BELO vs. CA and ANAY342 SCRA 20, G.R. No. 127405, October 4, 2000, Ynares-Santiago, J.:p

FACTS: Nenita A. Anay met petitioner William T. Belo. 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 cook wares. 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 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.

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 Tocao's name.

On October 9, 1987, Anay learned that Marjorie Tocao had signed a letter addressed to the Cubao sales office to the effect that she was no longer the vice-president of Geminesse Enterprise.

ISSUE: Whether or not Anay was a partner of Tocao and Belo.

HELD: Yes. Anay is an industrial partner. Tocao and Belo admitted that Anay had the expertise to engage in the business of distributorship of cookware. Anay contributed such expertise to the partnership and, hence, under the law, she was the industrial or managing partner. It was through her reputation that the partnership was able to open the business of distributorship; it was through the same efforts that the business was propelled to financial success. Moreover, Anay had a voice in the management of the affairs of the business, including selection of people who would constitute the administrative staff and the sales force. Likewise, Tocao admitted that, like her who owned Gimenesse Enterprises, Anay received only commissions and transportation and representation allowances and not a fixed salary. If indeed Tocao was Anay's employer, it was difficult to believe that they shall receive the same income in the business.

ANTONIA TORRES vs. COURT OF APPEALS320 SCRA 428, G.R. No. 134559 December 9, 1999, Panganiban, J.:p

FACTS: In 1969, sisters Antonia Torres and Emeteria Baring entered into a joint venture agreement with Manuel Torres. Under the agreement, the sisters agreed to execute a deed of sale in favor Manuel over a parcel of land, the sisters received no

cash payment from Manuel but the promise of profits (60% for the sisters and 40% for Manuel) – said parcel of land is to be developed as a subdivision.

Manuel then had the title of the land transferred in his name and he subsequently mortgaged the property. He used the proceeds from the mortgage to start building roads, curbs and gutters. Manuel also contracted an engineering firm for the building of housing units. But due to adverse claims in the land, prospective buyers were scared off and the subdivision project eventually failed.

The sisters then filed a civil case against Manuel for damages equivalent to 60% of the value of the property, which according to the sisters, is what’s due them as per the contract.

The lower court ruled in favor of Manuel and the Court of Appeals affirmed the lower court.

The sisters then appealed before the Supreme Court where they argued that there is no partnership between them and Manuel because the joint venture agreement is void.

ISSUE: Whether or not there exists a partnership.

HELD: Yes. The joint venture agreement the sisters entered into with Manuel is a partnership agreement whereby they agreed to contribute property (their land) which was to be developed as a subdivision. While on the other hand, though Manuel did not contribute capital, he is an industrial partner for his contribution for general expenses and other costs. Furthermore, the income from the said project would be divided according to the stipulated percentage (60-40). Clearly, the contract manifested the intention of the parties to form a partnership. Further still, the sisters cannot invoke their right to the 60% value of the property and at the same time deny the same contract which entitles them to it.

At any rate, the failure of the partnership cannot be blamed on the sisters, nor can it be blamed to Manuel (the sisters on their appeal did not show evidence as to Manuel’s fault in the failure of the partnership). The sisters must then bear their loss (which is 60%). Manuel does not bear the loss of the other 40% because as an industrial partner he is exempt from losses.

LIM TONG LIM vs. PHILIPPINE FISHING GEAR INDUSTRIES, INC. 317 SCRA 728, G.R. No. 136448, Nov. 3, 1999, Panganiban, J.:p

FACTS: Antonio Chua and Peter Yap bought nets of various sizes and floats from Philippine Fishing Gear (PFG) for Ocean Quest Fishing Corporation (OQF), saying that petitioner was also involved with OQF despite not being a signatory to the agreement.

They failed to pay the purchase price, hence PFG filed a collection case against OQF. PFG also alleged that OQF is a non-existent corporation by virtue of a certification by the SEC. RTC issued the writ of attachment on the nets, and was sold at a public auction with the proceeds deposited to the court. RTC ruled there was partnership between the three (Chua, Yao, Lim) anchoring on the Compromise Agreement they executed in the civil case filed by Chua and Yao against Lim for the declaration of ownership of the fishing boats, among other things. CA affirmed.

ISSUE: Whether or not by their acts, Lim, Chua, and Yao are deemed to have entered into a partnership.

HELD: Yes. A partnership is a contract where 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. The three engaged in a commercial venture for commercial fishing and contracted loans to buy two fishing boats, and the nets and floats needed to operate the fishing business. 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. It extended to the fishing nets and the floats, both essential to fishing, which were obviously acquired in furtherance of their business.

Petitioner’s defense that he was a mere lessor does not hold water. In effect, he would like this Court to believe that 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.

Corporation by estoppels: Although the partnership/corporation was never legally formed for unknown reasons, this fact alone does not preclude the liabilities of the three as contracting parties in representation of it. Clearly, under the law on estoppel, those acting on behalf of a corporation and those benefited by it, knowing it to be without valid existence, are held liable as general partners.

JARANTILLA, JR. vs. JARANTILLA636 SCRA 299, G.R. No. 154486, December 1, 2010, Leonardo-De Castro, J.:p

FACTS: The present case stems from the complaint filed by Antonieta Jarantilla against Buenaventura Remotigue, Cynthia Remotigue, Federico Jarantilla, Jr., Doroteo Jarantilla and Tomas Jarantilla, for the accounting of the assets and income of the co-ownership, for its partition and the delivery of her share corresponding to eight percent (8%), and for damages. Antonieta claimed that in 1946, she had entered into an agreement with the defendants to engage in business through the execution of a document denominated as "Acknowledgement of Participating Capital”. Antonieta also alleged that she had helped in the management of the business they co-owned without receiving any salary. Antonieta further claimed co-ownership of certain properties (the subject real properties) in the name of the defendants since the only way the defendants could have purchased these properties were through the partnership as they had no other source of income.The respondents did not deny the existence and validity of the "Acknowledgement of Participating Capital" and in fact used this as evidence to support their claim that Antonieta’s 8% share was limited to the businesses enumerated therein. The respondents denied using the partnership’s income to purchase the subject real properties.

During the course of the trial at the RTC, petitioner Federico Jarantilla, Jr., who was one of the original defendants, entered into a compromise agreement17 with Antonieta Jarantilla wherein he supported Antonieta’s claims and asserted that he too was entitled to six percent (6%) of the supposed partnership in the same manner as Antonieta was.

ISSUE: Whether or not the partnership subject of the Acknowledgement of Participating Capital funded the subject real properties.

HELD: Under Article 1767 of the Civil Code, there are two essential elements in a contract of partnership: (a) an agreement to contribute money, property or industry to a common fund; and (b) intent to divide the profits among the contracting parties. The first element is undoubtedly present in the case at bar, for, admittedly, all the parties in this case have agreed to, and did, contribute money and property to a common fund. Hence, the issue narrows down to their intent in acting as they did. It is not denied that all the parties in this case have agreed to contribute capital to a common fund to be able to later on share its profits. They have admitted this fact, agreed to its veracity, and even submitted one common documentary evidence to prove such partnership - the Acknowledgement of Participating Capital. The petitioner himself claims his share to be 6%, as stated in the Acknowledgement of Participating Capital. However, petitioner fails to realize that this document specifically enumerated the businesses covered by the partnership: Manila Athletic Supply, Remotigue Trading in Iloilo City and Remotigue Trading in Cotabato City. Since there was a clear agreement that the capital the partners contributed went to the three businesses, then there is no reason to deviate from such agreement and go beyond the stipulations in the document. There is no

evidence that the subject real properties were assets of the partnership referred to in the Acknowledgement of Participating Capital. Petition denied.

HEIRS OF JOSE LIM vs. JULIET VILLA LIM614 SCRA 141, G.R. No. 172690, March 3, 2010, Nachura, J.:p

FACTS: Petitioners are the heirs of the late Jose Lim (Jose). They filed a Complaint for Partition, Accounting and Damages against respondent Juliet Villa Lim (respondent), widow of the late Elfledo Lim (Elfledo), who was the eldest son of Jose and Cresencia. 

Petitioners alleged that Jose was the liaison officer of Interwood Sawmill in Cagsiay, Mauban, Quezon. Sometime in 1980, Jose, together with his friends Jimmy Yu (Jimmy) and Norberto Uy (Norberto), formed a partnership to engage in the trucking business. Initially, with a contribution of P50,000.00 each, they purchased a truck to be used in the hauling and transport of lumber of the sawmill. Jose managed the operations of this trucking business until his death on August 15, 1981. Thereafter, Jose's heirs, including Elfledo, and partners agreed to continue the business under the management of Elfledo. The shares in the partnership profits and income that formed part of the estate of Jose were held in trust by Elfledo, with petitioners' authority for Elfledo to use, purchase or acquire properties using said funds. Petitioners alleged that Elfledo was never a partner or an investor in the business and merely supervised the purchase of additional trucks using the income from the trucking business of the partners.

On May 18, 1995, Elfledo died, leaving respondent as his sole surviving heir. Petitioners claimed that respondent took over the administration of the aforementioned properties, which belonged to the estate of Jose, without their consent and approval. Claiming that they are co-owners of the properties, petitioners required respondent to submit an accounting of all income, profits and rentals received from the estate of Elfledo, and to surrender the administration thereof. Respondent refused; thus, the filing of this case. 

Respondent traversed petitioners' allegations and claimed that Elfledo was himself a partner of Norberto and Jimmy. Respondent also alleged that when Jose died in 1981, he left no known assets, and the partnership with Jimmy and Norberto ceased upon his demise. Respondent also stressed that Jose left no properties that Elfledo could have held in trust. Respondent maintained that all the properties involved in this case were purchased and acquired through her and her husband’s joint efforts and hard work, and without any participation or contribution from petitioners or from Jose. 

ISSUE: Whether or not a partnership exists. 

HELD: YES. A partnership exists when two or more persons agree to place their money, effects, labor, and skill in lawful commerce or business, with the understanding that there shall be a proportionate sharing of the profits and losses among them. A contract of partnership is defined by the Civil Code as one where 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.

The following circumstances tend to prove that Elfledo was himself the partner of Jimmy and Norberto: 1) Cresencia testified that Jose gave Elfledo P50,000.00, as share in the partnership, on a date that coincided with the payment of the initial capital in the partnership; (2) Elfledo ran the affairs of the partnership, wielding absolute control, power and authority, without any intervention or opposition whatsoever from any of petitioners herein; (3) all of the properties were registered in the name of Elfledo; (4) Jimmy testified that Elfledo did not receive wages or salaries from the partnership, indicating that what he actually received were shares of the profits of the business; and (5) none of the petitioners, as heirs of Jose, the alleged partner, demanded periodic accounting from Elfledo during his lifetime. 

Furthermore, petitioners failed to adduce any evidence to show that the real and personal properties acquired and registered in the names of Elfledo and Juliet formed part of the estate of Jose, having been derived from Jose’s alleged partnership with Jimmy and Norberto.

