Aurelio K. Litonjua, Jr. v. Eduardo K. Litonjua, et al.

Facts:
Petitioner and Eduardo Litonjua are brothers. The former filed a suit against Eduardo and Robert Yang
and several other corporations for specific performance and accounting, asking for the delivery or
payment to him of his share from the partnership/joint venture after accounting. Petitioner alleged that
he and Eduardo entered into a joint venture/partnership agreement in the Odeon Theater business
which expended thru investments with other corporations. Petitioner alleges that he and Eduardo have
formed a partnership evidenced by an unsigned document which was admitted to the court as “Annex
A-1”. Such unsigned document contains averments that Eduardo wants the petitioner to continue
managing their family business until such time that Eduardo’s children will be ready to run the same.
Also, it states that Eduardo is giving the petitioner P1,000,000.00 or 10% equity, which ever is higher,
of the corporation. P100,000.00 in cash or asset was likewise to be given to the petitioner as payment
for the place where he will stay. Eduardo denied that he and petitioner entered into a contract of
partnership. Eduardo alleged that whatever undertaking Eduardo agreed to do under Annex A-1 are
unenforceable for it violates the Statute of Frauds.
The trial denied the affirmative defenses of Eduardo. On appeal, the CA reversed the decision of the
trial court, dismissing the complaint filed by the petitioner.

Issue:
Whether or not the petitioner and the respondents are partners.

Held:
No. Clearly, the said document allegedly containing the contract of partnership/joint venture was void.
I was in violation of Art. 1771, Art. 1772, and Art. 1773 of the Civil Code. From the facts stated,
petitioner’s contribution to the said partnership was his shares in the Litonjua family businesses which
was in contrary to his allegation that he was an industrial partner. Whether he was a capitalist partner
or an industrial partner is of no moment. What matters is that, an immovable property was contributed,
in which case, an inventory of the contributed property duly signed by the parties should be attached
to the public document. Otherwise, no partnership to speak of. Thus, no contract of partnership has
existed among the petitioner and the respondents because the rules laid down in Arts. 1771-1773 of
the Civil Code were not complied accordingly. Hence, petitioner has no cause of action so to speak.
Lilibeth Sunga-Chan and Cecilia Sunga v. Lamberto T. Chua

Facts:
Respondent Chua filed a complaint against the petitioners, wife and daughter of the deceased Jacinto
L. Sunga for Winding up of partnership affairs, accounting, appraisal, and recovery of shares with the
RTC of Zamboanga del Norte. Respondent alleged that he and Jacinto L. Sunga verbally entered into
a partnership in the distribution of Shellane Liquefied Petroleum Gas (LPG). They agreed to name their
partnership “Shellite Gas Appliance Center” under the name of Jacinto as sole proprietor. As to their
contribution, both of them put P100,000.00 each into their common fund with the intention of dividing
equally the profit between them. Jacinto became the manager who was assisted by Josephine Sy, a
sister of the wife of respondent. Upon Jacinto’s death, petitioners took over the operations, control,
custody of Shellite without respondent’s consent. Petitioners failed to comply with the repeated
demands of respondent for accounting, inventory, etc.
The trial court ruled in favor of the respondent. On appeal, the CA dismissed the petitioners’ appeal.

Issue:
Whether or not respondent and Jacinto had entered into a contract of partnership.

Held:
Yes. Petitioners’ claim that there was no sufficient evidence that a contract of partnership was entered
into by the respondent and Jacinto because there was no written document to prove the same, is
erroneous. Josephine, witness presented by the respondent, has credibly proved that a partnership
had existed between the parties.
Desperately, petitioners maintain that there were doubts on the validity of the oral partnership because,
having an initial capital of P200,000.00, should have been registered with the SEC since registration is
mandated by Art. 1772 of the Civil Code. They were wrong. 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 the registration is to give notice to third parties, and
it can be assumed that members themselves knew of the contents of their contract. Noncompliance
with this directory provision of the law not invalidate the partnership considering that the totality of the
evidence proves that respondent and Jacinto indeed forged the partnership in question.
Mauricio Agad v. Severino Mabato and Mabato & Agad Company

Facts:
Severino Mabato and petitioner Agad, pursuant to a public instrument, are partners in a fishpond
business. Agad contributed P1,000.00 with the right to receive 50% of the profits. Mabato renders the
accounting of the operations of the partnership. However, years after, the latter failed and refused to
render accounts for the years 1957-1963. Thus, Agad filed a complaint against Mabato praying for the
latter to pay him his lawful shares in the profits of the partnership. Mabato denied the existence of said
partnership because Agad failed to give his P1,000.00 contribution. Mabato then filed a motion to
dismiss which was granted by the trial court. The Trial Court held that the contract of partnership
entered into by the parties is null and void, pursuant to Art. 1773 of the Civil Code because an inventory
of the fishpond had not been attached thereto.

Issue:
Whether or not immovable property or real rights have been contributed to the partnership.

Held:
No. Neither parties contributed a fishpond or real rights over the fishpond. They only contributed a sum
of P2,000.00 according to their contract. The operation of the fishpond was the purpose of the
partnership.
Antonia Torres and Emeteria Baring v. CA and Manual Torres

Facts:
Petitioners entered into a joint venture agreement with respondent for the development of a parcel of
land into a subdivision. Petitioners executed a deed of sale covering the said parcel of land in favor of
respondent who mortgaged the same to Equitable Bank to obtain a loan of P40,000, which was to be
used for the development of the subdivision. However, such project did not push through and the land
was subsequently foreclosed by the bank. Petitioner, thus, filed a criminal case for estafa against
respondent and his wife, who were then acquitted.
Likewise, petitioners instituted this civil case against the respondent. The Trial Court ruled in favor of
the respondent. On appeal, the CA affirmed the decision of the CA.

