HEIRS OF TAN ENG KEE vs.CA 341 SCRA 740, G.R. No. 126881, October 3, 2000 establish a partnership.
tablish a partnership. In the absence of evidence, we cannot accept as an established
FACTS:
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 herein averred that the
business prospered due to the hard work and thrift of the alleged partners. However,
they claimed that in 1981, Tan Eng Lay and his children caused the conversion of the
partnership "Benguet Lumber" into a corporation called "Benguet Lumber Company."
The incorporation was purportedly a ruse to deprive Tan EngKee and his heirs of their
rightful participation in the profits of the business. 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 the deceased Tan EngKee and Tan Eng Lay are joint adventurers and/or
partners in a business venture and/or particular partnership called Benguet Lumber and
as such should share in the profits and/or losses of the business venture or particular
partnership
RULING:
There was no partnership whatsoever. Except for a firm name, there was no firm
account, no firm letterheads submitted as evidence, no certificate of partnership, no
agreement as to profits and losses, and no time fixed for the duration of the partnership.
There was even no attempt to submit an accounting corresponding to the period after
the war until Kee's death in 1984. It had no business book, no written account nor any
memorandum for that matter and no license mentioning the existence of a partnership.
Also, 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 maycontinue 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
fact that Tan EngKee 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 EngKee 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 EngKee appeared never to have made any such demand for accounting from his
brother, Tang Eng Lay. We conclude that Tan EngKee was only an employee, not a
partner since they did not present and offer evidence that would show that Tan EngKee
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.
VICENTE SY, TRINIDAD PAULINO, 6B’S TRUCKING CORPORATION, and SBT TRUCKING
CORPORATION, petitioners, vs. HON. COURT OF APPEALS and JAIME SAHOT,
respondents. [G.R. No. 142293. February 27, 2003]
FACTS: Sometime in 1958, private respondent Jaime Sahot[5] started working as a truck
helper for petitioners’ family-owned trucking business named Vicente Sy Trucking. In
1965, he became a truck driver of the same family business, renamed T. Paulino Trucking
Service, later 6B’s Trucking Corporation in 1985, and thereafter known as SBT Trucking
Corporation since 1994. Throughout all these changes in names and for 36 years, private
respondent continuously served the trucking business of petitioners. When Sahot was 59
years old, he incurred several absences due to various ailments. Particularly causing him
pain was his left thigh, which greatly affected the performance of his task as a driver. He
inquired about his medical and retirement benefits with the Social Security System (SSS)
on April 25, 1994, but discovered that his premium payments had not been remitted by
his employer.Sahot filed a week-long leave to get medical attention. He was treated for
EOR, presleyopia, hypertensive retinopathy G II and heart enlargement. Because of such,
Belen Paulino of the SBT Trucking Service management told him to file a formal request
for extension of his leave. When Sahot applied for an extended leave, he was threatened
of termination of employment should he refuse to go back to work. Eventually, Sahot was
dismissed from employment which prompted the latter to file an illegal dismissal case
with the NLRC. For their part, petitioners admitted they had a trucking business in the
1950s but denied employing helpers and drivers. They contend that private respondent
was not illegally dismissed as a driver because he was in fact petitioner’s industrial
partner. They add that it was not until the year 1994, when SBT Trucking Corporation was
established, and only then did respondent Sahot become an employee of the company,
with a monthly salary that reached P4,160.00 at the time of his separation. The NLRC and
the CA ruled that Sahot was an employee of the petitioner.
ISSUE: Whether Sahot is an industrial partner
RULING:
No. Article 1767 of the Civil Code states that in a contract of partnership two or more
persons bind themselves to contribute money, property or industry to a common fund,
with the intention of dividing the profits among themselves. Not one of these
circumstances is present in this case. No written agreement exists to prove the
partnership between the parties. Private respondent did not contribute money, property
or industry for the purpose of engaging in the supposed business. There is no proof that
he was receiving a share in the profits as a matter of course, during the period when the
trucking business was under operation. Neither is there any proof that he had actively
participated in the management, administration and adoption of policies of the business.
Thus, the NLRC and the CA did not err in reversing the finding of the Labor Arbiter that
private respondent was an industrial partner from 1958 to 1994. On this point, the Court
affirmed the findings of the appellate court and the NLRC. Private respondent Jaime
Sahot was not an industrial partner but an employee of petitioners from 1958 to 1994.
The existence of an employer-employee relationship is ultimately a question of fact and
the findings thereon by the NLRC, as affirmed by the Court of Appeals, deserve not only
respect but finality when supported by substantial evidence. Substantial evidence is such
amount of relevant evidence which a reasonable mind might accept as adequate to
justify a conclusion.
ANTONIA TORRES, assisted by her husband, ANGELO TORRES; and EMETERIA BARING,
petitioners, vs. COURT OF APPEALS and MANUEL TORRES, respondents.
Facts:
Petitioners Torres and Baring entered into a “joint venture agreement” with Respondent
Torres for the development of a parcel of land into a subdivision. They executed a Deed
of Sale covering the said parcel of land in favor of respondent Manual Torres, who then
had it registered in his name. By mortgaging the property, respondent Manuel Torres
obtained from Equitable Bank a loan of P40,000, which was supposed to be used for the
development of subdivision as per the JVA. However, the project did not push through
and the land was subsequently foreclosed by the bank.
Petitioners Antonia Torres alleged that it was due to respondent’s lack of funds/skills that
caused the project to fail, and that respondent use the loan in the furtherance of his own
company. On the otherhand, respondent Manuel Torres alleged that he used the loan to
implement the JVA – surveying and subdivision of lots, approval of the project,
advertisement, and construction of roads and the likes, and that he did all of these for a
total of P85,000.
Petitioners filed a case for estafa against respondent but failed. They then instituted a
civil case. CA held that the two parties formed a partnership for the development of
subdivision and as such, they must bear the loss suffered by the partnership in the same
proportion as their share in profits. Hence, the petition.
Issue #1:
Whether or not the transaction between petitioner and respondent was that of joint
venture/partnership.
Held:
Yes. There formed a partnership between the two on the basis of joint-venture
agreement and deed of sale. A reading of the terms of agreement shows the existence of
partnership pursuant to Art 1767 of Civil Code, which states “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.”
In the agreement, petitioners would contribute property to the partnership in the form of
land which was to be developed into a subdivision; while respondent would give, in
addition to his industry, the amount needed for general expenses and other costs.
Furthermore, the income from the said project would be divided according to the
stipulated percentage. Clearly, the contract manifested the intention of the parties to
form a partnership.