The extent of his control, administration and management of the partnership and its business, the fact that its properties were placed in his name, and that he was not paid salary or other compensation by the partners, are indicative of the fact that Elfledo was a partner and a controlling one at that. It is apparent that the other partners only contributed in the initial capital but had no say thereafter on how the business was ran. Evidently it was through Elfredo’s efforts and hard work that the partnership was able to acquire more trucks and otherwise prosper. Even the appellant participated in the affairs of the partnership by acting as the bookkeeper sans salary.

PHILEX MINING CORP. vs. COMMISSIONER OF INTERNAL REVENUE551 SCRA 183, G.R. No. 148187, April 16, 2008, Ynares-Santiago, J.:p

FACTS: Petitioner Philex entered into an agreement with Baguio Gold Mining Corporation for the former to manage the latter’s mining claim known as the Sto. Mine. The parties’ agreement was denominated as “Power of Attorney”. The mine suffered continuing losses over the years, which resulted in petitioners’ withdrawal as manager of the mine. The parties executed a “Compromise Dation in Payment”, wherein the debt of Baguio amounted to Php. 112,136,000.00. Petitioner deducted said amount from its gross income in its annual tax income return as “loss on the settlement of receivables from Baguio Gold against reserves and allowances”. BIR disallowed the amount as deduction for bad debt. Petitioner claims that it entered a contract of agency evidenced by the “power of attorney” executed by them and the advances made by petitioners is in the nature of a loan and thus can be deducted from its gross income. Court of Tax Appeals (CTA) rejected the claim and held that it is a partnership rather than an agency. CA affirmed CTA 

ISSUE: Whether or not partnership exists 

HELD: Yes. The lower courts correctly held that the “Power of Attorney” (PA) is the instrument material in determining the true nature of the business relationship between petitioner and Baguio. An examination of the said PA reveals that a partnership or joint venture was indeed intended by the parties. While a corporation like the petitioner cannot generally enter into a contract of partnership unless authorized by law or its charter, it has been held that it may enter into a joint venture, which is akin to a particular partnership. The PA indicates that the parties had intended to create a PAT and establish a common fund for the purpose. They also had a joint interest in the profits of the business as shown by the 50-50 sharing of income of the mine. 

Moreover, in an agency coupled with interest, it is the agency that cannot be revoked or withdrawn by the principal due to an interest of a third party that depends upon it or the mutual interest of both principal and agent. In this case the non-revocation or non-withdrawal under the PA applies to the advances made by the petitioner who is the agent and not the principal under the contract. Thus, it cannot be inferred from the stipulation that it is an agency. Partnership does exist in this case.

FERNANDO SANTOS vs. SPOUSES REYESG.R. No. 135813, October 25, 2001, Panganiban, J.:p

FACTS: In June 1986, Fernando Santos (70%), Nieves Reyes (15%), and Melton Zabat (15%) orally instituted a partnership with them as partners. Their venture is to set up a lending business where it was agreed that Santos shall be financier and that Nieves and Zabat shall contribute their industry. **The percentages after their names denote their share in the profit. Later, Nieves introduced Cesar Gragera to Santos. Gragera was the chairman of a corporation. It was agreed that the partnership shall provide loans to the employees of Gragera’s corporation and Gragera shall earn commission from loan payments. In August 1986, the three partners put into writing their verbal agreement to form the partnership. As earlier agreed, Santos shall finance and Nieves shall do the daily cash flow more particularly from their dealings with Gragera, Zabat on the other hand shall be a loan investigator. But then later, Nieves and Santos found out that Zabat was engaged in another lending business which competes with their partnership hence Zabat was expelled. The two continued with the partnership and they took with them Nieves’ husband, Arsenio, who became their loan investigator.

Later, Santos accused the spouses of not remitting Gragera’s commissions to the latter. He sued them for collection of sum of money. The spouses countered that Santos merely filed the complaint because he did not want the spouses to get their shares in the profits. Santos argued that the spouses, insofar as the dealing with Gragera is concerned, are merely his employees. Santos alleged that there is a distinct partnership

between him and Gragera which is separate from the partnership formed between him, Zabat and Nieves.

The trial court as well as the Court of Appeals ruled against Santos and ordered the latter to pay the shares of the spouses.

ISSUE: Whether or not the spouses are partners.

HELD: Yes. Though it is true that the original partnership between Zabat, Santos and Nieves was terminated when Zabat was expelled, the said partnership was however considered continued when Nieves and Santos continued engaging as usual in the lending business even getting Nieves’ husband, who resigned from the Asian Development Bank, to be their loan investigator – who, in effect, substituted Zabat. There is no separate partnership between Santos and Gragera. The latter being merely a commission agent of the partnership. This is even though the partnership was formalized shortly after Gragera met with Santos (Note that Nieves was even the one who introduced Gragera to Santos exactly for the purpose of setting up a lending agreement between the corporation and the partnership).

HOWEVER, the order of the Court of Appeals directing Santos to give the spouses their shares in the profit is premature. The accounting made by the trial court is based on the “total income” of the partnership. Such total income calculated by the trial court did not consider the expenses sustained by the partnership. All expenses incurred by the money-lending enterprise of the parties must first be deducted from the “total income” in order to arrive at the “net profit” of the partnership. The share of each one of them should be based on this “net profit” and not from the “gross income” or “total income”.

TOCAO vs. CA (MR)365 SCRA 463, G.R. No. 127405, Sept. 20, 2001, Ynares-Santiago, J.:p

FACTS: Petitioners Marjorie Tocao and William T. Belo filed a Motion for Reconsideration in re Decision dated October 4, 2000. They maintain that there was no partnership between petitioner Belo, on the one hand, and respondent Nenita A. Anay, on the other hand; and that the latter being merely an employee of petitioner Tocao.

ISSUE: Whether or not there is a partnership between Belo and Anay.

HELD: After a careful review of the evidence presented, the Court is convinced that, indeed, petitioner Belo acted merely as guarantor of Geminesse Enterprise. This was categorically affirmed by respondent's own witness, Elizabeth Bantilan, during her cross-examination. Furthermore, Bantilan testified that it was Peter Lo who was the company's financier; that Lo fixes the Company’s orders because he is the financier of the Company. The testimony of the witness was neither refuted nor contradicted by respondent's evidence.

It should be recalled that the business relationship created between petitioner Tocao and respondent Anay was an informal partnership, which was not even recorded with the Securities and Exchange Commission. As such, it was understandable that Belo, who was after all petitioner Tocao's good friend and confidante, would occasionally participate in the affairs of the business, although never in a formal or official capacity. Again, respondent's witness, Elizabeth Bantilan, confirmed that petitioner Belo's presence in Geminesse Enterprise's meetings was merely as guarantor of the company and to help petitioner Tocao.

Furthermore, no evidence was presented to show that petitioner Belo participated in the profits of the business enterprise. Respondent herself professed lack of knowledge that petitioner Belo received any share in the net income of the partnership. On the other hand, petitioner Tocao declared that petitioner Belo was not entitled to any share in the profits of Geminesse Enterprise. With no participation in the profits, petitioner Belo cannot be deemed a partner since the essence of a partnership is that the partners share in the profits and losses. Consequently, inasmuch as petitioner Belo was not a partner in Geminesse Enterprise, respondent had no cause of action against him and her complaint against him should accordingly be dismissed.

The MR is partially granted. RTC Makati is ordered to dismiss the complaint against pet. Belo only. The sum of P208,250.00 shall be deducted from whatever amount petitioner Tocao shall be held liable to pay respondent after the formal accounting of the partnership affairs.

AFISCO INSURANCE CORP vs. CA302 SCRA 1, G.R. No. 112675 January 25, 1999, Panganiban, J.:p

FACTS: The petitioners, 41 non-life insurance corporations, entered into a Quota Share Reinsurance Treaty and a Surplus Reinsurance Treaty with the Munchener Ruckversicherungs-Gesselschaft (hereafter called Munich). Munich), a non-resident foreign insurance corporation. The reinsurance treaties required petitioners to form a pool. Accordingly, a pool composed of the petitioners was formed on the same day. The Commissioner of Internal Revenue (CIR) assessed them of deficiency corporate taxes on dividends paid to Munich and to the petitioners. These assessments were protested by the petitioner through its auditors SGV but CIR denied it and ordered the petitioners, assessed as "Pool of Machinery Insurers," to pay deficiency income tax, interest, and withholding tax. The CA, in affirming CTA, ruled that the pool of machinery insurers was a partnership taxable as a corporation, and that the latter's collection of premiums on behalf of its members, the ceding companies, was taxable income.

ISSUE: WON the pool of machinery insurers is a partnership

HELD: For partnership to be established the following requisites must be established: (1) mutual contribution to a common stock, and (2) a joint interest in the profits. It is evident that the pool has a common fund consisting of money and valuables that are

deposited in the name and credit of the pool. This common fund pays for the administration and expenses of the pool. Most importantly, profit motive or business is the primordial reason for the pool’s formation. The fact that they do not retain profit, because profit is apportioned among the members, what is important is that their object was to earn profit.

Being a partnership, it now falls within the meaning of a corporation under section 22 (B) of NIRC, and thus is taxable.

* SEC. 24. Rate of tax on corporations. — (a) Tax on domestic corporations. — A tax is hereby imposed upon the taxable net income received during each taxable year from all sources by every corporation organized in, or existing under the laws of the Philippines, no matter how created or organized, but not including duly registered general co-partnership general professional partnerships, private educational institutions.

SEC. 22(B): The term 'corporation' shall include partnerships, no matter how createdor organized (this means unregistered partnerships)

EVANGELISTA vs. COLLECTOR OF INTERNAL REVENUE 102 Phil 140, G.R. No. L-9996, October 15, 1957, Concepcion, J.:p

FACTS: The petitioners borrowed from their father PhP59,140.00 which amount together with their personal monies was used by them for the purpose of buying and selling real properties. From 1943 to1944, they bought 24 parcels of land (including the improvements thereon) on four different occasions. In 1945, they appointed their brother Simeon to manage their properties with full power to lease; to collect and receive rents; to issue receipts therefore; in default of such payment, to bring suits against the defaulting tenant; and to endorse and deposit all notes and checks for them. In 1948, their net rental income amounted to PhP12,615.35. On September 1954, the respondent Collector of Internal Revenue demanded the payment of (1) income tax on corporations, (2) real estate dealer’s fixed tax, and (3) corporation residence tax for the years 1945-1949, computed according to the assessments made on their properties. Because of this, the petitioners filed a case against the respondents in the Court of Tax Appeals, praying that the decision of the respondent contained in its letter of demand be reversed and that they be absolved from the payment of the taxes in question.

Court of Tax Appeals: The petitioners are liable. (No explanation for such in the case)

Petitioners: They are mere co-owners, not co-partners, for, in consequence of the acts performed by them, a legal entity, with a personality independent of that of its members, did not come into existence, and some of the characteristics of partnerships are lacking in the case at bar.

