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1.) DAN FUE LEUNG, petitioner, vs. HON. INTERMEDIATE APPELLATE COURT and LEUNG YIU, respondents.

G.R. No. 70926 January 31, 1989

GUTIERREZ, JR., J.:

FACTS:

The petitioner asks for the reversal of the decision of the then Intermediate Appellate Court in AC-G.R. No. CV-00881 which
affirmed the decision of the then Court of First Instance of Manila, Branch II in Civil Case No. 116725 declaring private
respondent Leung Yiu a partner of petitioner Dan Fue Leung in the business of Sun Wah Panciteria and ordering the
petitioner to pay to the private respondent his share in the annual profits of the said restaurant.

This case originated from a complaint filed by respondent Leung Yiu with the then Court of First Instance of Manila, Branch
II to recover the sum equivalent to twenty-two percent (22%) of the annual profits derived from the operation of Sun Wah
Panciteria since October, 1955 from petitioner Dan Fue Leung.

The Sun Wah Panciteria, a restaurant, located at Florentino Torres Street, Sta. Cruz, Manila, was established sometime in
October, 1955. It was registered as a single proprietorship and its licenses and permits were issued to and in favor of
petitioner Dan Fue Leung as the sole proprietor. Respondent Leung Yiu adduced evidence during the trial of the case to
show that Sun Wah Panciteria was actually a partnership and that he was one of the partners having contributed P4,000.00
to its initial establishment.

The private respondents evidence is summarized as follows:

About the time the Sun Wah Panciteria started to become operational, the private respondent gave P4,000.00 as his
contribution to the partnership. This is evidenced by a receipt wherein the petitioner acknowledged his acceptance of the
P4,000.00 by affixing his signature thereto. Furthermore, the private respondent received from the petitioner the amount of
P12,000.00 covered by the latter's Equitable Banking Corporation Check from the profits of the operation of the restaurant
for the year 1974

The petitioner denied having received from the private respondent the amount of P4,000.00. He contested and impugned
the genuineness of the receipt. His evidence is summarized as follows:

The petitioner did not receive any contribution at the time he started the Sun Wah Panciteria. He used his savings from his
salaries as an employee at Camp Stotsenberg in Clark Field and later as waiter at the Toho Restaurant amounting to a little
more than P2,000.00 as capital in establishing Sun Wah Panciteria. Petitioner presented various government licenses and
permits showing the Sun Wah Panciteria was and still is a single proprietorship solely owned and operated by himself alone.
Fue Leung also flatly denied having issued to the private respondent the receipt (Exhibit G) and the Equitable Banking
Corporation's Check No. 13389470 B in the amount of P12,000.00 (Exhibit B).

ISSUE: WON Private respondent is a partner of the petitioner in Sun Wah Panciteria?

HELD:

The private respondent is a partner of the petitioner in Sun Wah Panciteria. The requisites of a partnership which are — 1)
two or more persons bind themselves to contribute money, property, or industry to a common fund; and 2) intention on the
part of the partners to divide the profits among themselves (Article 1767, Civil Code; Yulo v. Yang Chiao Cheng, 106 Phil.
110)-have been established. As stated by the respondent, a partner shares not only in profits but also in the losses of the
firm. If excellent relations exist among the partners at the start of business and all the partners are more interested in seeing
the firm grow rather than get immediate returns, a deferment of sharing in the profits is perfectly plausible. It would be
incorrect to state that if a partner does not assert his rights anytime within ten years from the start of operations, such rights
are irretrievably lost. The private respondent's cause of action is premised upon the failure of the petitioner to give him the
agreed profits in the operation of Sun Wah Panciteria. In effect the private respondent was asking for an accounting of his
interests in the partnership.
It is Article 1842 of the Civil Code in conjunction with Articles 1144 and 1155 which is applicable. Article 1842 states:

The right to an account of his interest shall accrue to any partner, or his legal representative as against
the winding up partners or the surviving partners or the person or partnership continuing the business, at
the date of dissolution, in the absence or any agreement to the contrary.

Regarding the prescriptive period within which the private respondent may demand an accounting, Articles 1806, 1807, and
1809 show that the right to demand an accounting exists as long as the partnership exists. Prescription begins to run only
upon the dissolution of the partnership when the final accounting is done.

Considering the facts of this case, the Court may decree a dissolution of the partnership under Article 1831 of the Civil Code
which, in part, provides:

Art. 1831. On application by or for a partner the court shall decree a dissolution whenever:

xxx xxx xxx

(3) A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the
business;

(4) A partner willfully or persistently commits a breach of the partnership agreement, or otherwise so
conducts himself in matters relating to the partnership business that it is not reasonably practicable to
carry on the business in partnership with him;

xxx xxx xxx

(6) Other circumstances render a dissolution equitable.

There shall be a liquidation and winding up of partnership affairs, return of capital, and other incidents of dissolution because
the continuation of the partnership has become inequitable.

2.) HEIRS OF TAN ENG KEE, petitioners, vs. COURT OF APPEALS and BENGUET LUMBER COMPANY,
represented by its President TAN ENG LAY, respondents.

G.R. No. 126881 October 3, 2000

DE LEON, JR., J.:

FACTS:

After the second World War, Tan Eng Kee and Tan Eng Lay, pooling their resources and industry together, entered
into a partnership engaged in the business of selling lumber and hardware and construction supplies. They named
their enterprise "Benguet Lumber" which they jointly managed until Tan Eng Kee's death. Petitioners herein averred
that the business prospered due to the hard work and thrift of the alleged partners. However, they claimed that in
1981, Tan Eng Lay and his children caused the conversion of the partnership "Benguet Lumber" into a corporation
called "Benguet Lumber Company." The incorporation was purportedly a ruse to deprive Tan Eng Kee and his heirs
of their rightful participation in the profits of the business. Petitioners prayed for accounting of the partnership assets,
and the dissolution, winding up and liquidation thereof, and the equal division of the net assets of Benguet Lumber.

