GR L 2880; (December, 1906) (Digest)
G.R. No. L‑2880
December 4 1906
FACTS
– Plaintiff Frank S. Bourns sued D. M. Carman and several others for the balance of ₱437.50 due on a contract for sawing lumber for the lumber yard of Lo‑Chim‑Lim.
– The contract was entered into by Lo‑Chim‑Lim in his own name; he personally promised to pay the price.
– Plaintiff also sued Lo‑Chim‑Lim’s alleged partnersVicente Palanca, Go‑Tuaco, etc.asserting that they were joint proprietors of the lumber yard and thus jointly liable.
– The trial court dismissed the complaint against Carman and Fulgencio Tan‑Tongco (finding no partnership) but rendered judgment against the other defendants.
– On appeal, the Supreme Court examined whether the alleged relationship constituted a partnership that could bind the co‑participants to the plaintiff’s claim.
ISSUE
Whether the defendants who were merely participants in the profits and losses of Lo‑Chim‑Lim’s lumber yard were liable to the plaintiff under a partnership liability scheme, or whether the relationship was an accidental partnership of cuentas en participación (Article 239, Code of Commerce) that limited liability only to the managing partner.
RULING
– The Court held that the alleged partnership was based solely on a verbal arrangement, had no corporate name, and was not evidenced by a written or publicly recorded agreement.
– The business was conducted in Lo‑Chim‑Lim’s own name; the other parties merely shared in profits and losses without being parties to the contract with the plaintiff.
– Accordingly, the arrangement fit the definition of a cuentas en participación (Article 239). Under Article 242, a third‑party contract with the managing partner (“the person under whose name the business is conducted”) creates liability only against that partner, not against the silent participants.
– The plaintiff therefore had no cause of action against the appellants; the complaint lacked legal basis.
Disposition The Supreme Court reversed the lower court’s judgment against the appellants, absolving them of liability. No costs were awarded; the case was remanded for execution of the reversed judgment.