Page 7 of 22

1. LIM TONG LIM,petitioner, vs.PHILIPPINE FISHING GEAR INDUSTRIES, INC.,respondent.

A partnership may be deemed to exist among parties who agree to borrow money to pursue a business and to divide the profits or losses that may arise therefrom, even if it is shown that they have not contributed any capital of their own to a "common fund." Their contribution may be in the form of credit or industry, not necessarily cash or fixed assets.Being partners, they are all liable for debts incurred by or on behalf of the partnership.The liability for a contract entered into on behalf of an unincorporated association or ostensible corporation may lie in a person who may not have directly transacted on its behalf, but reaped benefits from that contract.

FACTS: Petitioner Lim Tong Lim requested Peter Yao who was engaged in commercial fishing to join him, while Antonio Chua was already Yaos partner. Lim, Chua, and Yao verbally agreed to acquire two fishing boats, theFB Lourdesand theFB Nelsonfor the sum of P3.35 million and they borrowed P3.25 million from Jesus Lim, brother of Petitioner Lim Tong Lim, to finance the venture. They bought the boats from CMF Fishing Corporation, which executed a Deed of Sale over these two (2) boats in favor of Petitioner Lim Tong Lim only to serve as security for the loan extended by Jesus Lim. Lim, Chua and Yao agreed that the refurbishing, re-equipping, repairing, dry docking and other expenses for the boats would be shouldered by Chua and Yao. Subsequently, they again borrowed money for the purchase of fishing nets and other fishing equipments. Yao and Chua represented themselves as acting in behalf of Ocean Quest Fishing Corporation (their alleged corporation) and they contracted with Philippine Fishing Gear Industries (PFGI) for the purchase of fishing nets amounting to more than P500k. However, they were unable to pay PFGI and hence were sued in their own names as Ocean Quest Fishing Corporation is a non-existent corporation as shown by a Certification from the SEC. Chua admitted his liability while Lim Tong Lim refused such liability alleging that Chua and Yao acted without his knowledge and consent in representing themselves as a corporation.

TRIAL COURT RULING:A partnership among Lim, Chua and Yao existed based on the testimonies of the witnesses presented a Compromise Agreement executed by the threein Civil Case which Chua and Yao had brought against Lim The Compromise Agreement had revealed their intention to pay the loan with the proceeds of the sale of the vessels and fishing nets and to divide equally among them the excess or loss.

COURT OF APPEALS RULING: Affirmed trial courts decision petitioner was a partner of Chua and Yao in a fishing business and may thus be held liable as a such for the fishing nets and floats purchased by and for the use of the partnership. The evidence establishes that all the defendants including herein appellant Lim Tong Lim undertook a partnership for a specific undertaking, that is for commercial fishing.Obviously, the ultimate undertaking of the defendants was to divide the profits among themselves which is what a partnership essentially is.

PETITIONERS CONTENTION: the CA based its finding on the Compromise Agreement alone. disclaims any direct participation in the purchase of the nets, alleging that the negotiations were conducted by Chua and Yao only, and that he has not even met the representatives of the respondent company. he was a lessor, not a partner, of Chua and Yao, for the "Contract of Lease"

ISSUE: WON a partnership between Chua, Yao and Lim exists. YESWON Lim is liable as a partner. YES

SUPREME COURT RULING:From the factual findings of both lower courts, it is clear that Chua, Yao and Lim had decided to engage in a fishing business, which they started by buying boats worthP3.35 million, financed by a loan secured from Jesus Lim who was petitioners brother.In their Compromise Agreement, they subsequently revealed their intention to pay the loan with the proceeds of the sale of the boats, and to divide equally among them the excess or loss.These boats, the purchase and the repair of which were financed with borrowed money, fell under the term common fund under Article 1767.The contribution to such fund need not be cash or fixed assets; it could be an intangible like credit or industry.That the parties agreed that any loss or profit from the sale and operation of the boats would be divided equally among them also shows that they had indeed formed a partnership.Moreover, it is clear that the partnership extended not only to the purchase of the boat, but also to that of the nets and the floats.The fishing nets and the floats, both essential to fishing, were obviously acquired in furtherance of their business.It would have been inconceivable for Lim to involve himself so much in buying the boat but not in the acquisition of the aforesaid equipment, without which the business could not have proceeded.Given the preceding facts, it is clear that there was, among petitioner, Chua and Yao, a partnership engaged in the fishing business.They purchased the boats, which constituted the main assets of the partnership, and they agreed that the proceeds from the sales and operations thereof would be divided among them.

TRIVIAL ISSUE: Petitioners contention that he was not a partner, only a lessorIn the Contract of Lease and the registration papers, he was the owner of the boats.His allegation defies logic.He would like the Court to believe that he consented to the sale ofhis ownboats to pay a debt ofChua and Yao, with the excess of the proceeds to be divided amongthe three of them.No lessor would do what petitioner did.Indeed, his consent to the sale proved that there was a preexisting partnership among all three.It is absurd for petitioner to sell his property to pay a debt he did not incur, if the relationship among the three of them was merely that of lessor-lessee, instead of partners.

1. ANTONIA TORRES, assisted by her husband, ANGELO TORRES; and EMETERIA BARING,petitioners,vs. COURT OF APPEALS and MANUEL TORRES,respondents.

G.R. No. 134559.December 9, 1999

FACTS:Sisters Antonia Torres and Emeteria Baring entered into a "joint venture agreement" with Manuel Torres for the development of a parcel of land into a subdivision.Pursuant to the contract, they executed a Deed of Sale covering the said parcel of land in favor of respondent, who then had it registered in his name.By mortgaging the property, respondent obtained from Equitable Bank a loan of P40, 000 which, under the Joint Venture Agreement, was to be used for the development of the subdivision. All three of them also agreed to share the proceeds from the sale of the subdivided lots.The project did not push through, and the land was subsequently foreclosed by the bank.PETITIONER: The project failed because of respondents lack of funds or means and skills. They add that respondent used the loan not for the development of the subdivision, but in furtherance of his own company, Universal Umbrella Company.RESPONDENT: He used the loan to implement the Agreement.The proceeds of which were used for the survey and the subdivision of the land. He developed the roads, the curbs and the gutters of the subdivision and entered into a contract to construct low-cost housing units on the property. Respondent claimed that the subdivision project failed because petitioners and their relatives had separately caused the adverse claims on the title to the land, which eventually scared away prospective buyers.Despite his requests, petitioners refused to cause the clearing of the claims, thereby forcing him to give up on the project.Subsequently, petitioners filed a criminal case for estafa against respondent and his wife, who were however acquitted.Thereafter, they filed the present civil case which was later dismissed by the trial court.On appeal, however, the appellate court remanded the case for further proceedings.Thereafter, the RTC issued its assailed Decision which was affirmed by the CA which held that:Petitioners and respondent had formed a partnership for the development of the subdivision.Thus, they must bear the loss suffered by the partnership in the same proportion as their share in the profits stipulated in the contract.Disagreeing with the trial courts pronouncement that losses as well as profits in a joint venture should be distributed equally, the CA invoked Article 1797 of the Civil Code which provides:The losses and profits shall be distributed in conformity with the agreement.If only the share of each partner in the profits has been agreed upon, the share of each in the losses shall be in the same proportion.