ISSUE: whether Tan Eng Kee and Tan Eng Lay were partners in Benguet Lumber

HELD:

Thus, in order to constitute a partnership, it must be established that (1) two or more persons bound themselves to
contribute money, property, or industry to a common fund, and (2) they intend to divide the profits among
themselves. The agreement need not be formally reduced into writing, since statute allows the oral constitution of a
partnership, save in two instances: (1) when immovable property or real rights are contributed, and (2) when the
partnership has a capital of three thousand pesos or more. In both cases, a public instrument is required. An
inventory to be signed by the parties and attached to the public instrument is also indispensable to the validity of the
partnership whenever immovable property is contributed to the partnership.

The trial court determined that Tan Eng Kee and Tan Eng Lay had entered into a joint venture, which it said is akin to
a particular partnership. A particular partnership is distinguished from a joint adventure, to wit:

(a) A joint adventure (an American concept similar to our joint accounts) is a sort of informal partnership,
with no firm name and no legal personality. In a joint account, the participating merchants can transact
business under their own name, and can be individually liable therefor.

(b) Usually, but not necessarily a joint adventure is limited to a SINGLE TRANSACTION, although the
business of pursuing to a successful termination may continue for a number of years; a partnership
generally relates to a continuing business of various transactions of a certain kind.

A joint venture "presupposes generally a parity of standing between the joint co-ventures or partners, in which each
party has an equal proprietary interest in the capital or property contributed, and where each party exercises equal
0rights in the conduct of the business."

Tan Eng Kee never asked for an accounting. The essence of a partnership is that the partners share in the profits
and losses. Each has the right to demand an accounting as long as the partnership exists. We have allowed a
scenario wherein "[i]f excellent relations exist among the partners at the start of the business and all the partners are
more interested in seeing the firm grow rather than get immediate returns, a deferment of sharing in the profits is
perfectly plausible." But in the situation in the case at bar, the deferment, if any, had gone on too long to be plausible.
A person is presumed to take ordinary care of his concerns.

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

(1) Except as provided by Article 1825, persons who are not partners as to each other are not partners as to
third persons;

(2) Co-ownership or co-possession does not of itself establish a partnership, whether such co-owners or co-
possessors do or do not share any profits made by the use of the property;

(3) The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing
them have a joint or common right or interest in any property which the returns are derived;

(4) The receipt by a person of a share of the profits of a business is a prima facie evidence that he is a
partner in the business, but no such inference shall be drawn if such profits were received in payment:

(a) As a debt by installment or otherwise;

(b) As wages of an employee or rent to a landlord;

(c) As an annuity to a widow or representative of a deceased partner;

(d) As interest on a loan, though the amount of payment vary with the profits of the business;

(e) As the consideration for the sale of a goodwill of a business or other property by installments or
otherwise.

In the light of the aforequoted legal provision, we conclude that Tan Eng Kee was only an employee, not a partner.
Even if the payrolls as evidence were discarded, petitioners would still be back to square one, so to speak, since they
did not present and offer evidence that would show that Tan Eng Kee received amounts of money allegedly
representing his share in the profits of the enterprise. Petitioners failed to show how much their father, Tan Eng Kee,
received, if any, as his share in the profits of Benguet Lumber Company for any particular period. Hence, they failed
to prove that Tan Eng Kee and Tan Eng Lay intended to divide the profits of the business between themselves, which
is one of the essential features of a partnership.

There being no partnership, it follows that there is no dissolution, winding up or liquidation to speak of.

3.) MARIANO P. PASCUAL and RENATO P. DRAGON, petitioners, vs.THE COMMISSIONER OF INTERNAL REVENUE
and COURT OF TAX APPEALS, respondents.

G.R. No. 78133 October 18, 1988

GANCAYCO, J.:

FACTS:

On June 22, 1965, petitioners bought two (2) parcels of land from Santiago Bernardino, et al. and on May 28, 1966, they
bought another three (3) parcels of land from Juan Roque. The first two parcels of land were sold by petitioners in 1968 to
Marenir Development Corporation, while the three parcels of land were sold by petitioners to Erlinda Reyes and Maria
Samson on March 19,1970. Petitioners realized a net profit in the sale made in 1968 in the amount of P165,224.70, while
they realized a net profit of P60,000.00 in the sale made in 1970. The corresponding capital gains taxes were paid by
petitioners in 1973 and 1974 by availing of the tax amnesties granted in the said years.

However, in a letter dated March 31, 1979 of then Acting BIR Commissioner Efren I. Plana, petitioners were assessed and
required to pay a total amount of P107,101.70 as alleged deficiency corporate income taxes for the years 1968 and 1970.

respondent Commissioner informed petitioners that in the years 1968 and 1970, petitioners as co-owners in the real estate
transactions formed an unregistered partnership or joint venture taxable as a corporation under Section 20(b) and its income
was subject to the taxes prescribed under Section 24, both of the National Internal Revenue Code 1 that the unregistered
partnership was subject to corporate income tax as distinguished from profits derived from the partnership by them which is
subject to individual income tax; and that the availment of tax amnesty under P.D. No. 23, as amended, by petitioners
relieved petitioners of their individual income tax liabilities but did not relieve them from the tax liability of the unregistered
partnership. Hence, the petitioners were required to pay the deficiency income tax assessed.

ISSUE: whether petitioners are subject to the tax on corporations provided for in section 24 of Commonwealth Act No. 466,
otherwise known as the National Internal Revenue Code, as well as to the residence tax for corporations and the real estate
dealers' fixed tax.

HELD:

Article 1767 of the Civil Code of the Philippines 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.

Pursuant to this article, the essential elements of a partnership are two, namely: (a) an agreement to
contribute money, property or industry to a common fund; and (b) intent to divide the profits among the
contracting parties. The first element is undoubtedly present in the case at bar, for, admittedly, petitioners
have agreed to, and did, contribute money and property to a common fund. Hence, the issue narrows
down to their intent in acting as they did. Upon consideration of all the facts and circumstances
surrounding the case, we are fully satisfied that their purpose was to engage in real estate transactions
for monetary gain and then divide the same among themselves, because:

1. Said common fund was not something they found already in existence. It was not a property inherited
by them pro indiviso. They created it purposely. What is more they jointly borrowed a substantial portion
thereof in order to establish said common fund.