ISSUE: Whether the petitioners are subject to the tax on corporations, real estate dealer’s fixed tax, and corporation residence tax.

HELD: The petitioners are liable to pay the tax on corporations provided for in Sec. 24 of the Commonwealth Act No. 466, otherwise known as the National Internal Revenue Code. According to Sec.84 of the same statute, “the term ‘corporation’ includes partnerships, no matter how created or organized, joint-stock companies, joint accounts, associations or insurance companies, but does not include duly registered general co-partnerships.” Also, Article 1767 of the Civil Code provides: “By the contract of partnership, 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.” Pursuant to this article, the essential elements of a partnership are two, namely: (1) an agreement to contribute money, property or industry to a common fund; and (2) intent to divide the profits among the contracting parties. The first element is undoubtedly present in the case at bar, for, admittedly, the petitioners have agreed to, and did, contribute money and property to a common fund. Also, it can be said that their purpose was to engage in real estate transactions for monetary gain and then divide the same among themselves because: (1) they created the common fund purposely; (2) they invested the same, not merely in one transaction, but in a series of transactions; (3) the parcels of land that they bought were not devoted to residential purposes, or to other personal uses of the petitioners but were leased separately to several persons; (4) the properties have been under the management of one person, namely Simeon Evangelista, making the affairs relative to the said properties appear to have been handled as if the same belonged to a corporation or business enterprise operated for profit; and (5) the petitioners have not testified or introduced any evidence, either on their purpose in creating the set up already adverted to, or on the causes for its continued existence. Hence, the petitioners herein constitute a partnership, and in so far as the National Internal Revenue Code is concerned, they are subject to the income tax for corporations.

Lastly, the records show that the petitioners have habitually engaged in leasing the properties for a period of 12 years, and that the yearly gross rentals of the said properties from 1945 to 1948 ranged fromPhP9,599.00 to PhP 17,453.00. Thus, they are subject to the tax provided in Section 193 (q) of our national Internal Revenue Code, for “real estate dealers,” in as much as, pursuant to Section 194 (s) thereof: “Real estate dealers include any person engaged in the business of buying, selling, exchanging, leasing, or renting property of his own account as principal and holding himself out as full or part-time dealer in real estate or as an owner of rental property or properties rented or offered to rent for an aggregate amount of three thousand pesos or more a year. * * *

YULO vs. YANG CHIAO SENG106 Phil 111, G.R. No. L-12541, August 28, 1959, Labrador, J.:p

FACTS: Yang Chiao Seng proposed to form a partnership with Rosario Yulo to run and operate a theatre on the premises occupied by Cine Oro, Plaza Sta. Cruz, Manila, the principal conditions of the offer being (1) Yang guarantees Yulo a monthly participation of P3,000 (2) partnership shall be for a period of 2 years and 6 months with the condition that if the land is expropriated, rendered impracticable for business, owner

constructs a permanent building, then Yulo’s right to lease and partnership even if period agreed upon has not yet expired; (3) Yulo is authorized to personally conduct business in the lobby of the building; and (4) after Dec 31, 1947, all improvements placed by partnership shall belong to Yulo but if partnership is terminated before lapse of 1 and ½ years, Yang shall have right to remove improvements.

Parties established, “Yang and Co. Ltd.”, to exist from July 1,1945 – Dec 31, 1947. In June 1946, they executed a supplementary agreement extending the partnership for 3 years beginning Jan.1, 1948 to Dec. 31, 1950. The land on which the theater was constructed was leased by Yulo from owners, Emilia Carrion and Maria Carrion Santa Marina for an indefinite period but that after 1 year, such lease may be cancelled by either party upon 90-day notice. In Apr 1949, the owners notified Yulo of their desire to cancel the lease contract come July. Yulo and husband brought a civil action to declare the lease for an indefinite period. Owners brought their own civil action for ejectment upon Yulo and Yang.

CFI: Two cases were heard jointly; Complaint of Yulo and Yang dismissed declaring contract of lease terminated.

CA: Affirmed the judgment. In 1950, Yulo demanded from Yang her share in the profits of the business. Yang answered saying he had to suspend payment because of pending ejectment suit. Yulo filed present action in 1954, alleging the existence of a partnership between them and that Yang has refused to pay her shares.

Defendant’s Position: The real agreement between plaintiff and defendant was one of lease and not of partnership; that the partnership was adopted as a subterfuge to get around the prohibition contained in the contract of lease between the owners and the plaintiff against the sublease of the property.

Trial Court: Dismissal. It is not true that a partnership was created between them because defendant has not actually contributed the sum mentioned in the Articles of Partnership or any other amount. The agreement is a lease because plaintiff didn’t share either in the profits or in the losses of the business as required by Art 1769 (CC) and because plaintiff was granted a “guaranteed participation” in the profits belies the supposed existence of a partnership.

ISSUE: Was the agreement a contract a lease or a partnership?

HELD: Dismissed. The agreement was a sublease not a partnership.

The following are the requisites of partnership: (1) two or more persons who bind themselves to contribute money, property or industry to a common fund; (2) the intention on the part of the partners to divide the profits among themselves (Article 1761, CC). Plaintiff did not furnish the supposed P20,000 capital nor did she furnish any help or intervention in the management of the theatre. Neither has she demanded from defendant any accounting of the expenses and earnings of the business. She was

absolutely silent with respect to any of the acts that a partner should have done; all she did was to receive her share of P3,000 a month which cannot be interpreted in any manner than a payment for the use of premises which she had leased from the owners.

MENDIOLA vs. CA497 SCRA 346, G.R. No. 159333, July 31, 2006, Puno, J.:p

FACTS: Private respondent Pacific Forest Resources, Phils., Inc. (Pacfor) is a corporation organized and existing under the laws of California, USA. Private respondent Pacfor entered into a "Side Agreement on Representative Office known as Pacific Forest Resources (Phils.), Inc." with petitioner Arsenio T. Mendiola (ATM), effective May 1, 1995, "assuming that Pacfor-Phils. is already approved by the Securities and Exchange Commission [SEC] on the said date. Petitioner is not a part-owner of Pacfor Phils. because the latter is merely Pacfor-USA's representative office and not an entity separate and distinct from Pacfor-USA. "It's simply a 'theoretical company' with the purpose of dividing the income 50-50." Petitioner presumably knew of this arrangement from the start, having been the one to propose to private respondent Pacfor the setting up of a representative office, and "not a branch office" in the Philippines to save on taxes. On November 27, 2000, private respondent Pacfor, through counsel, ordered petitioner to turn over to it all papers, documents, files, records, and other materials in his or ATM Marketing Corporation's possession that belong to Pacfor or Pacfor Phils. Petitioner construed these directives as a severance of the "unregistered partnership" between him and Pacfor, and the termination of his employment as resident manager of Pacfor Phils private respondent Pacfor placed petitioner on preventive suspension and ordered him to show cause why no disciplinary action should be taken against him. Petioner was dismissed.

ISSUE: WON there is partnership or employer-employee relationship?

HELD: We hold that petitioner is an employee of private respondent Pacfor and that no partnership or co-ownership exists between the parties.

In a partnership, the members become co-owners of what is contributed to the firm capital and of all property that may be acquired thereby and through the efforts of the members. The property or stock of the partnership forms a community of goods, a common fund, in which each party has a proprietary interest. In fact, the New Civil Code regards a partner as a co-owner of specific partnership property. Each partner possesses a joint interest in the whole of partnership property. If the relation does not have this feature, it is not one of partnership. This essential element, the community of interest, or co-ownership of, or joint interest in partnership property is absent in the relations between petitioner and private respondent Pacfor. Petitioner is not a part-owner of Pacfor Phils. William Gleason, private respondent Pacfor's President established this fact when he said that Pacfor Phils. is simply a "theoretical company" for the purpose of dividing the income 50-50. He stressed that petitioner knew of this arrangement from the very start, having been the one to propose to private respondent Pacfor the setting up of a representative office, and "not a branch office" in the

Philippines to save on taxes. Thus, the parties in this case, merely shared profits. This alone does not make a partnership.

Besides, a corporation cannot become a member of a partnership in the absence of express authorization by statute or charter. This doctrine is based on the following considerations: (1) that the mutual agency between the partners, whereby the corporation would be bound by the acts of persons who are not its duly appointed and authorized agents and officers, would be inconsistent with the policy of the law that the corporation shall manage its own affairs separately and exclusively; and, (2) that such an arrangement would improperly allow corporate property to become subject to risks not contemplated by the stockholders when they originally invested in the corporation. No such authorization has been proved in the case at bar.

J.M. TUASON & CO. vs. BOLANOS 95 Phil 106, G.R. No. L-4935, May 28, 1954, Reyes, J.:p

FACTS: Plaintiff-appellee JM Tuason & Co., Inc. is a partnership. Thru its managing partner, Gregorio Araneta, Inc., it originally brought this suit with QC CFI to recover possession of registered land situated in Tatalon, QC. Defendant-appellant Quirino BOLAÑOS, on the other hand, is an adverse owner of the same land by alleged acquisitive prescription thru “open, continuous, exclusive, public and notorious possession of land in dispute under claim of ownership, adverse to the entire world time immemorial”. The complaint was amended three times with respect to the description of the land sought to be recovered. Originally, it was 13 hectares reduced to 6 hectares and then back to 13. Meanwhile, BOLAÑOS had prayed for the dismissal of the case against him by alleging his prior, adverse possession of the disputed land and alleging that TUASON’s registration of the land in dispute was obtained thru fraud or error and without knowledge of his and/or predecessors interest therein. CFI rendered judgment in favor of TUASON, declaring BOLAÑOS to be without any right to the land in question and ordering him to restore possession thereof to TUASON and to pay the latter a monthly rent and also to pay the costs. BOLAÑOS appealed directly to the SC because of the value of the property involved.

ISSUES: Whether or not Gregorio Araneta, Inc. (a corporation) be a “partner” of another corporation?

HELD: BOLAÑOS’ petition is without merit. The CFI decision is AFFIRMED.

It is true that the complaint also states that the TUASON is being represented by its “Managing Partner” Gregorio Araneta, Inc., another corporation. There is nothing against one corporation being represented by another person, natural or juridical, in a suit in court. The contention that Gregorio Araneta, Inc. cannot act as managing partner for TUASON on the theory that it is illegal for two corporations to enter into a partnership is without merit for the true rule is that "though a corporation has no power to enter into a partnership, it may nevertheless enter into a joint venture with another where the nature of that venture is in line with the business authorized by its charter. (citing Wyoming-Indiana Oil Gas Co. vs. Weston, 80 A. L.

