ETRIII Civil Law Review Lecture
Series
OUTLINE/ LECTURE ON
PARTNERSHIP
By: Atty. Eduardo T. Reyes, III
(Prepared for Law 4-C,
Univ. of San Agustin Law School,
Civil Law Review II, SY
2016-2017)
I. PARTNERSHIP. Partnership is a contract
whereby 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 [1].
1.1. Perfection. By mere consent. “A de
jure partnership exists by mere consent as to the elements of the
contractof partnership. On the other hand, if there is no intent to enter into
a partnership, then there can be no partnership whether de jure or de
facto”.[2]
1.2. How INTENT to form a Partnership
Ascertained.
In the case of Marjorie
Tocao v. CA[3], the
legal tell-tale signs that point to a partnership having been formed and
not mere hiring of an employee was taught in this manner, viz:
“Fresh from her
stint as marketing adviser of Technolux in Bangkok, Thailand, private
respondent Nenita A. Anay met petitioner William T. Belo, then the vice-president
for operations of Ultra Clean Water Purifier, through her former employer in
Bangkok. Belo introduced Anay to petitioner Marjorie Tocao, who conveyed
her desire to enter into a joint venture with her for the importation and local
distribution of kitchen cookwares. Belo volunteered to finance the joint
venture and assigned to Anay the job of marketing the product considering her
experience and established relationship with West Bend Company, a manufacturer
of kitchen wares in Wisconsin, U.S.A. Under the joint venture, Belo acted
as capitalist, Tocao as president and general manager, and Anay as head of the
marketing department and later, vice-president for sales. Anay organized
the administrative staff and sales force while Tocao hired and fired employees,
determined commissions and/or salaries of the employees, and assigned them to
different branches. The parties agreed that Belos name should not appear in any
documents relating to their transactions with West Bend Company. Instead,
they agreed to use Anays name in securing distributorship of cookware from that
company. The parties agreed further that Anay would be entitled to: (1)
ten percent (10%) of the annual net profits of the business; (2) overriding
commission of six percent (6%) of the overall weekly production; (3) thirty
percent (30%) of the sales she would make; and (4) two percent (2%) for her
demonstration services. The agreement was not reduced to writing on the
strength of Belos assurances that he was sincere, dependable and honest when it
came to financial commitments.
Anay having
secured the distributorship of cookware products from the West Bend Company and
organized the administrative staff and the sales force, the cookware business
took off successfully. They operated under the name of Geminesse
Enterprise, a sole proprietorship registered in Marjorie Tocaos name, with
office at 712 Rufino Building, Ayala Avenue, Makati City. Belo made good
his monetary commitments to Anay. Thereafter, Roger Muencheberg of West Bend
Company invited Anay to the distributor/dealer meeting in West Bend, Wisconsin,
U.S.A., from July 19 to 21, 1987 and to the southwestern regional convention in
Pismo Beach, California, U.S.A., from July 25-26, 1987. Anay accepted the
invitation with the consent of Marjorie Tocao who, as president and general
manager of Geminesse Enterprise, even wrote a letter to the Visa Section of the
U.S. Embassy in Manila on July 13, 1987. A portion of the letter reads:
Ms. Nenita D. Anay (sic), who has been patronizing and
supporting West Bend Co. for twenty (20) years now, acquired the
distributorship of Royal Queen cookware for Geminesse Enterprise, is the Vice
President Sales Marketing and a business partner of our company, will
attend in response to the invitation. (Italics supplied.)[3]
Anay arrived from
the U.S.A. in mid-August 1987, and immediately undertook the task of saving the
business on account of the unsatisfactory sales record in the Makati and Cubao
offices. On August 31, 1987, she received a plaque of appreciation from the
administrative and sales people through Marjorie Tocao[4] for
her excellent job performance. On October 7, 1987, in the presence of Anay,
Belo signed a memo[5] entitling
her to a thirty-seven percent (37%) commission for her personal sales "up
Dec 31/87. Belo explained to her that said commission was apart from her ten
percent (10%) share in the profits. On October 9, 1987, Anay learned that
Marjorie Tocao had signed a letter[6] addressed
to the Cubao sales office to the effect that she was no longer the
vice-president of Geminesse Enterprise. The following day, October 10, she
received a note from Lina T. Cruz, marketing manager, that Marjorie Tocao had
barred her from holding office and conducting demonstrations in both Makati and
Cubao offices.[7] Anay
attempted to contact Belo. She wrote him twice to demand her overriding
commission for the period of January 8, 1988 to February 5, 1988 and the audit
of the company to determine her share in the net profits. When her letters were
not answered, Anay consulted her lawyer, who, in turn, wrote Belo a letter.
