Professional Documents
Culture Documents
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Article 141 relates exclusively to the settlement of the
partnership affairs among the partners themselves and
has nothing to do with the liability of the partners to third
persons; that each one of the industrial partners is liable to
third persons for the debts of the firm; that if he has paid
such debts out of his private property during the life of the
partnership, when its affairs are settled he is entitled to
credit for the amount so paid, and if it results that there is
not enough property in the partnership to pay him, then
the capitalist partners must pay him.
In relation to this, the Supreme Court noted that
partnerships under the Civil Code provides for a scenario
where all partners are industrial partners (like when it is a
partnership for the exercise of a profession). In such case,
if it is permitted that industrial partners are not liable to
third persons then such third persons would get practically
nothing from such partnerships if the latter is indebted.
Pedro Yulo failed to the balance due of 1,638.40 pesos from the
firm hence Dy-Sianco filed a case against Yulo. The lower
court ordered the defendant to pay the entire amount with
interest.
ISSUE: W/N Pedro Yulo shall pay the entire amount for the
partnership debt. (NO)
HELD: Being a civil partnership, the partners are not liable
each for the whole debt of the partnership. The liability is pro
rata and in this case Pedro Yulo is responsible to plaintiff for
only one-half of the debt. The fact that the other partner, Jaime
Palacios, had left the country can not increase the liability of Pedro
Yulo.
The judgment of the court below is reversed and judgment is
ordered in favor of the plaintiff and against the defendant,
Pedro Yulo, for the sum of P819.20 pesos, Philippine Currency,
with interest thereon at the rate of 6 per cent per annum from
the 12th day of January, 1905, and the costs of the Court of
First Instance. No costs will be allowed to either party in this
court. So ordered.
G.R. No. L-11840
December 10, 1963
ANTONIO C. GOQUIOLAY, ET AL., plaintiffs-appellants,
vs.
WASHINGTON Z. SYCIP, ET AL., defendants-appellees.
Facts: Tan Sin An and Goquiolay entered into a general
commercial partnership under the partnership name Tan Sin
An and Antonio Goquiolay for the purpose of dealing in real
estate. The agreement lodged upon Tan Sin An the sole
management of the partnership affairs. The lifetime of the
partnership was fixed at ten years and the Articles of Copartnership stipulated that in the event of death of any of the
partners before the expiration of the term, the partnership will
not be dissolved but will be continued by the heirs or assigns of
the deceased partner.
The plaintiff partnership purchased 3 parcels of land which was
mortgaged to La Urbana. Another 46 parcels of land were
purchased by Tan Sin An in his individual capacity which he
assumed payment of a mortgage debt for P35K. The
downpayment and the amortization were advanced by Yutivo
and Co.
Tan Sin An died leaving his widow, Kong Chai Pin. The widow
subsequently became the administratrix of the estate.
Yutivo Sons and Sing Yee filed their claim in the intestate
proceedings of Tan Sin An for advances, interest and taxes
paid in amortizing and discharging their obligations to La
Urbana.
Kong Chai Pin filed a petition with the probate court for
authority to sell all the 49 parcels of land. She then sold it to
Sycip and Lee in consideration of P37K and of the vendees
assuming payment of the claims filed by Yutivo Sons and Sing
Yee.
When Goquiolay learned about the sale to Sycip and Lee, he
filed apetition in the intestate proceedings to set aside the order
of the probate court approving the sale in so far as his interest
over the parcels of land sold was concerned.
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Probate court annulled the sale executed by the
administratrix w/respect to the 60% interest of Goquiolay
over the properties. Administratrix appealed. Decision was
set aside, hence this petition.
Issues: 1)Did the lower court err in holding that the widow
succeeded her husband Tan Sin An in the sole
management of the partnership upon Tans death? Yes
2)WON the consent of the other partners was necessary
to perfectthe sale of the partnership properties to Sycip
and Lee? No.
Held: 1) Yes. While in the Articles of Co-Partnership and
the power of attorney executed by Goquiolay conferred
upon Tan the exclusive management of the business, such
power premised as it is upon trust and confidence, was a
mere personal right that terminated upon Tans
demise. The provision in the articles stating that in the
event of death of any one of the partners within 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. The heirs of the
deceased, by never repudiating or refusing to be bound
under the said provision in the articles became individual
partners with Goquiolay upon Tans demise. This is
sanctioned under Article 222 under the Code of
Commerce.