Issue #2:
Whether or not the deed of sale between the two was valid.
Held:
No. Petitioners were wrong in contending that the JVA is void under Article 1422[14] of
the Civil Code, because it is the direct result of an earlier illegal contract, which was for
the sale of the land without valid consideration.
The Joint Venture Agreement clearly states that the consideration for the sale was the
expectation of profits from the subdivision project. Its first stipulation states that
petitioners did not actually receive payment for the parcel of land sold to respondent.
Consideration, more properly denominated as cause, can take different forms, such as
the prestation or promise of a thing or service by another.
In this case, the cause of the contract of sale consisted not in the stated peso value of the
land, but in the expectation of profits from the subdivision project, for which the land
was intended to be used. As explained by the trial court, the land was in effect given to
the partnership as petitioners participation therein. There was therefore a consideration
for the sale, the petitioners acting in the expectation that, should the venture come into
fruition, they would get sixty percent of the net profits.
AFISCO INSURANCE CORP. et al. vs. COURT OF APPEALS
[G.R. No. 112675. January 25, 1999]
DOCTRINE:
Unregistered Partnerships and associations are considered as corporations for tax
purposes – Under the old internal revenue code, “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, xxx.” Ineludibly, the Philippine legislature included in the concept
of corporations those entities that resembled them such as unregistered partnerships
and associations.
Insurance pool in the case at bar is deemed a partnership or association taxable as a
corporation – In the case at bar, petitioners-insurance companies formed a Pool
Agreement, or an association that would handle all the insurance businesses covered
under their quota-share reinsurance treaty and surplus reinsurance treaty with Munich is
considered a partnership or association which may be taxed as a ccorporation.
Double Taxation is not Present in the Case at Bar – Double taxation means “taxing the
same person twice by the same jurisdiction for the same thing.” In the instant case, the
insurance pool is a taxable entity distince from the individual corporate entities of the
ceding companies. The tax on its income is obviously different from the tax on the
dividends received by the companies. There is no double taxation.
FACTS:
The petitioners are 41 non-life domestic insurance corporations. They issued risk
insurance policies for machines. The petitioners in 1965 entered into a Quota Share
Reinsurance Treaty and a Surplus Reinsurance Treaty with the Munchener
Ruckversicherungs-Gesselschaft (hereafter called Munich), a non-resident foreign
insurance corporation. The reinsurance treaties required petitioners to form a pool,
which they complied with.
In 1976, the pool of machinery insurers submitted a financial statement and filed an
“Information Return of Organization Exempt from Income Tax” for 1975. On the basis of
this, the CIR assessed a deficiency of P1,843,273.60, and withholding taxes in the amount
of P1,768,799.39 and P89,438.68 on dividends paid to Munich and to the petitioners,
respectively.
The Court of Tax Appeal sustained the petitioner's liability. The Court of Appeals
dismissed their appeal.
The CA ruled in 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/S:
Whether or not the pool is taxable as a corporation.
Whether or not there is double taxation.
HELD:
1) Yes: Pool taxable as a corporation
Argument of Petitioner: The reinsurance policies were written by them “individually and
separately,” and that their liability was limited to the extent of their allocated share in
the original risks thus reinsured. Hence, the pool did not act or earn income as a
reinsurer. Its role was limited to its principal function of “allocating and distributing the
risk(s) arising from the original insurance among the signatories to the treaty or the
members of the pool based on their ability to absorb the risk(s) ceded[;] as well as the
performance of incidental functions, such as records, maintenance, collection and
custody of funds, etc.”
Argument of SC: According to Section 24 of the NIRC of 1975:
“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 (compañias colectivas), general professional partnerships, private
educational institutions, and building and loan associations xxx.”
Ineludibly, the Philippine legislature included in the concept of corporations those
entities that resembled them such as unregistered partnerships and associations.
Interestingly, the NIRC’s inclusion of such entities in the tax on corporations was made
even clearer by the Tax Reform Act of 1997 Sec. 27 read together with Sec. 22 reads:
“SEC. 27. Rates of Income Tax on Domestic Corporations. --
(A) In General. -- Except as otherwise provided in this Code, an income tax of thirty-five
percent (35%) is hereby imposed upon the taxable income derived during each taxable
year from all sources within and without the Philippines by every corporation, as defined
in Section 22 (B) of this Code, and taxable under this Title as a corporation xxx.”
“SEC. 22. -- Definition. -- When used in this Title:
xxx xxx xxx
(B) The term ‘corporation’ shall include partnerships, no matter how created or
organized, joint-stock companies, joint accounts (cuentas en participacion), associations,
or insurance companies, but does not include general professional partnerships [or] a
joint venture or consortium formed for the purpose of undertaking construction projects
or engaging in petroleum, coal, geothermal and other energy operations pursuant to an
operating or consortium agreement under a service contract without the Government.
‘General professional partnerships’ are partnerships formed by persons for the sole
purpose of exercising their common profession, no part of the income of which is derived
from engaging in any trade or business.
Thus, the Court in Evangelista v. Collector of Internal Revenue held that Section 24
covered these unregistered partnerships and even associations or joint accounts, which
had no legal personalities apart from their individual members.
Furthermore, Pool Agreement or an association that would handle all the insurance
businesses covered under their quota-share reinsurance treaty and surplus reinsurance
treaty with Munich may be considered a partnership because it contains the following
elements: (1) The pool has a common fund, consisting of money and other valuables that
are deposited in the name and credit of the pool. This common fund pays for the
administration and operation expenses of the pool. (2) The pool functions through an
executive board, which resembles the board of directors of a corporation, composed of
one representative for each of the ceding companies. (3) While, the pool itself is not a
reinsurer and does not issue any policies; its work is indispensable, beneficial and
economically useful to the business of the ceding companies and Munich, because
without it they would not have received their premiums pursuant to the agreement with
Munich. Profit motive or business is, therefore, the primordial reason for the pool’s
formation.
2) No: There is no double taxation.
Argument of Petitioner: Remittances of the pool to the ceding companies and Munich are
not dividends subject to tax. Imposing a tax “would be tantamount to an illegal double
taxation, as it would result in taxing the same premium income twice in the hands of the
same taxpayer.” Furthermore, even if such remittances were treated as dividends, they
would have been exempt under tSections 24 (b) (I) and 263 of the 1977 NIRC , as well as
Article 7 of paragraph 1and Article 5 of paragraph 5 of the RP-West German Tax Treaty.
