. NO. 150128, August 31,2006

A power of attorney is only but an instrument in writing by which a person, asprincipal, appoints another as his agent and confers upon him the authority toperform certain specified acts on behalf of the principal. The writtenauthorization itself is the power of attorney, and this is clearly indicated by thefact that it has also been called a “letter of attorney.” Its primary purpose is notto define the authority of the agent as between himself and his principal but toevidence the authority of the agent to third parties with whom the agent deals.Except as may be required by statute, a power of attorney is valid although nonotary public intervened in its execution.

SHOPPER’S PARADISE REALTY & DEVELOPMENT CORPORATION vs.EFREN P. ROQUE, G.R. NO. 148775, January 13, 2004

Article 1878 of the Civil Code expresses that a special power of attorney isnecessary to lease any real property to another person for more than one year.The lease of real property for more than one year is considered not merely anact of administration but an act of strict dominion or of ownership. A specialpower of attorney is thus necessary for its execution through an agent.

VIII. Agency by Operation of Law

IX. Rights and Obligations of Principal

VICTORIAS MILLING CO., INC. vs. COURT OF , G.R. NO. 117356, June 19,2000

One factor which most clearly distinguishes agency from other legal concepts iscontrol; one person - the agent - agrees to act under the control or direction ofanother - the principal. Indeed, the very word "agency" has come to connotecontrol by the principal. The control factor, more than any other, has causedthe courts to put contracts between principal and agent in a separate category.

X. Irrevocable Agency

Republic vs. Evangelista, G.R. NO. 156015, August 11, 2005

A contract of agency is generally revocable as it is a personal contract ofrepresentation based on trust and confidence reposed by the principal on hisagent. As the power of the agent to act depends on the will and license of theprincipal he represents, the power of the agent ceases when the will orpermission is withdrawn by the principal. Thus, generally, the agency may berevoked by the principal at will. However, an exception to the revocability of acontract of agency is when it is coupled with interest, i.e., if a bilateral contractdepends upon the agency. The reason for its irrevocability is because theagency becomes part of another obligation or agreement. It is not solely therights of the principal but also that of the agent and third persons which areaffected. Hence, the law provides that in such cases, the agency cannot berevoked at the sole will of the principal.

Lim vs. Saban, G.R. NO. 163720, December 16, 2004

Under Article 1927 of the Civil Code, an agency cannot be revoked if a bilateralcontract depends upon it, or if it is the means of fulfilling an obligation alreadycontracted, or if a partner is appointed manager of a partnership in thecontract of partnership and his removal from the management is unjustifiable. Stated differently, an agency is deemed as one coupled with an interest where itis established for the mutual benefit of the principal and of the agent, or for theinterest of the principal and of third persons, and it cannot be revoked by theprincipal so long as the interest of the agent or of a third person subsists. Inan agency coupled with an interest, the agent’s interest must be in the subject

matter of the power conferred and not merely an interest in the exercise of thepower because it entitles him to compensation. When an agent’s interest isconfined to earning his agreed compensation, the agency is not one coupledwith an interest, since an agent’s interest in obtaining his compensation assuch agent is an ordinary incident of the agency relationship.

XI. Modes of Extinguishment

RAMON RALLOS, Administrator of the Estate of CONCEPCION RALLOS vs.FELIX GO CHAN & SONS REALTY CORPORATION, G.R. NO. L-24332,January 31, 1978

By reason of the very nature of the relationship between principal and agent,agency is extinguished ipso jure upon the death of either principal or agent.Although a revocation of a power of attorney to be effective must becommunicated to the parties concerned, yet a revocation by operation of law,such as by death of the principal is, as a rule, instantaneously effectiveinasmuch as "by legal fiction the agent's exercise of authority is regarded as anexecution of the principal's continuing will. With death, the principal's willceases or is the of authority is extinguished.

COMPROMISE

I.Definition

Air Transportation Office v. Gopuco, Jr., G.R. NO. 158563. June 30, 2005

A compromise agreement, when not contrary to law, public order, public policy,morals, or good customs, is a valid contract which is the law between theparties. It is a contract perfected by mere consent, whereby the parties,making reciprocal concessions, avoid litigation or put an end to one alreadycommenced. It has the force of law and is conclusive between the parties, andcourts will not relieve parties from obligations voluntarily assumed, simplybecause their contracts turned out to be unwise

II.Void Compromise

Uy vs. Chua, G.R. NO. 183965, September 18, 2009

Like any other contract, a compromise agreement must comply with therequisites in Article 1318 of the Civil Code, to wit: (a) consent of thecontracting parties; (b) object certain that is the subject matter of the contract;and (c) cause of the obligation that is established. And, like any other contract,