Case digests compilation 1st set (PAT) MARJORIE TOCAO and WILLIAM T. BELO, petitioners, vs.

COURT OF APPEALS and NENITA A. ANAY, respondents. (AGASANG) 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. Lim Tong Lim vs. Philippine Fishing Gear Industries, Inc. (AGUILAR, Ares Victor S.) G.R. No. 136448 Nov. 3, 1999 Panganiban, J. 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: By their acts, Lim, Chua, and Yao are deemed to have entered into a partnership. Page 1 of 36

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. Petitioners 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. Heirs of Jose Lim vs Juliet Villa Lim (barrido) 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 oracquire 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 Page 2 of 36

this case were purchased and acquired through her and her husbands 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 propertieswere 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 Joses 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 Elfredos 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. V. COMMISSIONER OF INTERNAL REVENUE (BRIEVA) Facts: Petitioner Philex entered into an agreement with Baguio Gold Mining Corporation for the former to manage the latters 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 annualtax 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 loanand 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 Page 3 of 36

Held: Yes it does! The lower courts correctly held that the Power of Attorney (PA) is the instrument material that is 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 Reyes (ESPERANZA) GR 135813, October 25, 2001 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 Grageras 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 Grageras 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.

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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. Case: Tocao vs CA, G.R. No. 127405, 20 September 2001 (MR) (GANAN) 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. Ruling: The inherent powers of a Court to amend and control its processes and orders so as to make them conformable to law and justice includes the right to reverse itself, especially when in its honest opinion it has committed an error or mistake in judgment, and that to adhere to its decision will cause injustice to a party litigant. 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 Companys 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.

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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. Held: 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 CA (GUILLEN) 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 he 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 pools 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 created or organized (this means unregistered partnerships) Page 6 of 36

EVANGELISTA, ET. AL. VS.COLLECTOR OFINTERNAL REVENUE, ET. AL. (INGUSAN) 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; tocollect and receive rents; to issue receipts therefore; in default of such payment, to bring suits against thedefaulting tenant; and to endorse and deposit all notes and checks for them. In 1948, their net rentalincome 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 dealers 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. Issue: Whether the petitioners are subject to the tax on corporations, real estate dealers fixed tax, and corporation residence tax. Court of Tax Appeals: The petitioners are liable. (No explanation for such in the case) Petitioners: They are mere co-owners, not copartners, 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. 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 ororganized, joint-stock companies, joint accounts, associations or insurance companies, but does notinclude 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 residentialpurposes, 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 theaffairs 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 thecauses 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. I. As regards to the residence tax for corporations provided Sec. 2 of Commonwealth Act No. 4651, the terms corporation and partnership are used in both statutes with substantially the same meaning. Consequently, petitioners are subject, also, to the residence tax for corporations. Entities liable to residence taxEvery corporation, no matter how created or organized, whether domestic or resident foreign, engaged in or doing business in the Philippines shall pay an annual residence tax of five pesos Page 7 of 36

and an annual additional tax, which in no case, shall exceed one thousand pesos, in accordance with the following schedule: * * * II. 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 RevenueCode, for real estate dealers, inasmuchas, pursuant to Section 194 (s) thereof:Real estate dealers include any person engagedin the business of buying, selling, exchanging,leasing, or renting property of his own account asprincipal and holding himself out as full ro part-timedealer in real estate or as an owner of rentalproperty or properties rented or offered to rent for anaggregate amount of three thousand pesos or morea year. * * *

YULO V. YANG CHIAO SENG (IRUGUIN) 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, PlazaSta. 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 Yulos 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 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 a indefinite period. Owners brought their own civil action for ejectment upon Yulo and Yang. CFI: Two cases were heard jointly; Complaint of Yuloand 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.