Argument of Supreme Court: Double taxation means “taxing the same person twice by
the same jurisdiction for the same thing.” In the instant case, the insurance pool is a
taxable entity distince from the individual corporate entities of the ceding companies.
The tax on its income is obviously different from the tax on the dividends received by the
companies. There is no double taxation.
Tax exemption cannot be claimed by non-resident foreign insurance corporattion; tax
exemption construed strictly against the taxpayer - Section 24 (b) (1) pertains to tax on
foreign corporations; hence, it cannot be claimed by the ceding companies which are
domestic corporations. Nor can Munich, a foreign corporation, be granted exemption
based solely on this provision of the Tax Code because the same subsection specifically
taxes dividends, the type of remittances forwarded to it by the pool. The foregoing
interpretation of Section 24 (b) (1) is in line with the doctrine that a tax exemption must
be construed strictissimi juris, and the statutory exemption claimed must be expressed in
a language too plain to be mistaken.
AGUILAR v. CA- Co-ownership
Any of the Co-owners may demand the sale of the house and lot at any time and the
other cannot object to such demand; thereafter the proceeds of the sale shall be divided
equally according to their respective interests.
FACTS:
Petitioner Vergilio and respondent Senen bought a house and lot in Paraňaque where
their father could spend and enjoy his remaining years in a peaceful neighborhood. They
initially agreed that Vergilio will get 2/3 and Senen will get 1/3; but later they agreed on
equal shares. Senen was left in the said lot to take care of their father since Vergilio’s
family was in Cebu. After their father’s death petitioner demanded from private
respondent that the latter vacate the house and that the property be sold and proceeds
thereof divided among them but the latter refused. Petitioner then filed to compel the
sale of the property. The chunk of the issue tackled by the courts was regarding the pre-
trial. Respondent filed a motion to cancel Pre-trial since the counsel had to accompany
his wife in Dumaguete City where she would be a principal sponsor in a wedding. CFI
denied the motion; and the pre-trial proceeded on the scheduled date. The respondents
did not appear thus they were declared in default. The trial went on ex parte without the
respondent and held that the property should be sold to a third party and that the
proceeds be distributed to the parties; in addition respondent was made to pay rent from
the time the action was filed. Respondents appealed this and the decision was reversed
by the CA saying that the TC erred in declaring respondents in default; the case was then
remanded to the trial court. Hence this appeal.
ISSUE:
A) W/N CA erred (1) in holding that the motion of respondent through counsel to cancel
the pre-trial was dilatory in character and (2) in remanding the case to the trial court for
pre-trial and trial?
ISSUE RELEVANT TO PROPERTY:
B) W/N trial court was correct with regards to the sale and rent?
RULING:
A) YES, CA erred in granting the respondents motion and remanding the case. The law is
clear that the appearance of parties at the pretrial is mandatory. A party who fails to
appear at a pre-trial conference may be non-suited or considered as in default. It is the
discretion of the court to grant the motion if it sees that the reason for the cancelation of
the same would be reasonable. SC found that the reason for the cancelation of the pre-
trial was insufficient and that the trial court was not in grave abuse of discretion when
they denied it.
B) YES, with a few modification. Petitioner and respondents are co-owners of subject
house and lot in equal shares; either one of them may demand the sale of the house and
lot at any time and the other cannot object to such demand; thereafter the proceeds of
the sale shall be divided equally according to their respective interests.
BASIS: Article 494 of the Civil Code provides that no co-owner shall be obliged to remain
in the co-ownership, and that each co-owner may demand at any time partition of the
thing owned in common insofar as his share is concerned. Corollary to this rule, Art. 498
of the Code states that whenever the thing is essentially indivisible and the co-owners
cannot agree that it be allotted to one of them who shall indemnify the others, it shall be
sold and its proceeds accordingly distributed.
SC held that ½ of the proceeds should go to the petitioner and the remainder to the
respondent (1,200 each.) Also rent was awarded 1,200 pesos per month with legal
interest from the time the trial court ordered the respondent to vacate, for the use and
enjoyment of the other half of the property.
BASIS: When petitioner filed an action to compel the sale of the property and the trial
court granted the petition and ordered the ejectment of respondent, the co-ownership
was deemed terminated and the right to enjoy the possession jointly also ceased.
Aurelio Litonjua Jr vs Eduardo Litonjua Sr. et al
Business Organization – Partnership, Agency, Trust – Partnership, how formed
Aurelio and Eduardo are brothers. In 1973, Aurelio alleged that Eduardo entered into a
contract of partnership with him. Aurelio showed as evidence a letter sent to him by
Eduardo that the latter is allowing Aurelio to manage their family business (if Eduardo’s
away) and in exchange thereof he will be giving Aurelio P1 million or 10% equity,
whichever is higher. A memorandum was subsequently made for the said partnership
agreement. The memorandum this time stated that in exchange of Aurelio, who just got
married, retaining his share in the family business (movie theatres, shipping and land
development) and some other immovable properties, he will be given P1 Million or 10%
equity in all these businesses and those to be subsequently acquired by them whichever
is greater.
In 1992 however, the relationship between the brothers went sour. And so Aurelio
demanded an accounting and the liquidation of his share in the partnership. Eduardo did
not heed and so Aurelio sued Eduardo.
ISSUE: Whether or not there exists a partnership.
HELD: No. The partnership is void and legally nonexistent. The documentary evidence
presented by Aurelio, i.e. the letter from Eduardo and the Memorandum, did not prove
partnership.
The 1973 letter from Eduardo on its face, contains typewritten entries, personal in tone,
but is unsigned and undated. As an unsigned document, there can be no quibbling that
said letter does not meet the public instrumentation requirements exacted under Article
1771 (how partnership is constituted) of the Civil Code. Moreover, being unsigned and
doubtless referring to a partnership involving more than P3,000.00 in money or property,
said letter cannot be presented for notarization, let alone registered with the Securities
and Exchange Commission (SEC), as called for under the Article 1772 (capitalization of a
partnership) of the Code. And inasmuch as the inventory requirement under the
succeeding Article 1773 goes into the matter of validity when immovable property is
contributed to the partnership, the next logical point of inquiry turns on the nature of
Aurelio’s contribution, if any, to the supposed partnership.
The Memorandum is also not a proof of the partnership for the same is not a public
instrument and again, no inventory was made of the immovable property and no
inventory was attached to the Memorandum. Article 1773 of the Civil Code requires that
if immovable property is contributed to the partnership an inventory shall be had and
attached to the contract.