Still, that letter was not answered.
Anay still
received her five percent (5%) overriding commission up to December
1987. The following year, 1988, she did not receive the same commission
although the company netted a gross sales of P13,300,360.00.
On April 5, 1988,
Nenita A. Anay filed Civil Case No. 88-509, a complaint for sum of money with
damages[8] against
Marjorie D. Tocao and William Belo before the Regional Trial Court of Makati,
Branch 140.
In her complaint,
Anay prayed that defendants be ordered to pay her, jointly and severally, the
following: (1) P32,00.00 as unpaid overriding commission from January 8, 1988
to February 5, 1988; (2) P100,000.00 as moral damages, and (3) P100,000.00 as
exemplary damages. The plaintiff also prayed for an audit of the finances of
Geminesse Enterprise from the inception of its business operation until she was
illegally dismissed to determine her ten percent (10%) share in the net
profits. She further prayed that she be paid the five percent (5%) overriding
commission on the remaining 150 West Bend cookware sets before her dismissal.
In their answer,[9] Marjorie
Tocao and Belo asserted that the alleged agreement with Anay that was neither
reduced in writing, nor ratified, was either unenforceable or void or
inexistent. As far as Belo was concerned, his only role was to introduce Anay to
Marjorie Tocao. There could not have been a partnership because, as Anay
herself admitted, Geminesse Enterprise was the sole proprietorship of Marjorie
Tocao. Because Anay merely acted as marketing demonstrator of Geminesse
Enterprise for an agreed remuneration, and her complaint referred to either her
compensation or dismissal, such complaint should have been lodged with the
Department of Labor and not with the regular court.
Petitioners
(defendants therein) further alleged that Anay filed the complaint on account
of ill-will and resentment because Marjorie Tocao did not allow her to lord it
over in the Geminesse Enterprise. Anay had acted like she owned the
enterprise because of her experience and expertise. Hence, petitioners were the
ones who suffered actual damages including unreturned and unaccounted stocks of
Geminesse Enterprise, and serious anxiety, besmirched reputation in the
business world, and various damages not less than P500,000.00. They also
alleged that, to vindicate their names, they had to hire counsel for a fee of
P23,000.00.
At the pre-trial
conference, the issues were limited to: (a) whether or not the plaintiff was an
employee or partner of Marjorie Tocao and Belo, and (b) whether or not the
parties are entitled to damages.[10]
In their defense,
Belo denied that Anay was supposed to receive a share in the profit of the
business. He, however, admitted that the two had agreed that Anay would
receive a three to four percent (3-4%) share in the gross sales of the
cookware. He denied contributing capital to the business or receiving a share
in its profits as he merely served as a guarantor of Marjorie Tocao, who was
new in the business. He attended and/or presided over business meetings of the
venture in his capacity as a guarantor but he never participated in
decision-making. He claimed that he wrote the memo granting the plaintiff
thirty-seven percent (37%) commission upon her dismissal from the business
venture at the request of Tocao, because Anay had no other income.
For her part,
Marjorie Tocao denied having entered into an oral partnership agreement with
Anay. However, she admitted that Anay was an expert in the cookware
business and hence, they agreed to grant her the following commissions:
thirty-seven percent (37%) on personal sales; five percent (5%) on gross sales;
two percent (2%) on product demonstrations, and two percent (2%) for
recruitment of personnel. Marjorie denied that they agreed on a ten percent
(10%) commission on the net profits. Marjorie claimed that she got the capital
for the business out of the sale of the sewing machines used in her garments
business and from Peter Lo, a Singaporean friend-financier who loaned her the
funds with interest. Because she treated Anay as her co-equal, Marjorie
received the same amounts of commissions as her. However, Anay failed to
account for stocks valued at P200,000.00.
On April 22,
1993, the trial court rendered a decision the dispositive part of which is as
follows:
WHEREFORE, in view of the foregoing, judgment is hereby
rendered:
1. Ordering
defendants to submit to the Court a formal account as to the partnership
affairs for the years 1987 and 1988 pursuant to Art. 1809 of the Civil Code in order
to determine the ten percent (10%) share of plaintiff in the net profits of the
cookware business;
2. Ordering
defendants to pay five percent (5%) overriding commission for the one hundred
and fifty (150) cookware sets available for disposition when plaintiff was
wrongfully excluded from the partnership by defendants;
3. Ordering
defendants to pay plaintiff overriding commission on the total production which
for the period covering January 8, 1988 to February 5, 1988 amounted to
P32,000.00;
4. Ordering
defendants to pay P100,000.00 as moral damages and P100,000.00 as exemplary
damages, and
5. Ordering
defendants to pay P50,000.00 as attorneys fees and P20,000.00 as costs of suit.
