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BELO vs.

342 SCRA 20, G.R. No. 127405, October 4, 2000, Ynares-Santiago, J .:p
FACTS: Nenita A. Anay met petitioner William T. Belo. Belo introduced Anay to
petitioner Marjorie Tocao, who conveyed her desire to enter into a joint venture with her
for the importation and local distribution of kitchen cook wares. Belo volunteered to
finance the joint venture and assigned to Anay the job of marketing the product
considering her experience and established relationship with West Bend Company, a
manufacturer of kitchen wares in Wisconsin, U.S.A. Under the joint venture, Belo acted
as capitalist, Tocao as president and general manager, and Anay as head of the
marketing department and later, vice-president for sales. Anay organized the
administrative staff and sales force while Tocao hired and fired employees, determined
commissions and/or salaries of the employees, and assigned them to different
branches. The parties agreed that Anay would be entitled to: 1. ten percent (10%) of the
annual net profits of the business; 2. overriding commission of six percent (6%) of the
overall weekly production; 3. thirty percent (30%) of the sales she would make; and 4.
two percent (2%) for her demonstration services.
Anay having secured the distributorship of cookware products from the West Bend
Company and organized the administrative staff and the sales force, the cookware
business took off successfully. They operated under the name of Geminesse
Enterprise, a sole proprietorship registered in Marjorie Tocao's name.
On October 9, 1987, Anay learned that Marjorie Tocao had signed a letter addressed to
the Cubao sales office to the effect that she was no longer the vice-president of
Geminesse Enterprise.
ISSUE: Whether or not Anay was a partner of Tocao and Belo.

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

320 SCRA 428, G.R. No. 134559 December 9, 1999, Panganiban, J.:p
FACTS: In 1969, sisters Antonia Torres and Emeteria Baring entered into a joint
venture agreement with Manuel Torres. Under the agreement, the sisters agreed to
execute a deed of sale in favor Manuel over a parcel of land, the sisters received no
cash payment from Manuel but the promise of profits (60% for the sisters and 40% for
Manuel) said parcel of land is to be developed as a subdivision.
Manuel then had the title of the land transferred in his name and he subsequently
mortgaged the property. He used the proceeds from the mortgage to start building
roads, curbs and gutters. Manuel also contracted an engineering firm for the building of
housing units. But due to adverse claims in the land, prospective buyers were scared off
and the subdivision project eventually failed.
The sisters then filed a civil case against Manuel for damages equivalent to 60% of the
value of the property, which according to the sisters, is whats due them as per the
The lower court ruled in favor of Manuel and the Court of Appeals affirmed the lower
The sisters then appealed before the Supreme Court where they argued that there is no
partnership between them and Manuel because the joint venture agreement is void.
ISSUE: Whether or not there exists a partnership.
HELD: Yes. The joint venture agreement the sisters entered into with Manuel is a
partnership agreement whereby they agreed to contribute property (their land) which
was to be developed as a subdivision. While on the other hand, though Manuel did not
contribute capital, he is an industrial partner for his contribution for general expenses
and other costs. Furthermore, the income from the said project would be divided
according to the stipulated percentage (60-40). Clearly, the contract manifested the
intention of the parties to form a partnership. Further still, the sisters cannot invoke their
right to the 60% value of the property and at the same time deny the same contract
which entitles them to it.
At any rate, the failure of the partnership cannot be blamed on the sisters, nor can it be
blamed to Manuel (the sisters on their appeal did not show evidence as to Manuels
fault in the failure of the partnership). The sisters must then bear their loss (which is
60%). Manuel does not bear the loss of the other 40% because as an industrial partner
he is exempt from losses.
317 SCRA 728, G.R. No. 136448, Nov. 3, 1999, Panganiban, J .:p