The CA elucidated further:In the absence of stipulation, the share of each partner in the profits and losses shall be in proportion to what he may have contributed, but the industrial partner shall not be liable for the losses.As for the profits, the industrial partner shall receive such share as may be just and equitable under the circumstances.If besides his services he has contributed capital, he shall also receive a share in the profits in proportion to his capitalHence, this PetitionPETITIONERs contention: That the Joint Venture Agreement and the earlier Deed of Sale, both of which were the bases of the appellate courts finding of a partnership, were void. That under those very same contracts, respondent is liable for his failure to implement the project.Because the agreement entitled them to receive 60 percent of the proceeds from the sale of the subdivision lots, they pray that respondent pay them damages equivalent to 60 percent of the value of the property.

ISSUE:WON CA erred in concluding that the transaction between the petitioners and respondent was that of a joint venture/partnership, ignoring outright the provision of Article 1769, and other related provisions of the Civil Code of the Philippines.

HELD:NOThe Agreement indubitably shows the existence of a partnership pursuant to Article 1767 of the New Civil Code, which provides:By the contract of partnership two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves.Under the Agreement, petitioners would contribute property to the partnership in the form of land which was to be developed into a subdivision; while respondent would give, in addition to his industry, the amount needed for general expenses and other costs.Furthermore, the income from the said project would be divided according to the stipulated percentage.Clearly, the contract manifested the intention of the parties to form a partnershipIt should be stressed that the parties implemented the contract.Thus,petitioners transferred the title to the land to facilitate its use in the name of the respondent.On the other hand, respondent caused the subject land to be mortgaged, the proceeds of which were used for the survey and the subdivision of the land.As noted earlier, he developed the roads, the curbs and the gutters of the subdivision and entered into a contract to construct low-cost housing units on the property.

Petitioners Bound by Terms of ContractART. 1315.Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law.It is undisputed that petitioners are educated thus presumed to have understood the terms of the contract they voluntarily signed.If it was not in consonance with their expectations, they should have objected to it and insisted on the provisions they wanted.Courts are not authorized to extricate parties from the necessary consequences of their acts, and the fact that the contractual stipulations may turn out to be financially disadvantageous will not relieve parties thereto of their obligations.They cannot now disavow the relationship formed from such agreement due to their supposed misunderstanding of its terms.

Alleged Nullity of the Partnership AgreementPetitioners argue that the Joint Venture Agreement is void under Article 1773 of the Civil Code, which provides:A contract of partnership is void, whenever immovable property is contributed thereto, if an inventory of said property is not made, signed by the parties, and attached to the public instrument.They contend that since the parties did not make, sign or attach to the public instrument an inventory of the real property contributed, the partnership is void. HOWEVER, court held that:1. Article 1773 was intended primarily to protect third persons. Under the provision which is a complement of Article 1771, the execution of a public instrument would be useless if there is no inventory of the property contributed, because without its designation and description, they cannot be subject to inscription in the Registry of Property, and their contribution cannot prejudice third persons.Thus, the contract is declared void by the law when no such inventory is made.The case at bar does not involve third parties who may be prejudiced.Partnership Agreement Not the Result of an Earlier Illegal ContractPetitioners also contend that the Joint Venture Agreement is void under Article 1422 of the Civil Code, because it is the direct result of an earlier illegal contract, which was for the sale of the land without valid consideration.This argument is trivial.The Joint Venture Agreement clearly states that the consideration for the sale was the expectation of profits from the subdivision project.Its first stipulation states that petitioners did not actually receive payment for the parcel of land sold to respondent.Consideration, more properly denominated ascause, can take different forms, such as the prestation or promise of a thing or service by another.In this case, the cause of the contract of sale consisted not in the stated peso value of the land, but in the expectation of profits from the subdivision project, for which the land was intended to be used.

Liability of the PartiesClaiming that respondent was solely responsible for the failure of the subdivision project, petitioners maintain that he should be made to pay damages equivalent to 60% of the value of the property, which was their share in the profits under the Joint Venture Agreement.We are not persuaded.True, the CA held that petitioners acts were not the cause of the failure of the project. But it also ruled that neither was respondent responsible therefor. In imputing the blame solely to him, petitioners failed to give any reason why we should disregard the factual findings of the appellate court relieving him of fault.COURT DECISION:The Petition is herebyDENIEDand the challenged DecisionAFFIRMED.

2. BENITO LIWANAG and MARIA LIWANAG REYES, petitioners-appellants, vs. WORKMEN'S COMPENSATION COMMISSION, ET AL., respondents-appellees

FactsThe hired commercial guard of appellants, Benito Liwanag and Maria Liwanag Reyes in their co-owned Liwanag Auto Supply, was killed by criminal hands while at work. The guards widow, Ciriaca Vda. de Balderama, and minor children, in due time filed a claim for compensation with the Workmen's Compensation Commission which was granted.The award was the ordering of the appellants in this case to pay jointly and severally the amount of three thousand Four Hundred Ninety Four and 40/100 (P3,494.40) Pesos to the claimants in lump sum, and to pay to the Workmen's Compensation Funds the sum of P4.00 (including P5.00 for this review) as fees, pursuant to Section 55 of the Workmen's Compensation Act.In appealing the case to this Tribunal, appellants claimed that, under the Workmen's Compensation Act, the compensation is divisible. Moreover, they argue that the Act does not specifically provide that the obligation of an employer arising from compensable injury or death of an employee should be a solidary obligation. They conclude that in the absence of such provision, the responsibility of appellants should not be solidary but merely joint.

ISSUEWhether or not the law governing the liability of partners will apply in a case of a claim for compensation by dependents of an employee who died in line of duty.