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Defendants 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 didnt 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? Ruling: 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. We find no error in the judgment of the court below and we affirm it in toto, with costs against plaintiffappellant. G.R. No. 159333 July 31, 2006

ARSENIO T. MENDIOLA, petitioner, vs. COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION, PACIFIC FOREST RESOURCES, PHILS., INC. and/or CELLMARK AB, respondents.(JOAQUIN) 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." 5 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. etitioner 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 5050."11 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.12On November 27, 2000, private respondent Pacfor, through counsel, Page 9 of 36

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 coownership 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. 36 The property or stock of the partnership forms a community of goods, a common fund, in which each party has a proprietary interest.37 In fact, the New Civil Code regards a partner as a co-owner of specific partnership property.38 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. 39 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. 40 Besides, a corporation cannot become a member of a partnership in the absence of express authorization by statute or charter.41 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. 42 No such authorization has been proved in the case at bar. J.M. Tuason v. Bolanos 95 Phil 106 (MAGLAQUE) 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 BOLAOS, 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 Page 10 of 36

 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, BOLAOS had prayed for the dismissal of the case against him by alleging his prior, adverse possession of the disputed land and alleging that TUASONs 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 BOLAOS 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 BOLAOS appealed directly to the SC because of the value of the property involved raising the following issues ISSUES: WON the case was brought by the real party in interest (only relevant issue) o side-issue: Can Gregorio Araneta, Inc. (a corporation) be a partner of another corporation? WON the CFI correctly admitted TUASONs amendment of the complaint YES. WON the CFI correctly ruled that TUASON is the true and lawful owner of the land YES. HELD: BOLAOS petition is without merit. The CFI decision is AFFIRMED. RATIO: (1) It is beyond question that the present action was brought by the real party in interest, that is, by J. M. Tuason and Co., Inc. What the Rules of Court require is that an action be brought in the name of, but not necessarily by, the real party in interest. (Section 2, Rule 2) The practice is for an attorney-at-law to bring the action, that is to file the complaint, in the name of the plaintiff. That practice appears to have been followed in this case, since the complaint is signed by the law firm of Araneta and Araneta, "counsel for plaintiff" Side-Issue: WON a corporation can be a partner of another corporation 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

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(2) As to the admission of TUASONs amendments, suffice it to say that Section 4 of Rule 17, Rules of Court sanctions such amendment. In fact, under the same Rule, amendment is not even necessary for the purpose of rendering judgment on issues proved though not alleged (3) Considering the ruling in issues #1 and 2 (plus the evidence on record and the admissions of both plaintiff and defendants on trial), and it having been proven that TUASONs Torrens title is valid and regularly registered as early as 1914, the decree of registration can no longer be impugned on the ground of fraud, error or lack of notice to defendant, as more than one year has already elapsed from the issuance and entry of the decree Neither can the decree be collaterally attacked by any person claiming title to, or interest in, the land prior to the registration proceedings Nor could title to that land in derogation of that of TUASON, the registered owner, be acquired by prescription or adverse possession Adverse, notorious and continuous possession under claim of ownership for the period fixed by law is ineffective against a Torrens title Aurbach vs. Sanitary Wares (MENDIOLA) 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 no. that should have been nominated. For foreigner,3 nominees only, while the Filipino group shall have a 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, theLagdameo 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 theparties should be viewed strictly on the "Agreement" dated August 15,1962 wherein it is clearly statedthat 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 itsannual stockholders' meeting held on March 8, 1983. Ruling: While certain provisions of the Agreement would make it appear that the parties theretodisclaim being partners or joint venturers such disclaimer is directed at third parties and is notinconsistent with, and does not preclude, the existence of two distinct groups of stockholders inSaniwares one of which (the Philippine Investors) shall constitute the majority, and the other ASIshall constitute the minority stockholder. In any event, the evident intention of the PhilippineInvestors and ASI in entering into the Agreement is to enter into a joint venture enterprise Page 12 of 36

An examination of the Agreement shows that certain provisions were included to protect theinterests of ASI as the minority. For example, the vote of 7 out of 9 directors is required incertain enumerated corporate acts. ASI is contractually entitled to designate a member of theExecutive 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 andby-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 isnormally followed by ASI and that Saniwares should not export "Standard" products otherwisethan through ASI's Export Marketing Services. Under the Agreement, ASI agreed to providetechnology 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 definitionbut 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 partnershipcontemplates a general business with some degree of continuity , while the joint venture is formedfor the execution of a single transaction, and is thus of a temporary nature

ESSENTIAL ELEMENTS: OBJECT CERTAIN OR LAWFUL SUBJECT MATTER G.R. No. L-21906 December 24, 1968

INOCENCIA DELUAO and FELIPE DELUAO plaintiffs-appellees, vs. NICANOR CASTEEL and JUAN DEPRA, defendants, NICANOR CASTEEL, defendant-appellant. (RECAMARA) CASTRO, J.: The basic action is for specific performance, and damages resulting from an alleged breach of contract. In 1940, Nicanor Casteel filed a fishpond application for a big tract of swampy land in Davao. No action was taken thereon by the authorities concerned. During the Japanese occupation, he filed another fishpond application for the same area, but because of the conditions then prevailing, it was not acted upon either. On December 12, 1945 he filed a third fishpond application for the same area, which, after a survey, was found to contain 178.76 hectares. Upon investigation, it was discovered that the area applied for was still needed for firewood production. Hence on May 13, 1946 this third application was disapproved.

