Partnership

Partnership as Primarily a Contractual Relationship
FERNANDEZ VS. DELA ROSA
Facts: On the part of plaintiff Fernandez, he claims that he entered into a verbal agreement
with defendant De la Rosa to form a partnership for the purchase of cascoes with the
undertaking that the defendant will buy the cascoes and that each partner will furnish such
amount as he could, while the profits will be divided proportionately. Plaintiff furnished P300
for casco No. 1515 and P825 for casco No. 2089, both of which were placed under the name of
the defendant only. In April 1900, the parties undertook to draw up articles of their partnership
for the purpose of embodying it in an authentic document. The agreement however did not
materialize because defendant proposed articles which were materially different from their
verbal agreement, and he was also unwilling to include casco No. 2089 in the partnership.
Because the cascoes were under the management of the defendant, the plaintiff demanded an
accounting over it to which the defendant refused claiming that no partnership existed
between them.
De la Rosa, on the other hand, admits that he desired to form a partnership with the plaintiff
but denies that any agreement was ever consummated. Moreover, he denied receiving any
money furnished by plaintiff for casco No. 1515, but claims that he merely borrowed the P300
on his individual account from the bakery business in which plaintiff was a copartner. And as for
the P825 furnished by the plaintiff, the defendant claims that it was actually for casco No. 1515
and not for casco No. 2089. He also added that the repairs made on the two cascoes were
exclusively borne by him, and that he returned a sum of P1,125 to plaintiff with an express
reservation on his part of all his rights as a partner.
Issue: a) W/N a partnership existed between the parties. Yes.
a) The essential points upon which the minds of the parties must meet in a contract of
partnership are 1) mutual contribution and 2) joint interest in the profits.
It must be noted however that this partnership was subject to a suspensive condition which is
the execution of a written agreement regarding the distribution of profits, character of
partnership, etc. But since the defendant actually purchased the cascoes, it would seem that
the partnership already existed. And as furthermore provided by the Civil Code, a written
agreement was not necessary in order to give efficacy to the verbal agreement of the
partnership because the contributions of the partners to the partnership were not in the form
of immovables.
b) W/N the partnership was terminated when the defendant returned the P1,125 to plaintiff.
No.
Held:
b) During trial, the court was able to prove that plaintiff actually furnished some amount for the
repair of the cascoes and that it was presumed that a profit has been obtained by the
defendant prior to the return of the money. With these, the return of the
P1,125 fell short of the amount which the plaintiff has actually contributed to the partnership.
For these reasons, the acceptance by the plaintiff of the amount returned by the defendant did
not have the effect of terminating the legal existence of the partnership by converting it into a
societas leonina.
The court also proved that there was no intention on the part of the plaintiff, in accepting the
money, to relinquish his rights as a partner. On the contrary he notified defendant that he
waived none of his rights in the partnership. Also the lack of recognition on the part of the
defendant of the plaintiff’s right in the partnership property and in the profits does not give the
former the right to force a dissolution upon the later upon the terms which the plaintiff is
unwilling to accept. A partnership therefore existed between the two and cascoes No. 1515 and
2089 are partnership properties.

The fact that the defendant received money furnished by the plaintiff for the purpose of using
it to purchase the cascoes establishes the first element of the partnership, mutual contribution
to a common stock. For the second element, the fact that the formation of partnership had
been a subject of negotiation between them, even before the purchase of the first casco, and
that both parties intended to purchase the cascoes in common satisfies the requirement that
there should be an intention on the part of both parties to share the profits. With these, a
complete and perfect contract of partnership was entered into by the parties.