RULINGNo. Their liability is solidary as the nature of the obligation requires it. According to Article 1207 of the Civil Code, there is solidary liability not just when the obligation expressly so states, but also when the nature of the obligation requires it. The following laws reasonably indicate that in compensation cases, the right to the employees dependents should be given full protection:1. Article 1711 of the New Civil Code provides that owners of enterprises and other employers are obliged to pay compensation for the death of or injuries to their laborers, workmen, mechanics or other employees, even though the event may have been purely accidental or entirely due to a fortuitous cause, if the death or personal injury arose out of and in the course of the employment.2. Article 1712 provides that if the death or injury is due to the negligence of a fellow-worker, the latter and the employer shall be solidarily liable for compensation. 3. Section 2 of the Workmen's Compensation Act as amended provides that the right to compensation as provided in this Act shall not be defeated or impaired on the ground that the death, injury or disease was due to the negligence of a fellow servant or employee, without prejudice to the right of the employer to proceed against the negligence party.Moreover, the Court ruled in its previous cases that Workmen's Compensation Act should be construed liberally in favor of the employee and his dependents and that doubts as to the right of compensation should be resolved in his favor.If the responsibility of appellants were to be merely joint and solidary, and one of them happens to be insolvent, the amount awarded to the appellees would only be partially satisfied, which is evidently contrary to the intent of the Law which mandates the giving of full protection the employee and his dependents.Thus, the Court ruled in favor of the appellees.

4. ELMO MUASQUE vs. COURT OF APPEALS, CELESTINO GALAN TROPICAL COMMERCIAL COMPANY and RAMON PONS, G.R. No. L-39780, November 11, 1985FACTS:Pet. filed a complaint for payment of sum of money and damages against Resp. Galan. The checks issued by Respondents Tropical and Pons for the remodelling of a portion of Tropicalsbuilding fell into the hands of Resp. Galan placingMunasque faced financial difficulties subjected him from demands of creditors to pay construction materials. Nevertheless, he undertook the construction and demanded to be paid by Resp. Galan.Respondent Pons succeeded in changing the payees name in the check delivered from Elmo Muasqueto Galan and Associates. Thus enabling Galan to cash the same at the Cebu Branch of the Philippine Commercial and Industrial Bank (PCIB) Business firms Cebu Southern Hardware Company and Blue Diamond Glass Palace were allowed to intervene, both having legal interest in the matter in litigation.RTC Decision: Both parties (Galan and Munasque) were ordered to pay intervenorssolidarily. CA Decision: Changed solidary to joint. Munasque contended that he and Galan are not partners. Moreover, it was only Galan who misappropriated the money.ISSUE:

WON Munasque and Galan are partners.WON Munasque shall be liable to pay the intervenors.

SC DECISION: Yes, for both issues.

The records will show that Munasque entered into a contract with Tropical for the renovation of the latters building on behalf of the partnership of "Galan and Muasque". When Muasque received the first payment of Tropical in the amount of P7,000.00 with a check made out in his name, he indorsed the check in favor of Galan. The liability of partners under the law to third persons for contracts executed in connection with partnership business is only pro rata under Art. 1816, of the Civil Code.

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 in the case of the third person.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 herein intervenors, as it was satisfactorily established that Galan acted in bad faith in his dealings with Muasque as a partner.

5. LEONCIA VIUDA DE CHAN DIACO (ALIAS LAO LIONG NAW) VS. JOSE S. Y. PENG, G.R. NO. L-29182, OCTOBER 24, 1928 -

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 proceeding sagainst 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, consisting of some merchandise. Judge Simplicio del Rosario appointed Ricardo Summers, as referee, authorizing him to take further evidence. Summers recommended that Vda. de Chan Diaco deliver to Jose S. Y. Peng, assignee of SMB, PPC and RRSC, a certain sum of money, accounts receivable, and books of account. Judge del Rosario approved Summers recommendation and ordered the merchants Cua Ico, Chan Keep, and Simon A. Chan Bona to show cause why they should not return the merchandise allegedly delivered to them by Vda. de Chan Diaco, together with P5,000 in cash, allegedly received from Vda. de Chan Diaco by Ico.Attorney for Vda. de Chan Diaco filed a motion to dismiss the proceedings, alleging that it should have been brought against LLNC. Judge del Rosario suspended his previous order, appointing Summers as referee. Summers found that LLNC was only a fictitious organization created for the purpose of deceiving the Bureau of Customs and enabling some of the partner-relatives to come to the Philippines under the status of merchants. Judge Francisco Zandueta, who temporarily replaced Judge del Rosario, disapproved Summers recommendation, affirmed the suspension of Judge del Rosarios previous order, dismissed the insolvency proceedings, ordered the return of all the properties of Vda. de Chan Diaco, and provided for leave of Peng to file a new petition for insolvency against LLNC.

ISSUE:Whether or not Vda. de Chan Diaco may be held liable for the debt allegedly contracted by LLNC.

HELD:YES. LLNC has no visible assets. The partners, individually, must jointly and severally respond for its debts (Art. 127, Code of Commerce). As Vda. de Chan Diaco is one of the partners and admits that she is insolvent, there is no reason for the dismissal of the proceedings against her. Both the partnership and the separate partners thereof may be joined in the same action, though the private property of the latter cannot be taken in payment of the partnership debts until the common property of the concern is exhausted

We also call attention to the fact that the evidence clearly shows that the business, alleged to have been that of the partnership, was carried on under the name "Leoncia Vda. de Chan Diaco" or "La Vda. de G. G. Chan Diaco," both of which are names of the appellee, and we think it can be safely held that a partnership may be adjudged bankrupt in the name of an ostensible partner, when such name is the name under which the partnership did business.