2. They invested the same, not merely in one transaction, but in a series of transactions. On February 2,
1943, they bought a lot for P100,000.00. On April 3, 1944, they purchased 21 lots for P18,000.00. This
was soon followed, on April 23, 1944, by the acquisition of another real estate for P108,825.00. Five (5)
days later (April 28, 1944), they got a fourth lot for P237,234.14. The number of lots (24) acquired and
transcations undertaken, as well as the brief interregnum between each, particularly the last three
purchases, is strongly indicative of a pattern or common design that was not limited to the conservation
and preservation of the aforementioned common fund or even of the property acquired by petitioners in
February, 1943. In other words, one cannot but perceive a character of habituality peculiar to business
transactions engaged in for purposes of gain.

3. The aforesaid lots were not devoted to residential purposes or to other personal uses, of petitioners
herein. The properties were leased separately to several persons, who, from 1945 to 1948 inclusive, paid
the total sum of P70,068.30 by way of rentals. Seemingly, the lots are still being so let, for petitioners do
not even suggest that there has been any change in the utilization thereof.

4. Since August, 1945, the properties have been under the management of one person, namely, Simeon
Evangelists, with full power to lease, to collect rents, to issue receipts, to bring suits, to sign letters and
contracts, and to indorse and deposit notes and checks. Thus, the affairs relative to said properties have
been handled as if the same belonged to a corporation or business enterprise operated for profit.

5. The foregoing conditions have existed for more than ten (10) years, or, to be exact, over fifteen (15)
years, since the first property was acquired, and over twelve (12) years, since Simeon Evangelists
became the manager.

6. Petitioners have not testified or introduced any evidence, either on their purpose in creating the set up
already adverted to, or on the causes for its continued existence. They did not even try to offer an
explanation therefor.

Although, taken singly, they might not suffice to establish the intent necessary to
constitute a partnership, the collective effect of these circumstances is such as to leave
no room for doubt on the existence of said intent in petitioners herein. Only one or two of
the aforementioned circumstances were present in the cases cited by petitioners herein,
and, hence, those cases are not in point. 5

In the present case, there is no evidence that petitioners entered into an agreement to contribute money, property or
industry to a common fund, and that they intended to divide the profits among themselves. Respondent commissioner and/
or his representative just assumed these conditions to be present on the basis of the fact that petitioners purchased certain
parcels of land and became co-owners thereof.

4.) EVANGELISTA & CO., DOMINGO C. EVANGELISTA, JR., CONCHITA B. NAVARRO and LEONARDA ATIENZA
ABAD SABTOS, petitioners, vs. ESTRELLA ABAD SANTOS, respondent.

G.R. No. L-31684 June 28, 1973

MAKALINTAL, J.:

FACTS:

On October 9, 1954 a co-partnership was formed under the name of "Evangelista & Co." On June 7, 1955 the Articles of Co-
partnership was amended as to include herein respondent, Estrella Abad Santos, as industrial partner, with herein
petitioners Domingo C. Evangelista, Jr., Leonardo Atienza Abad Santos and Conchita P. Navarro, the original capitalist
partners, remaining in that capacity, with a contribution of P17,500 each. The amended Articles provided, inter alia, that "the
contribution of Estrella Abad Santos consists of her industry being an industrial partner", and that the profits and losses
"shall be divided and distributed among the partners ... in the proportion of 70% for the first three partners, Domingo C.
Evangelista, Jr., Conchita P. Navarro and Leonardo Atienza Abad Santos to be divided among them equally; and 30% for
the fourth partner Estrella Abad Santos."

On December 17, 1963 herein respondent filed suit against the three other partners in the Court of First Instance of Manila,
alleging that the partnership, which was also made a party-defendant, had been paying dividends to the partners except to
her; and that notwithstanding her demands the defendants had refused and continued to refuse and let her examine the
partnership books or to give her information regarding the partnership affairs to pay her any share in the dividends declared
by the partnership. She therefore prayed that the defendants be ordered to render accounting to her of the partnership
business and to pay her corresponding share in the partnership profits after such accounting, plus attorney's fees and costs.

ISSUE: whether the plaintiff-appellee (respondent here) is an industrial partner as claimed by her or merely a profit sharer
entitled to 30% of the net profits that may be realized by the partnership from June 7, 1955 until the mortgage loan from the
Rehabilitation Finance Corporation shall be fully paid, as claimed by appellants (herein petitioners).

HELD:

One cannot read appellee's testimony just quoted without gaining the very definite impression that, even
as she was and still is a Judge of the City Court of Manila, she has rendered services for appellants
without which they would not have had the wherewithal to operate the business for which appellant
company was organized. Article 1767 of the New Civil Code which provides that "By 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, 'does not specify the kind of
industry that a partner may thus contribute, hence the said services may legitimately be considered as
appellee's contribution to the common fund. Another article of the same Code relied upon appellants
reads:

'ART. 1789. An industrial partner cannot engage in business for himself, unless the
partnership expressly permits him to do so; and if he should do so, the capitalist
partners may either exclude him from the firm or avail themselves of the benefits
which he may have obtained in violation of this provision, with a right to damages in
either case.'