R., 1043). There is nothing in the record to indicate that the venture in which TUASON is represented by Gregorio Araneta, Inc. as "its managing partner" is not in line with the corporate business of either of them

AURBACH vs. SANITARY WARES180 SCRA 130, G.R. No. 75875, December 15, 1989, Gutierrez, Jr., J.:p

FACTS: This consolidated petition assailed the decision of the CA directing a certain MANNER OF ELECTION OFOFFICERS IN THE BOARD OF DIRECTORS. (Noted: There was a disagreement about the election of Board of Members, wherein the no. of nominees exceeded to the prescribe number that should have been nominated. For foreigner, 3 nominees only, while the Filipino group shall have 6 nominees. During the election, there are 3 nominees from the foreign group while the Filipino group have 8 nominees. The Chairman ruled that the first 9 nominees will be the winner in the said election *There are two groups in this case, the Lagdameo group composed of Filipino investors and the American Standard Inc. (ASI) composed of foreign investors. The ASI Group and petitioner Salazar (G.R. Nos. 75975-76) contend that the actual intention of the parties should be viewed strictly on the "Agreement" dated August 15,1962 wherein it is clearly stated that the parties' intention was to form a corporation and not a joint venture.

ISSUE: The main issue hinges on who were the duly elected directors of Saniwares for the year 1983 during its annual stockholders' meeting held on March 8, 1983.

HELD: While certain provisions of the Agreement would make it appear that the parties thereto disclaim being partners or joint venturers such disclaimer is directed at third parties and is not inconsistent with, and does not preclude, the existence of two distinct groups of stockholders in Saniwares one of which (the Philippine Investors) shall constitute the majority, and the other ASI shall constitute the minority stockholder. In any event, the evident intention of the Philippine Investors and ASI in entering into the Agreement is to enter into a joint venture enterprise.

An examination of the Agreement shows that certain provisions were included to protect the interests of ASI as the minority. For example, the vote of 7 out of 9 directors is required in certain enumerated corporate acts. ASI is contractually entitled to designate a member of the Executive Committee and the vote of this member is required for certain transactions

The Agreement also requires a 75% super-majority vote for the amendment of the articles and by-laws of Saniwares. ASI is also given the right to designate the president and plant manager. The Agreement further provides that the sales policy of Saniwares shall be that which is normally followed by ASI and that Saniwares should not export "Standard" products otherwise than through ASI's Export Marketing Services. Under the

Agreement, ASI agreed to provide technology and know-how to Saniwares and the latter paid royalties for the same.

The legal concept of a joint venture is of common law origin. It has no precise legal definition but it has been generally understood to mean an organization formed for some temporary purpose. It is in fact hardly distinguishable from the partnership, since their elements are similar community of interest in the business, sharing of profits and losses, and a mutual right of control.

The main distinction cited by most opinions in common law jurisdictions is that the partnership contemplates a general business with some degree of continuity , while the joint venture is formed for the execution of a single transaction, and is thus of a temporary nature.

DELUAO vs. CASTEEL 26 SCRA 475, G.R. No. L-21906, December 24, 1968, CASTRO, J.:

FACTS: A (Casteel) filed a fishpond application for a big tract of swampy land. B (Deluao) also filed his own application for the area covered by A’s application. A ntroduced improvements on portions of the area applied for him in the form of dikes, fishpond gates, clearings, etc. Subsequently, A and C (B’s wife) entered into a contract of partnership, with A as industrial partner and C, as capitalist partner, which contract may be divided into two parts, namely, a contract to exploit the fishpond pending its award to either A or B, and a contract to divide the fishpond between A and C after such award. The Secretary of [Agriculture and] Natural Resources awarded to A the possession of the area in question. Thereafter, A forbade C from further administering the fishpond. B and C brought action for specific performance and damages resulting from breach of contract. Under the law (Sec.63, Act No. 4003 [Fisheries Act] and Fisheries Administrative Order 14, Sec. 7.), the transfer or subletting of fishponds covered by permits or lease agreements without prior approval of the DENR Secretary is prohibited.

ISSUE: Is the contract of partnership valid?

HELD: (1) The first part is valid. — Although the fishpond was then in possession of A, neither he nor B was the holder of a fishpond permit over the area. Be that as it may, they were not, however, precluded from exploiting the fishpond pending approval of A’s application over the same area. No law, rule, or regulation prohibited them from doing so. Thus, rather than let the fishpond remain idle, they cultivated it.

(2) The second part is illegal. — Under the law, only a holder of a permit or lease and no one else may enjoy the benefits allowed by the law. Since the partnership had for its object the division into two equal parts of the fishpond between A and C after it shall have been awarded to the former, and therefore, it envisaged the unauthorized transfer of one-half thereof to C other than A, it was dissolved by the approval of the application and the award of the fishpond. The approval was an event which made it unlawful for

the business of the partnership to be carried on or for the members to carry it on in partnership and, therefore, caused its ipso facto dissolution. And since the contract is null and void, A cannot be made to execute a formal transfer of one-half of the fishpond and to secure official approval of the same as agreed upon.

ARBES vs. POLISTICO53 Phil 489, G.R. No. 31057, September 7, 1929, Villamor, J.:p

FACTS: This is an action for the liquidation of the funds and property of the association called "Turnuhan Polistico & Co”. It appears that in April 1911, the plaintiffs and defendants, together with several hundred other persons, formed an association under the name of Turuhan Polistico & Co. Vicente Polistico. Under the by-laws of the association, each member shall pay 50 centavos every Sunday, except that on every 5th

Sunday the amount to be paid was P1. It is alleged that from April, 1911, until April, 1917, the said contributions were paid weekly by all of the members of the society (with few irregularities). The inducement to these weekly contributions was found in provisions of the by-laws to the effect that a lottery should be conducted weekly among the members of the association and that the successful member should be paid the amount collected each week.

It has already been ruled that "Turnuhan Polistico & Co." was an unlawful partnership. Plaintiffs now seek the recovery of contributions paid by them.

ISSUES: Whether or not the plaintiffs can still recover the contributions paid by them considering that "Turnuhan Polistico & Co." has no valid existence having been declared as an unlawful partnership?

HELD: Article 1666 of the Civil Code, provides:

“A partnership must have a lawful object, and must be established for the common benefit of the partners.

When the dissolution of an unlawful partnership is decreed, the profits shall be given to charitable institutions of the domicile of the partnership, or, in default of such, to those of the province.” (emphasis supplied)

The partner who limits himself to demanding only the amount contributed by him need not resort to the partnership contract on which to base his action. As said contract does not exist in the eyes of the law, the purpose from which the contribution was made has not come into existence, and the administrator of the partnership holding said contribution retains what belongs to others, without any consideration; for which reason he is not bound to return it and he who has paid in his share is entitled to recover it.

This is not the case with regard to profits. In order to demand the proportional part of the said profits, the partner would have to base his action on the contract which is null and

void, since this partition or distribution of the profits is one of the juridical effects thereof. Wherefore considering this contract as non-existent, by reason of its illicit object, it cannot give rise to the necessary action, which must be the basis of the judicial complaint. Furthermore, it would be immoral and unjust for the law to permit a profit from an industry prohibited by it.

The Civil Code does not state whether, upon the dissolution of the unlawful partnership, the amounts contributed are to be returned by the partners, because it only deals with the disposition of the profits; but the fact that said contributions are not included in the disposal prescribed profits, shows that in consequences of said exclusion, the general law must be followed, and hence the partners should reimburse the amount of their respective contributions.

FERNANDEZ vs. DE LA ROSA1 Phil 671, G.R. No. 413, February 2, 1903, Ladd, J:p

FACTS: The plaintiff alleges that in January, 1900, he entered into a verbal agreement with the defendant to form a partnership for the purchase of cascoes and the carrying on of the business of letting the same for hire in Manila, the defendant to buy the cascoes and each partner to furnish for that purpose such amount of money as he could, the profits to be divided proportionately; that in the same January, the plaintiff furnished the defendant 300 pesos to purchase a casco designated as No. 1515. That the plaintiff furnished further sums aggregating about 300 pesos for repairs on this casco; that on the fifth of the following March he furnished the defendant 825 pesos to purchase another casco designated as No. 2089. That in April the parties undertook to draw up articles of partnership for the purpose of embodying the same in an authentic document, but that the defendant having proposed a draft of such articles which differed materially from the terms of the earlier verbal agreement, and being unwilling to include casco No. 2089 in the partnership, they were unable to come to any understanding and no written agreement was executed.

ISSUE: 1. Did a partnership exist between the parties; 2. If such partnership existed, was it terminated as a result of the act of the plaintiff in receiving back the 1,125 pesos.

HELD: 1. The essential points upon which the minds of the parties must meet in a contract of partnership are, therefore, 1. mutual contribution to a common stock, and 2. a joint interest in the profits. If the contract contains these two elements the partnership relation results.

We have found as a fact that money was furnished by the plaintiff and received by the defendant with the understanding that it was to be used for the purchase of the cascoes in question. This establishes the first element of the contract, namely, mutual contribution to a common stock. The second element, namely, the intention to share profits, appears to be an unavoidable deduction from the fact of the purchase of the cascoes in common, in the absence of any other explanation of the object of the parties in making the purchase in that form, and, it may be added, in view of the admitted fact that prior to the purchase of the first casco the formation of a partnership had been a subject of negotiation between them.

2. The remaining question is as to the legal effect of the acceptance by the plaintiff of the money returned to him by the defendant after the definitive failure of the attempt to agree upon partnership articles. The amount returned fell short, in our view of the facts, of that which the plaintiff had contributed to the capital of the partnership, since it did not include the sum which he had furnished for the repairs of casco No. 1515. Moreover, it is quite possible, as claimed by the plaintiff, that a profit may have been realized from the business during the period in which the defendant had been administering it prior to the return of the money, and if so he still retained that sum in his hands. For these reasons the acceptance of the money by the plaintiff did not have the effect of terminating the legal existence of the partnership.

There was no intention on the part of the plaintiff in accepting the money to relinquish his rights as a partner, nor is there any evidence that by anything that he said or by anything that he omitted to say he gave the defendant any ground whatever to believe that he intended to relinquish them. On the contrary he notified the defendant that he waived none of his rights in the partnership.

REALUBIT vs. JASO658 SCRA 146, G.R. No. 178782, September 21, 2011, Perez, J.:p

FACTS: Petitioner Josefina Realibut (Josefina) entered into a Joint Venture Agreement with Francis Eric Amaury Biondo (Biondo), a French national, for the operation of an ice manufacturing business. With Josefina as the industrial partner and Biondo as the capitalist partner, the parties agreed that they would each receive 40% of the net profits, with the remaining 20% to be used for the payment of the ice making machine which was purchased for the business. For and in consideration of the sum of P500,000.00, however Biondo subsequently executed a Deed of Assignment, transferring all his rights and interests in the business in favor of respondent Eden Jaso (Eden), the wife of respondent Prosencio Jaso. With Biondo’s eventual departure from the country, the Spuoses Jaso coused their lawyer to send Josefina a letter dated February 19, 1998, apprising her their acquisition of said Frenchman’s share in the business and formally demanding an accounting and inventory thereof as well as the remittance of their portion of its profits.