FACTS: Antonio Chua and Peter Yap bought nets of various sizes and floats from
Philippine Fishing Gear (PFG) for Ocean Quest Fishing Corporation (OQF), saying that
petitioner was also involved with OQF despite not being a signatory to the agreement.
They failed to pay the purchase price, hence PFG filed a collection case against OQF.
PFG also alleged that OQF is a non-existent corporation by virtue of a certification by
the SEC. RTC issued the writ of attachment on the nets, and was sold at a public
auction with the proceeds deposited to the court. RTC ruled there was partnership
between the three (Chua, Yao, Lim) anchoring on the Compromise Agreement they
executed in the civil case filed by Chua and Yao against Lim for the declaration of
ownership of the fishing boats, among other things. CA affirmed.
ISSUE: Whether or not by their acts, Lim, Chua, and Yao are deemed to have entered
into a partnership.
HELD: Yes. A partnership is a contract where two or more persons bind themselves to
contribute money, property, or industry to a common fund, with the intention of dividing
the profits among themselves. The three engaged in a commercial venture for
commercial fishing and contracted loans to buy two fishing boats, and the nets and
floats needed to operate the fishing business. In their Compromise Agreement, they
subsequently revealed their intention to pay the loan with the proceeds of the sale of the
boats, and to divide equally among them the excess or loss. These boats, the purchase
and the repair of which were financed with borrowed money, fell under the term
"common fund" under Article 1767. The contribution to such fund need not be cash or
fixed assets; it could be an intangible like credit or industry. That the parties agreed that
any loss or profit from the sale and operation of the boats would be divided equally
among them also shows that they had indeed formed a partnership. It extended to the
fishing nets and the floats, both essential to fishing, which were obviously acquired in
furtherance of their business.
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.
636 SCRA 299, G.R. No. 154486, December 1, 2010, Leonardo-De Castro, J.:p

FACTS: The present case stems from the complaint filed by Antonieta Jarantilla against
Buenaventura Remotigue, Cynthia Remotigue, Federico Jarantilla, Jr., Doroteo
Jarantilla and Tomas Jarantilla, for the accounting of the assets and income of the co-
ownership, for its partition and the delivery of her share corresponding to eight percent
(8%), and for damages. Antonieta claimed that in 1946, she had entered into an
agreement with the defendants to engage in business through the execution of a
document denominated as "Acknowledgement of Participating Capital. Antonieta also
alleged that she had helped in the management of the business they co-owned without
receiving any salary. Antonieta further claimed co-ownership of certain properties (the
subject real properties) in the name of the defendants since the only way the
defendants could have purchased these properties were through the partnership as
they had no other source of income.The respondents did not deny the existence and
validity of the "Acknowledgement of Participating Capital" and in fact used this as
evidence to support their claim that Antonietas 8% share was limited to the businesses
enumerated therein. The respondents denied using the partnerships income to
purchase the subject real properties.
During the course of the trial at the RTC, petitioner Federico Jarantilla, Jr., who was one
of the original defendants, entered into a compromise agreement
with Antonieta
Jarantilla wherein he supported Antonietas claims and asserted that he too was entitled
to six percent (6%) of the supposed partnership in the same manner as Antonieta was.
ISSUE: Whether or not the partnership subject of the Acknowledgement of Participating
Capital funded the subject real properties.
HELD: Under Article 1767 of the Civil Code, there are two essential elements in a
contract of partnership: (a) an agreement to contribute money, property or industry to a
common fund; and (b) intent to divide the profits among the contracting parties. The first
element is undoubtedly present in the case at bar, for, admittedly, all the parties in this
case have agreed to, and did, contribute money and property to a common
fund. Hence, the issue narrows down to their intent in acting as they did. It is not denied
that all the parties in this case have agreed to contribute capital to a common fund to be
able to later on share its profits. They have admitted this fact, agreed to its veracity, and
even submitted one common documentary evidence to prove such partnership - the
Acknowledgement of Participating Capital. The petitioner himself claims his share to be
6%, as stated in the Acknowledgement of Participating Capital. However, petitioner fails
to realize that this document specifically enumerated the businesses covered by the
partnership: Manila Athletic Supply, Remotigue Trading in Iloilo City and Remotigue
Trading in Cotabato City. Since there was a clear agreement that the capital the
partners contributed went to the three businesses, then there is no reason to deviate
from such agreement and go beyond the stipulations in the document. There is no
evidence that the subject real properties were assets of the partnership referred to in
the Acknowledgement of Participating Capital. Petition denied.
614 SCRA 141, G.R. No. 172690, March 3, 2010, Nachura, J .:p

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

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

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

Respondent traversed petitioners' allegations and claimed that Elfledo was himself a
partner of Norberto and Jimmy. Respondent also alleged that when Jose died in 1981,
he left no known assets, and the partnership with Jimmy and Norberto ceased upon his
demise. Respondent also stressed that Jose left no properties that Elfledo could have
held in trust. Respondent maintained that all the properties involved in this case were
purchased and acquired through her and her 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 properties were registered in the name of Elfledo; (4)
Jimmy testified that Elfledo did not receive wages or salaries from the partnership,
indicating that what he actually received were shares of the profits of the business; and
(5) none of the petitioners, as heirs of Jose, the alleged partner, demanded
periodic accounting from Elfledo during his lifetime.

