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G.R. No.

L-8576

February 11, 1915

VARGAS and COMPANY, plaintiff-appellee, vs. CHAN HANG CHIU, ET AL., defendants-appellants.

Facts: On the 19th day of August, 1911, an action was begun by Chan Hang Chiu against the plaintiff in this case as a mercantile association duly organized under the laws of the Philippine Islands, to recover a sum of money. The summons and complaint were placed in the hands of the sheriff, delivering to and leaving with one Jose Macapinlac personally true copies thereof, he being the managing agent of said Vargas & Co. at the time of such service. On July 2, 1912, the justice's court rendered judgment against Vargas & Co. for the sum of 372.28. It is plaintiffs contention that Vargas & Co. being a partnership, it is necessary, in bringing an action against it, to serve the summons on all of the partners, delivering to each one of them personally a copy thereof; and that the summons in this case having been served on the managing agent of the company only, the service was of no effect as against the company and the members thereof and the judgment entered by virtue of such a service was void. Issue: Whether or not it is indispensable in bringing an action to a partnership to serve summons to all parties thereof. Held: No, it is dispensable. Reasons: 1. It has been the universal practice in the Philippine Islands since American occupation, and was the practice prior to that time, to treat companies of the class to which the plaintiff belongs as legal or juridical entities and to permit them to sue and be sued in the name of the company, the summons being served solely on the managing agent or other official of the company specified by the section of the Code of Civil Procedure referred to. The plaintiff brings this action in the company name and not in the name of the members of the firm. Actions against companies of the class to which plaintiff belongs are brought, according to the uninterrupted practice, against such companies in their company names and not against the individual partners constituting the firm. In case the individual members of the firm must be separately served with process, the rule also prevails that they must be parties to the action, either plaintiffs or defendant, and that the action cannot be brought in the name of or against the company itself. 2. If it is necessary to serve the partners individually, they are entitled to be heard individually in the action and they must, therefore, be made parties thereto so that they can be heard. It would be idle to serve process on individual members of a partnership if the litigation were to be conducted in the name of the partnership itself and by the duly constituted officials of the partnership exclusively. In this case, is apparent that the plaintiff is acting contrary to its own contention by bringing the action in the name of the company. If not served with process, then the action should be brought in the individual names of the partners and not in the name of the company itself.

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[G.R. No. 136448. November 3, 1999] LIM TONG LIM, Petitioner, vs. PHILIPPINE FISHING GEAR INDUSTRIES, INC., respondent. Facts: Antonio Chua and Peter Yao entered into a Contract dated February 7, 1990, for the purchase of fishing nets of various sizes and floats 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 buyers, however, failed to pay for the fishing nets and the floats; hence, private respondent 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. 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. 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. The trial court noted that the Compromise Agreement was silent as to the nature of their obligations, but that joint liability could be presumed from the equal distribution of the profit and loss. CA affirmed. Lim appealed asserting that no partnership existed among. He disclaims any direct participation in the purchase of the nets, alleging that the negotiations were conducted by Chua and Yao only, and that he has not even met the representatives of the respondent company. Petitioner further argues that he was a lessor, not a partner, of Chua and Yao, for the "Contract of Lease" dated February 1, 1990, showed that he had merely leased to the two the main asset of the purported partnership -- the fishing boat F/B Lourdes. Issue: Whether by their acts, Lim, Chua and Yao could be deemed to have entered into a partnership. Held: Yes, they had entered into partnership.

Reason: Article 1767 - By the contract of partnership, two or more persons binds
themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves.

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

main assets of the partnership, and they agreed that the proceeds from the sales and operations thereof would be divided among them. Petitioners argument that he was merely the lessor of the boats to Chua and Yao, not a partner is baseless. He consented to the sale of his own boats to pay a debt of Chua and Yao, with the excess of the proceeds to be divided among the three of them. No lessor would do what petitioner did. Indeed, his consent to the sale proved that there was a preexisting partnership among all three. G.R. No. L-27343 February 28, 1979 MANUEL G. SINGSONG, JOSE BELZUNCE, AGUSTIN E. TONSAY, JOSE L. ESPINOS, BACOLOD SOUTHERN LUMBER YARD, and OPPEN, ESTEBAN, INC., plaintiffs-appellees, vs. ISABELA SAWMILL, MARGARITA G. SALDAJENO and her husband CECILIO SALDAJENO LEON GARIBAY, TIMOTEO TUBUNGBANUA, and THE PROVINCIAL SHERIFF OF NEGROS OCCIDENTAL, defendants, MARGARITA G. SALDAJENO and her husband CECILIO SALDAJENO, defendants-appellants. Facts: Isabela Sawmill was formed by partners Saldajeno, Lon and Timoteo. Saldajeno withdrew from the partnership and after dissolution; Leon and Timoteo continued the business still under the name Isabela Sawmill. The partnership is indebted to various creditors and that Sheriff sold the assets of Isabela Sawmill to Saldajeno and was subsequently sold to a separate company. Issue: Whether or not Isabela Sawmill ceased to be a partnership and that creditors could no longer demand payment. Held: On dissolution, the partnership is not terminated but continues until the winding up of the business. It does not appear that the withdrawal of Saldajeno from the partnership was published in the newspapers. The appellee and the public had a right to expect that whatever credit they extended to Leon and Timoteo doing business in the name of Isabela Sawmill could be enforced against the properties of said partnership. The judicial foreclosure of the chattel mortgage executed in favor of Saldajeno did not relieve her from liability to the creditors of the partnership. It may be presumed that Saldajeno acted in good faith, the appellees also acted in good faith in extending credit to the partnership. Where one of the 2 innocent persons must suffer, that person who gave occasion for the damages to be caused must bear the consequences.

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G.R. No. L-19819 October 26, 1977 WILLIAM UY, Plaintiff-Appellee, vs. BARTOLOME PUZON, substituted by FRANCO PUZON, Defendant-Appellant.

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