2)No. Strangers dealing with a partnership have the right
to assume,in the absence of restrictive clauses in the copartnership agreement that every general partner has
power to bind the partnership specially those acting with
ostensible authority. Also, inspite of the provision of Art
129 of the Code of Commerce to the effect that if the
management of the general partnership has not been
limited by special agreement to any of the members, all
shall have the power to take part in the direction and
management of the common business, and the members
present shall come to an agreement for all contracts or
obligations which may concern the association, such
obligation is one imposed by law on the partners among
themselves, that does not necessarily affect the validity of
the acts of a partner while acting within the scope of the
ordinary course of business of the partnership as regards
third persons without notice. The latter may rightfully
assume that th econtracting partner was duly authorized to
contract for and in behalf of the firm and that he would not
ordinarily act to the prejudice of his co-partners.Also, the
records fail to disclose that Goquiolay made any
opposition to the sale of the partnership realty to Sycip
and Lee. On the contrary, it appears that he only
interposed his objections after the deed of conveyance
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The fact that the complaint against the defendant Romulo
B. Lumauig was dismissed, upon motion of the plaintiff,
does not unmake the said Lumauig as a general partner in
the defendant company. In so moving to dismiss the
complaint, the plaintiff merely condoned Lumauig's
individual liability to the plaintiff.
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Separate Opinions
October 5, 1927
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(2) Appellants admit, and it appears from the
context of Exhibit A, that the defendant association formed
by the defendants is a general partnership, as defined in
article 126 of the Code Commerce. This partnership was
registered in the mercantile register of the Province of
Iloilo. The only anomaly noted in its organization is that
instead of adopting for their firm name the names of all of
the partners, of several of them, or only one of them, to be
followed in the last two cases, by the words "and to be
followed in the last two cases, by the words "and
company" the partners agreed upon "Tai Sing & Co." as
the firm name.
ARTICLE 1815
LIABILITY FOR INCLUSION OF NAME IN FIRM NAME
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a general partnership.
HELD: Professor Jose A. Espiritu, as amicus curi,
states: My opinion is that such a fact alone cannot and
will not be a sufficient cause of preventing the formation of
a general partnership, especially if the other requisites are
present and the requisite regarding registration of the
articles of association in the Commercial Registry has
been complied with, as in the present case. I do not
believe that the adoption of a wrong name is a material
fact to be taken into consideration in this case; first,
because the mere fact that a person uses a name not his
own does not prevent him from being bound in a contract
or an obligation he voluntarily entered into; second,
because such a requirement of the law is merely a formal
and not necessarily an essential one to the existence of
the partnership, and as long as the name adopted
sufficiently identity the firm or partnership intended to use
it, the acts and contracts done and entered into under
such a name bind the firm to third persons; and third,
because the failure of the partners herein to adopt the
correct name prescribed by law cannot shield them from
their personal liabilities, as neither law nor equity will
permit them to utilize their own mistake in order to put the
blame on third persons, and much less, on the firm
creditors in order to avoid their personal possibility.
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 which in law constitutes a
partnership, they are partners, although their purpose was
to avoid the creation of such relation. Here, the intention of
the persons making up Teck Seing & co., Ltd. was to
establish a partnership which they erroneously
denominated a limited partnership. If this was their
purpose, all subterfuges resorted to in order to evade
liability for possible losses, while assuming their
enjoyment of the advantages to be derived from the
relation, must be disregarded. The partners who have
disguised their identity under a designation distinct from
that of any of the members of the firm should be
penalized, and not the creditors who presumably have
dealt with the partnership in good faith.
Articles 127 and 237 of the Code of Commerce make all
the members of the general copartnership liable
personally and in solidum with all their property for the
results of the transactions made in the name and for the
account of the partnership. Section 51 of the Insolvency
Law, likewise, makes all the property of the partnership
and also all the separate property of each of the partners
liable. In other words, if a firm be insolvent, but one or
more partners thereof are solvent, the creditors may
proceed both against the firm and against the solvent
ARTICLE 1816
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affirmed with modification the trial courts decision,
ordering Muasque and Galan to pay jointly CSHC and
BDGP.