6. EUFRACIO D. ROJAS VS. CONSTANCIO B. MAGLANA, G.R. NO. 30616, DECEMBER 10, 1990 FACTSOn January 14, 1955, Maglana and Rojas executed their Articles of Co-Partnership (Exhibit "A") called Eastcoast Development Enterprises (EDE) with only the two of them as partners. The partnership EDE with an indefinite term of existence was duly registered on January 21, 1955 with the Securities and Exchange Commission. One of the purposes of the duly-registered partnership was to "apply or secure timber and/or minor forests products licenses and concessions over public and/or private forest lands and to operate, develop and promote such forests rights and concessions." Under the said Articles of Co-Partnership, appellee Maglana shall manage the business affairs of the partnership, including marketing and handling of cash and is authorized to sign all papers and instruments relating to the partnership, while appellant Rojas shall be the logging superintendent and shall manage the logging operations of the partnership. It is also provided in the said articles of co-partnership that all profits and losses of the partnership shall be divided share and share alike between the partners.During the period from January 14, 1955 to April 30, 1956, there was no operation of said partnership. Because of the difficulties encountered, Rojas and Maglana decided to avail of the services of Pahamotang as industrial partner.On March 4, 1956, Maglana, Rojas and Agustin Pahamotang executed their Articles of Co-Partnership (Exhibit "B" and Exhibit "C") under the firm name EASTCOAST DEVELOPMENT ENTERPRISES (EDE). Aside from the slight difference in the purpose of the second partnership which is to hold and secure renewal of timber license instead of to secure the license as in the first partnership and the term of the second partnership is fixed to thirty (30) years, everything else is the same.The partnership formed by Maglana, Pahamotang and Rojas started operation on May 1, 1956. On October 25, 1956, Pahamotang, Maglana and Rojas executed a document entitled "CONDITIONAL SALE OF INTEREST IN THE PARTNERSHIP, EASTCOAST DEVELOPMENT ENTERPRISE" (Exhibits "C" and "D") agreeing among themselves that Maglana and Rojas shall purchase the interest, share and participation in the Partnership of Pahamotang, the two (Maglana and Rojas) shall become the owners of all equipment contributed by Pahamotang and the EASTCOAST DEVELOPMENT ENTERPRISES, the name also given to the second partnership, be dissolved.After the withdrawal of Pahamotang, the partnership was continued by Maglana and Rojas without the benefit of any written agreement or reconstitution of their written Articles of Partnership On January 28, 1957, Rojas entered into a management contract with another logging enterprise, the CMS Estate, Inc. He left and abandoned the partnership.On February 4, 1957, Rojas withdrew his equipment from the partnership for use in the newly acquired area. The equipment withdrawn were his supposed contributions to the first partnership and was transferred to CMS Estate, Inc. by way of chattel mortgage. On March 17, 1957, Maglana wrote Rojas reminding the latter of his obligation to contribute, either in cash or in equipment, to the capital investments of the partnership as well as his obligation to perform his duties as logging superintendent.Two weeks after March 17, 1957, Rojas told Maglana that he will not be able to comply with the promised contributions and he will not work as logging superintendent. Meanwhile, Rojas took funds from the partnership more than his contribution. ISSUES 1. Whether or not the Second Partnership formed by Rojas, Maglana and Pamatong superseded the First Partnership.2. Whether or not after the dissolution of the Second Partnership a de facto partnership was formed between Maglana and Rojas.3. Whether or not Maglana can unilaterally dissolve the partnership. (Please note that since the First Partnership was not superseded, no de facto was formed and was still in effect, so this 3rd question pertains only between Maglana and Rojas)HELD1. No. The Second Partnership did not supersede the First Partnership. After a careful study of the records as against the conflicting claims of Rojas and Maglana, it appears evident that it was not the intention of the partners to dissolve the first partnership, upon the constitution of the second one. Except for the fact that they took in one industrial partner; gave him an equal share in the profits and fixed the term of the second partnership to thirty (30) years, everything else was the same. Thus, they adopted the same name, EASTCOAST DEVELOPMENT ENTERPRISES, they pursued the same purposes and the capital contributions of Rojas and Maglana as stipulated in both partnerships call for the same amounts. Just as important is the fact that all subsequent renewals of Timber License No. 35-36 were secured in favor of the First Partnership, the original licensee. To all intents and purposes therefore, the First Articles of Partnership were only amended, in the form of Supplementary Articles of Co-Partnership (Exhibit "C") which was never registered. Otherwise stated, even during the existence of the second partnership, all business transactions were carried out under the duly registered articles (referring to the First Partnership). As found by the trial court, it is an admitted fact that even up to now, there are still subsisting obligations and contracts of the first partnership. No rights and obligations accrued in the name of the second partnership except in favor of Pahamotang which was fully paid by the duly registered partnership. Duly registered partnership of Eastcoast Development Enterprises (First Partnership) continued to exist until liquidated and that the sharing basis of the partners should be on share and share alike.2. No. There was no formation of a de facto or at will partnership between Maglana and Rojas after they purchased the share of Pamatong leading to the second partnerships dissolution. The registered partnership under the firm name of Eastcoast Development Enterprises (EDE) evidenced by the Articles of Co-Partnership (Exhibit "A") has not been novated, superseded and/or dissolved by the unregistered articles of co-partnership among appellant Rojas, appellee Maglana and Agustin Pahamotang, (Exhibit "C") and accordingly, the terms and stipulations of said registered Articles of Co-Partnership (Exhibit "A") should govern the relations between him and Maglana. Upon withdrawal of Agustin Pahamotang from the unregistered partnership (Exhibit "C"), the legally constituted partnership EDE (Exhibit "A") continues to govern the relations between them and it was legal error to consider a de facto partnership between said two partners or a partnership at will.3. Yes. Maglana can unilaterally dissolve the partnership. Hence, as there are only two parties when Maglana notified Rojas that he dissolved the partnership, it is in effect a notice of withdrawal.Under Article 1830, par. 2 of the Civil Code, even if there is a specified term, one partner can cause its dissolution by expressly withdrawing even before the expiration of the period, with or without justifiable cause. Of course, if the cause is not justified or no cause was given, the withdrawing partner is liable for damages but in no case can he be compelled to remain in the firm. With his withdrawal, the number of members is decreased, hence, the dissolution. And in whatever way he may view the situation, the conclusion is inevitable that Rojas and Maglana shall be guided in the liquidation of the partnership by the provisions of its duly registered Articles of Co-Partnership; that is, all profits and losses of the partnership shall be divided "share and share alike" between the partners.As to whether Maglana is liable for damages because of such withdrawal, it will be recalled that after the withdrawal of Pahamotang, Rojas entered into a management contract with another logging enterprise, the CMS Estate, Inc., a company engaged in the same business as the partnership. He withdrew his equipment, refused to contribute either in cash or in equipment to the capital investment and to perform his duties as logging superintendent, as stipulated in their partnership agreement. The records also show that Rojas not only abandoned the partnership but also took funds in an amount more than his contribution. In the given situation Maglana cannot be said to be in bad faith nor can he be liable for damages.

7. MARJORIE TOCAO and WILLIAM T. BELO v COURT OF APPEALS and NENITA A. ANAY. G.R. No. 127405, October 4, 2000

FACTS:

Tocao, Belo, and Anay entered into a joint venture agreement for the importation and local distribution of kitchen cookwares. Their business name Geminiesse Enterprises was registered sole proprietorship under Tocaos name Belo was named capitalist, Tocao-President and General Manager, while Anay as Head of Marketing Department. Anay was later appointed as Vice-President for Sales. They agreed that Belos name will not appear in their transactions to West Bend Co. (their supplier). Instead, they used Anays name in their transactions with West Bend. Anay has a strong and established connection with West Bend Co. They agreed that Anay will be entitled to 10% of the net profits of the business operations. The agreement was not reduced to writing. Anay was invited invited to a distributor/dealers meeting with West Bend Co. Tocao consented and in her letter to the Embassy, she declared that Anay is a business partner of Geminesse Ents. Later, Tacao signed a letter saying that no longer is VP-Sales of Geminesse Ents., and that she is no longer allowed to hold office in their business. Anay cannot contact Belo despite attempts. Anay wanted to get her commission and share of profits. Belo & Tacao contend that since their agreement was reduced in writing, their agreement is unenforceable, void, and inexistent. They considered that there was no partnership between them and that Anay as only an employee and not a partner in their joint venture agreement.