Faulting Josefina with unjustified failure to heed their demand, the Spouses Jaso commenced the instant suit with the filing of Complaint against Josefina, her husband, Ike Realubit (Ike), and their alleged dummies, for specific performance, accounting, examination, audit and inventory of assets and properties, dissolution of the joint venture, appointment of receiver and damages.

Spouses Realubit filed their answer, specifically denying the material allegations of the foregoing complaint. Claiming that they have engaged in the tube ice trading business under single proprietorship even before their dealings with Biondo, the spouses Realubit, in turn, averred that their said business partner had left the country in May 1997 and could not have executed the Deed of Assignment which bears the signature markedly different from that which he affixed on their Joint Venture Agreement; that they refused the Spouses Joso’s demand in view of the dubious circumstances surrounding

their acquisition of Biondo’s share in the business; that said business had already stopped operations when its plant shut down after its power supply was disconnected by MERALCO for non-payment of utility bills; and, that it was their own tube ice trading business which had been moved to another location and that Spouses Joso mistook for the ice manufacturing business established in partnership with Biondo.

RTC ruled in favor of Josefina. On appeal, the CA, set aside the decision of RTC.

ISSUE: 1. Whether or not there was a valid assignment of rights to the joint venture; 2. Whether the court may order Josefina as partner in joint venture to render an accounting to one who is not a partner in said joint venture; 3. Whether Spouse Jaso have any right in the joint venture and in the separate ice business of petitioners.

HELD: 1. Yes, it cannot be gainsaid that, a public document, the Deed of Assignment, Biondo executed in favor of Eden Jaso not only conveys a presumption of regularity but also considered prima facie evidence of the facts therein stated. A party assailing the authenticity and due execution of a notarized document is required to present evidence that a clear, convincing and more than merely preponderant.

2&3. No, 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 of fruits, or a specific undertaking, or the exercise of profession or vocation.”

Insofar as a partner’s conveyance if the entirety of his interest in the partnership is concerned, Art. 1813 provides that “the 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 assignee’s profits. The assignment of the ultimate residue as the assignor may become entitled to receive by virtue of his proportionate interest in the capital.”

Since the partner’s interest in the partnership includes his share in the profits, we find that the CA committed no reversible error in ruling that the Spouses Jaso are entitled to Biondo’s share in the profits, despite Josefinas lack of consent to the assignment of said Biodo’s 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 foe dissolution of the joint venture conformably with the right granted to the purchaser of partner’s interest under Art. 1831 of the Civil Code.

PRIMELINK PROPERTIES AND DEV’T CORP. vs. LAZATIN-MAGAT493 SCRA 444, G.R. No. 167379, June 27, 2006, CALLEJO, SR., J.:

FACTS: Primelink and the respondents entered into a Joint Venture Agreement (JVA) for the development of 2 parcels of land in Tagaytay, which were owned by the

respondents, to a residential subdivision to be known as Tagaytay Garden Villas. Petitioner as developer would be entitled to 60% of the net profits, with respondents as owners 40%. Primelink did not make good their own end of the contract, only managing to build a few units in the subdivision as compared to the agreement between them and the respondents. Respondents filed a case for rescission and damages, alleging that Primelink failed to uphold its own obligations as stated under the contract, and whatever units they have made were subject to complaints for poor workmanship and use of substandard materials, undermining the project’s marketability. RTC rendered judgment in favor of the respondents, rescinding the contract and restoring to them the possession of the land. RTC also ruled that Primelink breached the agreement and attempted to defraud respondents, as the revenues stated in the reports submitted indicated a net loss of 5million pesos, a fact that was not true. The CA affirmed with modification, and ordered the restoration of possession to the Lazatins, along with the improvements introduced by Primelink as their contribution to the JVA.

ISSUES: 1. The respondents are entitled to possession of the parcels of land along with the improvements; 2. Petitioners are entitled to reimbursement to the extent of the value of the improvements on said parcels of land

HELD: Since the parcels of land, as well as the improvements made thereon, were contributed by the parties to the joint venture under the JVA, they formed part of the assets of the joint venture. The RTC declared that respondents were entitled to the possession not only of the parcels of land but also of the improvements thereon as a consequence of its finding that petitioners breached their agreement and defrauded respondents of the net income under the JVA.

A JVA is a form of partnership; therefore it would be governed by the laws on partnership. Since the RTC declared rescission of the contract, the JVA was dissolved. On dissolution, the partnership is not terminated but continues until the winding up of partnership affairs is completed. “Winding up” means the administration of the assets of the partnership for the purpose of terminating the business and discharging the obligations of the partnership. The transfer of the possession of the parcels of land and the improvements thereon to respondents was only for a specific purpose: the winding up of partnership affairs, and the partition and distribution of the net partnership assets as provided by law. Until the partnership accounts are determined, it cannot be ascertained how much any of the parties is entitled to, if at all. CA decision affirmed insofar as they conform to the decision of the SC.

HEIRS OF TAN ENG KEE vs.CA341 SCRA 740, G.R. No. 126881, October 3, 2000, De Leon, Jr.:p FACTS: The complaint alleged that after the second World War, Tan EngKee and Tan Eng Lay, pooling their resources and industry together, entered into a partnership engaged in the business of selling lumber and hardware and construction supplies. They named their enterprise "Benguet Lumber" which they jointly managed until Tan EngKee's death. Petitioners claimed that Tan Eng Lay and his children caused the

conversion of the partnership "Benguet Lumber" into a corporation called "Benguet Lumber Company" allegedly to deprive Tan Eng Kee and his heirs of their rightful participation in the profits of the business. After Tang Eng Kee’s death petitioners prayed for accounting of the partnership assets, and the dissolution, winding up and liquidation thereof, and the equal division of the net assets of Benguet Lumber. The RTC ruled in favor of petitioners, declaring that Benguet Lumber is a joint venture which is akin to a particular partnership. The Court of Appeals rendered the assailed decision reversing the judgment of the trial court.

ISSUE: Whether or not Tan Eng Kee and Tan Eng Lay were partners in Benguet Lumber.

HELD: NO. The trial court determined that Tan EngKee and Tan Eng Lay had entered into a joint venture, which it said is akin to a particular partnership. A particular partnership is distinguished from a joint adventure, to wit:(a) A joint adventure (an American concept similar to our joint accounts) is a sort of informal partnership, with no firm name and no legal personality. In a joint account, the participating merchants can transact business under their own name, and can be individually liable therefor.(b) Usually, but not necessarily a joint adventure is limited to a SINGLE TRANSACTION, although the business of pursuing to a successful termination may continue for a number of years; a partnership generally relates to a continuing business of various transactions of a certain kind. A joint venture "presupposes generally a parity of standing between the joint co-ventures or partners, in which each party has an equal proprietary interest in the capital or property contributed, and where each party exercises equal rights in the conduct of the business. The evidence presented by petitioners falls short of the quantum of proof required to establish a partnership. In the absence of evidence, we cannot accept as an established fact that Tan Eng Kee allegedly contributed his resources to a common fund for the purpose of establishing a partnership. Besides, it is indeed odd, if not unnatural, that despite the forty years the partnership was allegedly in existence, Tan Eng Kee never asked for an accounting. The essence of a partnership is that the partners share in the profits and losses. Each has the right to demand an accounting as long as the partnership exists. A demand for periodic accounting is evidence of a partnership. During his lifetime, Tan Eng Kee appeared never to have made any such demand for accounting from hisbrother, Tang Eng Lay. We conclude that Tan Eng Kee was only an employee, not a partner since they did not present and offer evidence that would show that Tan Eng Kee received amounts of money allegedly representing his share in the profits of the enterprise.

There being no partnership, it follows that there is no dissolution, winding up or liquidation to speak of. Hence, the petition must fail.

SEVILLA vs.CA160 SCRA 171, G.R. No. L-41182-3, April 16, 1988, Sarmiento , J.:p

FACTS: A contract was entered into on Oct. 19, 1960 by and between Mrs. Segundina Noguera, party of the first part; the Tourist World Service, Inc., represented by Mr.

Eliseo Canilao as party of the second part, and hereinafter referred to as appellants. The Tourist World Service, Inc. leased the premises belonging to the party of the first part at Mabini St., Manila for the former’s use as a branch office. In the said contract the party of the third part held herself solidarily liable with the party of the part for the prompt payment of the monthly rental agreed on. When the branch office was opened, the same was run by the herein appellant Una 0. Sevilla payable to Tourist World Service Inc. by any airline for any fare brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla and 3% was to be withheld by the Tourist World Service, Inc.

On or about November 24, 1961 the Tourist World Service, Inc. appears to have been informed that Lina Sevilla was connected with a rival firm, the Philippine Travel Bureau, and, since the branch office was anyhow losing, the Tourist World Service considered closing down its office. This was firmed up by two resolutions of the board of directors of Tourist World Service, Inc., the first abolishing the office of the manager and vice-president of the Tourist World Service, Inc., Ermita Branch, and the second, authorizing the corporate secretary to receive the properties of the Tourist World Service then located at the said branch office. It further appears that on Jan. 3, 1962, the contract with the appellees for the use of the Branch Office premises was terminated and while the effectivity thereof was Jan. 31, 1962, the appellees no longer used it. As a matter of fact appellants used it since Nov. 1961. Because of this, and to comply with the mandate of the Tourist World Service, the corporate secretary Gabino Canilao went over to the branch office, and, finding the premises locked, and, being unable to contact Lina Sevilla, he padlocked the premises on June 4, 1962 to protect the interests of the Tourist World Service. When neither the appellant Lina Sevilla nor any of her employees could enter the locked premises, a complaint was filed by the herein appellants against the appellees with a prayer for the issuance of mandatory preliminary injunction. Both appellees answered with counterclaims. For apparent lack of interest of the parties therein, the trial court ordered the dismissal of the case without prejudice.

In this appeal, appealant Lina Sevilla claims that a joint bussiness venture was entered into by and between her and appellee TWS with offices at the Ermita branch office and that she was not an employee of the TWS to the end that her relationship with TWS was one of a joint business venture 

ISSUE: Whether or not a joint venture exist.

HELD: No. The Supreme Court rejected Sevilla’s claim that the parties had embarked on a joint venture or otherwise, a partnership. And apparently, Sevilla herself did not recognize the existence of such a relation. In her letter of November 28, 1961, she expressly 'concedes your [Tourist World Service, Inc.'s] right to stop the operation of your branch office in effect, accepting Tourist World Service, Inc.'s control over the manner in which the business was run.

A joint venture, including a partnership, presupposes generally a standing between the joint co-venturers or partners, in which each party has an equal proprietary interest in the capital or property contributed and where each party exercises equal rights in the

conduct of the business.  Furthermore, the parties did not hold themselves out as partners, and the building itself was embellished with the electric sign "Tourist World Service, Inc.” in lieu of a distinct partnership name.