ISSUE:
WON (1) there was a partnership between
Muasque and Galan, (2) TCCI was justified in disbursing
money to Galan, and (3) Muasque and Galan are jointly
and severally liable to CSHC and BDGP.
HELD:
YES. Muasque entered into a contract with
TCCI, for the renovation of the latter's building, on behalf
of the partnership of "Galan and Muasque," as evidenced
by the first paragraph of the contract:
This agreement made this 20th day of December
in the year 1966 by Galan and Muasque
hereinafter called the Contractor, and Tropical
Commercial Co., Inc., hereinafter called the owner
do hereby for and in consideration agree on the
following: ... .
Likewise, when Muasque received the first
check, he indorsed the same in favor of Galan. TCCI,
therefore, had every right to presume that Muasque and
Galan were true partners. If they were not partners,
Muasque has only himself to blame for making the
relationship appear otherwise, not only to TCCI but to their
other creditors as well. The payments made to the
partnership were, therefore, valid payments.
In the case of Singsong v. Isabela Sawmill (88
SCRA 643),we ruled:
Although it may be presumed that Margarita G.
Saldajeno had acted in good faith, the appellees
also acted in good faith in extending credit to the
partnership. Where one of two innocent persons
must suffer, that person who gave occasion for
the damages to be caused must bear the
consequences.
Since Muasque and Galan were partners when
the debts were incurred, they, are also both liable to third
persons who extended credit to their partnership. In the
case of George Litton v. Hill and Ceron, et al, (67 Phil.
513, 514), we ruled:
There is a general presumption that each
individual partner is an authorized agent for the
firm and that he has authority to bind the firm in
carrying on the partnership transactions. (Mills vs.
Riggle,112 Pan, 617).
The presumption is sufficient to permit third
persons to hold the firm liable on transactions
entered into by one of members of the firm acting
apparently in its behalf and within the scope of his
authority. (Le Roy vs. Johnson, 7 U.S. (Law. ed.),
391.)
YES. While it is true that under Article 1816 of the Civil
Code "All partners, including industrial ones, shall be liable
prorate with all their property and after all the partnership
assets have been exhausted, for the contracts which may be
entered into the name and on the account of the partnership,
under its signature and by a person authorized to act for the
partner-ship. ...", this provision should be construed together
with Article 1824, which provides that: "All partners are liable
solidarily with the partnership for everything chargeable to the
partnership under Articles 1822 and 1823." In short, while the
liability of the partners are merely joint in transactions entered
into by the partnership, a third person who transacted with said
partnership can hold the partners solidarily liable for the whole
obligation if the case of the third person falls under Articles
1822 or 1823.
Articles 1822 and 1823 of the Civil Code provide:
Art. 1822. Where, by any wrongful act or omission of
any partner acting in the ordinary course of the
business of the partner-ship or with the authority of his
co-partners, loss or injury is caused to any person, not
being a partner in the partnership or any penalty is
incurred, the partnership is liable therefor to the same
extent as the partner so acting or omitting to act.
Art. 1823. The partnership is bound to make good:
(1) Where one partner acting within the scope of his
apparent authority receives money or property of a
third person and misapplies it; and
(2) Where the partnership in the course of its business
receives money or property of a third person and t he
money or property so received is misapplied by any
partner while it is in the custody of the partnership.
The obligation is solidary, because the law protects
him, who in good faith relied upon the authority of a partner,
whether such authority is real or apparent. That is why under
Article 1824 of the Civil Code all partners, whether innocent or
guilty, as well as the legal entity, which is the partnership, are
solidarily liable.
However. as between the partners Muasque and
Galan, justice also dictates that Muasque be reimbursed by
Galan for the payments made by the former representing the
liability of their partnership to CSHC and BDGP, as it was
satisfactorily established that Galan acted in bad faith in his
dealings with Muasque as a partner.
ARTICLE 1819
EFFECTS OF CONVEYANCE OF REAL PROPERTIES
BELONGING TO THE PARTNERSHIP
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SANTIAGO SYJUCO INC VS CASTRO
175 SCRA 171 (1989)
FACTS: The Lims loaned from Syjuco 80k, secured by
two titles thereof. Lims defaulted despite numerous
demands issued by Syjuco. Syjuco then attempted to
extra-judicially foreclose the properties. Lims opposed the
moved and the legal battle for 20 years began.