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

551 SCRA 183, G.R. No. 148187, April 16, 2008, Ynares-Santiago, J .:p

FACTS: Petitioner Philex entered into an agreement with Baguio Gold Mining
Corporation for the former to manage the 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 annual tax income return as loss on the
settlement of receivables from Baguio Gold against reserves and allowances. BIR
disallowed the amount as deduction for bad debt. Petitioner claims that it entered a
contract of agency evidenced by the power of attorney executed by them and the
advances made by petitioners is in the nature of a loan and thus can be deducted from
its gross income. Court of Tax Appeals (CTA) rejected the claim and held that it is a
partnership rather than an agency. CA affirmed CTA

ISSUE: Whether or not partnership exists

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

Moreover, in an agency coupled with interest, it is the agency that cannot be revoked or
withdrawn by the principal due to an interest of a third party that depends upon it or the
mutual interest of both principal and agent. In this case the non-revocation or non-
withdrawal under the PA applies to the advances made by the petitioner who is the
agent and not the principal under the contract. Thus, it cannot be inferred from the
stipulation that it is an agency. Partnership does exist in this case.
G.R. No. 135813, October 25, 2001, Panganiban, J .:p

FACTS: In June 1986, Fernando Santos (70%), Nieves Reyes (15%), and Melton Zabat
(15%) orally instituted a partnership with them as partners. Their venture is to set up a
lending business where it was agreed that Santos shall be financier and that Nieves and
Zabat shall contribute their industry. **The percentages after their names denote their
share in the profit. Later, Nieves introduced Cesar Gragera to Santos. Gragera was the
chairman of a corporation. It was agreed that the partnership shall provide loans to the
employees of 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.
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.

365 SCRA 463, G.R. No. 127405, Sept. 20, 2001, Ynares-Santiago, J .:p

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

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

HELD: After a careful review of the evidence presented, the Court is convinced
that, indeed, petitioner Belo acted merely as guarantor of Geminesse Enterprise. This
was categorically affirmed by respondent's own witness, Elizabeth Bantilan, during
her cross-examination. Furthermore, Bantilan testified that it was Peter Lo who was the
company's financier; that Lo fixes the 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.

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

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

302 SCRA 1, G.R. No. 112675 January 25, 1999, Panganiban, J .:p

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

ISSUE: WON the pool of machinery insurers is a partnership

HELD: For partnership to be established the following requisites must be established:
(1) mutual contribution to a common stock, and (2) a joint interest in the profits. It is
evident that the pool has a common fund consisting of money and valuables that are
deposited in the name and credit of the pool. This common fund pays for the
administration and expenses of the pool. Most importantly, profit motive or business is
the primordial reason for the 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)

102 Phil 140, G.R. No. L-9996, October 15, 1957, Concepcion, J .:p

FACTS: The petitioners borrowed from their father PhP59,140.00 which amount
together with their personal monies was used by them for the purpose of buying and
selling real properties. From 1943 to1944, they bought 24 parcels of land (including the
improvements thereon) on four different occasions. In 1945, they appointed their brother
Simeon to manage their properties with full power to lease; to collect and receive rents;
to issue receipts therefore; in default of such payment, to bring suits against the
defaulting tenant; and to endorse and deposit all notes and checks for them. In 1948,
their net rental income amounted to PhP12,615.35. On September 1954, the
respondent Collector of Internal Revenue demanded the payment of (1) income tax on
corporations, (2) real estate 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.

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

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

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

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

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

106 Phil 111, G.R. No. L-12541, August 28, 1959, Labrador, J .:p

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

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

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

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?

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

The following are the requisites of partnership: (1) two or more persons who bind
themselves to contribute money, property or industry to a common fund; (2) the
intention on the part of the partners to divide the profits among themselves (Article
1761, CC). Plaintiff did not furnish the supposed P20,000 capital nor did she furnish any
help or intervention in the management of the theatre. Neither has she demanded from
defendant any accounting of the expenses and earnings of the business. She was
absolutely silent with respect to any of the acts that a partner should have done; all
she did was to receive her share of P3,000 a month which cannot be interpreted in any
manner than a payment for the use of premises which she had leased from the owners.