Page 13 of 36

Meanwhile, several applications were submitted by other persons for portions of the area covered by Casteel's application. Because of these applications, Casteel realized the urgent necessity of expanding his occupation of the land by constructing dikes and cultivating marketable fishes, in order to prevent old and new squatters from usurping it. But lacking financial resources at that time, he sought financial aid from his uncle Felipe Deluao who then extended loans totalling more or less P27,000 with which to finance the needed improvements on the fishpond. Hence, a wide productive fishpond was built. Moreover, upon learning that portions of the area applied for by him were already occupied by rival applicants, Casteel immediately filed the corresponding protests. The Director of Fisheries nevertheless rejected Casteel's application on October 25, 1949, required him to remove all the improvements which he had introduced on the land, and ordered that the land be leased through public auction. On November 25, 1949 Inocencia Deluao (wife of Felipe) and Nicanor Casteel executed a contract denominated a "contract of service" - wherein the Deluaos financed the sum of TWENTY SEVEN THOUSAND PESOS (P27,000.00) to Casteel who renders only his services for the construction and improvements of the fishpond; That Casteel will be the Manager and sole buyer of all the produce of the fish that will be produced from said fishpond; That Deluao will be the administrator of the same she having financed the construction and improvement of said fishpond. On the same date the above contract was entered into, Inocencia Deluao executed a special power of attorney in favor of Jesus Donesa for the latter to represent her in the administration of the fishpond and to supervise, demand, receive, and collect the value of the fish that is being periodically realized from it. On September 15, 1950 the Secretary of Agriculture and Natural Resources issued a decision on the administrative cases Casteel filed against the other occupants of the land. The order reinstated Casteel and gave due course for the area disputed in one and rejected his objection in the other. Further, the fishpond permits of two other adverse claimants were cancelled and revoked. Sometime in January 1951 Nicanor Casteel forbade Inocencia Deluao from further administering the fishpond, and ejected the latter's representative (encargado), Jesus Donesa, from the premises. Alleging violation of the contract of service entered into between Inocencia Deluao and Nicanor Casteel, Felipe and Inocencia Deluao on April 3, 1951 filed an action in the Court of First Instance of Davao for specific performance and damages against Nicanor Casteel praying inter alia, (a) that Casteel be ordered to respect and abide by the terms and conditions of said contract and that Inocencia Deluao be allowed to continue administering the said fishpond and collecting the proceeds from the sale of the fishes caught from time to time; and (b) that the defendants be ordered to pay jointly and severally to plaintiffs the sum of P20,000 in damages. Casteel contends that the lower court incurred an error in ordering the issuance ex parte of a writ of preliminary injunction against him, and in not dismissing the appellee's complaint.