Lims lawyers claimed that the mortgage was void, being
usurious for stipulating interest of 23% on top of 11 % that
they had been required to pay as "kickback." Also, the
mortgage which they, together with their mother, had
individually constituted (and thereafter amended during
the period from 1964 to 1967) over lands standing in their
names in the Property Registry as owners pro indiviso, in
fact no longer belonged to them at that time, having been
earlier deeded over by them to the partnership, "Heirs of
Hugo Lim", more precisely, on March 30, 1959, hence,
said mortgage was void because executed by them
without authority from the partnership.
Judge Castro issued a restrining order to the foreclosure
of the properties.
Syjuco, embattled, opposed the same claiming that judge
castro never acted on his motions!
Issue: won the partnership can shield the Lims from extra
judicial foreclosure n(no)
Held:The legal fiction of a separate juridical personality
and existence will not shield it from the conclusion of
having such knowledge which naturally and irresistibly
flows from the undenied facts. It would violate all precepts
of reason, ordinary experience and common sense to
propose that a partnership, as commonly known to all the
partners or of acts in which all of the latter, without
exception, have taken part, where such matters or acts
affect property claimed as its own by said partnership.
If, therefore, the respondent partnership was inescapably
chargeable with knowledge of the mortgage executed by
all the partners thereof, its silence and failure to impugn
said mortgage within a reasonable time, let alone a space
of more than seventeen years, brought into play the
doctrine of estoppel to preclude any attempt to avoid the
mortgage as allegedly unauthorized.
Equally or even more preclusive of the respondent
partnership's claim to the mortgaged property is the last
paragraph of Article 1819 of the Civil Code, which
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Issue: won Lawa's issuance and statement justifies and
proves that there was no more outstanding liabilities for
Trillana. (NO)
Held: The partneship was already dissolved and Lawa has
no more authority to issue such sworn proof in behalf of
the business.
Seeing that the amounts stated in the vales acknowledged
by the debtor were advanced to him in part payment of the
price of certain qualities of tuba or liquor of the nipa palm
which he had contracted to deliver at the distillery, and as
long as he is able to comply with these stipulations within
a reasonable time, the Trillana cannot be compelled to pay
his debt in cash. The amounts stated in the vales were
advanced under the condition that the same would be paid
or satisfied with the value of the tuba received by the
distillery; therefore, the decision of the court below, which
moreover appears to have been acquiesced in by the
Congco for the reason that it was undoubtedly so
stipulated, is in accordance with the law.
Thus, the non existence of the partnership in validates the
statement of Lawa, but still Trillana shall pay by means of
nipa liquior, concurring with the agreement of copartnership.
ARTICLE 1825
PARTNER BY ESTOPPEL
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better right than the seller.
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contribution (Ward v. Brigham, 127 Mass. 24). A
partnership relation between certain stockholders and
other stockholders, who were also directors, will not be
implied in the absence of an agreement, so as to make the
former liable to contribute for payment of debts illegally
contracted by the latter (Heald v. Owen, 44 N.W. 210, 79
Iowa 23). (Corpus Juris Secundum, Vol. 68, p. 464).
(Italics supplied).
It is therefore clear that the petitioner never had the
intention to form a corporation with the respondents
despite his representations to them. This gives credence
to the cross-claims of the respondents to the effect that
they were induced and lured by the petitioner to make
contributions to a proposed corporation which was never
formed because the petitioner reneged on their
agreement.
Applying therefore the principles of law earlier cited to the
facts of the case, necessarily, no de facto partnership was
created among the parties which would entitle the
petitioner to a reimbursement of the supposed losses of
the proposed corporation. The record shows that the
petitioner was acting on his own and not in behalf of his
other would-be incorporators in transacting the sale of the
airplanes and spare parts.
ARTICLE 1827
PREFERENCE OF PARTNERSHIP CREDITOR IN
PARTNERSHIP PROPERTY
G.R. No. L-29182 October 24, 1928
LEONCIA VIUDA DE CHAN DIACO (alias LAO LIONG
NAW) appellee,
vs.
JOSE S. Y. PENG, assignee, appellant.