497 SCRA 346, G.R. No. 159333, July 31, 2006, Puno, J .:p

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

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

HELD: We hold that petitioner is an employee of private respondent Pacfor and that no
partnership or co-ownership exists between the parties.
In a partnership, the members become co-owners of what is contributed to the firm
capital and of all property that may be acquired thereby and through the efforts of the
members. The property or stock of the partnership forms a community of goods, a
common fund, in which each party has a proprietary interest. In fact, the New Civil Code
regards a partner as a co-owner of specific partnership property. Each partner
possesses a joint interest in the whole of partnership property. If the relation does not
have this feature, it is not one of partnership. This essential element, the community of
interest, or co-ownership of, or joint interest in partnership property is absent in the
relations between petitioner and private respondent Pacfor. Petitioner is not a part-
owner of Pacfor Phils. William Gleason, private respondent Pacfor's President
established this fact when he said that Pacfor Phils. is simply a "theoretical company"
for the purpose of dividing the income 50-50. He stressed that petitioner knew of this
arrangement from the very start, having been the one to propose to private respondent
Pacfor the setting up of a representative office, and "not a branch office" in the
Philippines to save on taxes. Thus, the parties in this case, merely shared profits. This
alone does not make a partnership.
Besides, a corporation cannot become a member of a partnership in the absence of
express authorization by statute or charter. This doctrine is based on the following
considerations: (1) that the mutual agency between the partners, whereby the
corporation would be bound by the acts of persons who are not its duly appointed and
authorized agents and officers, would be inconsistent with the policy of the law that the
corporation shall manage its own affairs separately and exclusively; and, (2) that such
an arrangement would improperly allow corporate property to become subject to risks
not contemplated by the stockholders when they originally invested in the
corporation. No such authorization has been proved in the case at bar.

95 Phil 106, G.R. No. L-4935, May 28, 1954, Reyes, J .:p

FACTS: Plaintiff-appellee JM Tuason & Co., Inc. is a partnership. Thru its managing
partner, Gregorio Araneta, Inc., it originally brought this suit with QC CFI to recover
possession of registered land situated in Tatalon, QC. Defendant-appellant Quirino
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. 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.

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

HELD: BOLAOS petition is without merit. The CFI decision is AFFIRMED.

It is true that the complaint also states that the TUASON is being represented by its
Managing Partner Gregorio Araneta, Inc., another corporation. There is nothing
against one corporation being represented by another person, natural or juridical, in a
suit in court. The contention that Gregorio Araneta, Inc. cannot act as managing partner
for TUASON on the theory that it is illegal for two corporations to enter into a
partnership is without merit for the true rule is that "though a corporation has no
power to enter into a partnership, it may nevertheless enter into a joint venture
with another where the nature of that venture is in line with the business
authorized by its charter. (citing Wyoming-Indiana Oil Gas Co. vs. Weston, 80 A. L.
R., 1043). There is nothing in the record to indicate that the venture in which TUASON
is represented by Gregorio Araneta, Inc. as "its managing partner" is not in line with the
corporate business of either of them

180 SCRA 130, G.R. No. 75875, December 15, 1989, Gutierrez, Jr., J .:p

FACTS: This consolidated petition assailed the decision of the CA directing a certain
There was a disagreement about the election of Board of Members, wherein the no. of
nominees exceeded to the prescribe number that should have been nominated. For
foreigner, 3 nominees only, while the Filipino group shall have 6 nominees. During the
election, there are 3 nominees from the foreign group while the Filipino group have 8
nominees. The Chairman ruled that the first 9 nominees will be the winner in the said
election *There are two groups in this case, the Lagdameo group composed of Filipino
investors and the American Standard Inc. (ASI) composed of foreign investors. The ASI
Group and petitioner Salazar (G.R. Nos. 75975-76) contend that the actual intention of
the parties should be viewed strictly on the "Agreement" dated August 15,1962 wherein
it is clearly stated that the parties' intention was to form a corporation and not a joint
ISSUE: The main issue hinges on who were the duly elected directors of Saniwares for
the year 1983 during its annual stockholders' meeting held on March 8, 1983.
HELD: While certain provisions of the Agreement would make it appear that the parties
thereto disclaim being partners or joint venturers such disclaimer is directed at third
parties and is not inconsistent with, and does not preclude, the existence of two distinct
groups of stockholders in Saniwares one of which (the Philippine Investors) shall
constitute the majority, and the other ASI shall constitute the minority stockholder. In
any event, the evident intention of the Philippine Investors and ASI in entering into the
Agreement is to enter into a joint venture enterprise.
An examination of the Agreement shows that certain provisions were included to protect
the interests of ASI as the minority. For example, the vote of 7 out of 9 directors is
required in certain enumerated corporate acts. ASI is contractually entitled to designate
a member of the Executive Committee and the vote of this member is required for
certain transactions
The Agreement also requires a 75% super-majority vote for the amendment of the
articles and by-laws of Saniwares. ASI is also given the right to designate the president
and plant manager. The Agreement further provides that the sales policy of Saniwares
shall be that which is normally followed by ASI and that Saniwares should not export
"Standard" products otherwise than through ASI's Export Marketing Services. Under the
Agreement, ASI agreed to provide technology and know-how to Saniwares and the
latter paid royalties for the same.
The legal concept of a joint venture is of common law origin. It has no precise legal
definition but it has been generally understood to mean an organization formed for
some temporary purpose. It is in fact hardly distinguishable from the partnership, since
their elements are similar community of interest in the business, sharing of profits and
losses, and a mutual right of control.
The main distinction cited by most opinions in common law jurisdictions is that the
partnership contemplates a general business with some degree of continuity , while the
joint venture is formed for the execution of a single transaction, and is thus of a
temporary nature.