SO ORDERED.
The trial court
held that there was indeed an oral partnership agreement between the plaintiff
and the defendants, based on the following: (a) there was an intention to
create a partnership; (b) a common fund was established through contributions
consisting of money and industry, and (c) there was a joint interest in the
profits. The testimony of Elizabeth Bantilan, Anays cousin and the
administrative officer of Geminesse Enterprise from August 21, 1986 until it
was absorbed by Royal International, Inc., buttressed the fact that a
partnership existed between the parties. The letter of Roger Muencheberg of
West Bend Company stating that he awarded the distributorship to Anay and
Marjorie Tocao because he was convinced that with Marjories financial
contribution and Anays experience, the combination of the two would be invaluable
to the partnership, also supported that conclusion. Belos claim that he was
merely a guarantor has no basis since there was no written evidence thereof as
required by Article 2055 of the Civil Code. Moreover, his acts of attending
and/or presiding over meetings of Geminesse Enterprise plus his issuance of a
memo giving Anay 37% commission on personal sales belied this. On the contrary,
it demonstrated his involvement as a partner in the business.
The trial court
further held that the payment of commissions did not preclude the existence of
the partnership inasmuch as such practice is often resorted to in business
circles as an impetus to bigger sales volume. It did not matter that the
agreement was not in writing because Article 1771 of the Civil Code provides
that a partnership may be constituted in any form. The fact that Geminesse
Enterprise was registered in Marjorie Tocaos name is not determinative of
whether or not the business was managed and operated by a sole proprietor or a
partnership. What was registered with the Bureau of Domestic Trade was merely
the business name or style of Geminesse Enterprise.
The trial court
finally held that a partner who is excluded wrongfully from a partnership is an
innocent partner. Hence, the guilty partner must give him his due upon the
dissolution of the partnership as well as damages or share in the profits
realized from the appropriation of the partnership business and goodwill. An
innocent partner thus possesses pecuniary interest in every existing contract
that was incomplete and in the trade name of the co-partnership and assets at
the time he was wrongfully expelled.
Petitioners
appeal to the Court of Appeals[11] was
dismissed, but the amount of damages awarded by the trial court were reduced to
P50,000.00 for moral damages and P50,000.00 as exemplary damages. Their
Motion for Reconsideration was denied by the Court of Appeals for lack of
merit.[12] Petitioners
Belo and Marjorie Tocao are now before this Court on a petition for review
on certiorari, asserting that there was no business partnership between
them and herein private respondent Nenita A. Anay who is, therefore, not
entitled to the damages awarded to her by the Court of Appeals.
Petitioners Tocao
and Belo contend that the Court of Appeals erroneously held that a partnership
existed between them and private respondent Anay because Geminesse Enterprise
came into being exactly a year before the alleged partnership was formed, and
that it was very unlikely that petitioner Belo would invest the sum of
P2,500,000.00 with petitioner Tocao contributing nothing, without any
memorandum whatsoever regarding the alleged partnership.[13]
The issue of
whether or not a partnership exists is a factual matter which are within the
exclusive domain of both the trial and appellate courts. This Court cannot set
aside factual findings of such courts absent any showing that there is no
evidence to support the conclusion drawn by the court a quo.[14] In
this case, both the trial court and the Court of Appeals are one in ruling that
petitioners and private respondent established a business partnership. This
Court finds no reason to rule otherwise.
To be considered
a juridical personality, a partnership must fulfill these requisites: (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.[15] It
may be constituted in any form; a public instrument is necessary only where
immovable property or real rights are contributed thereto.[16] This
implies that since a contract of partnership is consensual, an oral contract of
partnership is as good as a written one. Where no immovable property or real
rights are involved, what matters is that the parties have complied with the
requisites of a partnership. The fact that there appears to be no record
in the Securities and Exchange Commission of a public instrument embodying the
partnership agreement pursuant to Article 1772 of the Civil Code[17] did
not cause the nullification of the partnership. The pertinent provision of
the Civil Code on the matter states:
Art. 1768. The partnership has a juridical personality
separate and distinct from that of each of the partners, even in case of
failure to comply with the requirements of article 1772, first paragraph.