It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to (wo)man the private respondent, Tourist World Service, Inc.'s Ermita office, she must have done so pursuant to a contract of agency. It is the essence of this contract that the agent renders services "in representation or on behalf of another”.   In the case at bar, Sevilla solicited airline fares, but she did so for and on behalf of her principal, Tourist World Service, Inc. As compensation, she received 4% of the proceeds in the concept of commissions. And as we said, Sevilla herself based on her letter of November 28, 1961, pre-assumed her principal's authority as owner of the business undertaking. We are convinced, considering the circumstances and from the respondent Court's recital of facts, that the ties had contemplated a principal agent relationship, rather than a joint management or a partnership.

BOURNS vs. CARMAN7 Phil 117, G.R. No. 2800, December 04, 1906, Mapa, J.:p

FACTS: The plaintiff in this action seeks to recover the sum of $437.50, United States currency, balance due on a contract for the sawing of lumber for the lumber yard of Lo-Chim-Lim. The contract relating to the said work was entered into by the said Lo-Chim-Lim, acting as in his own name with the plaintiff, and it appears that the said Lo-Chim-Lim personally agreed to pay for the work himself. The plaintiff, however, has brought this action against Lo-Chim-Lim and his co-defendants jointly, alleging that, at the time the contract was made, they were the joint proprietors and operators of the said lumber yard engaged in the purchase and sale of lumber under the name and style of Lo-Chim-Lim. Apparently the plaintiff tries to show by the words above italicized that the other defendants were the partners of Lo-Chim-Lim in the said lumber-yard business.

ISSUE: Does the contract of partnership exist in the case at hand?

HELD: No. The evidence of record shows, according to the judgment of the court, “That Lo-Chim-Lim had a certain lumber yard in Calle Lemery of the city of Manila, and that he was the manager of the same, having ordered the plaintiff to do some work for him at his sawmill in the city of Manila; and that Vicente Palanca was his partner, and had an interest in the said business as well as in the profits and losses thereof . . .,” and that Go-Tuaco received part of the earnings of the lumber yard in the management of which he was interested.

The court accordingly found that “Lo-Chim-Lim, Vicente Palanca, Go-Tuaco had a lumber yard in Calle Lemmery of the city of Manila in the year 1904, and participated in the profits and losses of business and that Lo-Chim-Lim was managing partner of the said lumber yard.” In other words, co-participants with the said Lo-Chim-Lim in the business in question.

Although the evidence upon this point as stated by the by the however, that is plainly and manifestly in conflict with the above finding of that court. Such finding should therefore be sustained.

It seems that the alleged partnership between Lo-Chim-Lim and the appellants was formed by verbal agreement only. At least there is no evidence tending to show that the said agreement was reduced to writing, or that it was ever recorded in a public instrument.

Moreover, that partnership had no corporate name. The plaintiff himself alleges in his complaint that the partnership was engaged in business under the name and style of Lo-Chim-Lim only, which according to the evidence was the name of one of the defendants. On the other hand, and this is very important, it does not appear that there was any mutual agreement, between the parties, and if there were any, it has not been shown what the agreement was. As far as the evidence shows it seems that the business was conducted by Lo-Chim-Lim in his own name, although he gave to the appellants a share was has been shown with certainty. The contracts made with the plaintiff were made by Lo-Chim-Lim individually in his own name, and there is no evidence that the partnership over contracted in any other form. Under such circumstances we find nothing upon which to consider this partnership other than as a partnership of cuentas en participacion. It may be that, as a matter of fact, it is something different, but a simple business and scant evidence introduced by the partnership. We see nothing, according to the evidence, but a simple business conducted by Lo-Chim-Lim exclusively, in his own name, the names of other persons interested in the profits and losses of the business nowhere appearing. A partnership constituted in such a manner, the existence of which was only known to those who had an interest in the same, being no mutual agreements between the partners and without a corporate name indicating to the public in some way that there were other people besides the one who ostensibly managed and conducted the business, is exactly the accidental partnership of cuentas en participacion defined in article 239 of the Code of Commerce.

Those who contract with the person under whose name the business of such partnership of cuentas en participacion is conducted, shall have only a right of action against such person and not against the other persons interested, and the latter, on the other hand, shall have no right of action against the third person who contracted with the manager unless such manager formally transfers his right to them. (Article 242 of the Code of Commerce.) It follows, therefore that the plaintiff has no right to demand from the appellants the payment of the amount claimed in the complaint, as Lo-Chim-Lim was the only one who contracted with him. the action of the plaintiff lacks, therefore, a legal foundation and should be accordingly dismissed.

DIETRICH vs. FREEMAN18 Phil 341, G.R. No. L-6252 January 28, 1911, Trent, J.:

FACTS: When the plaintiff was first employed, this steam laundry was owned and operated by Freeman and Pierce. Thereafter, Pierce sold all of his right, title, and interest in the said laundry to Whitcomb, who, together with Freeman, then became the owners of this laundry and continued to operate the same as long as the plaintiff was employed.

The trial court found that there is a balance due to Dietrich for services performed.

However, it appears from the record that Whitcomb never knew the plaintiff, never had anything to do with personally, and that the plaintiff's contract was with Freeman, the managing partner of the laundry. It further appears from the record that Pierce, after he sold his interest in this laundry to Whitcomb, continued to look after Whitcomb's interest by authority of the latter.

ISSUE: Whether or not partnership was organized between Freeman and Whitcomb

HELD: Articles 17 and 119 of the Code of Commerce provide:

Art. 17. The record in the commercial registry shall be optional for private merchants and compulsory for associations established in accordance with this code or with special laws, and for vessels.

Art. 119 Every commercial association before beginning business shall be obliged to record its establishment, agreements, and conditions in a public instrument, which shall be presented for record in the commercial registry, in accordance with the provisions of article 17.

Additional instrument which modify or alter in any manner whatsoever the original contracts of the association are subject to the same formalities, in accordance with the provisions of article 25.

Partners can not make private agreements, but all must appear in the articles of co-partnership.

The above provisions of law were not complied with. No formal partnership was ever entered into by them, notwithstanding the fact that they were engaged in the operation of this laundry.

The purpose for which this partnership was entered into by Freeman and Whitcomb was not a commercial one. Hence the provisions of the Civil Code and not the Code of Commerce must govern in determining the liability of the partners.

The plaintiff was employed by and performed services for the Manila Steam Laundry and was not employed by nor did he perform services for Freeman alone. The public did not deal with Freeman and Whitcomb personally, but with the Manila Steam Laundry.

These two partners were doing business under this name and, as we have said, it was not a commercial partnership. Therefore, by the express provisions of articles 1698 and 1137 of the Civil Code the partners are not liable individually for the entire amount due the plaintiff. The liability is pro rata and in this case the appellant is responsible to the plaintiff for only one-half of the debt.

NOTE: Cuentas en participacion is a partnership constituted in such a manner that its existence was only known to those who had an interest in the same, there being no mutual agreement between the partners, and without a corporate name indicating to the public in some way that there were other people besides the one who ostensibly managed and conducted the business, is exactly the accidental partnership of cuentas en participacion defined in article 239 of the Code of Commerce. In a partnership of cuentas en participacion, under the provisions of article 242 of the Code of Commerce, those who contract with the person in whose name the business of such a partnership was conducted shall have only the right of action against such person and not against other persons interested,

BIGLANGAWA vs. CONSTANTINO 109 Phil 172, G.R. No. L-9965, 29 August 1960, Barrera, J.:p

FACTS: Respondents appointed petitioner as their agent to develop a parcel of land owned by the former and to sell them to prospective buyers. As compensation for his services, respondents promised to pay him 20% commission on gross sales and a fee of 10% on the collections made by the Biglangawa. Petitioner, however, advances all the expenses incurred in the development and administration of the project. After the petitioner had sold more than half of the property, respondents paid only 30% of the gross monthly collections such that there was still a balance on the petitioner’s commission. Respondents, however, acknowledged their liability and they promised to settle the same in successive monthly installments. After some time, respondents continued their practice of paying the petitioner to the latter’s disadvantage. Hence, this complaint for collection of the petitioner’s remaining commissions.

ISSUE: Whether or not the contract is one of agency or of a partnership.

HELD: Petitioner’s theory is neither supported by the allegations of his complaint, nor borne out by the purpose of his action. There is no word or expression in the various paragraphs of his amended complaint that suggests any idea of partnership. On the contrary, petitioner expressly averred that respondents "appointed plaintiff (appellant) their exclusive agent to develop the area described in paragraph 2 into subdivision lots and to sell them to prospective homeowners; and as compensation for his services defendants (appellees) promised to pay him a commission of 20% on the gross sales and a fee of 10% on the collections made by him . Categorically, appellant referred to himself as an agent, not a partner; entitled to compensation, not participation, in the form of commission or fee, not a share.

It is true that in the amended complaint petitioner claims to have made advances for the expenses incurred in the development and administration of the property. But again he never considered these as contributions to the business as to make him a partner; otherwise, he would have so stated it in his complaint. In fact, after a liquidation of these advances and the commissions due to petitioner at the time of the termination of the agency, the whole balance was considered as respondent’s' indebtedness which petitioner consented to be settled in monthly installments.

While it is true again that the prayer in a complaint does not determine the nature of the action, it not being a material part of the cause of action, still it logically indicates the purpose of the actor. The paragraphs of the prayer seek the recovery of fixed amounts of underpayments and commissions and fees, not liquidation or accounting or partition as now insisted upon by petitioner. The appealed order of the court was affirmed.

ONA vs. CIR 45 SCRA 24, G.R. No. L-19342 May 25, 1972, Barredo, J.:p

FACTS: Julia Bunales died leaving as heirs her husband, petitioner Lorenzo, and her five children. Lorenzo was appointed as the administrator of his wife’s estate and also the guardian of their three minor children. Although the project of partition was approved by the court, there was no attempt to divide the properties. The properties remained under the management of Lorenzo who used it in business by leasing or selling them and investing the income or proceeds derived therefrom in real properties and securities. As a result, petitioner’s properties and investments increased. Petitioners did not actually receive their shares in the yearly income. The income was always left in the hands of Lorenzo T. Oña who, as heretofore pointed out, invested them in real properties and securities. The Commissioner of Internal Revenue (CIR) decided that petitioners formed an unregistered partnership and therefore subject to corporate income tax.

ISSUE: WON the petitioners formed an unregistered partnership

HELD: Petitioners did not merely limit themselves to holding the properties inherited by them. In fact, some were sold at considerable profit, and with said profit, petitioners engaged, thru Lorenzo T. Oña, in the purchase and sale of corporate securities. It is likewise admitted that all the profits from these ventures were divided among petitioners proportionately in accordance with their respective shares in the inheritance. It is thus manifest that there was a common fund to undertake several businesses, with the intention of deriving profit to be shared by them proportionally, such act was tantamount to actually contributing such incomes to a common fund and, in effect, they thereby formed an unregistered partnership.