It is not disputed that the provision against the industrial partner engaging in business for himself seeks
to prevent any conflict of interest between the industrial partner and the partnership, and to insure faithful
compliance by said partner with this prestation. There is no pretense, however, even on the part of the
appellee is engaged in any business antagonistic to that of appellant company, since being a Judge of
one of the branches of the City Court of Manila can hardly be characterized as a business. That appellee
has faithfully complied with her prestation with respect to appellants is clearly shown by the fact that it
was only after filing of the complaint in this case and the answer thereto appellants exercised their right of
exclusion under the codal art just mentioned by alleging in their Supplemental Answer dated June 29,
1964 — or after around nine (9) years from June 7, 1955 — subsequent to the filing of defendants'
answer to the complaint, defendants reached an agreement whereby the herein plaintiff been excluded
from, and deprived of, her alleged share, interests or participation, as an alleged industrial partner, in the
defendant partnership and/or in its net profits or income, on the ground plaintiff has never contributed her
industry to the partnership, instead she has been and still is a judge of the City Court (formerly Municipal
Court) of the City of Manila, devoting her time to performance of her duties as such judge and enjoying
the privilege and emoluments appertaining to the said office, aside from teaching in law school in Manila,
without the express consent of the herein defendants' (Record On Appeal, pp. 24-25). Having always
knows as a appellee as a City judge even before she joined appellant company on June 7, 1955 as an
industrial partner, why did it take appellants many yearn before excluding her from said company as
aforequoted allegations? And how can they reconcile such exclusive with their main theory that appellee
has never been such a partner because "The real agreement evidenced by Exhibit "A" was to grant the
appellee a share of 30% of the net profits which the appellant partnership may realize from June 7, 1955,
until the mortgage of P30,000.00 obtained from the Rehabilitation Finance Corporal shall have been fully
paid." (Appellants Brief, p. 38).

What has gone before persuades us to hold with the lower Court that appellee is an industrial partner of
appellant company, with the right to demand for a formal accounting and to receive her share in the net
profit that may result from such an accounting, which right appellants take exception under their second
assigned error. Our said holding is based on the following article of the New Civil Code:

'ART. 1899. Any partner shall have the right to a formal account as to partnership
affairs:

(1) If he is wrongfully excluded from the partnership business or possession of its property by his co-
partners;
(2) If the right exists under the terms of any agreement;

(3) As provided by article 1807;

(4) Whenever other circumstance render it just and reasonable.

We find no reason in this case to depart from the rule which limits this Court's appellate jurisdiction to reviewing only errors
of law, accepting as conclusive the factual findings of the lower court upon its own assessment of the evidence.

5.) LA COMPAÑIA MARITIMA, plaintiff-appellant, vs. FRANCISCO MUÑOZ, ET AL., defendants-appellees.

G.R. No. L-3704 December 12, 1907

WILLARD, J.:

FACTS:

On the 31st day of March, 1905, the defendants Francisco Muñoz, Emilio Muñoz, and Rafael Naval formed on ordinary
general mercantile partnership under the name of Francisco Muñoz & Sons for the purpose of carrying on the mercantile
business in the Province of Albay which had formerly been carried on by Francisco Muñoz. Francisco Muñoz was a
capitalist partner and Emilio Muñoz and Rafael Naval were industrial partners.

The claim of the appellees that Emilio Muñoz contributed nothing to the partnership, either in property, money, or industry,
can not be sustained. He contributed as much as did the other industrial partner, Rafael Naval, the difference between the
two being that Rafael Naval was entitled by the articles of agreement to a fixed salary of P2,500 as long as he was in charge
of the branch office established at Ligao. If he had left that branch office soon after the partnership was organized, he would
have been in the same condition then that Emilio Muñoz was from the beginning. Such a change would have deprived him
of the salary P2,500, but would not have affected in any way the partnership nor have produced the effect of relieving him
from liability as a partner. The argument of the appellees seems to be that, because no yearly or monthly salary was
assigned to Emilio Muñoz, he contributed nothing to the partnership and received nothing from it. By the articles themselves
he was to receive at the end of five years one-eighth of the profits. It can not be said, therefore, that he received nothing
from the partnership. The fact that the receipt of this money was postponed for five years is not important. If the contention
of the appellees were sound, it would result that, where the articles of partnership provided for a distribution of profits at the
end of each year, but did not assign any specific salary to an industrial partner during that time, he would not be a member
of the partnership. Industrial partners, by signing the articles, agree to contribute their work to the partnership and article 138
of the Code of Commerce prohibits them from engaging in other work except by the express consent of the partnership.
With reference to civil partnerships, section 1683 of the Civil Code relates to the same manner.

It is also said in the brief of the appellees that Emilio Muñoz was entirely excluded from the management of the business. It
rather should be said that he excluded himself from such management, for he signed the articles of partnership by the terms
of which the management was expressly conferred by him and the others upon the persons therein named. That partners in
their articles can do this, admits of no doubt. Article 125 of the Code of Commerce requires them to state the partners to
whom the management is intrusted. This right is recognized also in article 132

ISSUE:

HELD:

Emilio Muñoz was, therefore, a general partner, and the important question in the case is whether, as such general partner,
he is liable to third persons for the obligations contracted by the partnership, or whether he relieved from such liability, either
because he is an industrial partner or because he was so relieved by the express terms of the articles of partnership.

Paragraph 12 of the articles of partnership is as follows:


Twelfth. All profits arising from mercantile transactions carried on, as well as such as may be obtained from the
sale of property and other assets which constitute the corporate capital, shall be distributed, on completion of the
term of five years agreed to for the continuation of the partnership, in the following manner: Three-fourths thereof
for the capitalist partner Francisco Muñoz de Bustillo and one-eighth thereof for the industrial partner Emilio Muñoz
de Bustillo y Carpiso, and the remaining one-eighth thereof for the partner Rafael Naval y Garcia. If, in lieu of
profits, losses should result in the winding up of the partnership, the same shall be for the sole and exclusive
account of the capitalist partner Francisco Muñoz de Bustillo, without either of the two industrial partners
participating in such losses.

In limited partnership the Code of Commerce recognizes a difference between general and special partners, but in a general
partnership there is no such distinction-- all the members are general partners. The fact that some may be industrial and
some capitalist partners does not make the members of either of these classes alone such general partners. There is
nothing in the code which says that the industrial partners shall be the only general partners, nor is there anything which
says that the capitalist partners shall be the only general partners.

Article 127 of the Code of Commerce is as follows:

All the members of the general copartnership, be they or be they not managing partners of the same, are 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, under the signature of the latter, and by a person authorized to make use thereof.