Lim vs. Philippine Fishing Gear Industries Inc. [GR 136448, 3 November 1999]
FACTS: Lim Tong Lim requested Peter Yao and Antonio Chuato engage in commercial
fishing with him. The three agreed to purchase two fishing boats but since they do not
have the money they borrowed from one Jesus Lim the brother of Lim Tong Lim.
Subsequently, they again borrowed money for the purchase of fishing nets and other
fishing equipments. Yao and Chua represented themselves as acting in behalf of “Ocean
Quest Fishing Corporation” (OQFC) and they contracted with Philippine Fishing Gear
Industries (PFGI) for the purchase of fishing nets amounting to more than P500k.
However, they were unable to pay PFGI and hence were sued in their own names as
Ocean Quest Fishing Corporation is a non-existent corporation. Chua admitted his liability
while Lim Tong Lim refused such liability alleging that Chua and Yao acted without his
knowledge and consent in representing themselves as a corporation.
ISSUE: Whether Lim Tong Lim is liable as a partner
HELD: Yes. It is apparent from the factual milieu that the three decided to engage in a
fishing business. Moreover, their Compromise Agreement had revealed their intention to
pay the loan with the proceeds of the sale and to divide equally among them the excess
or loss. The boats and equipment used for their business entails their common fund. 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. The principle of corporation by estoppel cannot apply in
the case as Lim Tong Lim also benefited from the use of the nets in the boat, which was
an asset of the partnership. Under the law on estoppel, those acting in behalf of a
corporation and those benefited by it, knowing it to be without valid existence are held
liable as general partners. Hence, the question as to whether such was legally formed for
unknown reasons is immaterial to the case.
TOCAO V. CA
G.R. No. 127405; October 4, 2000
Ponente: J. Ynares-Santiago
FACTS:
Private respondent Nenita A. Anay met petitioner William T. Belo, then the vice-president
for operations of Ultra Clean Water Purifier, through her former employer in Bangkok.
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
cookwares
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
The parties agreed that Belo's name should not appear in any documents relating to their
transactions with West Bend Company. 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.
The parties agreed further 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. The agreement was not reduced to
writing on the strength of Belo's assurances that he was sincere, dependable and honest
when it came to financial commitments.
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.
Anay attempted to contact Belo. She wrote him twice to demand her overriding
commission for the period of January 8, 1988 to February 5, 1988 and the audit of the
company to determine her share in the net profits.
Anay still received her five percent (5%) overriding commission up to December 1987.
The following year, 1988, she did not receive the same commission although the
company netted a gross sales of P 13,300,360.00.
On April 5, 1988, Nenita A. Anay filed Civil Case No. 88-509, a complaint for sum of
money with damages against Marjorie D. Tocao and William Belo before the Regional
Trial Court of Makati, Branch 140
The trial court held that there was indeed an "oral partnership agreement between the
plaintiff and the defendants. The Court of Appeals affirmed the lower court’s decision.
ISSUE:
Whether the parties formed a partnership
HELD:
Yes, the parties involved in this case formed a partnership
The Supreme Court held that to be considered a juridical personality, a partnership must
fulfill these requisites:
(1) two or more persons bind themselves to contribute money, property or industry to a
common fund; and
(2) intention on the part of the partners to divide the profits among themselves. It may
be constituted in any form; a public instrument is necessary only where immovable
property or real rights are contributed thereto.
This implies that since a contract of partnership is consensual, an oral contract of
partnership is as good as a written one.
In the case at hand, Belo acted as capitalist while Tocao as president and general
manager, and Anay as head of the marketing department and later, vice-president for
sales. Furthermore, Anay was entitled to a percentage of the net profits of the business.
Therefore, the parties formed a partnership.
Sunga – Chan v. Chua
Facts:
On June 22, 1992, respondent Lamberto T. Chua filed a complaint against petitioners,
Lilibeth Sunga Sunga Chan and Cecilia Sunga, daughter and wife, respectively of the
deceased Jacinto L. Sunga, 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, 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 with initial capital
contribution of Php100,000.00 each, with the intention that the profits would be equally
divided between them. For business convenience, respondent and Jacinto agreed to
register the business name of their partnership SHELLITE GAS APPLIANCE CENTER under
the name of Jacinto as sole proprietorship.
Petitioners question the correctness of the finding of the Trial Court and the Court of
Appeals that a partnership existed in the absence of any written document to show
partnership between respondent and Jacinto from 1977 until Jacinto’s death.
Issue:
Whether or not respondent Lamberto Chua and Jacinto L. Sunga has entered into a
partnership?
Held:
Yes. The court ruled that a partnership may be constituted in any form, except where
immovable property or real rights are contributed thereto, in which case a public
instrument shall be necessary. Also, Article 1772 of the Civil Code requires that
partnership with a capital of Php3,000.00 or more must register with the Securities and
Exchange Commission, 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 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.
VILLAREAL V. RAMIREZ
Facts:
 In 1984, Villareal, Carmelito Jose and Jesus Jose formed a partnership with a capital of
P750,000for the operation of a restaurant and catering business. Respondent Ramirez
joined as a partner in the business with the capital contribution of P250,000. In 1987,
Jesus Jose withdrew from the partnership and within the same time, Villareal and
Carmelito Jose, petitioners closed the business without prior knowledge of respondents
In March 1987, respondents wrote a letter to petitioners stating that they were no longer
interested in continuing the partnership and that they were accepting the latter’s offer to
return their capital contribution. This was left unheeded by the petitioners, and by
reason of which respondents filed a complaint in the RTC.RTC ruled that the parties had
voluntarily entered into a partnership, which could be dissolved at any time, and this
dissolution was showed by the fact that petitioners stopped operating the restaurant. On
appeal, CA upheld RTC’s decision that the partnership was dissolved and it added that
respondents had no right to demand the return of their capital contribution. However
since petitioners did not give the proper accounting for the liquidation of the partnership,
the CA took it upon itself to compute their liabilities and the amount that is proper to the
respondent. The computation of which was:(capital of the partnership – outstanding
obligation) / remaining partners =amount due to private respondent
Issue: W/N petitioners are liable to respondents for the latter’s share in the partnership?
Ruling:
No. Respondents have no right to demand from petitioner the return of their equity
share. As found by the court petitioners did not personally hold its equity or assets. “The
partnership has a juridical personality separate and distinct from that of each of the
partners.” Since the capital was contributed to the partnership, not to petitioners, it is
the partnership that must refund the equity of the retiring partners. However, before the
partners can be paid their shares, the creditors of the partnership must first be
compensated. Therefore, the exact amount of refund equivalent to respondents’ one-
third share in the partnership cannot be determined until all the partnership assets will
have been liquidated and all partnership creditors have been paid. CA’s computation of
the amount to be refunded to respondents as their share was thus erroneous.