Petitioners' reliance on Article 1769, paragraph (3), of the Civil Code, providing that: "The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from

which the returns are derived," is unavailing. In Evangelista case, the SC clearly differentiated the concept of partnerships under the Civil Code from that of unregistered partnerships which are considered as "corporations" under Sections 24 and 84(b) of the National Internal Revenue Code. Mr. Justice Roberto Concepcion, now Chief Justice, elucidated on this point thus: "To begin with, the tax in question is one imposed upon 'corporations', which, strictly speaking, are distinct and different from 'partnerships'. When our Internal Revenue Code includes 'partnerships' among the entities subject to the tax on 'corporations', said Code must allude, therefore, to organizations which are not necessarily 'partnerships', in the technical sense of the term. Thus, for instance, section 24 of said Code exempts from the aforementioned tax 'duly registered general partnerships', which constitute precisely one of the most typical forms of partnerships in this jurisdiction. Likewise, as defined in section 84(b) of said Code, 'the term corporation includes partnerships, no matter how created or organized.' This qualifying expression clearly indicates that a joint venture need not be undertaken in any of the standard forms, or in conformity with the usual requirements of the law on partnerships, in order that one could be deemed constituted for purposes of the tax on corporation.

REYES vs. CIR24 SCRA 198, G.R. Nos. L-24020-21, July 29, 1968, Fernando, J.:p

FACTS: Petitioners purchased a lot and building. The initial payment was shared equally by the respondents. At the time of the purchase, the building was leased to various tenants, whose rights under the lease contracts with the original owners, the purchasers, petitioners herein, agreed to respect. The administration of the building was entrusted to an administrator who collected the rents; kept books and records and rendered statement of accounts to the owners. Petitioners divided equally the income of operation and maintenance. The CTA held that petitioners formed a partnership taxable by law applying the ruling in Evangelista case.

ISSUE: W/N petitioners indeed formed a partnership as contemplated by law.

HELD: Yes. The essential elements of partnerships are present in this case, namely; (a) an agreement to contribute money, property, or industry to a common fund; and (b) intent to divide the profits among the contracting parties. The first was already admitted and therefore it boils down to their intent in acting as they did. Upon consideration of the circumstances surrounding the case, it was found out that the petitioner’s purpose was to engage in real estate transactions for monetary gain and then divide the same among themselves. In the case at bar, there was a common fund used in a series of transactions; the property thus acquired was not used for residential or other purposes other than leasing. Such properties having been under management by one person with full power to lease and such condition existed for 10 years already. The collective effect of these circumstances is such as to leave no room for doubt on the existence of said intent in the petitioners herein.

OBILLOS vs. CIR139 SCRA 436, G.R. No. L-68118 October 29, 1985, Aquino, J.:p

FACTS: The Commissioner acted on the theory that the 4 petitioners had formed an unregistered partnership or joint venture within the meaning of Sections 24(a) and 84(b) of the Tax Code.

For at least one year after their receipt of two parcels of land from their father, petitioners resold said lots to the Walled City Securities Corporation and Olga Cruz Canda, for which they earned a profit of P134,341.88 or P33,584 for each of them. They treated the profit as a capital gain and paid an income tax on one-half thereof or of P16,792.

One day before the expiration of the five-year prescriptive period, the Commissioner of Internal Revenue, Commissioner acting on the theory that the four petitioners had formed an unregistered partnership or joint venture, required the four petitioners to pay corporate income tax on the total profit of P134,336 in addition to individual income tax on their shares thereof, a 50% fraud surcharge and a 42% accumulated interest. Further, the Commissioner considered the share of the profits of each petitioner in the sum of P33,584 as a " taxable in full (not a mere capital gain of which is taxable) and required them to pay deficiency income taxes aggregatingP56,707.20 including the 50% fraud surcharge and the accumulated interest.

ISSUE: Whether or not petitioners have indeed formed a partnership or joint venture and thus, liable for corporate income tax.

HELD: It is error to consider the petitioners as having formed a partnership under article 1767 of the Civil Code simply because they allegedly contributed P178,708.12 to buy the two lots, resold the same and divided the profit among themselves.

To regard the petitioners as having formed a taxable unregistered partnership would result in oppressive taxation. As testified by Jose Obillos, Jr., they had no such intention. They were co-owners pure and simple. To consider them as partners would obliterate the distinction between a co-ownership and a partnership. The petitioners were not engaged in any joint venture by reason of that isolated transaction. Article 1769(3) of the Civil Code provides that "the sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived". There must be an unmistakable intention to form a partnership or joint venture.( Such intent to form a partnership was present in Gatchalian v. Collector of Internal Revenue, where 15 persons contributed small amounts to purchase a 2-peso sweepstakes ticket with the agreement that they would divide the prize. The ticket won the 3rd prize of P50,000. The 15 persons were held liable for income tax as an unregistered partnership.)

The judgment of the Tax Court is reversed and set aside. The assessments are cancelled.

SARDANE vs. CA167 SCRA 524, G.R. No. L-47045 November 22, 1988 Regalado, J.:p FACTS: Acojedo brought an action in the City Court of Dipolog for collection of a sum of P5,217.25 based on promissory notes executed by the herein Nobio Sardane in favor of the herein Acojedo. Exhibit B is a printed promissory note involving Pl,117.25 and dated May 13, 1972. Exhibit C is likewise a printed promissory note and denotes on its face that the sum loaned was Pl,400.00. Exhibit D is also a printed promissory note dated May 31, 1977 involving an amount of P100.00. Exhibit E is what is commonly known to the layman as 'vale' which reads: 'Good for: two hundred pesos (Sgd) Nobio Sardane'. Exhibit F is stated in the following tenor: 'Received from Mr. Romeo Acojedo the sum Pesos: Two Thousand TwoHundred (P2,200.00) ONLY, to be paid on or before December 25, 1975. (Sgd) Nobio Sardane.' Exhibit G and H are both vales' involving the same amount of one hundred pesos, and dated August 25, 1972 and September 12, 1972 respectively.

IN VIEW OF THE FOREGOING, judgment is hereby rendered in favor of the plaintiff and against the defendant as follows:

(a) Ordering the defendant to pay unto the plaintiff the sum of Five Thousand Two Hundred Seventeen Pesos and Twenty-five centavos (P5,217.25) plus legal interest to commence from April 23, 1976 when this case was filed in court.

ISSUE: Whether or not Sardane is a partner in a partnership thus the debts in issue are partnership contributions?

HELD: No. The Court of Appeals held, and still the evidence is insufficient to prove that a partnership existed between the private parties hereto. As manager of the basnig, Sarcado naturally some degree of control over the operations and maintenance thereof had to be exercised by herein petitioner. The fact that he had received 50% of the net profits does not conclusively establish that he was a partner of the private respondent herein. Article1769(4) of the Civil Code is explicit that while the receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business, no such inference shall be drawn if such profits were received in payment as wages of an employee. Furthermore, herein petitioner had no voice in the management of the affairs of the basnig. Under similar facts, this Court in the early case of Fortis vs. Gutierrez Hermanos, in denying the claim of the plaintiff therein that he was a partner in the business of the defendant, declared: This contention cannot be sustained. It was a mere contract of employment. The plaintiff had no voice nor vote in the management of the affairs of the company. The fact that the compensation received by him was to be determined with reference to the profits made by the defendant in their business did not in any sense make him a partner therein. ...There are other considerations noted by respondent Court which negate herein petitioner's pretension that he was a partner and not a mere employee indebted to the present private respondent. Also, although he contends that herein private respondent is the treasurer of the alleged partnership, yet it is the latter who is demanding an accounting. The advertence of the Court of

First Instance to the fact that the casco bears the name of herein petitioner disregards the finding of the respondent Court that it was just a concession since it was he who obtained the engine used in the Sardaco from the Department of Local Government and Community Development. Further, the use by the parties of the pronoun "our" in referring to "our  basnig, our catch", "our deposit", or "our boseros" was merely indicative of the camaraderie and not evidentiary of a partnership, between them.

LITONJUA vs. LITONJUA 477 SCRA 576, G.R. NOS. 166299-300 December 13, 2005, Garcia, J.:p

FACTS: Aurelio and Eduardo are brothers. In 1973, Aurelio alleged that Eduardo entered into a contract of partnership with him. Aurelio showed as evidence a letter sent to him by Eduardo that the latter is allowing Aurelio to manage their family business (if Eduardo’s away) and in exchange thereof he will be giving Aurelio P1 million or 10% equity, whichever is higher. A memorandum was subsequently made for the said partnership agreement. The memorandum this time stated that in exchange of Aurelio, who just got married, retaining his share in the family business (movie theatres, shipping and land development) and some other immovable properties, he will be given P1 Million or 10% equity in all these businesses and those to be subsequently acquired by them whichever is greater.

In 1992 however, the relationship between the brothers went sour. And so Aurelio demanded an accounting and the liquidation of his share in the partnership. Eduardo did not heed and so Aurelio sued Eduardo.

ISSUE: Whether or not there exists a partnership.

HELD:  No. The partnership is void and legally nonexistent. The documentary evidence presented by Aurelio, i.e. the letter from Eduardo and the Memorandum, did not prove partnership.

The 1973 letter from Eduardo on its face, contains typewritten entries, personal in tone, but is unsigned and undated. As an unsigned document, there can be no quibbling that said letter does not meet the public instrumentation requirements exacted under Article 1771 (how partnership is constituted) of the Civil Code. Moreover, being unsigned and doubtless referring to a partnership involving more than P3,000.00 in money or property, said letter cannot be presented for notarization, let alone registered with the Securities and Exchange Commission (SEC), as called for under the Article 1772 (capitalization of a partnership) of the Code. And inasmuch as the inventory requirement under the succeeding Article 1773 goes into the matter of validity when immovable property is contributed to the partnership, the next logical point of inquiry turns on the nature of Aurelio’s contribution, if any, to the supposed partnership.

The Memorandum is also not a proof of the partnership for the same is not a public instrument and again, no inventory was made of the immovable property and no inventory was attached to the Memorandum. Article 1773 of the Civil Code requires that

if immovable property is contributed to the partnership an inventory shall be had and attached to the contract.

AGUILA JR. vs. CA319 SCRA 246, G.R. No. 127347, November 25, 1999, Mendoza, J.:p

FACTS: In April 1991, the spouses Ruben and Felicidad Abrogar entered into a loan agreement with a lending firm called A.C. Aguila & Sons, Co., a partnership. The loan was for P200k. To secure the loan, the spouses mortgaged their house and lot located in a subdivision. The terms of the loan further stipulates that in case of non-payment, the property shall be automatically appropriated to the partnership and a deed of sale be readily executed in favor of the partnership. She does have a 90 day redemption period.

Ruben died, and Felicidad failed to make payment. She refused to turn over the property and so the firm filed an ejectment case against her (wherein she lost). She also failed to redeem the property within the period stipulated. She then filed a civil case against Alfredo Aguila, manager of the firm, seeking for the declaration of nullity of the deed of sale. The RTC retained the validity of the deed of sale. The Court of Appeals reversed the RTC. The CA ruled that the sale is void for it is a pactum commissorium sale which is prohibited under Art. 2088 of the Civil Code (note the disparity of the purchase price, which is the loan amount, with the actual value of the property which is after all located in a subdivision).