Do the words "all the partners" found in this article include industrial partners? The same expression is found in other articles
of the code. In article 129 it is said that, if the management of the partnership has not been limited by special act to one of
the partners, all shall have the right to participate in the management. Does this mean that the capitalist partners are the
only ones who have that right, or does it include also industrial partners? Article 132 provides that, when in the articles of
partnership the management has been intrusted to a particular person, he can not be deprived of such management, but
that in certain cases the remaining partners may appoint a comanager. Does the phrase "remaining partners" include
industrial partners, or is it limited to capitalist partners, and do industrial partners have no right to participate in the selection
of the comanager? Article 133 provides that all the partners shall have the right to examine the books of the partnership.
Under this article are the capitalist partners the only ones who have such right? Article 135 provides that the partners can
not use the firm name in their private business. Does this limitation apply only to capitalist partners or does it extend also to
industrial partners? Article 222 provides that a general partnership shall be dissolve by the death of one of the general
partners unless it is otherwise provided in the articles. Would such a partnership continue if all the industrial partners should
die? Article 229 provides that upon a dissolution of a general partnership it shall be liquidated by the former managers, but, if
all the partners do not agree to this, a general meeting shall be called, which shall determine to whom the settlement of the
affairs shall be intrusted. Does this phrase "all the partners" include industrial partners, or are the capitalist partners the only
ones who have a voice in the selection of a manager during a period of liquidation? Article 237 provides that the private
property of the general partners shall not be taken in payment of the obligations of the partnership until its property has been
exhausted. Does the phrase "the general partners" include industrial partners?

In all of these articles the industrial partners must be included. It can not have been intended that, in such a partnership as
the one in question, where there were two industrial and only one capitalist partner, the industrial partners should have no
voice in the management of the business when the articles of partnership were silent on that subject; that when the manager
appointed mismanages the business the industrial partners should have no right to appoint a comanager; that they should
have no right to examine the books; that they might use the firm name in their private business; or that they have no voice in
the liquidation of the business after dissolution. To give a person who contributed no more than, say, P500, these rights and
to take them away from a person who contributed his services, worth, perhaps, infinitely more than P500, would be
discriminate unfairly against industrial partners.

If the phrase "all the partners" as found in the articles other than article 127 includes industrial partners, then article 127
must include them and they are liable by the terms thereof for the debts of the firm.

But it is said that article 141 expressly declares to the contrary. It is to be noticed in the first place that this article does not
say that they shall not be liable for losses. Article 140 declares how the profits shall be divided amongthe partners. This
article simply declares how the losses shall be divided among the partners. The use of the words se imputaran is significant.
The verb means abonar una partida a alguno en su cuenta o deducirla de su debito. Article 141 says nothing about third
persons and nothing about the obligations of the partnership.

While in this section the word "losses" stand's alone, yet in other articles of the code, where it is clearly intended to impose
the liability to third persons, it is not considered sufficient, but the word "obligations" is added. Thus article 148, in speaking
of the liability of limited partners, uses the phrase las obligaciones y perdidas. There is the same use of the two same words
in article 153, relating to anonymous partnership. In article 237 the word "obligations" is used and not the word "losses."
The claim of the appellees is that this article 141 fixes the liability of the industrial partners to third persons for the obligations
of the company. If it does, then it also fixes the liability of the capitalist partners to the same persons for the same
obligations. If this article says that industrial partners are not liable for the debts of the concern, it also says that the capitalist
partners shall be only liable for such debts in proportion to the amount of the money which they have contributed to the
partnership; that is to say, that if there are only two capitalist partners, one of whom has contributed two-thirds of the capital
and the other one-third, the latter is liable to a creditor of the company for only one-third of the debt and the former for only
two-thirds. It is apparent that, when given this construction, article 141 is directly in conflict with article 127. It is not disputed
by the appellees that by the terms of article 127 each one of the capitalist partners is liable for all of the debts, regardless of
the amount of his contribution, but the construction which they put upon article 141 makes such capitalist partners liable for
only a proportionate part of the debts.

There is no injustice in imposing this liability upon the industrial partners. They have a voice in the management of the
business, if no manager has been named in the articles; they share in the profits and as to third persons it is no more than
right that they should share in the obligations. It is admitted that if in this case there had been a capitalist partner who had
contributed only P100 he would be liable for this entire debt of P26,000.

Our construction of the article is that it 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 this particular case that view is
strengthened by the provisions of article 12, above quoted. There it is stated that if, when the affairs of the partnership are
liquidated — that is, at the end of five years — it turns out that there had been losses instead of gains, then the capitalist
partner, Francisco Muñoz, shall pay such losses — that is, pay them to the industrial partners if they have been compelled
to disburse their own money in payment of the debts of the partnership.

While this is a commercial partnership and must be governed therefore by the rules of the Code of Commerce, yet an
examination of the provisions of the Civil Code in reference to partnerships may throw some light upon the question here to
be resolved. Articles 1689 and 1691 contain, in substance, the provisions of articles 140 and 141 of the Code of Commerce.
It is to be noticed that these articles are found in section 1 of Chapter II [Title VIII] of Book IV. That section treats of the
obligations of the partners between themselves. The liability of the partners as to third persons is treated in a distinct
section, namely, section 2, comprising articles from 1697 to 1699.

If industrial partners in commercial partnerships are not responsible to third persons for the debts of the firm, then industrial
partners in civil partnerships are not. Waiving the question as to whether there can be a commercial partnership composed
entirely of industrial partners, it seems clear that there can be such civil partnership, for article 1678 of the Civil Code
provides as follows:

A particular partnership has for its object specified things only, their use of profits, or a specified undertaking, or the
exercise of a profession or art.

It might very easily happen, therefor, that a civil partnership could be composed entirely of industrial partners. If it were,
according to the claim of the appellees, there would be no personal responsibility whatever for the debts of the partnership.
Creditors could rely only upon the property which the partnership had, which in the case of a partnership organized for the
practice of any art or profession would be practically nothing. In the case of Agustin vs. Inocencio, 1 just decided by this
court, it was alleged in the complaint, and admitted by the answer —

That is partnership has been formed without articles of association or capital other than the personal work of each
one of the partners, whose profits are to be equally divided among themselves.