ISSUE: WON Anay was a mere employee or a partner in Geminesse Ents.

RULING: Partnership is a consensual contract and an oral contract is as good as a written one. Though the partnership was not registered with SEC, the partnership is not nullified. Anay was an industrial partner who contributed his expertise to the partnership. The business venture did not result to employer-employee relationship. While it is true that receipt of percentage of net profits constitute only prima facie evidence of being a partner, Anay has a voice in the management of the business affairs. If Anay was only an employee, it is difficult to believe that they all receive same income. Though Geminesse Ents. was registered as a sole proprietorship in BDT, what was registered was only the name of the enterprise. Indubitably, the name was only used for practical reasons. Since it was Tacao who caused the dissolution of the partnership, she and Belo are jointly and severally liable for damages.

9. MAXIMO GUIDOTE vs. ROMANA BORJA, as administratrix of the estate of Narciso Santos, G.R. No. L-28920, October 24, 1928FACTS:Maximo Guidote and Narciso Santos formed in 1918 a partnership business under the name of Taller Sinukuan, in which Santos was the capitalist partner and Guidote was the industrial partner. Santos died in 1920. Guidote failed to liquidate the affairs of the partnership and to render an account thereof to Borja, the administratrix of Santos estate.Guidote brought an action against Borja to recover a sum of money [9k], a part of which was alleged to be the net profits from the business due Guidote, and the rest of the sum consisting of advances allegedly made by Guidote. Borja admitted the partnerships existence and prayed that Guidote be ordered to render an accounting and to pay the estate 25k as net profits, credits, and property pertaining to Santos.Guidote called several witnesses and introduced a so-called accounting and a mass of documentary evidence, which was so hopelessly and inextricably confusing that the court could not consider it of much probative value. The court dismissed Guidotes complaint and absolved Borja. Guidote was ordered to render a full and complete accounting, verified by vouchers, of the partnership business.Guidote rendered an account prepared by one Tomas Alfonso, a public accountant. Numerous objections were presented by Borja. The court disapproved the account and ordered that Borja submit an accounting from the date of the commencement of the partnershipup to the time the business was closed. Borja presented an account and liquidation prepared by a public accountant, Santiago A. Lindaya, showing a balance of P29k in Borjas [Santos estate] favor. At the hearing, Borja introduced the public accountant Jose Turiano Santiago to testify as to the results of an audit made by him of the partnership accounts. Santiago testified that he had prepared a separate accounting or liquidation similar in results to that prepared by Lindaya, but with a few differences in the sums total. [Computation: Santos is a creditor of the Taller Sinukuan in the sum of P26k. Guidote is a debtor to the Taller Sinukuan in the sum of P20k.]In order to contradict the conclusions of the two public accountants, Guidote presented Tomas Alfonso and the bookkeeper, Pio Gaudier, as witnesses.The trial court judge said that the testimonies of these witnesses are unreliable. Tomas Alfonso is the same public accountant who filed the liquidation Exhibit O on behalf of Guidote, in relation to the partnership business, which liquidation was disapproved by this court in a decision. The judge did not believe Alfonsos proposition that Guidote, a mere industrial partner, notwithstanding his having received 21k on the various jobs and contracts of the business had actually expended and paid out 63k, of 44k in excess of the gross receipts of the business. It materially contradicts Guidotes allegations to the effect that the advances that he [Guidote] made amounted only to 2k. Pio Gaudier is the same bookkeeper who prepared three entirely separate and distinct liquidation for the same partnership business, and the court found that the testimony given by him at the last hearing is confusing, contradictory and unreliable. Other witnesses were given scant considerationChua Chak can neither read nor write English, Spanish, or Tagalog; Claro Reyes was forced to admit that a certain exhibit was not the original.

The court gave credence to the conclusions reached by the public accountants presented by Borja. Guidote was ordered to pay P26k to Borja, with legal interest, plus costs. ISSUE & HOLDING: WON the trial court is correct in ordering Guidote to pay P26k to Borja. RATIO: YES. There may be some merit in Guidotes contention that the dismissal of his complaint was premature. The better practice would been to let the complaint stand until the result of the liquidation of the partnership affairs was known. But under the circumstances, no harm was done by the dismissal of Guidotes complaint. GUIDOTES ARGUMENTSince Santos, up to the time of his death, generally took care of the partnerships payments and collections, his legal representatives were under the obligation to render accounts of the operations, notwithstanding the fact that Guidote was in charge of the business subsequent to the death of Santos.GUIDOTES ARGUMENT IS UNAVAILINGWahl v. Donaldson Sim& Co.The death of one of the partners dissolves the partnership, but that the liquidation of its affairs is by law entrusted, not to the executors of the deceased partner, but to the surviving partners or the liquidators appointed by them.The rule for the conduct of a surviving partnerIn equity, surviving partners are treated as trustees of the representatives of the deceased partner, with regard to the interest of the deceased partner in the firm. As a consequence of this trusteeship, surviving partners are held in their dealings with the firm assets and the representatives of the deceased to that nicety of dealing and that strictness of accountability required of and incident to the position of one occupying a confidential relation. It is the duty of surviving partners to render an account of the performance of their trust to the personal representatives of the deceased partner, and to pay over to them the share of such deceased member in the surplus of firm property, whether it consists of real or personal assets. Guidote failed to observe this rule, and he is not in position to complain if his testimony and that of his witnesses is discredited. The appealed judgment is AFFIRMED.