Benjamin Yu vs. National Labor Relations Commission (NLRC)
FACTS:
Petitioner Yu was hired as the Assistant General Manager of Jade Mountain Products
Company Limited primarily responsible for the overall operations of marble quarrying
and export business of said partnership. He was hired by a virtue of a Partnership
Resolution in 1985 with a monthly salary of P4,000.00. Initially he received only half of his
stipulated monthly salary and was promised by the partners that the balance would be
paid upon securing additional operating funds from abroad. However, in 1988 without his
knowledge the general partners as well as one of the limited partners sold and
transferred their interest to Willy Co and Emmanuel Zapanta. Thus the new major
partners decided to transfer the firm’s main office but opted to continue the operation of
the old partnership under its old firm name and with all its employees and workers
except for the petitioner. Upon knowing of the changes in the partnership, petitioner
went to the new main office to meet the new partners and demand the payment of his
unpaid salaries, but the latter refused to pay him and instead informed him that since he
bought the business from the original partners, it was for him to decide whether or not
he was responsible for the obligations of the old partnership including petitioners unpaid
salaries. Hence, petitioner was dismissed from said partnership.
ISSUES:
1. Whether the partnership which had hired the petitioner as Asst. General Manager
had been extinguished and replaced by a new partnership composed of Willy Co and
Emmanuel Zapanta.
2. Whether petitioner could assert his rights under his employment contract as against
the new partnership
HELD:
1. Yes. The legal effect of the changes in the membership of the partnership was the
dissolution of the old partnership which had hired the petitioner in 1984 and the
emergence of the new firm composed of Willy Co and Emmanuel Zapanta in 1988. This is
based on the following provisions:
Art. 1828. The dissolution of partnership is the change in the relation of the partners
caused by any partner ceasing to be associated in the carrying on as a distinguished from
the winding up of the business.
Art. 1830. Dissolution is caused:
1. without violation of the agreement between the partners;
b. by the express will of any partner, who must act in good faith, when no definite
term or particular undertaking is specified.
 2. in contravention of the agreement between the partners, where the
circumstances do not permit a dissolution under any other provision of this
article, by the express will of any partner at any time;
However, the legal consequence of dissolution of a partnership do not automatically
result in the termination of the legal personality of the old partnership as according to
Art. 1829, “ on dissolution of the partnership is not terminated, but continues until the
winding up of the partnership affairs is completed. The new partnership simply continued
the operations of the old partnership under its old firm name without winding up the
business affairs of the old partnership.
2. Yes. Under Art. 1840, creditors of the old partnership are also creditors of the new
partnership which continued the business of former without liquidation of the
partnership affairs. Thus, creditor of the old Jade Mountain, such as the petitioner is
entitled to enforce his claim for unpaid salaries, as well as other claims relating to his
employment with the old partnership against the new Jade Mountain.
EMNACE vs. CA
November 23, 2001
FACTS: Emilio Emnace, Vicente Tabanao and Jacinto Divinagracia were partners in a
business concern known as Ma. Nelma Fishing Industry. Sometime in January of 1986,
they decided to dissolve their partnership and executed an agreement of partition and
distribution of the partnership properties among them.
Petitioner failed to submit to Tabanao's heirs any statement of assets and liabilities of the
partnership, and to render an accounting of the partnership's finances. Petitioner also
reneged on his promise to turn over to Tabanao's heirs the deceased's 1/3 share in the
total assets of the partnership. Tabanao's filed against petitioner an action for
accounting, payment of shares, division of assets and damages.
ISSUE:WON the heirs of Vicente Tabanao Lacks the capacity to sue the petitioner.
HELD:No. The surviving spouse does not need to be appointed as executrix or
administratrix of the estate before she can file the action. She and her children are
complainants in their own right as successors of Vicente Tabanao. From the very moment
of Vicente Tabanao's death, his rights insofar as the partnership was concerned were
transmitted to his heirs, for rights to the succession are transmitted from the moment of
death of the decedent.
Whatever claims and rights Vicente Tabanao had against the partnership and petitioner
were transmitted to respondents by operation of law, more particularly by succession,
which is a mode of acquisition by virtue of which the property, rights and obligations to
the extent of the value of the inheritance of a person are transmitted. Moreover,
respondents became owners of their respective hereditary shares from the moment
Vicente Tabanao died.
Sy Yong Hu and Sons et al v. CA
Case No. 20
GR No. 94285 August 31 1999
FACTS: Sy Yong Hu & Sons is a partnership of Sy Yung Hu and his six (6) sons. The
partnership has valuable assets such as tracts of land planted with sugar cane and
commercial lots in the business district of Bacolod City. Sometime in September 1977, a
certain Keng Sian brought an action before the then Court of First Instance of Negros
Occidental, docketed as Civil Case No. 13388, against the partnership for accounting of all
the partnership properties and for the delivery or reconveyance of her one-half (1/2)
share in the properties and in the fruits thereof. Keng Sian averred that she is the
common-law wife of Sy Yung Hu and that the latter and his children connived to deprive
her of her share in the properties by diverting it to the partnership. During the pendency
of said civil case, partner Marciano Sy filed a petition for declaratory relief against his co-
partners, praying that he be appointed managing partner to replace Jose Sy who just
died. Answering the petition, his brothers, Vicente, Jesus and Jaime, who claimed to
represent the majority interest in the partnership, sought the dissolution of the
partnership and the appointment of Vicente Sy as managing partner. The Hearing Officer,
in a decision (Sison Decision) dismissed the petition, and dissolved the partnership. The
Sison Decision was affirmed by the SEC En Banc. In the meantime the Regional Trial Court
appointed one Alex Ferrer as Special Administrator. Thereafter, Alex Ferrer moved to
intervene in the proceedings in for the partition and distribution of the of the partnership
assets on behalf of the respondent intestate estate but was denied. The Intestate Estate
appealed to the SEC en banc. In its decision, the SEC en banc reiterated that the Abello
decision, which upheld the order of dissolution of the partnership, had long become final
and executory. No further appeal was taken from said decision. During the continuation
of SEC Case, the parties brought to the attention of the Hearing Officer the fact of
existence of a Civil Case pending before the RTC. They also agreed that during the
pendency of said case, there would be no disposition of partnership assets. Hearing
Officer Tongco in an order placed the partnership under a receivership committee.