Article 1675 of the Civil Code is as follows:

General partnership of profits include all that the partners may acquire by their by their industry or work during the
continuation of the partnership.

Personal or real property which each of the partners may possess at the time of the celebration of the agreement
shall continue to be their private property, the usufruct only passing to the partnership.

It might very well happen in partnership of this kind that no one of the partners would have any private property and that if
they did the usufruct thereof would be inconsiderable.
Having in mind these different cases which may arise in the practice, that construction of the law should be avoided which
would enable two persons, each with a large amount of private property, to form and carry on a partnership and, upon the
bankruptcy of the latter, to say to its creditors that they contributed no capital to the company but only their services, and that
their private property is not, therefore, liable for its debts.

But little light is thrown upon this question by the authorities. No judgment of the supreme court of Spain has been called to
our attention, and we have been able to find none which refers in any way to this question. There is, therefore, no authority
from the tribunal for saying that an industrial partner is not liable to third persons for the debts of the partnership.

In a work published by Lorenzo Benito in 1889 (Lecciones de derecho mercantil) it is said that industrial partners are not
liable for debts. The author, at page 127, divides general partnership into ordinary and irregular. The irregular partnership
are those which include one or more industrial partners. It may be said in passing that his views can not apply to this case
because the articles of partnership directly state that it is an ordinary partnership and do not state that it is an irregular one.
But his view of the law seems to be derived from something other than the Code of Commerce now in force. He says:

. . . but it has not been very fortunate in sketching the characters of a regular collective partnership (since it says
nothing conclusive in reference to the irregular partnership) . . . . (p. 127.)

And again:

This article would not need to be commented upon were it not because the writer entirely overlooked the fact that
there might exist industrial partners who did not contribute with capital in money, credits, or goods, which partners
generally participate in the profits but not in the losses, and whose position must also be determined in the articles
of copartnership. (p. 128.)

And again: lawphil.net

The only defect that can be pointed out in this article is the fact that it has been forgotten that in collective
partnerships there are industrial partners who, not being jointly liable for the obligations of the copartnership,
should not include their names in that of the firm. (p. 129.)

As a logical result of his theory he says that an industrial partner has no right to participate in the administration of the
partnership and that his name can not appear in the firm name. In this last respect his view is opposed to that of Manresa,
who says (Commentaries on the Spanish Civil Code, vol. 11, p. 330):

It only remains to us to state that a partner who contributes his industry to the concern can also confer upon it the
name or the corporate name under which such industry should be carried on. In this case, so long as the
copartnership lasts, it can enjoy the credit, reputation, and name or corporate name under which such industry is
carried on; but upon dissolution thereof the aforesaid name or corporate name pertains to the partner who
contributed the same, and he alone is entitled to use it, because such a name or style is an accessory to the work
of industrial partner, and upon recovering his work or his industry he also recovers his name or the style under
which he exercised his activity. It has thus been decided by the French court of cassation in a decision dated June
6, 1859.

In speaking of limited partnerships Benito says (p. 144) that here are found two kinds of partners, one with unlimited
responsibility and the other with limited responsibility, but adopting his view as to industrial partners, it should be said that
there are three kinds of partners, one with unlimited responsibility, another with limited responsibility, and the third, the
industrial partner, with no responsibility at all. In Estasen's recent publication on mercantile partnerships (Tratado de las
Sociedades Mercantiles) he quotes from the work of Benito, but we do not understand that he commits himself to the
doctrines therein laid down. In fact, in his former treatise, Instituciones de Derecho Mercantil (vol. 3, pp. 1-99), we find
nothing which recognizes the existence of these irregular general partnerships, or the exemption from the liability to third
persons of the industrial partners. He says in his latter work (p. 186) that according to Dr. Benito the irregular general partner
originated from the desire of the partnership to associate with itself some old clerk or employee as a reward for his services
and the interest which he had shown in the affairs of the partnership, giving him in place of a fixed salary a proportionate
part of the profits of the business. Article 269 of the Code of Commerce of 1829 relates to this subject and apparently
provides that such partners shall not be liable for debts. If this article was the basis for Dr. Benito's view, it can be so no
longer, for it does not appear in the present code. We held in the case of Fortis vs. Gutirrez Hermanos (6 Phil. Rep., 100)
that a mere agreement of that kind does not make the employee a partner.

An examination of the works of Manresa and Sanchez Roman on the Civil Code, and of Blanco's Mercantile Law, will shows
that no one of these mentions in any way the irregular general partnership spoken of by Dr. Benito, nor is there anything
found in any one of these commentaries which in any way indicates that an industrial partner is not liable to third persons for
the debts of the partnership. An examination of the French law will also show that no distinction of that kind is therein
anywhere made and nothing can be found therein which indicates that the industrial partners are not liable for the debts of
the partnership. (Fuzier-Herman, Repertoire de Droit Francais, vol. 34, pp. 256, 361, 510, and 512.)

Our conclusion is upon this branch of the case that neither on principle nor on authority can the industrial partner be relieved
from liability to third persons for the debts of the partnership.

It is apparently claimed by the appellee in his brief that one action can not be maintained against the partnership and the
individual partners, this claim being based upon the provisions of article 237 of the Code of Commerce which provides that
the private property of the partners shall not be taken until the partnership property has been exhausted. But this article
furnishes to argument in support of the appellee's claim. An action can be maintained against the partnership and partners,
but the judgment should recognize the rights of the individual partners which are secured by said article 237. lawphil.net

6.) E. M. BACHRACH, plaintiff-appellee, vs."LA PROTECTORA", ET AL., defendants-appellants.