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Apparently, the lower court relied on exhibit A the so-called "contract of service" and the appellees' contention that it created a contract of co-ownership and partnership between Inocencia Deluao and the appellant over the fishpond in question. Too well-settled is the rule that everyone is conclusively presumed to know the law. It must be assumed, conformably to such rule, that the parties entered into the so-called "contract of service" cognizant of the mandatory and prohibitory laws governing the filing of applications for fishpond permits. And since they were aware of the said laws, it must likewise be assumed in fairness to the parties that they did not intend to violate them. This view must perforce negate the appellees' allegation that exhibit A created a contract of co-ownership between the parties over the disputed fishpond. If the establishment of a coownership violative of the prohibitory laws was to be admitted, the contract would altogether be declared null. The contract is construed as one of partnership, divided into two parts namely, a contract of partnership to exploit the fishpond pending its award to either Felipe Deluao or Nicanor Casteel, and a contract of partnership to divide the fishpond between them after such award. The first is valid, the second illegal. When they entered into the so-called contract of service, neither Casteel nor Felipe Deluao was the holder of a fishpond permit over the area although the fishpond was then in the possession of Casteel. They were not however precluded from exploiting the fishpond pending resolution of Casteel's appeal or the approval of Deluao's application over the same area whichever event happened first. No law, rule or regulation prohibited them from doing so. Thus, rather than let the fishpond remain idle they cultivated it. The initial intention of the parties was not to form a co-ownership but to establish a partnership Inocencia Deluao as capitalist partner and Casteel as industrial partner the ultimate undertaking of which was to divide into two equal parts such portion of the fishpond as might have been developed by the amount extended by the plaintiffs-appellees, with the further provision that Casteel should reimburse the expenses incurred by the appellees over one-half of the fishpond that would pertain to him. The document, although denominated as a "contract of service," was actually the memorandum of their partnership agreement. The arrangement under the so-called "contract of service" continued until the decisions were issued by the Secretary of Agriculture and Natural Resources. This development, by itself, brought about the dissolution of the partnership. Art. 1830(3) of the Civil Code enumerates, as one of the causes for the dissolution of a partnership, "... any event which makes it unlawful for the business of the partnership to be carried on or for the members to carry it on in partnership." The approval of the appellant's fishpond application by the decisions in DANR Cases 353 and 353-B brought to the fore several provisions of law which made the continuation of the partnership unlawful and therefore caused its ipso facto dissolution.

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Act 4003, known as the Fisheries Act, prohibits the holder of a fishpond permit (the permittee) from transferring or subletting the fishpond granted to him, without the previous consent or approval of the Secretary of Agriculture and Natural Resources. Sec. 40 of Commonwealth Act 141, otherwise known as the Public Land Act, likewise provides that the lessee shall not assign, encumber, or sublet his rights without the consent of the Secretary of Agriculture and Commerce, and the violation of this condition shall avoid the contract. Finally, section 37 of Administrative Order No. 14 of the Secretary of Agriculture and Natural Resources issued in August 1937, prohibits a transfer or sublease unless first approved by the Director of Lands and under such terms and conditions as he may prescribe. Since the partnership had for its object the division into two equal parts of the fishpond between the appellees and the appellant after it shall have been awarded to the latter, and therefore it envisaged the unauthorized transfer of one-half thereof to parties other than the applicant Casteel, it was dissolved by the approval of his application and the award to him 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. In addition, succeeding events reveal the intent of both parties to terminate the partnership by refusing to share the fishpond with the other. Inasmuch as the erstwhile partners articulated in their exchanges of letters their respective resolutions not to share the fishpond with each other in direct violation of the undertaking for which they have established their partnership each must be deemed to have expressly withdrawn from the partnership, thereby causing its dissolution pursuant to art. 1830(2) of the Civil Code which provides, inter alia, that dissolution is caused "by the express will of any partner at any time."

The case was remanded to the lower court for the reception of evidence relative to an accounting from November 25, 1949 to September 15, 1950, in order for the court to determine (a) the profits realized by the partnership, (b) the share (in the profits) of Casteel as industrial partner, (e) the share (in the profits) of Deluao as capitalist partner, and (d) whether the amounts totalling about P27,000 advanced by Deluao to Casteel for the development and improvement of the fishpond have already been liquidated. Besides, since the appellee Inocencia Deluao continued in possession and enjoyment of the fishpond even after it was awarded to Casteel, she did so no longer in the concept of a capitalist partner but merely as creditor of the appellant, and therefore, she must likewise submit in the lower court an accounting of the proceeds of the sales of all the fishes harvested from the fishpond from September 16, 1950 until Casteel shall have been finally given the possession and enjoyment of the same. In the event that the appellee Deluao has received more than her lawful credit of P27,000 (or whatever amounts have been advanced to Casteel), plus 6% interest thereon per annum, then she should reimburse the excess to the appellant.

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ARBES V. POLISTICO (REYES) I: 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 5 th 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. II: 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? III: HELD/RATIO 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. Page 17 of 36

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. JOSE FERNANDEZ, plaintiff-appellant, vs. FRANCISCO DE LA ROSA, defendant-appellee. (AGASANG) 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/s: 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 relinguish 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.