FACTS:
Leoncia Vda. de Chan Diaco (Lao Liong Naw),
owner of a grocery store (La Viuda de G. G. Chan Diaco),
formed a partnership (Lao Liong Naw & Co.) with her
relatives Chan Chiaco Wa, Cua Yuk, Chan Bun Suy, Cahn
Bun Le, and Juan Maquitan Chan.
San Miguel Brewery, Porta Pueco & Co., and Ruiz
& Rementaria S. en C. instituted insolvency proceedings
against Vda. de Chan Diaco, alleging that the latter was
indebted to them.
The court declared Vda. de Chan Diaco insolvent
and ordered the sheriff to take possession of her property,
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EFFECTS OF CHANGES IN MEMBERSHIP OF A
PARTNERSHIP
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the debts of the preceding partnership. In Singson, et al. v.
Isabela Saw Mill, et al, 8 the Court held that under facts
very similar to those in the case at bar, a withdrawing
partner remains liable to a third party creditor of the old
partnership. 9 The liability of the new partnership, upon
the other hand, in the set of circumstances obtaining in the
case at bar, is established in Article 1840 of the Civil Code.
HENCEFORTH: [the] petitioner Benjamin Yu is entitled to
interest at the legal rate of six percent (6%) per annum on
the amount of unpaid wages, and of his separation pay,
computed from the date of promulgation of the award of
the Labor Arbiter.
G.R. No. L-10040 January 31, 1916
EUGENIA LICHAUCO, ET AL., plaintiffs-appellants,
vs.
FAUSTINO LICHAUCO, defendant-appellant.
Facts: This action was brought by two of the partners of an
enterprise of which the defendant was manager (gestor),
to secure an accounting of its affairs, and the payment to
the plaintiffs of their respective shares of capital and
profits.
A notarial instrument was executed in Manila, by the terms
of which a partnership was duly organized for the purpose
of carrying on a rice-cleaning business at Dagupan, and
for the purchase and sale of palay and rice. The articles
of association, which were not recorded in the mercantile
registry, contain, among others, the following provisions:
2. The association will be named F. Lichauco Hermanos
and will be domiciled in the center of its operations, that is,
in the pueblo of Dagupan, Province of Pangasinan.
3. The association cannot be dissolved except by the
consent and agreement of two-thirds of its partners and in
the event of the death of any of the latter, the heirs of the
deceased, if they be minors or otherwise incapacitated,
shall be represented in the association by their legal
representatives or if two-thirds of the surviving partners
agree thereto, the participation of the deceased partner
may be liquidated.
The business thus organized was carried on until when it
was found to be unprofitable and discontinued by the
defendant manager (gestor); and thereafter, the machinery
of the rice mil was dismantled by his orders, and offered
for sale. No accounting ever was made to his associates
by the defendant until this action was instituted , although
it appears that, Mariano Limjap, one of the participants in
the venture, demanded a rendition of accounts; and that
Eugenia Lichauco, one of the plaintiffs in this action, made
repeated unsuccessful demands for the return of her
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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.
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16
(2)
Winding Up Defined
Winding up is the process of settling business affairs after
dissolution.
(NOTE: Examples of winding up: the paying of previous
obligations; the collecting of assets previously demandable;
even new business if needed to wind up, as the contracting
with a demolition company for the demolition of the garage
used in a used car partnership.)
(3)
Termination Defined
Termination is the point in time after all the partnership affairs
have been wound up.[16] [Citation omitted] (Underscoring
supplied.)
These final stages in the life of a partnership are recognized
under the Civil Code that explicitly declares that upon
dissolution, the partnership is not terminated, to wit:
Art. 1828. The dissolution of a partnership is the change in the
relation of the partners caused by any partner ceasing to be
associated in the carrying on as distinguished from the winding
up of the business.
Art. 1829. On dissolution the partnership is not terminated, but
continues until the winding up of partnership affairs is
completed. (Underscoring supplied.)
The best evidence of the existence of the partnership, which
was not yet terminated (though in the winding up stage), were
the unsold goods and uncollected receivables, which were
presented to the trial court. Since the partnership has not been
terminated, the petitioner and private complainant remained as
co-partners. The check was thus issued by the petitioner to
complainant, as would a partner to another, and not as
payment from a debtor to a creditor.