G.R. No. L-11624 January 21, 1918

STREET, J.:

FACTS:

In the year 1913, the individuals named as defendants in this action formed a civil partnership, called "La Protectora," for the
purpose of engaging in the business of transporting passengers and freight at Laoag, Ilocos Norte. In order to provide the
enterprise with means of transportation, Marcelo Barba, acting as manager, came to Manila and upon June 23, 1913,
negotiated the purchase of two automobile trucks from the plaintiff, E. M. Bachrach, for the agree price of P16,500. He paid
the sum of 3,000 in cash, and for the balance executed promissory notes representing the deferred payments. These notes
provided for the payment of interest from June 23, 1913, the date of the notes, at the rate of 10 per cent per annum.
Provision was also made in the notes for the payment of 25 per cent of the amount due if it should be necessary to place the
notes in the hands of an attorney for collection. Three of these notes, for the sum of P3,375 each, have been made the
subject of the present action, and there are exhibited with the complaint in the cause. One was signed by Marcelo Barba in
the following manner:

P. P. La Protectora
By Marcelo Barba
Marcelo Barba.

The other two notes are signed in the same way with the word "By" omitted before the name of Marcelo Barba in the second
line of the signature. It is obvious that in thus signing the notes Marcelo Barba intended to bind both the partnership and
himself. In the body of the note the word "I" (yo) instead of "we" (nosotros) is used before the words "promise to
pay" (prometemos) used in the printed form. It is plain that the singular pronoun here has all the force of the plural.

As preliminary to the purchase of these trucks, the defendants Nicolas Segundo, Antonio Adiarte, Ignacio Flores, and
Modesto Serrano, upon June 12, 1913, executed in due form a document in which they declared that they were members of
the firm "La Protectora" and that they had granted to its president full authority "in the name and representation of said
partnership to contract for the purchase of two automobiles" (en nombre y representacion de la mencionada sociedad
contratante la compra de dos automoviles). This document was apparently executed in obedience to the requirements of
subsection 2 of article 1697 of the Civil Code, for the purpose of evidencing the authority of Marcelo Barba to bind the
partnership by the purchase. The document in question was delivered by him to Bachrach at the time the automobiles were
purchased.

From time to time after this purchase was made, Marcelo Barba purchased of the plaintiff various automobile effects and
accessories to be used in the business of "La Protectora." Upon May 21, 1914, the indebtedness resulting from these
additional purchases amounted to the sum of P2,916.57

In May, 1914, the plaintiff foreclosed a chattel mortgage which he had retained on the trucks in order to secure the purchase
price. The amount realized from this sale was P1,000. This was credited unpaid. To recover this balance, together with the
sum due for additional purchases, the present action was instituted in the Court of First Instance of the city of Manila, upon
May 29, 1914, against "La Protectora" and the five individuals Marcelo Barba, Nicolas Segundo, Antonio Adiarte, Ignacio
Flores, and Modesto Serrano. No question has been made as to the propriety of impleading "La Protectora" as if it were a
legal entity. At the hearing, judgment was rendered against all of the defendants. From this judgment no appeal was taken in
behalf either of "La Protectora" or Marcelo Barba; and their liability is not here under consideration. The four individuals who
signed the document to which reference has been made, authorizing Barba to purchase the two trucks have, however,
appealed and assigned errors. The question here to be determined is whether or not these individuals are liable for the firm
debts and if so to what extent.

The amount of indebtedness owing to the plaintiff is not in dispute, as the principal of the debt is agreed to be P7,037. Of
this amount it must now be assumed, in view of the finding of the trial court, from which no appeal has been taken by the
plaintiff, that the unpaid balance of the notes amounts to P4,121, while the remainder (P2,916) represents the amount due
for automobile supplies and accessories.

ISSUE: WON Barba has the authority to bind the partnership?

HELD:

The business conducted under the name of "La Protectora" was evidently that of a civil partnership; and the liability of the
partners to this association must be determined under the provisions of the Civil Code. The authority of Marcelo Barba to
bind the partnership, in the purchase of the trucks, is fully established by the document executed by the four appellants upon
June 12, 1913. The transaction by which Barba secured these trucks was in conformity with the tenor of this document. The
promissory notes constitute the obligation exclusively of "La Protectora" and of Marcelo Barba; and they do not in any sense
constitute an obligation directly binding on the four appellants. Their liability is based on the fact that they are members of
the civil partnership and as such are liable for its debts. It is true that article 1698 of the Civil Code declares that a member
of a civil partnership is not liable in solidum (solidariamente) with his fellows for its entire indebtedness; but it results from
this article, in connection with article 1137 of the Civil Code, that each is liable with the others (mancomunadamente) for his
aliquot part of such indebtedness. And so it has been held by this court. (Co-Pitco vs. Yulo, 8 Phil. Rep., 544.)

As to so much of the indebtedness as is based upon the claim for automobile supplies and accessories, it is obvious that the
document of June 12, 1913, affords no authority for holding the appellants liable. Their liability upon this account is,
however, no less obvious than upon the debt incurred by the purchase of the trucks; and such liability is derived from the
fact that the debt was lawfully incurred in the prosecution of the partnership enterprise.

There is no proof in the record showing what the agreement, if any, was made with regard to the form of management.
Under these circumstances it is declared in article 1695 of the Civil Code that all the partners are considered agents of the
partnership. Barba therefore must be held to have had authority to incur these expenses. But in addition to this he is shown
to have been in fact the president or manager, and there can be no doubt that he had actual authority to incur this obligation.

7.) ELMO MUÑASQUE, petitioner, vs. COURT OF APPEALS,CELESTINO GALAN TROPICAL COMMERCIAL
COMPANY and RAMON PONS,respondents.