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

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

ISSUE: Is the contract of partnership valid?

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

(2) The second part is illegal. Under the law, only a holder of a permit or lease and
no one else may enjoy the benefits allowed by the law. Since the partnership had for its
object the division into two equal parts of the fishpond between A and C after it shall
have been awarded to the former, and therefore, it envisaged the unauthorized transfer
of one-half thereof to C other than A, it was dissolved by the approval of the application
and the award of the fishpond. The approval was an event which made it unlawful for
the business of the partnership to be carried on or for the members to carry it on in
partnership and, therefore, caused its ipso facto dissolution. And since the contract is
null and void, A cannot be made to execute a formal transfer of one-half of the fishpond
and to secure official approval of the same as agreed upon.

53 Phil 489, G.R. No. 31057, September 7, 1929, Villamor, J .:p

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

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

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

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

HELD: Article 1666 of the Civil Code, provides:

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

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

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

This is not the case with regard to profits. In order to demand the proportional part of the
said profits, the partner would have to base his action on the contract which is null and
void, since this partition or distribution of the profits is one of the juridical effects thereof.
Wherefore considering this contract as non-existent, by reason of its illicit object, it
cannot give rise to the necessary action, which must be the basis of the judicial
complaint. Furthermore, it would be immoral and unjust for the law to permit a profit
from an industry prohibited by it.

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

1 Phil 671, G.R. No. 413, February 2, 1903, Ladd, J :p
FACTS: The plaintiff alleges that in January, 1900, he entered into a verbal agreement
with the defendant to form a partnership for the purchase of cascoes and the carrying
on of the business of letting the same for hire in Manila, the defendant to buy the
cascoes and each partner to furnish for that purpose such amount of money as he
could, the profits to be divided proportionately; that in the same January, the plaintiff
furnished the defendant 300 pesos to purchase a casco designated as No. 1515. That
the plaintiff furnished further sums aggregating about 300 pesos for repairs on this
casco; that on the fifth of the following March he furnished the defendant 825 pesos to
purchase another casco designated as No. 2089. That in April the parties undertook to
draw up articles of partnership for the purpose of embodying the same in an authentic
document, but that the defendant having proposed a draft of such articles which differed
materially from the terms of the earlier verbal agreement, and being unwilling to include
casco No. 2089 in the partnership, they were unable to come to any understanding and
no written agreement was executed.
ISSUE: 1. Did a partnership exist between the parties; 2. If such partnership existed,
was it terminated as a result of the act of the plaintiff in receiving back the 1,125 pesos.
HELD: 1. The essential points upon which the minds of the parties must meet in a
contract of partnership are, therefore, 1. mutual contribution to a common stock, and 2.
a joint interest in the profits. If the contract contains these two elements the partnership
relation results.
We have found as a fact that money was furnished by the plaintiff and received by the
defendant with the understanding that it was to be used for the purchase of the cascoes
in question. This establishes the first element of the contract, namely, mutual
contribution to a common stock. The second element, namely, the intention to share
profits, appears to be an unavoidable deduction from the fact of the purchase of the
cascoes in common, in the absence of any other explanation of the object of the parties
in making the purchase in that form, and, it may be added, in view of the admitted fact
that prior to the purchase of the first casco the formation of a partnership had been a
subject of negotiation between them.
2. The remaining question is as to the legal effect of the acceptance by the plaintiff of
the money returned to him by the defendant after the definitive failure of the attempt to
agree upon partnership articles. The amount returned fell short, in our view of the facts,
of that which the plaintiff had contributed to the capital of the partnership, since it did not
include the sum which he had furnished for the repairs of casco No. 1515. Moreover, it
is quite possible, as claimed by the plaintiff, that a profit may have been realized from
the business during the period in which the defendant had been administering it prior to
the return of the money, and if so he still retained that sum in his hands. For these
reasons the acceptance of the money by the plaintiff did not have the effect of
terminating the legal existence of the partnership.
There was no intention on the part of the plaintiff in accepting the money to relinquish
his rights as a partner, nor is there any evidence that by anything that he said or by
anything that he omitted to say he gave the defendant any ground whatever to believe
that he intended to relinquish them. On the contrary he notified the defendant that he
waived none of his rights in the partnership.