Petitioners appealed to the SEC en banc. In an order (Lopez Order), the SEC en banc
affirmed the Tongco order. Then they filed a special civil action for certiorari with the
Court of Appeals. The appellate court granted the petition and remanded the case for
further execution of the Decisions, ordering partition and distribution of partnership
properties. On motion for reconsideration by private respondents, the Court of Appeals
reversed its earlier decision and remanded the case to the SEC for the formation of a
receivership committee as envisioned in the Tongco Order. Hence the present petition.
ISSUE: What is there is a difference between winding up and dissolution
HELD: Petitioners fail to recognize the basic distinctions underlying the principles of
dissolution, winding up and partition or distribution. The dissolution of a partnership is
the change in the relation of the parties caused by any partner ceasing to be associated in
the carrying on, as might be distinguished from the winding up, of its business. Upon its
dissolution, the partnership continues and its legal personality is retained until the
complete winding up of its business culminating in its termination. The dissolution of the
partnership did not mean that the juridical entity was immediately terminated and that
the distribution of the assets to its partners should perfunctorily follow. On the contrary,
the dissolution simply effected a change in the relationship among the partners. The
partnership, although dissolved, continues to exist until its termination, at which time the
winding up of its affairs should have been completed and the net partnership assets are
partitioned and distributed to the partners.
It ruled that although the Abello Decision was, indeed, final and executory, it did not pose
any obstacle to the hearing officer to issue orders not inconsistent therewith because
from the time a dissolution is ordered until the actual termination of the partnership,
PRIMELINK PROPERTIES AND DEVT CORP V. LAZATIN-MAGAT, G.R. O 167379 (2006)
FACTS: Primelink is a domestic corporation engaged in real estate development while
respondents Lazatin are co-owners of 2 parcels of land in Tagaytay. In 1994, Primelink,
represented by Lopez (President) and the Lazatins entered into a joint venture
agreement (JVA) for the development of the subject property into a residential
subdivision
1. Under the JVA, the Lazatins obliged themselves to contribute the subject
property as their share and for its part, Primelink undertook to contribute, money, labor
personnel, machineries, equipment, etc
2. For 4 years however, Primelink failed to develop the said land. As such, the
Lazatins filed a complaint to rescind the JVA
3. The trial court ruled in favor of the Lazatins and ordered Primelink to return the
possession of the property without the Lazatins paying for said improvements.On appeal,
CA affirmed the same.
4. Primelink assaidled the order that turning over improvements to the Lazatins
without reimbursement is unjust; that Lazatin did not ask the properties to be placed
under their possession but merely asked for rescission of the JVA
ISSUE: WON the improvements made by Primelink should also be turned over under the
possession of respondent Lazatin
RULING: Yes. The order of the court for Primelink to return possession of the real estate
property belonging to Lazatin including all improvements thereon was not a judgment
that was different in kind that what was prayed for by the Lazatins; it was just a
necessary consequence to the order of rescission.
As a general rule, the relation of the parties in joint ventures is government by their
agreement. When the agreement is silent on any particular issue, the general principles
of partnership may be resorted to.
The legal concept of a joint venture is of common law origin. It has generally been
understood to mean an organization formed for some temporary purpose. It is, in fact,
hardly distinguishable from partnership since elements are similar—community of
interest in the business, sharing of profits and losses, and a mutual right of control. The
main distinction is that partnership contemplates a general business with some degree of
continuity, while a joint venture is formed for the execution of a single transaction, and is
thus of a temporary nature.
With the rescission of the JVA on account of petitioner’s fraudulent acts, all authority of
any partner to act for the partnership is terminated except insofar as may be necessary
to wind up the partnership affairs or to complete transactions begun but not yet finished.
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 partnership and discharging the
obligations of the partnership.
It must be stressed that although respondents acquired possession of the lands and the
improvements thereon, the said lands and improvements remained partnership
property, subject to the rights and obligations of the parties under Art 1837 and 1838
NCC, and subject to the outcome of the settlement of the accounts between the parties
as provided in Art 1839, absent any agreement of the parties in their JVA to the contrary.
Until the partnership accounts are determined, it cannot be ascertained how much any of
the parties is entitled, if at all.
GREGORIO F. ORTEGA, TOMAS O. DEL CASTILLO, JR., and BENJAMIN T. BACORRO,
petitioners,
vs.
HON. COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION and JOAQUIN L.
MISA, respondents
G.R. No. 109248 July 3, 1995
FACTS:
Ortega, then a senior partner in the law firm Bito, Misa, and Lozada withdrew
from the said firm. He filed with SEC a petition for dissolution and liquidation of the
partnership. The SEC en banc ruled that withdrawal of Misa from the firm had dissolved
the partnership. Since it is partnership at will, the law firm could be dissolved by any
partner at anytime, such as by withdrawal therefrom, regardless of good faith or bad
faith, since no partner can be forced to continue in the partnership against his will.
ISSUE:
1. Whether or not the partnership of Bito, Lozada and Misa is a partnership at will.
2. Whether or not withdrawal of Misa dissolved the partnership regardless of good
faith and bad faith.
RULING:
1. Yes. The partnership agreement of the firm provides that ”[t]he partnership shall
continue so long as mutually satisfactory and upon the death or legal incapacity of one of
the partners, shall be continued by the surviving partners.”
2. Yes. Any one of the partners may, at his sole pleasure, dictate a dissolution of
the partnership at will (e.g. by way of withdrawal of a partner). He must, however, act in
good faith, not that the attendance of bad faith can prevent the dissolution of the
partnership but that it can result in a liability for damages.
A partnership that does not fix its term is a partnership at will. It can be dissolved
anytime since no partner can be forced to continue in the partnership against his will.
Doctrine of Delectus Personae allows them to have the power, although not necessary a
right to dissolve the partnership.
Idos v. CA G.R. NO. 110782, September 25, 1998, Quisumbing, J.
Facts:
In 1985, Eddie Alarilla and Irma Idos formed a partnership which they decided to
terminate after a year. To pay Alarilla’s share of the asset, Idos issued 4 post dated
checks. Alarilla was able to encash the first, second and fourth checks but the third was
dishonored for insufficiency of funds. He demanded payment but Idos failed to pay. She
claimed that the checks were issued as assurance of Alarilla’s share in the assets of the
partnership and that it was supposed to be deposited until the stocks were sold. He filed
an information for violation of BP blg. 22 against Idos in which she was found guilty by
the trial court.