ISSUE: Whether or not the case filed by Felicidad shall prosper.

HELD: No. Unfortunately, the civil case was filed not against the real party in interest. As pointed out by Aguila, he is not the real party in interest but rather it was the partnership A.C. Aguila & Sons, Co. The Rules of Court provide that “every action must be prosecuted and defended in the name of the real party in interest.” A real party in interest is one who would be benefited or injured by the judgment, or who is entitled to the avails of the suit. Any decision rendered against a person who is not a real party in interest in the case cannot be executed. Hence, a complaint filed against such a person should be dismissed for failure to state a cause of action, as in the case at bar.

Under Art.1768 of the Civil Code, a partnership “has a juridical personality separate and distinct from that of each of the partners.” The partners cannot be held liable for the obligations of the partnership unless it is shown that the legal fiction of a different juridical personality is being used for fraudulent, unfair, or illegal purposes. In this case, Felicidad has not shown that A.C. Aguila & Sons, Co., as a separate juridical entity, is being used for fraudulent, unfair, or illegal purposes. Moreover, the title to the subject property is in the name of A.C. Aguila & Sons, Co. It is the partnership, not its officers or agents, which should be impleaded in any litigation involving property registered in its name. A violation of this rule will result in the dismissal of the complaint.

SUNGA vs. CHUAG.R. No. 143340, August 15, 2001, Gonzaga-Reyes, J.:p

FACTS: On June 22, 1992, Lamberto T. Chua (hereafter respondent) filed a complaint against Lilibeth Sunga Chan (hereafter petitioner Lilibeth) and Cecilia Sunga (hereafter petitioner Cecilia), daughter and wife, respectively of the deceased Jacinto L. Sunga (hereafter Jacinto), for "Winding Up of Partnership Affairs, Accounting, Appraisal and Recovery of Shares and Damages with Writ of Preliminary Attachment" with the Regional Trial Court, Branch 11, Sindangan, Zamboanga del Norte.

Respondent alleged that in 1977, he verbally entered into a partnership with Jacinto in the distribution of Shellane Liquefied Petroleum Gas (LPG) in Manila. For business convenience, respondent and Jacinto allegedly agreed to register the business name of their partnership, SHELLITE GAS APPLIANCE CENTER (hereafter Shellite), under the name of Jacinto as a sole proprietorship. Respondent allegedly delivered his initial capital contribution of P100,000.00 to Jacinto while the latter in turn produced P100,000.00 as his counterpart contribution, with the intention that the profits would be equally divided between them. The partnership allegedly had Jacinto as manager, assisted by Josephine Sy (hereafter Josephine), a sister of the wife respondent, Erlinda Sy. As compensation, Jacinto would receive a manager's fee or remuneration of 10% of the gross profit and Josephine would receive 10% of the net profits, in addition to her wages and other remuneration from the business.

Allegedly, from the time that Shellite opened for business on July 8, 1977, its business operation went quite and was profitable. Respondent claimed that he could attest to success of their business because of the volume of orders and deliveries of filled Shellane cylinder tanks supplied by Pilipinas Shell Petroleum Corporation. While Jacinto furnished respondent with the merchandise inventories, balance sheets and net worth of Shellite from 1977 to 1989, respondent however suspected that the amount indicated in these documents were understated and undervalued by Jacinto and Josephine for their own selfish reasons and for tax avoidance.

Upon Jacinto's death in the later part of 1989, his surviving wife, petitioner Cecilia and particularly his daughter, petitioner Lilibeth, took over the operations, control, custody, disposition and management of Shellite without respondent's consent. Despite respondent's repeated demands upon petitioners for accounting, inventory, appraisal, winding up and restitution of his net shares in the partnership, petitioners failed to comply. Petitioner Lilibeth allegedly continued the operations of Shellite, converting to her own use and advantage its properties.

On March 31, 1991, respondent claimed that after petitioner Lilibeth ran out the alibis and reasons to evade respondent's demands, she disbursed out of the partnership funds the amount of P200,000.00 and partially paid the same to respondent. Petitioner Lilibeth allegedly informed respondent that the P200,000.00 represented partial payment of the latter's share in the partnership, with a promise that the former would make the complete inventory and winding up of the properties of the business

establishment. Despite such commitment, petitioners allegedly failed to comply with their duty to account, and continued to benefit from the assets and income of Shellite to the damage and prejudice of respondent.

ISSUE: WON Partnership exists

HELD: Yes, partnership exists. A partnership may be constituted in any form, except where immovable property of real rights are contributed thereto, in which case a public instrument shall necessary. Hence, based on the intention of the parties, as gathered from the facts and ascertained from their language and conduct, a verbal contract of partnership may arise. The essential elements that must be proven to that a partnership was agreed upon are (1) mutual contribution to a common stock, and (2) a joint interest in the profits. Understandably so, in view of the absence of the written contract of partnership between respondent and Jacinto, respondent resorted to the introduction of documentary and testimonial evidence to prove said partnership. The crucial issue to settle then is to whether or not the "Dead Man's Statute" applies to this case so as to render inadmissible respondent's testimony and that of his witness, Josephine.

The "Dead Man's Statute" provides that if one party to the alleged transaction is precluded from testifying by death, insanity, or other mental disabilities, the surviving party is not entitled to the undue advantage of giving his own uncontradicted and unexplained account of the transaction. But before this rule can be successfully invoked to bar the introduction of testimonial evidence, it is necessary that:

"1. The witness is a party or assignor of a party to case or persons in whose behalf a case in prosecuted.2. The action is against an executor or administrator or other representative of a deceased person or a person of unsound mind;3. The subject-matter of the action is a claim or demand against the estate of such deceased person or against person of unsound mind;4. His testimony refers to any matter of fact of which occurred before the death of such deceased person or before such person became of unsound mind."

Two reasons forestall the application of the "Dead Man's Statute" to this case. First, petitioners filed a compulsory counterclaim against respondents in their answer before the trial court, and with the filing of their counterclaim, petitioners themselves effectively removed this case from the ambit of the "Dead Man's Statute". Well entrenched is the rule that when it is the executor or administrator or representatives of the estates that sets up the counterclaim, the plaintiff, herein respondent, may testify to occurrences before the death of the deceased to defeat the counterclaim. Moreover, as defendant in the counterclaim, respondent is not disqualified from testifying as to matters of facts occurring before the death of the deceased, said action not having been brought against but by the estate or representatives of the deceased.

Second, the testimony of Josephine is not covered by the "Dead Man's Statute" for the simple reason that she is not "a party or assignor of a party to a case or persons in whose behalf a case is prosecuted." Records show that respondent offered the

testimony of Josephine to establish the existence of the partnership between respondent and Jacinto. Petitioners' insistence that Josephine is the alter ego of respondent does not make her an assignor because the term "assignor" of a party means "assignor of a cause of action which has arisen, and not the assignor of a right assigned before any cause of action has arisen." Plainly then, Josephine is merely a witness of respondent, the latter being the party plaintiff.

We are not convinced by petitioners' allegation that Josephine's testimony lacks probative value because she was allegedly coerced by respondent, her brother-in-law, to testify in his favor, Josephine merely declared in court that she was requested by respondent to testify and that if she were not requested to do so she would not have testified. We fail to see how we can conclude from this candid admission that Josephine's testimony is involuntary when she did not in any way categorically say that she was forced to be a witness of respondent.

Also, the fact that Josephine is the sister of the wife of respondent does not diminish the value of her testimony. In a desperate bid to cast doubt on the validity of the oral partnership between respondent and Jacinto, petitioners maintain that said partnership that had initial capital of P200,000.00 should have been registered with the Securities and Exchange Commission (SEC) since registration is mandated by the Civil Code, True, Article 1772 of the Civil Code requires that partnerships with a capital of P3,000.00 or more must register with the SEC, however, this registration requirement is not mandatory. Article 1768 of the Civil Code explicitly provides that the partnership retains its juridical personality even if it fails to register. The failure to register the contract of partnership does not invalidate the same as among the partners, so long as the contract has the essential requisites, because the main purpose of registration is to give notice to third parties, and it can be assumed that the members themselves knew of the contents of their contract.In the case at bar, non-compliance with this directory provision of the law will not invalidate the partnership considering that the totality of the evidence proves that respondent and Jacinto indeed forged the partnership in question.

CAMPOS RUEDA & CO. vs. PACIFIC COMMERCIAL CO., 44 Phil 916, G.R. No. L-18703, August 28, 1922, Romualdez, J.:p

FACTS: The limited partnership was, and is, indebted to the appellants in various sums amounting to not less than P1,000, payable in the Philippines, which were not paid more than thirty days prior to the date of the filing by the petitioners of the application for involuntary insolvency. 

ISSUE: Whether or not a limited partnership, such as the appellee, which has failed to pay its obligation with three creditors for more than thirty days, may be held to have committed an act of insolvency, and thereby be adjudged insolvent against its will.

HELD: Unlike the common law, the Philippine statutes consider a limited partnership as a juridical entity for all intents and purposes, which personality is recognized in all its acts and contracts (art. 116, Code of Commerce). This being so and the juridical

personality of a limited partnership being different from that of its members, it must, on general principle, answer for, and suffer, the consequence of its acts as such an entity capable of being the subject of rights and obligations. If, as in the instant case, the limited partnership of Campos Rueda & Co. Failed to pay its obligations with three creditors for a period of more than thirty days, which failure constitutes, under our Insolvency Law, one of the acts of bankruptcy upon which an adjudication of involuntary insolvency can be predicated, this partnership must suffer the consequences of such a failure, and must be adjudged insolvent. We are not unmindful of the fact that some courts of the United States have held that a partnership may not be adjudged insolvent in an involuntary insolvency proceeding unless all of its members are insolvent, while others have maintained a contrary view. But it must be borne in mind that under the American common law, partnerships have no juridical personality independent from that of its members; and if now they have such personality for the purpose of the insolvency law, it is only by virtue of general law enacted by the Congress of the United States on July 1, 1898. 

The liability of the limited partners for the obligations and losses of the partnership is limited to the amounts paid or promised to be paid into the common fund except when a limited partner should have included his name or consented to its inclusion in the firm name (arts. 147 and 148, Code of Commerce).

Therefore, it having been proven that the partnership Campos Rueda & Co. failed for more than thirty days to pay its obligations to the petitioners the Pacific Commercial Co. the Asiatic Petroleum Co. and the International Banking Corporation, the case comes under paragraph 11 of section 20 of Act No. 1956, and consequently the petitioners have the right to a judicial decree declaring the involuntary insolvency of said partnership.

The judgment of the lower court was reversed and it was adjudged that the limited partnership Campos Rueda & Co. is and was on December 28, 1921, insolvent and liable for having failed for more than thirty days to meet its obligations with the three petitioners. The proceeding was remanded to the Court of First Instance of Manila with instruction to issue the proper decrees under section 24 of Act No. 1956, and proceed therewith until its final disposition.