658 SCRA 146, G.R. No. 178782, September 21, 2011, Perez, J .:p

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

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

Spouses Realubit filed their answer, specifically denying the material allegations of the
foregoing complaint. Claiming that they have engaged in the tube ice trading business
under single proprietorship even before their dealings with Biondo, the spouses
Realubit, in turn, averred that their said business partner had left the country in May
1997 and could not have executed the Deed of Assignment which bears the signature
markedly different from that which he affixed on their Joint Venture Agreement; that they
refused the Spouses Josos demand in view of the dubious circumstances surrounding
their acquisition of Biondos share in the business; that said business had already
stopped operations when its plant shut down after its power supply was disconnected
by MERALCO for non-payment of utility bills; and, that it was their own tube ice trading
business which had been moved to another location and that Spouses Joso mistook for
the ice manufacturing business established in partnership with Biondo.

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

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

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

2&3. No, generally understood to mean an organization formed for some temporary
purpose, a joint venture is likened to a particular partnership or one which has for its
object determinate things, their use of fruits, or a specific undertaking, or the exercise of
profession or vocation.

Insofar as a partners conveyance if the entirety of his interest in the partnership is
concerned, Art. 1813 provides that the transfer by a partner of his partnership interest
does not make the assignee of such interest a partner of the firm, nor entitle the
assignee to interfere in the management of the partnership business or to receive
anything except the assignees profits. The assignment of the ultimate residue as the
assignor may become entitled to receive by virtue of his proportionate interest in the

Since the partners interest in the partnership includes his share in the profits, we find
that the CA committed no reversible error in ruling that the Spouses Jaso are entitled to
Biondos share in the profits, despite Josefinas lack of consent to the assignment of said
Biodos interest in the joint venture. Although, Eden did not, moreover, become a
partner as a consequence of the assignment and/or acquire the right to require an
accounting of the partnership business. The CA correctly granted her prayer foe
dissolution of the joint venture conformably with the right granted to the purchaser of
partners interest under Art. 1831 of the Civil Code.

493 SCRA 444, G.R. No. 167379, June 27, 2006, CALLEJO, SR., J .:

FACTS: Primelink and the respondents entered into a Joint Venture Agreement (JVA)
for the development of 2 parcels of land in Tagaytay, which were owned by the
respondents, to a residential subdivision to be known as Tagaytay Garden Villas.
Petitioner as developer would be entitled to 60% of the net profits, with respondents as
owners 40%. Primelink did not make good their own end of the contract, only managing
to build a few units in the subdivision as compared to the agreement between them and
the respondents. Respondents filed a case for rescission and damages, alleging that
Primelink failed to uphold its own obligations as stated under the contract, and whatever
units they have made were subject to complaints for poor workmanship and use of
substandard materials, undermining the 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 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.

341 SCRA 740, G.R. No. 126881, October 3, 2000, De Leon, Jr.:p

FACTS: The complaint alleged that after the second World War, Tan EngKee and Tan
Eng Lay, pooling their resources and industry together, entered into a partnership
engaged in the business of selling lumber and hardware and construction supplies.
They named their enterprise "Benguet Lumber" which they jointly managed until Tan
EngKee's death. Petitioners claimed that Tan Eng Lay and his children caused the
conversion of the partnership "Benguet Lumber" into a corporation called "Benguet
Lumber Company" allegedly to deprive Tan Eng Kee and his heirs of their rightful
participation in the profits of the business. After Tang Eng Kees death petitioners
prayed for accounting of the partnership assets, and the dissolution, winding up and
liquidation thereof, and the equal division of the net assets of Benguet Lumber. The
RTC ruled in favor of petitioners, declaring that Benguet Lumber is a joint venture which
is akin to a particular partnership. The Court of Appeals rendered the assailed decision
reversing the judgment of the trial court.

