Evangelista & Co. et.al. v. Estrella Abad Santos

FACTS:

On October 9, 1954, a co-partnership with herein petitioners as capitalist partners was formed under the name “Evangelista & Co.” The Articles of         Co-partnership was, however, amended on June 7, 1955 so as to include herein respondent, Estrella Abad Santos, as an industrial partner.

Consequently, on December 17, 1963, Abad Santos filed suit against the      three (3) capitalist partners, alleging that the partnership, which was also made a party-defendant, had been paying dividends to the partners except to her. It was further alleged that despite her requests that she be allowed to examine partnership books, to give her information regarding the partnership affairs and to receive her share in the dividends declared by the partnership, the petitioners refused and continued to refuse. She therefore prayed that the petitioners be ordered to render an accounting of the partnership business and to pay her the corresponding share in the dividends.

ISSUE:

Whether or not the Articles of Co-partnership shall be considered as a conclusive evidence of respondent’s status as a limited partner?

HELD:

NO. The Court held that despite the genuineness of the Articles of                   Co-partnership the same did not express the true intent and agreement of the parties, however, as the subsequent events and testimonial evidences indicate otherwise, the Court upheld that respondent is an industrial partner of the company.

Article 1789 provides that ‘An industrial partner cannot engage in business for himself, unless the partnership expressly permits him to do so; and if he should do so, the capitalist partners may either exclude him from the firm or avail themselves of the benefits which he may have obtained in violation of this provision, with a right to damages in either case.’ Since 1954 and until after the promulgation of the decision of the appellate court, Abad Santos has served as a judge of the City Court of Manila and had been paid for services rendered allegedly contributed by her to the partnership. Though being a judge of the City Court of Manila cannot be characterized a business and/or may be considered an antagonistic business to the partnership, the petitioners, subsequent of petitioners’ answer to the complaint, petitioners reached the decision that respondent be excluded from and deprived of her alleged share in the interest or participation as an alleged industrial partner in the net profits or income of the partnership.

Having always known the respondent is a City Judge even before she joined the partnership, why did it take petitioners so many years before excluding her from said company? Furthermore, the act of exclusion is premised on the ground that respondent has always been a partner, an industrial partner. In addition, the Court further held that with the consideration of Article 1767 that ‘By a contract of partnership two or more persons bind themselves, to contribute money, property, or industry to a common fund, with the intention of dividing profits among themselves’, the services rendered by respondent may legitimately be considered the respondent’s contribution to the common fund.