Issue: Did the court confused and merged into one the legal concepts of dissolution,
liquidation and termination of a partnership?
Ruling: The partners agreement to terminate the partnership did not automatically
dissolved the partnership. They were in the process of winding-up when the check in
question was issued. The best evidenceof the existence of the partnership, which was not
yet terminated were the unsold goods and uncollected receivables which were presented
to the trial court. Article 1829 of the Civil Code provides that “on dissolution the
partnership is not terminated but continues until the winding-up of partnership affairs is
completed. Since the partnership has not been terminated, Idos and Alarilla remained co-
partners. The check was issued by petitioner to respondent as would a partner to
another and not as a payment by debtor to creditor. Thus, absent the first element of the
complained offense, the act is not punishable by the statute.
ROJAS v MAGLANA
FACTS:
 Jan. 14, 1955 - Maglana and Rojas executed their Articles of Co-Partnership
called Eastcoast Development Enterprises with only 2 of them as partners with
an indefinite term of existence and was duly registered with the SEC.
 Under the said Articles, Maglana shall manage the business affairs of the
partnership while Rojas shall be the logging superintendent and shall manage
the logging operations of the partnership.
 It is also provided in the artices that all profits and losses of the partnership shall
be divided and shared between them.
  There was no operation for a year and because of this difficulty, Rojas and
Maglana decided to avail of the services of Pahamotang as industrial partner.
 March 4, 1956 - Maglana, Rojas and Pahamotang executed their Articles of Co-
Partnership under the firm name Eastcoast Development Enterprises.
 The only difference is the purpose of the 2nd partnership is to hold and secure
renewal of timber license instead of to secure the license as in the 1st
partnership and the term of the 2nd partnership is fixed to 30 years.
 The partnership started and was able to ship logs and realize profits.
 Oct. 1956 - the 3 executed a document entitled "Conditional Sale of Interest in
the Partnership, Eastcoast Development Enterprise" agreeing among themselves
that Maglana and Rojas shall purchase the interest, share and participation in
the Partnership of Pahamotang. It was also agreed that the 2 shall become
owners of al equipment contributed by Pahamotang and EDE, name given to the
2nd partnership be dissolved.
 After withdrawal of Pahamotang, the partnership continued by Maglana and
Rojas without the benefit of any written agreement or reconstitution of their
written Articles of Partnership.
 Rojas entered into a management contract with another logging enterprise, CMS
Estate, Inc. He left and abandoned the partnership. He withdrew his equipment
from the partnership for use in the newly acquired area. The Equipment were
his supposed contributions to the 1st partnership and was transferred to CMS
Estate by way of Chattel Mortgage.
 Maglana wrote Rojas reminding him of his obligation to contribute to the capital
investments of the partnership and also to perform his obligation as logging
superintendent.
 2 weeks after, Rojas told Maglana that he will not contribute and work as
logging superintendent. So, Maglana told him that his share will just be 20% of
the net profits. Such was the sharing from 1957-1959 without complaint.
 Meanwhile, Rojas took funds from the partnership more than his contribution.
Thus, in a letter, Maglana notified Rojas that he dissolved the partnership.
ISSUE:
The nature of the partnership and legal relationship of Maglana and Rojas after
Pahamotang retired from the 2nd partnership
RULING:
According to the trial court, the partnership was a de facto partnership and at will (no
period fixed).
Rojas: EDE evidenced by the 1st articles of co-partnership has not been novated,
superseded or dissolved by the unregistered 2nd articles of co-partnership, so the 1st
articles should govern the relations between him and Maglana. That the letter of
Maglana did not legally dissolve the registered partnership between them. So, Rojas is
entitled to sharing profits stipulated in the registered Articles.
 It was not the intention of the partners to dissolve the 1st partnership, upon the
constitution of the 2nd one, which they unmistakably called an "Additional
Agreement". Except for the fact that they took in one industrial partner; gave
him equal share in profits and fixed the term of the 2nd partnership, everything
else was the same. Thus, they adopted the same name, same purposes and
capital contributions of Rojas and Maglana call for the same amount. The timber
license renewals were secured in favor the 1st partnership.
 The 1st Articles, therefore, were only amended, in the form of Supplementary
Articles of Co-Partnership which was never registered. No rights and obligations
accrued in the name of the 2nd partnership except in favor of Pahamotang
which was fully paid by the duly registered partnership.
 On the other hand, there is no dispute that the second partnership was
dissolved by common consent. Said dissolution did not affect the first
partnership which continued to exist.
 By their acts (Maglana reminding Rojas of his contribution and Rojas replying
that he will not be able to comply), both considered themselves governed by the
articles of the duly registered partnership.
 Under the circumstances, the relationship of Rojas and Maglana after the
withdrawal of Pahamotang can neither be considered as a De Facto
Partnership, nor a Partnership at Will, for as stressed, there is an existing
partnership, duly registered.
 As to the question of WON Maglana can unilaterally dissolve the partnership,
the answer is YES.
 As there are only two parties when Maglana notified Rojas that he dissolved the
partnership, it is in effect a notice of withdrawal.
 Under Article 1830, par. 2 of the Civil Code, even if there is a specified term, one
partner can cause its dissolution by expressly withdrawing even before the
expiration of the period, with or without justifiable cause. Of course, if the cause
is not justified or no cause was given, the withdrawing partner is liable for
damages but in no case can he be compelled to remain in the firm. With his
withdrawal, the number of members is decreased, hence, the dissolution. And in
whatever way he may view the situation, the conclusion is inevitable that Rojas
and Maglana shall be guided in the liquidation of the partnership by the
provisions of its duly registered Articles of Co-Partnership; that is, all profits and
losses of the partnership shall be divided "share and share alike" between the
partners.
Philex Mining Corp. v. Commissioner of Internal Revenue
G.R. No. 148187 April 16, 2008 Ynares-Santiago, J.