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

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

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

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

FACTS: A contract was entered into on Oct. 19, 1960 by and between Mrs. Segundina
Noguera, party of the first part; the Tourist World Service, Inc., represented by Mr.
Eliseo Canilao as party of the second part, and hereinafter referred to as appellants.
The Tourist World Service, Inc. leased the premises belonging to the party of the first
part at Mabini St., Manila for the 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 was filed by the herein
appellants against the appellees with a prayer for the issuance of mandatory preliminary
injunction. Both appellees answered with counterclaims. For apparent lack of interest of
the parties therein, the trial court ordered the dismissal of the case without prejudice.

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

ISSUE: Whether or not a joint venture exist.

HELD: No. The Supreme Court rejected 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 where each party exercises equal rights in the
conduct of the business.

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

It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to
(wo)man the private respondent, Tourist World Service, Inc.'s Ermita office, she must
have done so pursuant to a contract of agency. It is the essence of this contract that the
agent renders services "in representation or on behalf of another.

In the case at bar,
Sevilla solicited airline fares, but she did so for and on behalf of her principal, Tourist
World Service, Inc. As compensation, she received 4% of the proceeds in the concept
of commissions. And as we said, Sevilla herself based on her letter of November 28,
1961, pre-assumed her principal's authority as owner of the business undertaking. We
are convinced, considering the circumstances and from the respondent Court's recital of
facts, that the ties had contemplated a principal agent relationship, rather than a joint
management or a partnership.

7 Phil 117, G.R. No. 2800, December 04, 1906, Mapa, J.:p

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

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

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

The court accordingly found that Lo-Chim-Lim, Vicente Palanca, Go-Tuaco had a
lumber yard in Calle Lemmery of the city of Manila in the year 1904, and participated in
the profits and losses of business and that Lo-Chim-Lim was managing partner of the
said lumber yard. In other words, co-participants with the said Lo-Chim-Lim in the
business in question.
Although the evidence upon this point as stated by the by the however, that is plainly
and manifestly in conflict with the above finding of that court. Such finding should
therefore be sustained.
It seems that the alleged partnership between Lo-Chim-Lim and the appellants was
formed by verbal agreement only. At least there is no evidence tending to show that the
said agreement was reduced to writing, or that it was ever recorded in a public
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

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.

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

FACTS: When the plaintiff was first employed, this steam laundry was owned and
operated by Freeman and Pierce. Thereafter, Pierce sold all of his right, title, and
interest in the said laundry to Whitcomb, who, together with Freeman, then became the
owners of this laundry and continued to operate the same as long as the plaintiff was
The trial court found that there is a balance due to Dietrich for services performed.
However, it appears from the record that Whitcomb never knew the plaintiff, never had
anything to do with personally, and that the plaintiff's contract was with Freeman, the
managing partner of the laundry. It further appears from the record that Pierce, after he
sold his interest in this laundry to Whitcomb, continued to look after Whitcomb's interest
by authority of the latter.
ISSUE: Whether or not partnership was organized between Freeman and Whitcomb
HELD: Articles 17 and 119 of the Code of Commerce provide:
Art. 17. The record in the commercial registry shall be optional for private
merchants and compulsory for associations established in accordance with this
code or with special laws, and for vessels.
Art. 119 Every commercial association before beginning business shall be
obliged to record its establishment, agreements, and conditions in a public
instrument, which shall be presented for record in the commercial registry, in
accordance with the provisions of article 17.
Additional instrument which modify or alter in any manner whatsoever the original
contracts of the association are subject to the same formalities, in accordance
with the provisions of article 25.
Partners can not make private agreements, but all must appear in the articles of
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,

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

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

HELD: 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. The appealed order of the
court was affirmed.

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

FACTS: Julia Bunales died leaving as heirs her husband, petitioner Lorenzo, and her
five children. Lorenzo was appointed as the administrator of his 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

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.