Issue:
Whether or not the CA erred in concluding that the transaction between the parties was that of a joint
venture/partnership, ignoring outright the provision of Art. 1769 of the Civil Code.

Held:
No. The petitioners’ contention that there was no partnership formed among them and that the Joint
Venture Agreement (JVA) and the earlier Deed of Sale were void, is erroneous. In the same breath,
the petitioners’ assertion that respondent is liable to them to pay 60% of the value of the property as
equivalent for the agreed 60% share from the proceeds of their venture of the petitioners, is also wrong.
The stipulations under their JVA show that a partnership exists among them.

On the claim of the petitioners that the JVA was void for being in violation of Art. 1773, is of no moment.
Art. 1773 was intended primarily for the protection of third persons. In this case, however, there was no
involved third person who may be prejudiced. Further, petitioners invoke that respondent is liable to
pay them 60% of the value of the property. They cannot in one breath deny the contract and in another
recognize it.
Commissioner of Internal Revenue v. William Suter and the CTA
(From the book, see pg. 80)

Facts:
Respondent, as a general partner, and Julia Spirig and Gustav Carlson, as limited partners, entered
into a limited partnership named as “William J. Suter ‘Morcoin’ Co., Ltd.” to engage, among others, in
the importation, marketing and operation of automatic phonographs, radios, television sets and
amusement machines, their parts and accessories. Subsequently, respondent and Julia got married.
Thereafter, Gustav sold his share to the spouses. For a taxable year, respondent and Julia filed a
separate income return, for their limited partnership and a consolidated income return for them as
spouses. The petitioner consolidated the income of the firm and the individual income of the partners
resulting in the determination of a deficiency income tax in the amount of P2,678.06 for 1954 and
P4,567.00 for 1955. Thus, the spouses protested said assessment.

Issues:
(1) Whether or not the separate personality of the limited partnership should be disregarded for income
tax purposes considering that the respondent and Julia actually formed a single taxable unit; and
(2) Whether or not the partnership was dissolved after the marriage of the respondent and Julia and
the subsequent sale to them by Gustav of the latter’s participation of P2,000.00 in the partnership for
the amount of P1.00.

Held:
(1) No. The partners retained their separate interests. The view that by the marriage of the respondent
and Julia the company became a single proprietorship is erroneous. The capital contributions were
separately contributed by them before their marriage; and after they were joined in wedlock, such
contributions remained their respective separate property. Thus, the individual interest of the spouses
did not become common property of them after marriage. The change in the membership of the firm is
no ground for withdrawing the partnership from the coverage of Sec. 24 of the NIRC requiring to pay
income tax. Respondent and Julia did not enter into marriage and thereafter buy the interests of Gustav
with the premeditated scheme or design to use the partnership as a business conduit to dodge the tax
laws.
(2) The said partnership was a particular one because the contributions of the partners were fixed sums
of money, P20,000.00 by respondent and P18,000.00 by Julia and neither of them was an industrial
partner. It follows that the said partnership was not a partnership that spouses were forbidden to enter
by Art. 1677 of the Civil Code of 1889. The subsequent marriage of the spouses did not operate to
dissolve it, such marriage not being one of the causes provided for that purpose by law.
E.S. Lyons v. C.W. Rosenstock

Facts:
Petitioner filed an actions to recover 460 and 2/3 shares of the stock of J.K. Pickering & Company
together with the sum of P125,000.00 against respondent, executor of the estate of H.W. Elser. Henry
W. Elser was then engaged in buying, selling, and administering real estate. In several ventures,
appellant Lyson joined Elser, agreeing to share the profits between them equally. Elser told Lyson
before latter’s departure to the USA that the he is the half owner with Elser of 3 real properties. Lyson,
then executed in favor of Elser a general power of attorney empowering him to engage and dispose of
said properties at will and to represent Lyson to the mutual advantage of both. 2 out of the 3 real
properties were sold by Elser, leaving only the one left in Carriedo, Manila. Elser aimed to but a piece
of land near the City of Manila, which is referred to as San Juan Estate (SJE). He needed funds to
purchase the same. The latter then borrowed P50,000.00 from Uy Siuliong. Elser gave a personal note
signed by him and 2 associates and Fidelity & Surety Company. The latter then asked for security for
the liability it assumed. Elser mortgaged the property in Carriedo, Manila which was substituted later
on by Elser of 1,000 share from J.K. Pickering & Company because it was not solely owned by him but
also by Lyson. Subsequently, Elser and the 3 associates organized a limited partnership, J.K. Pickering
& Co. Elser, thinking that Lyson might join him in this venture, made an offer to the latter. Lyson,
however, denied such offer.
After the death of Elser, Lyson knew that the property in Carriedo was mortgaged which made him
believe that he was the involuntary owner of an undivided interest in the SJE. In lieu of being such
owner, he insisted to be entitled to the 460 and 2/3 shares of J.K. Pickering & Company, with earnings
thereon. He also believed that the money obtained from the loan was used by Elser for the purchase
of the Ronquillo property, but it is not.

Issue:
Whether or not Elser and Lysons are partners.

Held:
No. There was no general relation of partnership between the parties. Most that can be said is that
Elser and Lyons had been coparticipants in various transactions. The term partnership was only used
to describe the relation in those particular transaction, which is a particular partnership.
Trust operates when money belonging to one person is used by another for the acquisition of property
which should belong to both. Trust, however, was not present in this case because no money belonging
to Lyons or any partnership composed of Elser and Lyson was in fact used by Elser in the purchase of
SJE. Of course, if any damage had been caused to Lyson by placing of the mortgaged upon the equity
of redemption in the Carriedo property, Elser’s estate would be liable for such damage. But it is evident
that Lyons was not prejudiced by that act.