FACTS: No. In this case, the non-revocation or non-withdrawal under paragraph 5(c)
applies to the advances made by petitioner who is supposedly the agent and not the
Philex Mining Corp. entered into an agreement with Baguio Gold Mining Co. for principal under the contract. Thus, it cannot be inferred from
the former to manage and operate the latter’s mining claim, known as the Sto. Nino the stipulation that the parties’ relation under the agreement is one of agency coupled
Mine. The parties’ agreement wasdenominated as “Power of Attorney” which provides with an interest and not a partnership.
interalia: Within three (3) years from
date thereof, the PRINCIPAL (Baguio Gold) shall make available to the MANAGERS (Philex The main object of the “Power of Attorney” was not to confer a power in favor of
Mining) up to ELEVEN MILLION PESOS (P11,000,000.00), in such amounts asfrom time to petitioner to contract with third persons on behalf of Baguio Gold but to create a
time may be required by the MANAGERS within the said 3-year period, for use in business relationship between petitioner and Baguio Gold, in which the former was to
theMANAGEMENT of the STO. NINO MINE. The said ELEVEN MILLION PESOS manage and operate the latter’s mine through the parties’ mutual contribution
(P11,000,000.00) shall be deemed, for internal audit purposes, as the owner’s account in of material resources and industry. The strongest indication that petitioner was a partner
the Sto. Nino PROJECT. Any part of any income of the PRINCIPAL from the STO. NINO in the Sto. Nino Mine is the fact that it would receive 50% of the net profits as
MINE, which is left with the Sto. Nino PROJECT,shall be added to such owner’s account. compensation under paragraph 12 of the agreement. The entirety of the parties’
contractual stipulations simply leads to no other conclusion than that petitioner’s
Philex Mining made advances of cash and property in accordance with “compensation” is actually its share in the income of the joint venture. Article 1769 (4)
paragraph 5 of the agreement. However, the mine suffered continuing losses over the of the Civil Code explicitly provides that the “receipt by a person of a share in the profits
years which resulted to PhilexMining’s withdrawal as manager of the mine and in the of a businessis prima facie evidence that he is a partner in the business.”
eventual cessation of mine operations. The parties executed a “Compromise with Dation
in Payment” wherein Baguio Gold admitted an indebtedness to petitioner in the amount Parsons v. Grim
of P179,394,000.00 and agreed to pay the same in three segments.
Parsons and Edward Miller Grimm formed in 1952 a partnership in the import/export and
The parties executed an “Amendment to Compromise with Dation in Payment” real estate business. At the core of the controversy is a stock certificate of the Manila
where the partiesdetermined that Baguio Gold’s indebtedness to petitioner actually
Golf & Country Club, Inc. ("MGCC" or the "Club", for short) covered by Membership
amounted to P259,137,245.00,which sum included liabilities of Baguio Gold to other
creditors that petitioner had assumed asguarantor. These liabilities pertained to long- Certificate (MC) No. 1088 for 100 units, the playing rights over which the Rizal
term loans amounting to US$11,000,000.00 contracted by Baguio Gold from the Bank of Commercial Banking Corporation (RCBC), the court-appointed receiver, had, in the
America NT & SA and Citibank N.A. This time, Baguio meantime, leased out. The Club issued MC No. 1088 to replace MC No. 590. Asserting
Goldundertook to pay petitioner in two segments by first assigning its tangible assets for clashing ownership claims over MC No.1088, albeit recorded in the name of Charles
P127,838,051.00 and then transferring its equitable title in its Philodrill assets for Parsons ("Parsons", hereinafter) are petitioner Estate of Edward Miller Grimm and
P16,302,426.00. The parties then ascertained that Baguio respondent G-P and Company Parsons and Grimm each owned proprietary membership
Gold had a remaining outstanding indebtedness topetitioner in the amount
share in MGCC, After Grimm's demise on November 27, 1977, Parsons and Simon
of P114,996,768.00.
continued with the partnership under the same name, G – P and Company, The articles of
In its 1982 annual income tax return, Philex Mining deducted from its gross income the the partnership undergo another amendment to admit Parsons' son, Patrick, in the
amount of P112,136,000.00 as “loss on settlement of receivables from Baguio Gold partnership. After Parsons died was an amended articles of partnership was executed
against reserves andallowances.” However, the BIR disallowed onSeptember 23, 1988 by and among Parsons' heirs, namely, Patrick, Michael, Peter and
the amount as deduction for bad debt and assessed petitioner a deficiency income tax of
Jose, all surnamed Parsons legal dispute started when brothers Patrick and Jose rejected
P62,811,161.39. Philex Mining protested before the BIR arguing that the deduction must
the existence of a trust arrangement between their father and Grimm involving MC No.
be allowed since all requisites for a bad debt deduction were satisfied.
1088 the Estate of Grimm filed on August 31, 1992 before the RTC of Makati City the
ISSUE: Estate of Grimm, represented by its judicial administrator, Ramon J. Quisumbing, alleged,
among other things, the following Grimm transferred MC No. 590 in trust to Parsons,
WON the parties entered into a contract of agency coupled with an interest
That in separate letters dated February 28, 1968 addressed to MGCC, both Grimm and
which is not revocable at will.
Parsons stated that the transfer of MC No. 590 was temporary. That Patrick and Jose
HELD: Parsons had, when reminded of the trust arrangement between their late father and
Grimm, denied the existence of a trust over the Club share and refused to return the
same Patrick Parsons averred that his father was, with respect to MC No. 1088, a mere
trustee of the true owner thereof, G-P & Co., and alleged, by way of affirmative defense,
that the claim set forth in the complaint is unenforceable, barred inter alia by the dead
man's statute, prescription or had been waived or abandoned. the trial court rendered
decision Ordering defendants ESTATE OF CHARLES PARSONS and PATRICK C. PARSONS: to
turn over [MC] No. 1088 to plaintiff ESTATE OF EDWARD MILLER GRIMM;there after the
petitioners appealed to the CA and the rtc decision was reversed and set aside

Issue: whether or not the transfer of MC No. 590 effected on September 7, 1964 by
Grimm in favor of Parsons resulted, as the petitioner would have it, in the formation of a
trust relation between the two, thus formed, the trust relationship would preclude the
trustee from disposing of the trust property

Rulling:

Trust is the legal relationship between one having an equitable ownership in property
and another person owning the legal title to such property, the equitable ownership of
the former entitling him to the performance of certain duties and the exercise of certain
powers by the latter. Trust relations between parties may be express, as when the trust is
created by the intention of the trustor.2 An express trust is created by the direct and
positive acts of the parties, by some writing or deed or by words evidencing an intention
to create a trustJudging from their documented acts immediately before and subsequent
to the actual transfer on September 7, 1964 of MC No. 590, Parsons, as transferee, and
Grimm, as transferor, indubitably contemplated a trust arrangement. Consider: In all, the
facts and circumstances attendant militate against the CA's finding pointing to G-P & Co.
as the beneficial owner of MC No. 1088. What the evidence adduced instead proved
beyond cavil is that Grimm or his estate is such owner. We therefore reverse. decision of
the Court of Appeals is REVERSED and SET ASIDE,