10. MANUEL G. SINGSONG ET AL v ISABELA SAWMILLFacts:* January 30, 1951 - the defendants entered into a Contract of Partnership under the firm name "Isabela Sawmill." * April 25, 1958 - an action to dissolve the partnership was filed by the spouses Cecilio Saldajeno against Isabela Sawmill, Leon Garibay, and Timoteo Tubungbanua * April 27, 1958 - the defendants Leon Garibay, Timoteo Tubungbanua and Margarita G. Saldajeno entered into a "Memorandum of Agreement * May 26, 1958 - the defendants Leon Garibay, Timoteo Tubungbanua and Margarita G. Saldajeno executed a document entitled "Assignment of Rights with Chattel Mortgage" in favor of Sps. Saldejano * The defendants Leon Garibay and Timoteo Tubungbanua did not divide the partnerships assets between them, but they continued the business under the same name "Isabela Sawmill". * The chattel mortgage was later foreclosed* May 18, 1959 - the Provincial Sheriff of Negros Occidental published two (2) notices that he would sell at public auction on June 5, 1959 at Isabela, Negros Occidental certain trucks, tractors, machinery, office equipment and other things-

* October 15, 1969 a Certificate of Sale was executed by the Provincial Sheriff of Negros Occidental in favor of the defendant Margarita G. Saldajeno

* October 20, 1959 - the defendant Margarita G. Saldajeno executed a deed of sale in favor of the Pan Oriental Lumber Company transferring to the latter for the sum of P45,000.00 the trucks, tractors, machinery, and other things that she had purchased at a public auction- Plaintiffs herein are creditors of the defendant partnership. They sued the defendants to recover the sums of money they have advanced to the partnership, and asked for the nullity of the chattel mortgage.-

* CFI of Negros Occidental ruled in favor of plaintiffs, saying that plaintiffs, as creditors of the defendant partnership, have a preferred right over the assets of the said partnership, and over the proceeds of their sale at the public auction.- Saldejanos appealed- CA certified the case to SC considering that the resolution of appeal involves purely questions of law

ISSUE: Whether or not Isabela Sawmill ceased to be a partnership and that creditors could no longer demand payment.

RULING:On dissolution, the partnership is not terminated but continues until the winding up of the business. It does not appear that the withdrawal of Saldajeno from the partnership was published in the newspapers. The appellee and the public had a right to expect that whatever credit they extended to Leon Garibay and Tubongbanua doing business in the name of Isabela Sawmill could be enforced against the properties of said partnership. The judicial foreclosure of the chattel mortgage executed in favor of Saldajeno did not relieve her from liability to the creditors of the partnership.

It may be presumed that Saldajeno acted in good faith, the appellees also acted in good faith in extending credit to the partnership. Where one of the 2 innocent persons must suffer, that person who gave occasion for the damages to be caused must bear the consequences.

11. GREGORIO F. ORTEGA, TOMAS O. DEL CASTILLO, JR., and BENJAMIN T. BACORROvs. HON. COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION and JOAQUIN L. MISA,G.R. No. 109248|July 3, 1995FACTS: The law firm of ROSS, LAWRENCE, SELPH and CARRASCOSO was duly registered in the Mercantile Registry on 4 January 1937 and reconstituted with the Securities and Exchange Commission on 4 August 1948. The SEC records show that there were several subsequent amendments to the articles of partnership on 18 September 1958, to change the firm [name] to ROSS, SELPH and CARRASCOSO; on 6 July 1965 . . . to ROSS, SELPH, SALCEDO, DEL ROSARIO, BITO & MISA; on 18 April 1972 to SALCEDO, DEL ROSARIO, BITO, MISA & LOZADA; on 4 December 1972 to SALCEDO, DEL ROSARIO, BITO, MISA & LOZADA; on 11 March 1977 to DEL ROSARIO, BITO, MISA & LOZADA; on 7 June 1977 to BITO, MISA & LOZADA. On 19 December 1980, [Joaquin L. Misa] appellees Jesus B. Bito and Mariano M. Lozada associated themselves together, as senior partners with respondents-appellees Gregorio F. Ortega, Tomas O. del Castillo, Jr., and Benjamin Bacorro, as junior partners. On 1988, Atty. Joaquin L. Misa withdrew from the firm stating that the partnership has ceased to be mutually satisfactory beacuse of the working conditions of the employees including the assistant attorneys. He filed with Commissions Securities Investigation and Clearing Department a petition for the dissolution and liquidation of partnership. On 13 July 1988, respondents-appellees filed their opposition to the petition. On 13 July 1988, petitioner filed his Reply to the Opposition. On 31 March 1989, the hearing officer rendered a decision ruling that: "[P]etitioner's withdrawal from the law firm Bito, Misa & Lozada did not dissolve the said law partnership. Accordingly, the petitioner and respondents are hereby enjoined to abide by the provisions of the Agreement relative to the matter governing the liquidation of the shares of any retiring or withdrawing partner in the partnership interest." On appeal, the SEC en banc reversed the decision of the Hearing Officer and held that the withdrawal of Attorney Joaquin L. Misa had dissolved the partnership of "Bito, Misa & Lozada." The Commission ruled that, being a partnership at will, the law firm could be dissolved by any partner at anytime, such as by his withdrawal therefrom, regardless of good faith or bad faith, since no partner can be forced to continue in the partnership against his will. The Court of Appeals, finding no reversible error on the part of respondent Commission, AFFIRMED in toto the SEC decision and order appealed from. In fine, the appellate court held, per its decision of 26 February 1993, (a) that Atty. Misa's withdrawal from the partnership had changed the relation of the parties and inevitably caused the dissolution of the partnership; (b) that such withdrawal was not in bad faith; (c) that the liquidation should be to the extent of Attorney Misa's interest or participation in the partnership which could be computed and paid in the manner stipulated in the partnership agreement; (d) that the case should be remanded to the SEC Hearing Officer for the corresponding determination of the value of Attorney Misa's share in the partnership assets; and (e) that the appointment of a receiver was unnecessary as no sufficient proof had been shown to indicate that the partnership assets were in any such danger of being lost, removed or materially impaired.ISSUES:1. Whether or not the Court of Appeals has erred in holding that the partnership of Bito, Misa & Lozada (now Bito, Lozada, Ortega & Castillo) is a partnership at will; 2. Whether or not the Court of Appeals has erred in holding that the withdrawal of private respondent dissolved the partnership regardless of his good or bad faith; and 3. Whether or not the Court of Appeals has erred in holding that private respondent's demand for the dissolution of the partnership so that he can get a physical partition of partnership was not made in bad faith; RULING:FIRST ISSUE YES, the law firm is a partnership at will. A partnership that does not fix its term is a partnership at will. The parthership agreement states that "the partnership shall continue so long as mutually satisfactory and upon the death or legal incapacity of one of the partners, shall be continued by the surviving partners."SECOND ISSUE YES, any one of the partners may, at his sole pleasure, dictate a dissolution of the partnership at will [Art.1830 (1)]. 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 [Art.19]. 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, in turn, dependent on the constancy of that mutual resolve, along with each partner's capability to give it, and the absence of a cause for dissolution provided by the law itself. Among partners, mutual agency arises and the doctrine of delectus personae allows them to have the power, although not necessarily the right, to dissolve the partnership. An unjustified dissolution by the partner can subject him to a possible action for damages.THIRD ISSUE On the third and final issue, we accord due respect to the appellate court and respondent Commission on their common factual finding, i.e., that Attorney Misa did not act in bad faith. Public respondents viewed his withdrawal to have been spurred by "interpersonal conflict" among the partners. It would not be right, we agree, to let any of the partners remain in the partnership under such an atmosphere of animosity; certainly, not against their will. Indeed, for as long as the reason for withdrawal of a partner is not contrary to the dictates of justice and fairness, nor for the purpose of unduly visiting harm and damage upon the partnership, bad faith cannot be said to characterize the act. Bad faith, in the context here used, is no different from its normal concept of a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity.WHEREFORE, the decision appealed from is AFFIRMED. No pronouncement on costs.