Petitioners admit
that private respondent had the expertise to engage in the business of
distributorship of cookware. Private respondent contributed such expertise to
the partnership and hence, under the law, she was the industrial or managing
partner. It was through her reputation with the West Bend Company that the
partnership was able to open the business of distributorship of that companys
cookware products; it was through the same efforts that the business was
propelled to financial success. Petitioner Tocao herself admitted private
respondents indispensable role in putting up the business when, upon being
asked if private respondent held the positions of marketing manager and
vice-president for sales, she testified thus:
A: No, sir
at the start she was the marketing manager because there were no one to sell
yet, its only me there then her and then two (2) people, so about four (4).
Now, after that when she recruited already Oscar Abella and Lina Torda-Cruz
these two (2) people were given the designation of marketing managers of which
definitely Nita as superior to them would be the Vice President.[18]
By the set-up of the business, third persons were made to
believe that a partnership had indeed been forged between petitioners and private
respondents. Thus, the communication dated June 4, 1986 of Missy Jagler of West
Bend Company to Roger Muencheberg of the same company states:
Marge Tocao is president of Geminesse Enterprises.
Geminesse will finance the operations. Marge does not have cookware experience.
Nita Anay has started to gather former managers, Lina Torda and Dory Vista. She
has also gathered former demonstrators, Betty Bantilan, Eloisa Lamela, Menchu
Javier. They will continue to gather other key people and build up the organization.
All they need is the finance and the products to sell.[19]
On the other
hand, petitioner Belos denial that he financed the partnership rings hollow in
the face of the established fact that he presided over meetings regarding
matters affecting the operation of the business. Moreover, his having
authorized in writing on October 7, 1987, on a stationery of his own business
firm, Wilcon Builders Supply, that private respondent should receive
thirty-seven (37%) of the proceeds of her personal sales, could not be
interpreted otherwise than that he had a proprietary interest in the business.
His claim that he was merely a guarantor is belied by that personal act of
proprietorship in the business. Moreover, if he was indeed a guarantor of
future debts of petitioner Tocao under Article 2053 of the Civil Code,[20] he
should have presented documentary evidence therefor. While Article 2055 of the
Civil Code simply provides that guaranty must be express, Article 1403, the
Statute of Frauds, requires that a special promise to answer for the debt,
default or miscarriage of another be in writing.[21]
Petitioner Tocao,
a former ramp model,[22] was
also a capitalist in the partnership. She claimed that she herself
financed the business. Her and petitioner Belos roles as both capitalists
to the partnership with private respondent are buttressed by petitioner Tocaos
admissions that petitioner Belo was her boyfriend and that the partnership was
not their only business venture together. They also established a firm
that they called Wiji, the combination of petitioner Belos first name, William,
and her nickname, Jiji.[23] The
special relationship between them dovetails with petitioner Belos claim that he
was acting in behalf of petitioner Tocao. Significantly, in the early stage of
the business operation, petitioners requested West Bend Company to allow them
to utilize their banking and trading facilities in Singapore in the matter of
importation and payment of the cookware products.[24] The
inevitable conclusion, therefore, was that petitioners merged their respective
capital and infused the amount into the partnership of distributing cookware
with private respondent as the managing partner.
The business
venture operated under Geminesse Enterprise did not result in an
employer-employee relationship between petitioners and private respondent.
While it is true that the receipt of a percentage of net profits constitutes
only prima facie evidence that the recipient is a partner in the
business,[25] the
evidence in the case at bar controverts an employer-employee relationship
between the parties. In the first place, private respondent had a voice in
the management of the affairs of the cookware distributorship,[26] including
selection of people who would constitute the administrative staff and the sales
force. Secondly, petitioner Tocaos admissions militate against an
employer-employee relationship. She admitted that, like her who owned Geminesse
Enterprise,[27]private
respondent received only commissions and transportation and representation
allowances[28] and
not a fixed salary.[29] Petitioner
Tocao testified:
Q: Of
course. Now, I am showing to you certain documents already marked as Exhs. X
and Y. Please go over this. Exh. Y is denominated `Cubao overrides 8-21-87 with
ending August 21, 1987, will you please go over this and tell the Honorable
Court whether you ever came across this document and know of your own knowledge
the amount ---
A: Yes, sir
this is what I am talking about earlier. Thats the one I am telling you earlier
a certain percentage for promotions, advertising, incentive.
Q: I see.
Now, this promotion, advertising, incentive, there is a figure here and words
which I quote: Overrides Marjorie Ann Tocao P21,410.50 this means that you have
received this amount?
A: Oh yes,
sir.
Q: I see.
And, by way of amplification this is what you are saying as one representing
commission, representation, advertising and promotion?
A: Yes, sir.
Q: I see.
Below your name is the words and figure and I quote Nita D. Anay P21,410.50,
what is this?
A: Thats her
overriding commission.