The more tenable view, one in favor of the accused, is that the
check was issued merely to evidence the complainants share
in the partnership property, or to assure the latter that he would
receive in time his due share therein. The alternative view that
the check was in consideration of a buy out is but a theory,
favorable to the complainant, but lacking support in the record;
and must necessarily be discarded.
For there is nothing on record which even slightly suggests that
petitioner ever became interested in acquiring, much less
keeping, the shares of the complainant. What is very clear
therefrom is that the petitioner exerted her best efforts to sell
the remaining goods and to collect the receivables of the
partnership, in order to come up with the amount necessary to
satisfy the value of complainants interest in the partnership at
the dissolution thereof. To go by accepted custom of the trade,
we are more inclined to the view that the subject check was
issued merely to evidence complainants interest in the
partnership. Thus, we are persuaded that the check was not
intended to apply on account or for value; rather it should be
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deemed as having been drawn without consideration at
the time of issue.
WHEREFORE, the instant petition is hereby GRANTED
AND THE PETITIONER ACQUITTED.
Additional:
As decided by this Court, the elements of the offense
penalized under B.P. 22, are as follows: (1) the making,
drawing and issuance of any check to apply to account or
for value; (2) the knowledge of the maker, drawer or issuer
that at the time of issue he does not have sufficient funds
in or credit with the drawee bank for the payment of such
check in full upon its presentment; and (3) subsequent
dishonor of the check by the drawee bank for insufficiency
of funds or credit or dishonor for the same reason had not
the drawer, without any valid cause, ordered the bank to
stop payment.
Absent the first element of the offense penalized under
B.P. 22, which is the making, drawing and issuance of
any check to apply on account or for value, petitioners
issuance of the subject check was not an act
contemplated in nor made punishable by said statute.
ARTICLE 1829
G.R. No. 126334 November 23, 2001
17
Ruling: No. The three (3) final stages of a partnership are: (1)
dissolution; (2) winding-up; and (3) termination.36 The
partnership, although dissolved, continues to exist and its legal
personality is retained, at which time it completes the winding
up of its affairs, including the partitioning and distribution of the
net partnership assets to the partners.37 For as long as the
partnership exists, any of the partners may demand an
accounting of the partnership's business. Prescription of the
said right starts to run only upon the dissolution of the
partnership when the final accounting is done.38
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1986, prescribing four (4) years thereafter, prescription
had not even begun to run in the absence of a final
accounting. Article 1842 of the Civil Code provides:
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period between 1906 an 1912, which in seven years make
a total of P20,141.45. The assets of the partnership, as
well as the value of its property, could not be determined
when making the liquidation because there was no
inventory and for this reason it was not possible to
determine the capital of the partnership. The plaintiff,
however, seems to be agreeable to considering the initial
partnership capital as the capital at the time of the winding
up of the business.
August 3, 1918, defendant assumed complete
responsibility for the business by objecting to the
appointment of a receiver as prayed for by plaintiff,
and giving a bond therefor. Until that date his acts
were those of a managing partner, binding against
the partnership; but thereafter his acts were those of
a receiver whose authority is contained in section
175 of the Code of Civil Procedure.
A receiver has no right to carry on and conduct a
business unless he is authorized or directed by the
court to do some, and such authority is not derived
from an order of appointment to take and preserve
the property (34 Cyc., 283; 23 R. C. L., 73). It does not
appear that the defendant as a receiver was
authorized by the court to continue the business of
the partnership in liquidation. This being so, he is
personally liable for the losses that the business any
have sustained. (34 Cyc., 296.) The partnership must
not, therefore, be liable for the acts of the defendant
in connection with the management of the business
until August 3, 1918, the date when he ceased to be a
member and manager in order to become receiver.
As to the first semester of 1918, during which time the
defendant had seen managing the business of the
partnership as a member and manager, taking into
account that the profits had been on the increase, said
profits having reached the amount of P10,174.69 in the
year 1917, it would not be an exaggeration to estimate
that the profits for 1918 would have been at least the
same as the profits of 1917; so that for the first half of
1918, the profit would be P5,087.34.
One-half of this total, that is, P30,299.14 pertains to the
plaintiff as administrator of the intestate estate of Go-Lio.