12. VILLAREAL V. RAMIREZG.R. No. 144214, July 14, 2003A share in a partnership can be returned only after the completion of the latters dissolution, liquidation and winding up of the business.

FACTS:

Luzviminda J. Villareal, Carmelito Jose and Jesus Jose formed a partnership with a capital of P750,000 to operate a restaurant and catering business under the name Aquarius Food House and Catering Services. Villareal was appointed general manager and Carmelito Jose, operations manager.Respondent Ramirez joined as a partner in the business. His capital contribution of P250,000 was paid by his parents, Respondents Cesar and Carmelita Ramirez. After Jesus Jose withdrew from the partnership, his capital contribution of P250,000 was refunded to him in cash by agreement of the partners. In the same month, without prior knowledge of respondents, petitioners closed down the restaurant, allegedly because of increased rental. The restaurant furniture and equipment were deposited in the respondents house for storageRespondent spouses wrote petitioners, saying that they were no longer interested in continuing their partnership or in reopening the restaurant, and that they were accepting the latters offer to return their capital contribution.Carmelita Ramirez wrote another letter informing petitioners of the deterioration of the restaurant furniture and equipment stored in their house. She also reiterated the request for the return of their one-third share in the equity of the partnership. The repeated oral and written requests were, however, left unheeded. Respondents subsequently filed a Complaint for the collection of a sum of money from petitioners.

PETITIONERS CONTENTION:1.) respondents had expressed a desire to withdraw from the partnership and had called for its dissolution2.) respondents had been paid, upon the turnover to them of furniture and equipment worth over P400,000; and 3.) that respondents have no right to demand a return of their equity because their share, together with the rest of the capital of the partnership, had been spent as a result of irreversible business losses.

RESPONDENTS CONTENTION:1.) They did not know of any loan encumbrance on the restaurant. And if such were true, the loans incurred by petitioners should be regarded as purely personal and thus, not chargeable to the partnership. 2.) They had not received any regular report or accounting from the latter, who had solely managed the business. 3.) They expected the equipment and the furniture stored in their house to be removed by petitioners as soon as the latter found a better location for the restaurant.

ISSUES:(1) whether petitioners are liable to respondents for the latters share in the partnership; (2) whether the CAs computation of P253,114 as respondents share is correct

HELD:

The Petition has merit.

First Issue:Share in PartnershipBoth courts found that a partnership had indeed existed and was dissolved. Dissolution took place when respondents informed petitioners of the intention to discontinue it because of the formers dissatisfaction with, and loss of trust in, the latters management of the partnership affairs.We hold that respondents have no right to demand from petitioners the return of their equity share. Except as managers of the partnership, petitioners did not personally hold its equity or assets. The partnership has a juridical personality separate and distinct from that of each of the partners. Since the capital was contributed to the partnership, not to petitioners, it is the partnership that must refund the equity of the retiring partners.

Second Issue:What Must Be Returned?Since it is the partnership, as a separate and distinct entity, that must refund the shares of the partners, the amount to be refunded is necessarily limited to its 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 their shares, the creditors of the partnership must first be compensated. After all the creditors have been paid, whatever is left of the partnership assets becomes available for the payment of the partners shares.In the present case, the exact amount of refund equivalent to respondents one-third share in the partnership cannot be determined until all the partnership assets will have been liquidated and all partnership creditors are paid. The CAs computation of the amount to be refunded to respondents as their share was thus erroneous. First, it seems that the appellate court misapprehend that the total capital contribution was equivalent to the gross assets to be distributed to the partners at the time of the dissolution of the partnership. Generally its capital does not remain static and unaffected by the changing fortunes of the business. In the present case, there were omissions of any provision for the depreciation of the furniture and the equipment and amortization of the goodwill.Properly taking these non-cash items into account will show that the partnership was actually sustaining substantial losses, which consequently decreased the capital of the partnership. Lower courts recognized the decrease of the partnership assets but CA failed to recognize the corresponding decrease of the capital.Second, the CAs finding that the partnership had an outstanding obligation was not supported by evidence. Third, the CA failed to reduce the capitalization by P250,000, which was the amount paid by the partnership to Jesus Jose when he withdrew from the partnership.Because of the above-mentioned transactions, the partnership capital was actually reduced. The original amount of P250,000 which they had invested could no longer be returned to them, because one third of the partnership properties at the time of dissolution did not amount to that much.Petitioners argue that the turnover of the remaining partnership assets to respondents was precisely the manner of liquidating the partnership and fully settling the latters share in the partnership.We disagree. The delivery of the store furniture and equipment to private respondents was for the purpose of storage. They were unaware that the restaurant would no longer be reopened by petitioners. Hence, the former cannot be faulted for not disposing of the stored items to recover their capital investment.

13. Yu v. NLRC GR No. 97212, June 30, 1993

Original Partners - Lea Bendal and Rhodora Bendal as general partners and Chin Shian Jeng, Chen Ho-Fu and Yu Chan, as limited partnersFACTSBenjamin Yu used to be the Assistant General Manager of Jade Mountain, a partnership(Jade Mountain Products Company Limited) engaged in marble quarrying and export business. The majority of the founding partners (Lea Bendal, Rhodora Bendal and Mr. Yu Chang) sold their interests in said partnership to Willy Co and Emmanuel Zapanta without Yus knowledge. Said new partnership continued operating under the same name and continued the businesss operations. However, it transferred its main office from Makati to Mandaluyong. Said new partnership did not anymore availed of the services of Yu. Thus, he filed a complaint for illegal dismissal, recovery of unpaid wages and damages.