Q: Overriding
commission, I see. Of course, you are telling this Honorable Court that there
being the same P21,410.50 is merely by coincidence?
A: No, sir,
I made it a point that we were equal because the way I look at her kasi,
you know in a sense because of her expertise in the business she is vital to my
business. So, as part of the incentive I offer her the same thing.
Q: So, in
short you are saying that this you have shared together, I mean having gotten
from the company P21,140.50 is your way of indicating that you were
treating her as an equal?
A: As an
equal.
Q: As an
equal, I see. You were treating her as an equal?
A: Yes, sir.
Q: I am
calling again your attention to Exh. Y Overrides Makati the other one is ---
A: That is
the same thing, sir.
Q: With
ending August 21, words and figure Overrides Marjorie Ann Tocao P15,314.25 the
amount there you will acknowledge you have received that?
A: Yes, sir.
Q: Again in
concept of commission, representation, promotion, etc.?
A: Yes, sir.
Q: Okey.
Below your name is the name of Nita Anay P15,314.25 that is also an indication
that she received the same amount?
A: Yes, sir.
Q: And, as
in your previous statement it is not by coincidence that these two (2) are the same?
A: No, sir.
Q: It is
again in concept of you treating Miss Anay as your equal?
A: Yes, sir.
(Italics supplied.)[30]
If indeed
petitioner Tocao was private respondents employer, it is difficult to believe
that they shall receive the same income in the business. In a partnership,
each partner must share in the profits and losses of the venture, except that
the industrial partner shall not be liable for the losses.[31] As
an industrial partner, private respondent had the right to demand for a formal
accounting of the business and to receive her share in the net profit.[32]
The fact that the
cookware distributorship was operated under the name of Geminesse Enterprise, a
sole proprietorship, is of no moment. What was registered with the Bureau
of Domestic Trade on August 19, 1987 was merely the name of that enterprise.[33] While
it is true that in her undated application for renewal of registration of that
firm name, petitioner Tocao indicated that it would be engaged in retail of
kitchenwares, cookwares, utensils, skillet,[34] she
also admitted that the enterprise was only 60% to 70% for the cookware
business, while 20% to 30% of its business activity was devoted to the sale of
water sterilizer or purifier.[35] Indubitably
then, the business name Geminesse Enterprise was used only for practical
reasons - it was utilized as the common name for petitioner Tocaos various
business activities, which included the distributorship of cookware.
Petitioners
underscore the fact that the Court of Appeals did not return the unaccounted
and unremitted stocks of Geminesse Enterprise amounting to P208,250.00.[36] Obviously
a ploy to offset the damages awarded to private respondent, that claim, more
than anything else, proves the existence of a partnership between them.
In Idos v. Court of Appeals, this Court said:
The best evidence of the existence of the partnership,
which was not yet terminated (though in the winding up stage), were the unsold
goods and uncollected receivables, which were presented to the trial court.
Since the partnership has not been terminated, the petitioner and private
complainant remained as co-partners. x x x.[37]
It is not surprising then that, even after private
respondent had been unceremoniously booted out of the partnership in October
1987, she still received her overriding commission until December 1987.
Undoubtedly,
petitioner Tocao unilaterally excluded private respondent from the partnership
to reap for herself and/or for petitioner Belo financial gains resulting from
private respondents efforts to make the business venture a success. Thus,
as petitioner Tocao became adept in the business operation, she started to
assert herself to the extent that she would even shout at private respondent in
front of other people.[38] Her
instruction to Lina Torda Cruz, marketing manager, not to allow private
respondent to hold office in both the Makati and Cubao sales offices concretely
spoke of her perception that private respondent was no longer necessary in the
business operation,[39] and
resulted in a falling out between the two. However, a mere falling out or
misunderstanding between partners does not convert the partnership into a sham
organization.[40] The
partnership exists until dissolved under the law. Since the partnership
created by petitioners and private respondent has no fixed term and is
therefore a partnership at will predicated on their mutual desire and consent,
it may be dissolved by the will of a partner. Thus:
x x x. 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 partners capability to give it, and the absence of
cause for dissolution provided by the law itself. Verily, any one of the
partners may, at his sole pleasure, dictate a dissolution of the partnership at
will. 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.[41]
An unjustified dissolution by a partner can subject him to
action for damages because by the mutual agency that arises in a partnership, the
doctrine of delectus personae allows the partners to have
the power, although not necessarily the right to dissolve
the partnership.[42]
In this case,
petitioner Tocaos unilateral exclusion of private respondent from the
partnership is shown by her memo to the Cubao office plainly stating that
private respondent was, as of October 9, 1987, no longer the vice-president for
sales of Geminesse Enterprise.[43] By
that memo, petitioner Tocao effected her own withdrawal from the partnership
and considered herself as having ceased to be associated with the partnership
in the carrying on of the business. Nevertheless, the partnership was not
terminated thereby; it continues until the winding up of the business.[44]
The winding up of
partnership affairs has not yet been undertaken by the partnership. This
is manifest in petitioners claim for stocks that had been entrusted to private
respondent in the pursuit of the partnership business.