G.R. No. L-39780 November 11, 1985

GUTTIERREZ, JR., J.:

FACTS:

Petitioner Elmo Muñasque filed a complaint for payment of sum of money and damages against respondents Celestino
Galan, Tropical Commercial, Co., Inc. (Tropical) and Ramon Pons, alleging that the petitioner entered into a contract with
respondent Tropical through its Cebu Branch Manager Pons for remodelling a portion of its building without exchanging or
expecting any consideration from Galan although the latter was casually named as partner in the contract; that by virtue of
his having introduced the petitioner to the employing company (Tropical). Galan would receive some kind of compensation
in the form of some percentages or commission; that Tropical, under the terms of the contract, agreed to give petitioner the
amount of P7,000.00 soon after the construction began and thereafter, the amount of P6,000.00 every fifteen (15) days
during the construction to make a total sum of P25,000.00; that on January 9, 1967, Tropical and/or Pons delivered a check
for P7,000.00 not to the plaintiff but to a stranger to the contract, Galan, who succeeded in getting petitioner's indorsement
on the same check persuading the latter that the same be deposited in a joint account; that on January 26, 1967 when the
second check for P6,000.00 was due, petitioner refused to indorse said cheek presented to him by Galan but through later
manipulations, respondent Pons succeeded in changing the payee's name from Elmo Muñasque to Galan and Associates,
thus enabling Galan to cash the same at the Cebu Branch of the Philippine Commercial and Industrial Bank (PCIB) placing
the petitioner in great financial difficulty in his construction business and subjecting him to demands of creditors to pay' for
construction materials, the payment of which should have been made from the P13,000.00 received by Galan; that petitioner
undertook the construction at his own expense completing it prior to the March 16, 1967 deadline;that because of the
unauthorized disbursement by respondents Tropical and Pons of the sum of P13,000.00 to Galan petitioner demanded that
said amount be paid to him by respondents under the terms of the written contract between the petitioner and respondent
company.

ISSUE: Whether or not there existed a partners between Celestino Galan and Elmo Muñasque

HELD:

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 fm the account cd 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.

In the case at bar the respondent Tropical had every reason to believe that a partnership existed between the petitioner and
Galan and no fault or error can be imputed against it for making payments to "Galan and Associates" and delivering the
same to Galan because as far as it was concerned, Galan was a true partner with real authority to transact on behalf of the
partnership with which it was dealing. This is even more true in the cases of Cebu Southern Hardware and Blue Diamond
Glass Palace who supplied materials on credit to the partnership. Thus, it is but fair that the consequences of any wrongful
act committed by any of the partners therein should be answered solidarily by all the partners and the partnership as a
whole

However. as between the partners Muñasque and Galan,justice also dictates that Muñasque 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 Muñasque as a partner.

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

G.R. No. 136448 November 3, 1999

PANGANIBAN, J.:
FACTS:

On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter Yao entered into a Contract dated February 7,
1990, for the purchase of fishing nets of various sizes from the Philippine Fishing Gear Industries, Inc. (herein respondent).
They claimed that they were engaged in a business venture with Petitioner Lim Tong Lim, who however was not a signatory
to the agreement. The total price of the nets amounted to P532,045. Four hundred pieces of floats worth P68,000 were also
sold to the Corporation. 4

The buyers, however, failed to pay for the fishing nets and the floats; hence, private respondents filed a collection suit
against Chua, Yao and Petitioner Lim Tong Lim with a prayer for a writ of preliminary attachment. The suit was brought
against the three in their capacities as general partners, on the allegation that "Ocean Quest Fishing Corporation" was a
nonexistent corporation as shown by a Certification from the Securities and Exchange Commission. 5 On September 20,
1990, the lower court issued a Writ of Preliminary Attachment, which the sheriff enforced by attaching the fishing nets on
board F/B Lourdes which was then docked at the Fisheries Port, Navotas, Metro Manila.

Instead of answering the Complaint, Chua filed a Manifestation admitting his liability and requesting a reasonable time within
which to pay. He also turned over to respondent some of the nets which were in his possession. Peter Yao filed an Answer,
after which he was deemed to have waived his right to cross-examine witnesses and to present evidence on his behalf,
because of his failure to appear in subsequent hearings. Lim Tong Lim, on the other hand, filed an Answer with
Counterclaim and Crossclaim and moved for the lifting of the Writ of Attachment. 6The trial court maintained the Writ, and
upon motion of private respondent, ordered the sale of the fishing nets at a public auction. Philippine Fishing Gear Industries
won the bidding and deposited with the said court the sales proceeds of P900,000. 7

On November 18, 1992, the trial court rendered its Decision, ruling that Philippine Fishing Gear Industries was entitled to the
Writ of Attachment and that Chua, Yao and Lim, as general partners, were jointly liable to pay respondent. 8

The trial court ruled that a partnership among Lim, Chua and Yao existed based (1) on the testimonies of the witnesses
presented and (2) on a Compromise Agreement executed by the three. In affirming the trial court, the CA held that 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.

ISSUE: whether by their acts, Lim, Chua and Yao could be deemed to have entered into a partnership.

HELD:

We are not persuaded by the arguments of petitioner. The facts as found by the two lower courts clearly showed that there
existed a partnership among Chua, Yao and him, pursuant to Article 1767 of the Civil Code which provides:

Art. 1767 — 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.

Specifically, both lower courts ruled that a partnership among the three existed based on the following factual findings: 15

(1) That Petitioner Lim Tong Lim requested Peter Yao who was engaged in commercial fishing to join
him, while Antonio Chua was already Yao's partner;

(2) That after convening for a few times, Lim, Chua, and Yao verbally agreed to acquire two fishing boats,
the FB Lourdes and the FB Nelson for the sum of P3.35 million;

(3) That they borrowed P3.25 million from Jesus Lim, brother of Petitioner Lim Tong Lim, to finance the
venture.

(4) That 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;

(5) That 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;
(6) That because of the "unavailability of funds," Jesus Lim again extended a loan to the partnership in
the amount of P1 million secured by a check, because of which, Yao and Chua entrusted the ownership
papers of two other boats, Chua's FB Lady Anne Mel and Yao's FB Tracy to Lim Tong Lim.

(7) That in pursuance of the business agreement, Peter Yao and Antonio Chua bought nets from
Respondent Philippine Fishing Gear, in behalf of "Ocean Quest Fishing Corporation," their purported
business name.

(8) That subsequently, Civil Case No. 1492-MN was filed in the Malabon RTC, Branch 72 by Antonio
Chua and Peter Yao against Lim Tong Lim for (a) declaration of nullity of commercial documents; (b)
reformation of contracts; (c) declaration of ownership of fishing boats; (4) injunction; and (e) damages.

(9) That the case was amicably settled through a Compromise Agreement executed between the parties-
litigants the terms of which are already enumerated above.

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 worth P3.35 million, financed by a loan secured from Jesus Lim who was
petitioner's 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.