In view of the foregoing, we are of the opinion that the
case must be, as is hereby, decided by the reversing the
judgment appealed from, and sentencing the defendant to
pay the plaintiff the sum of P30,299.14 with legal interest
at the rate of 6 per cent per annum from July 1, 1918, until
fully paid, with costs. So ordered.
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among other things, that the partnership "Palma" and "San
Isidro," formed by the agreement of February 1, 1919,
between Serra, Lazaro Mota, now deceased, and Juan J.
Vidaurrazaga for himself and in behalf of his brother, Felix
and Dionisio Vidaurrazaga, should be dissolved upon the
execution of this contract, and that the said partnership
agreement should be totally cancelled and of no force and
effect whatever.
So it results that the "Hacienda Palma," with the entire
railroad, the subject-matter of the contract of partnership
between plaintiffs and defendant, became the property of
Whitaker and Concepcion. Phil. C. Whitaker and Venancio
Concepcion having failed to pay to the defendant a part of
the purchase price, that is, P750,000, the vendor, the
herein defendant, foreclosed the mortgage upon the
saidhacienda, which was adjudicated to him at the public
sale held by the sheriff for the amount of P500,000, and
the defendant put in possession thereof, including what
was planted at the time, together with all the
improvements made by Messrs. Phil. C. Whitaker and
Venancio Concepcion.
Since the defendant Salvador Serra failed to pay one-half
of the amount expended by the plaintiffs upon the
construction of the railroad line, that is, P113,046.46, as
well as Phil. C. Whitaker and Venancio Concepcion, the
plaintiffs instituted the present action praying: (1) That the
deed of February 1, 1919, be declared valid and binding;
(2) that after the execution of the said document the
defendant improved economically so as to be able to pay
the plaintiffs the amount owed, but that he refused to pay
either in part or in whole the said amount notwithstanding
the several demands made on him for the purpose; and
(3) that the defendant be sentenced to pay plaintiffs the
aforesaid sum of P113,046.46, with the stipulated interest
at 10 per cent per annum beginning June 4, 1920, until full
payment thereof, with the costs of the present action.
Defendant set up three special defenses: (1) The novation
of the contract by the substitution of the debtor with the
conformity of the creditors; (2) the confusion of the rights
of the creditor and debtor; and (3) the extinguishment of
the contract, Exhibit A.
ISSUES:
1. Whether there was a valid novation between the original
debtor (Serra), new debtor (Whitaker and Luzuriaga) and
the creditor(Mota and Vidaurrazaga, the old partners of
Serra). (NONE, there was no valid novation!)
2.
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be a partner in said line and, therefore, the plaintiffs had to
take the vendees as their new partners. Plaintiffs had to
come to an understanding with the new owners of the
"Hacienda Palma" in connection with the railroad line
"Palma-San Isidro-Nandong." But in all of this, there was
nothing to show the express consent, the manifest and
deliberate intention of the plaintiffs to exempt the
defendant from his obligation and to transfer it to his
successors in interest, Messrs. Phil. C. Whitaker and
Venancio Concepcion.
As has been said, in all contracts of novation consisting in
the change of the debtor, the consent of the creditor is
indispensable, pursuant to article 1205 of the Civil Code
which reads as follows:
Novation which consists in the substitution of a
new debtor in the place of the original one may be
made without the knowledge of the latter, but not
without the consent of the creditor.
Notwithstanding the doctrines above quoted, defendant's
counsel calls our attention to the decision of the supreme
court of Spain of June 16, 1908, wherein it was held that
the provisions of article 1205 of Code do not mean nor
require that the consent of the creditor to the change of a
debtor must be given just at the time when the debtors
agree on the substitution, because its evident object being
the full protection of the rights of the creditor, it is sufficient
if the latter manifests his consent in any form and at any
time as long as the agreement among the debtors holds
good. And defendant insists that the acts performed by the
plaintiffs after the "Hacienda Palma" was sold to Messrs.
Phil. C. Whitaker and Venancio Concepcion constitute
evidence of the consent of the creditor.