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PRIMELINK PROPERTIES AND DEVELOPMENT CORPORATION and RAFAELITO W. LOPEZ, Petitioners vs. MA. CLARITA T. LAZATIN-MAGAT, JOSE SERAFIN T. LAZATIN, JAIME TEODORO T. LAZATIN and JOSE MARCOS T. LAZATIN, Respondents (Aguilar, Ares Victor S.) G.R. No. 167379 June 27, 2006 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 projects 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 Page 19 of 36

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. Sevilla vs.CA (BARRIDO) 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 formers 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 wall 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: None. The Supreme Court rejected Sevillas 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 Page 20 of 36

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 managament or a partnership.

FRANK S. BOURNS, plaintiff-appellee, D. M. CARMAN, ET AL., defendants-appellants. (BRIEVA)

vs.

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 codefendants 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 LoChim-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, coparticipants 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. Page 21 of 36

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. GEORGE O. DIETRICH, plaintiff-appellee, vs.O.K. FREEMAN, BURTONWHITCOMB, defendants. BURTON WHITCOMB, appellant G.R. No. L-6252 January 28, 1911 (ESPERANZA) JAMES L. PIERCE, and

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 Page 22 of 36

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 copartnership. 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,

Case: Biglangawa vs Constantino, G.R. No. L-9965, 29 August 1960 (GANAN) 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 Page 23 of 36

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 petitioners commission. Respondents, however, acknowledger 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 latters disadvantage. Hence, this complaint for collection of the petitioners remaining commissions. Issue: Whether or not the contract is one of agency or of a partnership. Ruling: Petitioners 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 respondents' 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. Held: The appealed order of the court was affirmed.

ONA vs CIR (GUILLEN) FACTS: Julia Bunales died leaving as heirs her husband, petitioner Lorenzo, and her five children. Lorenzo was appointed as the administrator of his wifes 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, petitioners 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. Oa 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

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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. Oa, 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. CIR (ingusan) F: Petitioners purchased a lot and building.The initial payment was shared equally bythe respondents. At the time of thepurchase, the building was leased to varioustenants, whose rights under the leasecontracts with the original owners, thepurchasers, petitioners herein, agreed torespect. The administration of the buildingwas entrusted to an administrator who collected the rents; kept books and recordsand rendered statement of accounts to the owners. Petitioners divided equally theincome of operation and maintenance.The CTA held that petitioners formed apartnership taxable by law applying theruling in Evangelista case. I: W/N petitioners indeed formed apartnership as contemplated by law. H: Yes. The essential elements ofpartnerships are present in this case,namely; (a) an agreement tocontribute money, property, orindustry to a common fund; and (b)intent to divide the profits among thecontracting parties. Page 25 of 36

 The first was already admitted andtherefore it boils down to their intentin acting as they did. Upon consideration of thecircumstances surrounding the case, itwas found out that the petitionerspurpose was to engage in real estatetransactions for monetary gain andthen divide the same amongthemselves. In the case at bar, there was acommon fund used in a series oftransactions; the property thusacquired was not used for residentialor other purposes other than leasing.Such properties having been undermanagement by one person with fullpower to lease and such conditionexisted for 10 years already. The collective effect of thesecircumstances is such as to leave noroom for doubt on the existence ofsaid intent in the petitioners herein. OBILLOS v. CIR (IRUGUIN) 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. 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 Page 26 of 36

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.

NOBIO SARDANE vs. THE COURT OF APPEALS and ROMEO J. ACOJEDO (JOAQUIN) FACTS: Acojedo brought an action in the City Court of Dipolog for collection of a sum of P5,217.25 basedon 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 aprinted promissory note and denotes on its face that the sum loaned was Pl,400.00. Exhibit D is also aprinted promissory note dated May 31, 1977 involving an amount of P100.00. Exhibit E is what is commonlyknown to the layman as 'vale' which reads: 'Good for: two hundred pesos (Sgd) Nobio Sardane'. Exhibit F isstated 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 Gand H are both vales' involving the same amount of one hundred pesos, and dated August 25, 1972 andSeptember 12, 1972 respectively. IN VIEW OF THE FOREGOING, judgment is hereby rendered in favor of the plaintiff and against thedefendant as follows: (a)Ordering the defendant to pay unto the plaintiff the sum of Five Thousand Two HundredSeventeen 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 betweenthe private parties hereto.As manager of the basnig, Sarcado naturally some degree of control over the operations andmaintenance thereof had to be exercised by herein petitioner. The fact that he had received 50% of thenet 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 businessis prima facie evidence that he is a partner in the business, no such inference shall be drawn if such profitswere received in payment as wages of an employee. Furthermore, herein petitioner had no voice in themanagement 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 theplaintiff 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 himwas to be determined with reference to the profits made by the defendant in their business did not in anysense make him a partner therein. ...There Page 27 of 36

