Partnership Case Doctrines and Evidence of Partnership

Lim Tong Lim vs PFGI (Engage in commercial fishing case)

• Started with Php 3.35M financed by a loan. Is this a valid contribution?
The contribution of a partner may be in the three forms of money, property and industry, or any
two or one of them. A partnership may, therefore, exist even if it is shown that
the partners have not contributed any capital of their own to a “common fund’’ for the
contribution may be in the form of credit or industry not necessarily cash or fixed assets.

Evidence of Partnership:
1. Contribution in the form of credit and industry
2. Lim approached Yao, already partners with Chua, to engage in commercial fishing
3. Compromise Agreement agreeing to split the profit or evenly pay the loss of the sale of
the boats

Evangelista vs CIR (3 sisters tax case)

• Is contribution and intent to divide the profits enough to form a partnership?
No. There has to be:
1. An intent to form a partnership
2. General participation in both profit and loss
3. Community of interest as far as 3 persons are concerned enabling each party to manage
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the whole property

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In this case, the 2 and 3 requirements are surely there. However, the intent to form the
partnership is derived from the following evidences:
1. The fund did not exist beforehand. There was an effort to create the fund for the purpose
of profit
2. Investments were a SERIES of transactions
3. The lots were not residential
4. Managed by one person similar to a business
5. The condition existed for more than 15 years

Estanislao vs CA (Gas station case)

• Is proof of contribution necessary?
Yes. The proof here is the Php15,000 pledge of capital in the joint affidavit which was cancelled
as it was duplicated in another contract with Shell. But the other contract did not mention of it
being a capital investment because of Shell’s policy of sole dealership.
Nevertheless there was an intent to form a partnership because of the following evidences:
1. Petitioner’s written authority for his sister to examine the books of their common
business
2. His sister assisted in the business
3. The siblings contributed to a common fund, the Php15,000 advanced rentals due to their
co-ownership of the leased land

Heirs of Lim vs Lim (Trucking business case)

• Additional evidences of partnership:
1. Wielding absolute control of the business without intervention
2. All properties in the questioned partner’s name
3. No salary received
4. No demand of periodic accounting

Torres vs CA (Subdivision 2 sisters case)

• Is the requirement of an inventory under Art. 1773 absolute?
No. Art. 1773 will not make the partnership agreement void for purposes of liability within the
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partnership i.e. no involvement of 3 persons.

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The purposes of Art. 1773 is to protect 3 persons such as creditors so that they would know the
value of the partnership and know which properties they can go after. In this case, there is no
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involvement of any 3 persons so voiding the partnership agreement would be unnecessary.

Further, nothing prevents the court from treating the partnership agreement as an ordinary
contract which contains rights and obligations. In other words, the partnership may be void
technically but in the interest of justice it may be a source of rights and obligations.

Evidence of partnership(joint venture) in this case:

1. Contribution of property from the sisters, contribution of industry, general expenses and
cost for Manuel Torres.
2. Division of profits 60-40 share in agreement

Litonjua vs Litonjua (Brothers family business case) <<opposite of Torres>>

• Can the case of Torres apply here?
No, because of the following reasons:
1. No agreement whatsoever (unsigned letter only)
2. Not in a public instrument
3. Multiple immovable properties
4. Involvement of 3 persons
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Agad vs Mabolo/Mabato (Fishpond business case)

• Is the inventory requirement under 1773 necessary for all partnerships involving
immovable property?

No. The immovable property has to be a contribution.

A partnership contract which states that the partnership is established “to operate a fishpond”
(not “to engage in a fi shpond business”) is not rendered void because no inventory of the
fishpond was made where it did not clearly and positively appear in the articles of
partnership that the real property had been contributed by anyone of the partners.

Angeles vs Sec of Justice (Antichresis lanzones case)

• Is the public instrument requirement in 1771 and the inventory requirement under
1773 necessary for all partnerships involving immovable property?

No. The immovable property has to be a contribution.

The contribution in this case is the Php210,000 for the spouses and the industry of Mercado. The
immovable property may be the land used for growing Lanzones but it is not a contribution
to the partnership.

Evidence of partnership in this case:

1. Contribution of money for the spouses, contribution of industry for Mercado
2. Mercado deposited amounts to spouses’ account representing their share in the profit
3. Spouses admitted to facts establishing industrial partnership
Navarro vs CA (Air Freight Agency case)
• Is co-ownership or co-possession enough to form a partnership?
No. There has to be the intent to form a partnership.

This case lacks evidence of partnership:

1. Mere agreement of co-possession of the personal property (Art. 1769)
2. The property remained registered in Yanson’s name and not in the “partnership” name
3. Existence of a net worth is not automatically equivalent to profit

Ortega vs CA (withdrawing partner case)

• Does a “Duration clause” in the partnership agreement signify a fixed term? Court presupposes a project
It depends if there was a period indicated. Here, there was no period of undertaking stated.
Therefore, it is still a partnership at will.

• Does a “Purpose clause” signify a partnership for a specific undertaking?

Not necessarily. The specific undertaking referred to in the law is a project with a definite period
of completion. Here, the purpose is generic and should it be ruled to be a partnership for a
specific undertaking, then all partnerships would be considered as such also.

• Does withdrawal demand payment for damages?

Only if the withdrawing partner did so in bad faith i.e. purposeful harm and damage upon the
partnership.

Moran Jr. vs CA (Poster printing case)

• Is the partner who failed to comply with his obligations required to pay
unrealized/compensatory (could have been) profits to the other partners?Is it
counted as fruits?
No. Only if the business is a profitable one. Here, the business failed. Hence, the award of
damages is speculative

The phrase in 1788 “…for interests and damages from the time he should have complied with his
obligation” is not applicable when there is no expectation of profit.
Further, here there is a mutual breach on both partners. Less reason to give compensatory
damages.

• If the partner at fault promised to pay the other partners a commission on the
profits, is he required to pay such?
No. Only if the business is a success. Payment of commissions are predicated on relatively
extravagant profits. Here, the business failed, hence no payment commission, despite the
promise.
• What should be paid if the erring partner exercised his best business judgment?
He should only return the:
1. Unused contribution
2. Share of the profits if there are any

Uy vs Puzon (UP Construction Company case)

• Why is compensatory damages awarded in this case? Why is this different from the
Moran Case?
1. The erring partner is the only one who failed to contribute (mutual breach in Moran)
2. The erring partner misapplied the funds, therefore, no exercise of best business judgment
3. His actions were prejudicial to the partnership
4. The business has the evidence of being profitable. The damages are not speculative but
based on a reasonable estimate
Evangelista vs Abad-Santos (Judge Indsutrial partner case)
• What kind of industry must an industrial partner contribute?
The law does not specify. As long as the partner rendered services without which the partnership
could not operate the business, he/she is an industrial partner.

• Is the description of “industrial partner” in the partnership agreement conclusive

that the partner is in fact an industrial partner?
Only if the one who opposes to such admitted the agreement’s genuineness and due execution.
They are barred from claiming the person is not an industrial partner by virtue of estoppel.

• Does being a judge bar a person from being an industrial partner under 1789 (An
industrial partner cannot engage in business for himself, unless the partnership expressly permits
him to do so…”)
Being a judge is hardly a business. If it is, it has no conflict of interest with any business. But
perhaps it can be argued that it takes so much time and attention.
But in this case, the partners already knew that the industrial partner was a judge prior to forming
the partnership. They cannot claim that they did not permit the said partner to perform such
duties.