Benjamin Yu was hired by virtue of a Partnership Resolution, as Assistant General Manager with a monthly salary of P4,000.00. According to petitioner Yu, however, he actually received only half of his stipulated monthly salary, since he had accepted the promise of the partners that the balance would be paid when the firm shall have secured additional operating funds from abroad. Benjamin Yu actually managed the operations and finances of the business; he had overall supervision of the workers at the marble quarry in Bulacan and took charge of the preparation of papers relating to the exportation of the firm's products.ISSUE(1) whether the partnership which had hired petitioner Yu as Assistant General Manager had been extinguished and replaced by a new partnership composed of Willy Co and Emmanuel Zapanta; and (2) if indeed a new partnership had come into existence, whether petitioner Yu could nonetheless assert his rights under his employment contract as against the new partnership.RULING1st court: Labor Arbiter Nieves Vivar-De Castro rendered a decision holding that petitioner had been illegally dismissed. The Labor Arbiter decreed his reinstatement and awarded him his claim for unpaid salaries, backwages and attorney's fees.On appeal, the National Labor Relations Commission ("NLRC") reversed the decision of the Labor Arbiter and dismissed petitioner's complaint in a Resolution dated 29 November 1990. The NLRC held that a new partnership consisting of Mr. Willy Co and Mr. Emmanuel Zapanta had bought the Jade Mountain business, that the new partnership had not retained petitioner Yu in his original position as Assistant General Manager, and that there was no law requiring the new partnership to absorb the employees of the old partnership. Benjamin Yu, therefore, had not been illegally dismissed by the new partnership which had simply declined to retain him in his former managerial position or any other position. Finally, the NLRC held that Benjamin Yu's claim for unpaid wages should be asserted against the original members of the preceding partnership, but these though impleaded had, apparently, not been served with summons in the proceedings before the Labor Arbiter.6Appeal napud - Certiorari on SC ruling:(short version)The legal effect of the changes in the membership of the partnership was the dissolution of the old partnership which had hired Yu in 1984 and the emergence of a new firm composed of Willy Co and Emmanuel Zapanta in 1987. The new partnership simply took over the business enterprise owned by the preceeding partnership, and continued using the old name of Jade Mountain Products Company Limited, without winding up the business affairs of the old partnership, paying off its debts, liquidating and distributing its net assets, and then re-assembling the said assets or most of them and opening a new business enterprise. Not only the retiring partners but also the new partnership itself which continued the business of the old, dissolved, one, are liable for the debts of the preceding partnership.1st issue legal basis: The applicable law in this connection of which the NLRC seemed quite unaware is found in the Civil Code provisions relating to partnerships. Article 1828 of the Civil Code provides as follows:Art. 1828. The dissolution of a partnership is the change in the relation of the partnerscaused by any partner ceasing to be associated in the carrying onas distinguished from the winding upof the business. (Emphasis supplied)Article 1830 of the same Code must also be noted:Art. 1830. Dissolution is caused:(1) without violation of the agreement between the partners;xxx xxx xxx(b) by the express will of any partner, who must act in good faith, when no definite term or particular undertaking is specified;xxx xxx xxx(2) in contravention of the agreement between the partners, where the circumstances do not permit a dissolution under any other provision of this article,by the express will of any partner at any time;2nd issue legal basis: InSingson, et al. v. Isabela Saw Mill, et al,8the 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.9The 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 CodeUnder Article 1840 above, creditors of the old Jade Mountain are also creditors of the new Jade Mountain which continued the business of the old one without liquidation of the partnership affairs. Indeed, a creditor of the old Jade Mountain, like petitioner Benjamin Yu in respect of his claim for unpaid wages, is entitled to priorityvis-a-visany claim of any retired or previous partner insofar as such retired partner's interest in the dissolved partnership is concerned. It is not necessary for the Court to determine under which one or mare of the above six (6) paragraphs, the case at bar would fall, if only because the facts on record are not detailed with sufficient precision to permit such determination. It is, however, clear to the Court that under Article 1840 above, Benjamin Yu is entitled to enforce his claim for unpaid salaries, as well as other claims relating to his employment with the previous partnership, against the new Jade Mountain.14. PHILIPPINE AIR LINES, INC.,Petitioner, vs. ANTONIO BALANGUIT, ET AL., (PUBLIC UTILITIES EMPLOYEES ASSOCIATION [FEATI CHAPTER] and THE COURT OF INDUSTRIAL RELATIONS,Respondents.[G.R. No. L-8715.June 30, 1956.]

Facts:1. May 21, 1947, the Philippine Air Lines, Inc. (referred to as PAL) purchased and acquired a majority of the shares of the Far Eastern Air Transport, Inc. (referred to as FEATI). The purchase gave rise to the problem of what to do with the FEATI employees. After some negotiations between the representatives of the FEATI Employees Association and the PAL, the parties finally reached an agreement on May 21, 1947, whereby the PAL agreed to absorb some 70 per cent of the FEATI employees, and the said employees agreed to work for PAL under the same terms and conditions as they worked for the FEATI. 2. August 1, 1946, the Collective Bargaining Agreement with the FEATI granted the said employees certain privileges, among which were; the vacation and sick Leave. The employees will be entitled to twelve (12) days vacation leave and twelve (12) days sick leave with pay every year, which may be cumulative.3.On July 9, 1947, the PAL and the Public Utilities Employees Association entered into an agreement cancelling the agreements of May 21, 1947 and August 1, 1946, and declaring them void and of no further force and effect. It also provided for the laying off of all the FEATI employees as of June 15, 1947 and the payment to them of one and a half months separation pay which amounted, roughly to P150,000.00.Respondents Contention:4. Almost 6 years from the time they were laid off, the Public Utilities Employees Association filed a petition with the Court of Industrial Relations (CIR) praying that the PAL be ordered to pay them the twelve (12) days vacation leave and twelve (12) days sick leave with pay, from August 1, 1946, which had already accrued at the time they were laid off on June 15, 1947.Petitioners Contention: The PAL denied the liability, alleging that it was not a party to the Agreement of August 1, 1946. The said employees were absorbed by the PAL only on May 21, 1947 and were laid off on June 15, 1947.Decision of the CIR: The Court of Industrial Relations, through Associate Judge V. Jimenez Yanson, issued an Order requiring the PAL to pay the said employees the money value of whatever vacation and sick leave might have accrued to the said employees from August 1, 1946 to June 15, 1947.

ISSUE:Whether or not the PAL is legally liable for the payment of the money equivalent of the sick and vacation leave?

RULINGS:The order of the CIR and the resolution of the CIR en banc are set aside, and the complaint of the employees (Association) against the PAL was dismissed. When one company buys out another and continues the business of the latter company, the buyer may be said to assume the obligations of the company bought out when said obligations are not of considerable amount or value, specially when incurred in the ordinary course of trade, and when the business of the latter company is continued. However, when said obligation is of extraordinary value, as in this case, amounting to about P100,000, and the FEATI was bought out not to continue its business but to stop its operation in order to eliminate competition, as shown by the fact that all the employees of the FEATI were laid-off, we cannot say that the vendee assumed all the obligations of the rival airline.