are other considerations noted by respondent Court which negate herein petitioner's pretension thathe 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 itis the latter who is demanding an accounting. The advertence of the Court of First Instance to the fact thatthe 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 ofLocal Government and Community Development. Further, the use by the parties of the pronoun "our" inreferring to "our basnig, our catch", "our deposit", or "our boseros" was merely indicative of the camaraderieand not evidentiary of a partnership, between them.

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Litonjua v. Litonjua 477 SCRA 576 December 13, 2005 (maglaque) FACTS: Petitioner and herein respondent are brothers. The legal dispute between them started when, Aurelio filed a suit against his brother Eduardo alleging that, since June 1973, he and Eduardo are into a joint venture/partnership arrangement in the Odeon Theater business which had accumulated various assets including but not limited to the corporate defendants and their respective assets. Also, the substantial assets of most of the corporate defendants consist of real properties. However, sometime in 1992, the relations between Aurelio and Eduardo became sour so that Aurelio requested for an accounting and liquidation of his share in the joint venture/partnership but to no avail. Petitioner has reasonable cause to believe that respondents are transferring various real properties of the corporations belonging to the joint venture/partnership to other parties in fraud of petitioner. ISSUE: WON petitioner and respondent are considered partners in the theatre, shipping and realty business. HELD: The instant petition is DENIED. A further examination of the allegations in the complaint would show that petitioners contribution to the so-called "partnership/joint venture" was his supposed share in their family business. In other words, his contribution as a partner in the alleged partnership/joint venture consisted of immovable properties and real rights. Lest it be overlooked, the contract-validating inventory requirement under Article 1773 of the Civil Code applies as long as real property or real rights are initially brought into the partnership. In context, the more important consideration is that real property was contributed, in which case an inventory of the contributed property duly signed by the parties should be attached to the public instrument, else there is legally no partnership to speak of. Considering that the allegations in the complaint showed that petitioner contributed immovable properties to the alleged partnership, the "Memorandum" which purports to establish the said "partnership/joint venture" is NOT a public instrument and there was NO inventory of the immovable property duly signed by the parties. As such, the said "Memorandum" is null and void for purposes of establishing the existence of a valid contract of partnership.

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Litonjua v. Litonjua 477 SCRA 576 December 13, 2005 Business Organization Partnership, Agency, Trust Partnership, how formed 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 Eduardos 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 Aurelios 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.

Alfredo Aguila Jr vs Court of Appeals et al (MENDIOLA) Page 30 of 36

Facts: In April 1991, the spouses Ruben and FelicidadAbrogar 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 nonpayment, 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 pactumcommissorium 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. Page 31 of 36

LILIBETH SUNGA-CHAN vs. LAMBERTO T. CHUA, respondent.

and

CECILIA

SUNGA, petitioners,

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
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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.6 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. 7 The essential profits 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. 8 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.9 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."10 Two reasons forestall the application of the "Dead Man's Statute" to this case. First, petitioners filed a compulsory counterclaim 11 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". 12 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.13 Moreover, as defendant in the counterclaim, respondent is not disqualified
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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.14 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." 15 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 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 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 25 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. 26 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.
CONSEQUENCES OF LEGAL PERSONALITY G.R. No. L-18703 August 28, 1922

INVOLUNTARY INSOLVENCY OF CAMPOS RUEDA & CO., S. en C., appellee, vs. PACIFIC COMMERCIAL CO., ASIATIC PETROLEUM CO., and INTERNATIONAL BANKING CORPORATION, petitioners-appellants. (recamara) Page 34 of 36

Jose Yulo, Ross and Lawrence and J. A. Wolfson for appellants. Antonio Sanz for appellee. ROMUALDEZ, J.: The fact that a man was insolvent on a certain day does not justify an inference that he was some time prior thereto. 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. The fundamental question is 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. 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

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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.

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