The determination
of the amount of damages commensurate with the factual findings upon which it
is based is primarily the task of the trial court.[45] The
Court of Appeals may modify that amount only when its factual findings are
diametrically opposed to that of the lower court,[46] or
the award is palpably or scandalously and unreasonably excessive.[47] However,
exemplary damages that are awarded by way of example or correction for the
public good,[48] should
be reduced to P50,000.00, the amount correctly awarded by the Court of
Appeals. Concomitantly, the award of moral damages of P100,000.00 was
excessive and should be likewise reduced to P50,000.00. Similarly,
attorneys fees that should be granted on account of the award of exemplary
damages and petitioners evident bad faith in refusing to satisfy private
respondents plainly valid, just and demandable claims,[49] appear
to have been excessively granted by the trial court and should therefore be
reduced to P25,000.00.
WHEREFORE, the instant petition for review
on certiorari is DENIED. The partnership among petitioners and
private respondent is ordered dissolved, and the parties are ordered to effect
the winding up and liquidation of the partnership pursuant to the pertinent
provisions of the Civil Code. This case is remanded to the Regional Trial
Court for proper proceedings relative to said dissolution. The appealed
decisions of the Regional Trial Court and the Court of Appeals are AFFIRMED
with MODIFICATIONS, as follows ---
1. Petitioners are ordered to submit to the Regional
Trial Court a formal account of the partnership affairs for the years 1987 and
1988, pursuant to Article 1809 of the Civil Code, in order to determine private
respondents ten percent (10%) share in the net profits of the partnership;
2. Petitioners are ordered, jointly and severally, to
pay private respondent five percent (5%) overriding commission for the one
hundred and fifty (150) cookware sets available for disposition since the time
private respondent was wrongfully excluded from the partnership by petitioners;
3. Petitioners are ordered, jointly and severally, to
pay private respondent overriding commission on the total production which, for
the period covering January 8, 1988 to February 5, 1988, amounted to
P32,000.00;
4. Petitioners are ordered, jointly and severally, to
pay private respondent moral damages in the amount of P50,000.00, exemplary
damages in the amount of P50,000.00 and attorneys fees in the amount of
P25,000.00.
SO ORDERED”.
1.3. Entity Theory. From the time of perfection, the
partnership has a personality separate and distinct from the partner .[4]
1.4. Elements of Partnership.
a) Two or more persons bound
themselves to contribute money, property, or industry to a common fund; and
1.5. Formalities.
1.5.1. General Rule: No formalities
required.
1.5.2. Exceptions:
a) When immovable property or real
rights are contributed- the agreement must be in a public instrument and an
inventory signed by the parties must be attached to the instrument otherwise
the partnership is invalid, the rule is primarily intended to protect third
persons.[6]
b) When the partnership capital is
P3,000 or more. The partnership agreement must also be in public instrument but
failure to comply does not affect the existence of the juridical entity.[7]
c) In addition to para. b, the
Securities and Exchange Commission (SEC) further requires that it must be
registered by the SEC. However, the juridical personality is still not affected
by failure of registration[8]. But the “partnership” will just be
deprived of proof of registration for compliance with regulatory body’s
requirements. Tax benefits inuring to partnerships for instance, may not
be availed of in the absence of registration.