By comparing the facts of that case with the defenses of
the case at bar, it will be seen that, whereas in the former
case the creditor sued the new debtor, in the instant case
the creditor sues the original debtor. The supreme court of
Spain in that case held that the fact that the creditor sued
the new debtor was proof incontrovertible of his assent to
the substitution of the debtor. This would seem evident
because the judicial demand made on the new debtor to
comply with the obligation of the first debtor is the best
proof that the creditor accepts the change of the debtor.
His complaint is an authentic document where his consent
is given to the change of the debtor. We are not holding
that the creditor's consent must necessarily be given in the
same instrument between the first and the new debtor.
The consent of the creditor may be given subsequently,
but in either case it must be expressly manifested. In the
present case, however, the creditor makes judicial
demand upon the first debtor for the fulfillment of his
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demand the sum that is the subject of his complaint in the
second cause of action, it becomes necessary first too
decide whether in fact the plaintiff is in estoppel and
unable to oppose any valid objection against said
liquidation and balance; inasmuch as, according to the
inventory of the firm's business, made on December 31,
1903, which was signed by Leopoldo Criado, Miguel
Gutierrez de Celis and Daniel Perez de Celis, plaintiff
Criado's capital on that date was only P25,129.09 which
were in force during the second period from January,
1904. From clause 7 of said contract, and according to
said inventory of December 31, 1903, it appears that the
firm's capital stock amounted to P1,605,497.30, of which
the sum of P25,129.09 belonged to Leopoldo Criado.
In an affidavit plaintiff stated that when he learned of the
contents of the firm's books, he protested against the
entries therein, but that the manager Guiterrez de Celis
assured him that he would lose nothing by those entries
made in connection with a serious matter then pending.
Criado alleged that the reason why said false and
erroneous entries were made in the firm's books by
Gutierrez de Celis was to show the family of the deceased
Miguel Alonso that the losses of the firm of Gutierrez
Hermanos were due to his poor management of the firm's
business
Where there appears an entry which reads thus:
P501,513.57, amount of the bills cancelled in the
books in this date which should have been
cancelled in previous years on account of difficulty
in their collection, some of these bills being of
such a nature that they should be charged to the
account of the management as they are contrary
to the provisions of the 5th and 10th clauses of
the partnership contract . . . but, in view of the fact
that the author of these irregularities is not living
so that compliance with the contract may be
demanded of him, we have distributed the losses
equally among the three principal partners . . . and
5 per cent against each of the industrial partners,
Leopoldo Criado's share of the losses being
P25,080.68.
Issue: WON the losses of the firm of Gutierrez Hermanos
was duly deducted from the share of Criado.
Ruling: No, without doubt this entry was made for the
purpose of showing that Miguel Alonso, former manger of
the partnership, was to blame for these losses. It is to be
noted that, according to the contract that plaintiff Criado,
as one of the industrial partners is not liable for the losses
which the firm may have sustained according to the eighth
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Ten per cent to D. Leopoldo Criado Garcia.
In the same proportion provided for the profits, the
partners shall be liable for the losses that may be
incurred.
Sixteenth. In case the partnership business
should incur such losses as to prevent a
continuance of the business or to make a
dissolution of the partnership advisable, same
shall be liquidated, each capitalist partner bearing
such loss in a pro rata proportion to the capital he
represents, the expenses necessary for the
prosecution of the business being chargeable to
the firm as a whole. Notwithstanding these
provisions the partners Don Placido and Don
Miguel as principal capitalist partners may
liquidate the partnership or alienate its rights
whenever they deem proper so to do.
By a notarial instrument of January 2, 1908, the life of the
partnership was extended to another term of four years,
upon the same bases and conditions (Exh. X, p. 100).
Issue: WON Criado having a capital stock with the firm of
Hermanos Gutierrez should be liable for the losses.
Ruling: Yes, from the two preinstated clauses of the
partnership contract it is deduced that the partners should
be liable for all the losses incurred by the partnership in
the proportion fixed in the 8th clause; but that, in case
such losses should be of so great importance as to
prevent a continuation of the partnership business, or to
make advisable the dissolution of the partnership, then
due action should be taken in conformity with the
provisions of said clause 16, and the partners should be
liable from the losses in a proportion pro rata to their share
in the partnership assets. The firm of Hermanos Gutierrez
shows a loss of P56,716.57. Consequently, there should
be deducted from plaintiff's capital 10 per cent of this sum
or P5,671.64 as his share of the loss.
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