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

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

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

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

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

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

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

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

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

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

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

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

167 SCRA 524, G.R. No. L-47045 November 22, 1988 Regalado, J .:p

FACTS: Acojedo brought an action in the City Court of Dipolog for collection of a sum of
P5,217.25 based on promissory notes executed by the herein Nobio Sardane in favor of
the herein Acojedo. Exhibit B is a printed promissory note involving Pl,117.25 and dated
May 13, 1972. Exhibit C is likewise a printed promissory note and denotes on its face
that the sum loaned was Pl,400.00. Exhibit D is also a printed promissory note dated
May 31, 1977 involving an amount of P100.00. Exhibit E is what is commonly known to
the layman as 'vale' which reads: 'Good for: two hundred pesos (Sgd) Nobio Sardane'.
Exhibit F is stated in the following tenor: 'Received from Mr. Romeo Acojedo the sum
Pesos: Two Thousand TwoHundred (P2,200.00) ONLY, to be paid on or before
December 25, 1975. (Sgd) Nobio Sardane.' Exhibit G and H are both vales' involving
the same amount of one hundred pesos, and dated August 25, 1972 and September
12, 1972 respectively.

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

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

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

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

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

FACTS: Aurelio and Eduardo are brothers. In 1973, Aurelio alleged that Eduardo
entered into a contract of partnership with him. Aurelio showed as evidence a letter sent
to him by Eduardo that the latter is allowing Aurelio to manage their family business (if
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

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.

319 SCRA 246, G.R. No. 127347, November 25, 1999, Mendoza, J .:p

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

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

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

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

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

G.R. No. 143340, August 15, 2001, Gonzaga-Reyes, J .:p

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

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

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

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

On March 31, 1991, respondent claimed that after petitioner Lilibeth ran out the alibis
and reasons to evade respondent's demands, she disbursed out of the partnership
funds the amount of P200,000.00 and partially paid the same to respondent. Petitioner
Lilibeth allegedly informed respondent that the P200,000.00 represented partial
payment of the latter's share in the partnership, with a promise that the former would
make the complete inventory and winding up of the properties of the business
establishment. Despite such commitment, petitioners allegedly failed to comply with
their duty to account, and continued to benefit from the assets and income of Shellite to
the damage and prejudice of respondent.

ISSUE: WON Partnership exists

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

The "Dead Man's Statute" provides that if one party to the alleged transaction is
precluded from testifying by death, insanity, or other mental disabilities, the surviving
party is not entitled to the undue advantage of giving his own uncontradicted and
unexplained account of the transaction. But before this rule can be successfully invoked
to bar the introduction of testimonial evidence, it is necessary that:
"1. The witness is a party or assignor of a party to case or persons in whose
behalf a case in prosecuted.
2. The action is against an executor or administrator or other representative of a
deceased person or a person of unsound mind;
3. The subject-matter of the action is a claim or demand against the estate of
such deceased person or against person of unsound mind;
4. His testimony refers to any matter of fact of which occurred before the death of
such deceased person or before such person became of unsound mind."

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

Second, the testimony of Josephine is not covered by the "Dead Man's Statute" for the
simple reason that she is not "a party or assignor of a party to a case or persons in
whose behalf a case is prosecuted." Records show that respondent offered the
testimony of Josephine to establish the existence of the partnership between
respondent and Jacinto. Petitioners' insistence that Josephine is the alter ego of
respondent does not make her an assignor because the term "assignor" of a party
means "assignor of a cause of action which has arisen, and not the assignor of a right
assigned before any cause of action has arisen." Plainly then, Josephine is merely a
witness of respondent, the latter being the party plaintiff.

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

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

44 Phil 916, G.R. No. L-18703, August 28, 1922, Romualdez, J.:p

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

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

HELD: Unlike the common law, the Philippine statutes consider a limited partnership as
a juridical entity for all intents and purposes, which personality is recognized in all its
acts and contracts (art. 116, Code of Commerce). This being so and the juridical
personality of a limited partnership being different from that of its members, it must, on
general principle, answer for, and suffer, the consequence of its acts as such an entity
capable of being the subject of rights and obligations. If, as in the instant case, the
limited partnership of Campos Rueda & Co. Failed to pay its obligations with three
creditors for a period of more than thirty days, which failure constitutes, under our
Insolvency Law, one of the acts of bankruptcy upon which an adjudication of involuntary
insolvency can be predicated, this partnership must suffer the consequences of such a
failure, and must be adjudged insolvent. We are not unmindful of the fact that some
courts of the United States have held that a partnership may not be adjudged insolvent
in an involuntary insolvency proceeding unless all of its members are insolvent, while
others have maintained a contrary view. But it must be borne in mind that under the
American common law, partnerships have no juridical personality independent from that
of its members; and if now they have such personality for the purpose of the insolvency
law, it is only by virtue of general law enacted by the Congress of the United States on
July 1, 1898.

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

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

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.