1.6. Parties
1.6.1. Doctrine of Delectus Personae.
“The
parties likewise agreed to arm themselves with protective mechanisms to
preserve their respective interests in the partnership in the event that (a) one
party decides to sell its shares to third parties; and (b) new Philseco shares
are issued. Anent the first situation, the non-selling party is given
the right of first refusal under section 1.4 to have a
preferential right to buy or to refuse the selling partys shares. The right of
first refusal is meant to protect the original or remaining joint venturer(s)
or shareholder(s) from the entry of third persons who are not acceptable to it
as co-venturer(s) or co-shareholder(s). The joint venture between
the Philippine Government and KAWASAKI is in the nature of a partnership[36] which,
unlike an ordinary corporation, is based on delectus personae.[37] No
one can become a member of the partnership association without the consent of
all the other associates. The right of first refusal thus ensures that the parties
are given control over who may become a new partner in substitution of or in
addition to the original partners. Should
the selling partner decide to dispose all its shares, the non-selling partner
may acquire all these shares and terminate the partnership. No person or
corporation can be compelled to remain or to continue the partnership. Of
course, this presupposes that there are no other restrictions in the maximum
allowable share that the non-selling partner may acquire such as the
constitutional restriction on foreign ownership in public utility. The
theory that KAWASAKI can acquire, as a maximum, only 40% of PHILSECOs shares is
correct only if a shipyard is a public utility. In such instance, the
non-selling partner who is an alien can acquire only a maximum of 40% of the
total capitalization of a public utility despite the grant of first
refusal. The partners cannot, by mere agreement, avoid the constitutional
proscription. X x x”[9].
1.7. Distinctions
1.7.1. Partnership v. Corporation.
a) Partnership is created by mere
consent; corporation by franchise granted by the State through the SEC.
b) Two persons enough to form a
partnership; corporation requires minimum of five incorporators.
c) There is mutual agency in
partnership but in corporation, none.
d) Interest in partnership can only
be transferred with consent of all other partners; in corporation, shares of
stock is property right of the shareholder.
e) There is no right of succession
in partnership as death dissolves it.
1.7.2. Joint Accounts
a) A joint account has no juridical
personality
b) No commercial name may be adopted
for joint accounts
1.7.3. Co-Ownership
a) There is no juridical personality
in co-ownership
b) Partnership cannot be created by
law but only by agreement while co-ownership may be created by law or
agreement.
c) Partnership is created for
business while co-ownership for common enjoyment of a thing.
d) Mutual agency rule applies in
partnership but in co-ownership the management devolves upon either the
financial or numerical majority
e) As to sharing in profits, in
partnership, it depends on the stipulation of the parties but in co-ownership,
the co-owner’s share in the benefits as well as in the charges shall be in
proportion to his interest and any stipulation to the contrary is void.
1.7.4. Joint- Ventures- Differs from partnership in that
a joint-venture is for a fleeting or “temporary purpose”, usually for a
particular business venture unlike a partnership which is usually meant to last
longer and for a series of transactions of the nature agreed upon by the
partners.
“Generally understood to mean an
organization formed for some temporary purpose, a
joint venture is likened to a particular partnership or one which has for its
object determinate things, their use or fruits, or a specific undertaking, or
the exercise of a profession or vocation.[27] The
rule is settled that joint ventures are governed by the law on partnerships[28] which
are, in turn, based on mutual agency or delectus personae.[29] Insofar
as a partners conveyance of the entirety of his interest in the partnership is
concerned, Article 1813 of the Civil Code provides as follows:
Art.
1813. A conveyance by a partner of his whole interest in the partnership
does not itself dissolve the partnership, or, as against the other partners in
the absence of agreement, entitle the assignee, during the continuance of the
partnership, to interfere in the management or administration of the
partnership business or affairs, or to require any information or account of
partnership transactions, or to inspect the partnership books; but it merely
entitles the assignee to receive in accordance with his contracts the profits
to which the assigning partners would otherwise be entitled. However, in
case of fraud in the management of the partnership, the assignee may avail
himself of the usual remedies.
In
the case of a dissolution of the partnership, the assignee is entitled to
receive his assignors interest and may require an account from the date only of
the last account agreed to by all the partners.
From the foregoing provision, it is
evident that (t)he transfer by a partner of his partnership interest does not
make the assignee of such interest a partner of the firm, nor entitle the
assignee to interfere in the management of the partnership business or to
receive anything except the assignees profits. The assignment does not
purport to transfer an interest in the partnership, but only a future
contingent right to a portion of the ultimate residue as the assignor may
become entitled to receive by virtue of his proportionate interest in the capital.[30]Since
a partners interest in the partnership includes his share in the profits,[31] we
find that the CA committed no reversible error in ruling that the Spouses Jaso
are entitled to Biondos share in the profits, despite Juanitas lack
of consent to the assignment of said Frenchmans interest in the joint venture. Although Eden did
not, moreover, become a partner as a consequence of the assignment and/or
acquire the right to require an accounting of the partnership business, the CA
correctly granted her prayer for dissolution of the joint venture conformably
with the right granted to the purchaser of a partners interest under Article
1831 of the Civil Code.[32]
Considering that they involve
questions of fact, neither are we inclined to hospitably entertain the Spouses
Realubits insistence on the supposed fact that Josefinas joint venture with
Biondo had already been dissolved and that the ice manufacturing business at
66-C Cenacle Drive, Sanville Subdivision, Project 6, Quezon City was merely a
continuation of the same business they previously operated under a single
proprietorship. It is well-entrenched doctrine that questions of fact
are not proper subjects of appeal by certiorari under Rule 45
of the Rules of Court as this mode of appeal is confined to questions of law.[33] Upon
the principle that this Court is not a trier of facts, we are not duty bound to
examine the evidence introduced by the parties below to determine if the trial
and the appellate courts correctly assessed and evaluated the evidence on
record.[34] Absent
showing that the factual findings complained of are devoid of support by the
evidence on record or the assailed judgment is based on misapprehension of
facts, the Court will limit itself to reviewing only errors of law.[35]
1.8. Kinds of Partnership. As to its object, a partnership
is either universal or particular. As regards the liability of the partners, a
partnership may be general or limited. A universal partnership may refer to all
the present property or to all the profits[11].
1.8.1.Universal partnership of
all present property. – The partners contribute all the properties
that actually belong to them at the time of perfection to a common fund or
shall become part of partnership property.[12]
1.8.2.Universal partnership of
profits. –comprises all that the partners may acquire by
their industry or work during the existence of the partnership.
1.8.3. Particular
partnership. – It has for its object determinate things, their use or
fruits, or specific undertaking, or the exercise of a profession or vocation.
1.9. Kinds of Partners
a) Capitalist partner- one
who contributes money or property
(Note: Capitalist partner cannot
engage in SAME LINE OF BUSINESS)
b) Industrial Partner- one
who contributes industry. (Note: He is not liable for losses; and he cannot
engage in ANY business unless expressly provided in the partnership agreement).
c) General Partner- one who
controls and manages the partnership and is liable for partnership obligations.
d) Limited Partner- he is
not personally liable for partnership obligations but is not involved in the
management of the partnership.
- Note: Under Article 1845, NCC,
“The contributions of a limited partner may be cash or other property, but
not services.” Therefore, no partner can be both industrial
and limited at the same time.
e) Managing Partner- one who
is designated as the person who will administer the affairs of the partnership.
f) Liquidating Partner- one who
winds- up the affairs of a dissolved partnership.
g) Associate or Sub-Partner- He
is not a real partner but he is the one with who a partner shares his profits
in a partnership. The associate may only be admitted as partner with the
consent of ALL the other partners.[13]
o May a CORPORATION be a partner?
-A corporation cannot become a
member of a partnership in the absence of express authorization by statute or
charter.
-Reasons:
i. Mutual agency between partners
would be inconsistent with the policy of law
ii. Such arrangement would improperly
allow corporate property to become subject to risks not contemplated by the
stockholders (Note: Limited liability doctrine).
Exception: SEC Rules allow
corporations to enter into a LIMITED PARTNERSHIP only and corporation is the
limited partner.
1.10. Obligations & Rights of
Partners
Fiduciary duties. In general, fiduciary duty
requires that the partners act in good faith and with fairness. The fiduciary
duties of the partners cannot be eliminated by contract. In Meinhard v.
Salmon[14] it
was held that “many forms of conduct permissible in a workday world for those
acting at arms length, are forbidden to those bound by fiduciary ties. A
(partner) is held to something stricter than the morals of the market place.
Not honesty alone, but punctilio of an honor the most sensitive, is then the
standard of behavior”.
The FIDUCIARY DUTIES include:
1) Loyalty
2) Obedience
3) Diligence
4) Duty to Inform.- Partner owes a
duty to inform other partners of all information regarding partnership affairs.
1.11. Liabilities of Partners
1.11.1. Note: Mutual Agency Rule
1.11.2. Kinds of Authority: Express, Implied and Apparent
Authority (see doctrine in Agency).
1.11.3. Partner by Estoppel. A person who is not a
partner but who represents himself as a partner (or who consented to such representation
being made public) is liable to third persons who relied on his
representations.[15]
- There could be a partner by
estoppel even if there is no partnership.
1.12. Dissolution: Dissolution, Winding-Up and
Termination of Partnership.
1.12.1. Extra-Judicial Dissolution-
a) By the act of one or more
partners without violation of the agreement between the partners
b) In contravention of the agreement
between partners
c) Dissolution by operation of law
(see Article 1803, NCC)- illegality of business; specific thing promised to be
contributed to partnership perishes BEFORE DELIVERY, death of partner,
Insolvency of any partner, civil interdiction of any partner.
1.12.2. Judicial Dissolution-
1.12.3. Wrongful Dissolution[16] - A partner who wrongfully terminates the
partnership in contravention of the agreement may be held liable for damages by
the innocent parties.
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