ART 1767

Lim vs. Philippine Fishing Gear Industries Inc

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.

EUFEMIA EVANGELISTA v. COLLECTOR OF INTERNAL REVENUE, GR No. L-9996, 1957-10-15

Facts:
This is a petition, filed by Eufemia Evangelista, Manuela Evangelista and Francisca Evangelista,...
for review of a decision of the Court of Tax Appeals,... hold that the petitioners are liable for the
income tax, real estate dealer's tax and the residence tax for the years 1945 to 1949... in the
total amount of P6,878.34,... It apears from the stipulation submitted by the parties:...
petitioners borrowed from their father the sum of P59,140.00 which amount together with
their personal monies was used by them for the purpose of buying real properties,... they
appointed their brother Simeon Evangelista to 'manage their properties with full power to
lease; to collect and receive rents; to issue receipts therefor; in default of such payment, to
bring' suits against the defaulting... tenant; to sign all letters, contracts, etc., for and in their
behalf, and to endorse and deposit all notes and checks for them;... after having bought the
above-mentioned real properties, the petitioners had the same rented or leased to various
tenants... respondent Collector of Internal Revenue demanded the payment, of income tax...
letter of demand and the corresponding assessments were delivered to petitioners, whereupon
they instituted the present case in the Court of Tax Appeals, with a prayer that "the decision of
the respondent contained in. his letter of demand... be reversed, and that they be absolved
from the payment of the taxes in question Court of Tax Appeals rendered... decision for the
respondent, and, a petition for reconsideration and new trial having been subsequently denied,
the case is now before Us for review at the instance of the petitioners.
Petitioners insist, however, that they are mere co-owners, not copartners, for, in consequence
of the acts performed by them, a legal entity, with a personality independent of that of its
members, did not come into existence, and some of the characteristics of partnerships... are
lacking in the case at bar.
Issues:
whether petitioners are subject to the tax on corporations provided for in section 24 of
National Internal Revenue Code
Ruling:
Article 1767 of the Civil Code of the Philippines 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 dividing1 the profits among-
themselves."
Pursuant to this article, the essential elements of a partnership are two, 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 element is undoubtedly present in
the... case at bar, for, admittedly, petitioners 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. Upon consideration of all the facts and circumstances surrounding the... case, we
are fully satisfied that their purpose was to engage in real estate transactions for monetary gain
and then divide the same among themselves,... because:
1. Said common fund was... created... purposely. What is more they jointly borrowed a
substantial portion thereof in order to... establish said common fund.
They invested the same, not merely in one transaction, but in a series of transactions.
s strongly indicative of a pattern or common design that was not limited to... the conservation
and preservation of the aforementioned common fund. In other words, one cannot but
perceive a character of habituality peculiar to business transactions engaged in for... purposes
of gain.
The aforesaid lots were not devoted to residential purposes,... , or to other personal uses, of
petitioners herein.
The properties were leased separately to several persons... properties have been under the
management of one person, namely, Simeon Evangelista
Thus, the affairs relative to said properties have been handled as if the same belonged to a
corporation or business enterprise operated for profit.
as defined in section 84(6) 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 couid be deemed constituted for
purposes of the tax on corporations. Again, pursuant to said section 84(6), the term
"corporation"... includes, among other, "joint accounts, (cuentas en participation)" and
"associations", none of which his a legal personality of its own, independent of that of its
members. Accordingly, the lawmaker could not have regarded that personality as a condition...
essential to the existence of the partnerships, therein referred to. In fact, as above stated, "duly
registered general copartnerships" which are possessed of the aforementioned personality
have been expressly excluded by law (sections 24 and 84 [6]) from the... connotation of the
term "corporation." It may not be amiss to add that petitioners' allegation to the effect that
their liability in connection with the leasing of the lots above referred to, under the
management of one person even if true, on which we express no opinion tends... to increase
the similarity between the nature of their venture and that of corporations, and is, therefore,
an additional argument in favor of the imposition of said tax on corporations.
For purposes of the tax on corporations, our National Internal Revenue Code, includes these
partnerships with the exception only of duly registered general copartnerships within the
purview of the term "corporation."
It is, therefore, clear to our mind that... petitioners herein constitute a partnership, insofar as
said Code is concerned, and are subject to the income tax for corporations.
As regards the residence tax for corporations, section 2 of Commonwealth Act No. 465 provides
in part:

"Entities liable to residence tax. Every corporation, no matter how created or organized,
whether domestic or resident foreign, engaged in or doing business in the Philippines shall pay
 an annual residence tax of five pesos and an annual additional tax... which, in no case, shall
exceed one thousand pesos, in accordance with the following schedule: * * *.

"The term 'corporation' as used in this Act includes joint-stock company, partnership, joint
account (cuentas en participacion), association or insurance company, no matter how created
or organized." (italics ours.)
Considering that the pertinent part of this provision is analogous to that of sections 24 and 84
(b) of our National Internal Revenue Code (Commonwealth Act No. 466), and that the latter
was approved on June 15, 1939, the day immediately after the approval of said
Commonwealth Act No. 465 (June 14, 1939), it is apparent that the terms "corporation" and
"partnership" are used in both statutes with substantially the same meaning. Consequently,
petitioners are subject, also, to the residence tax for corporations.
Wherefore, the appealed decision of the Court of Tax Appeals is hereby affirmed

Eligio Estanislao, Jr. v. Court of Appeals ,REMEDIOS ESTANISLAO, EMILIO and LEOCADIO
SANTIAGO

FACTS:

Petitioner and private respondents are brothers and sisters who are co-owners of certain lots at
the corner of Annapolis and Aurora Blvd., Quezon City which were then being leased to the Shell
Company of the Philippines Limited (SHELL). They agreed to open and operate a gas station
thereat to be known as Estanislao Shell Service Station with an initial investment of P15,000.00
to be taken from the advance rentals due to them from SHELL for the occupancy of the said lots
owned in common by them.

On May 26, 1966, the parties herein entered into an Additional Agreement with a proviso that
said agreement cancels and supersedes the original agreement executed by the co-owners.

For sometime, the petitioner submitted financial statements regarding the operation of the
business to private respondents, but thereafter petitioner failed to render subsequent
accounting.

A demand was made on petitioner:

• to render an accounting of the profits;
• to execute a public document embodying all the provisions of the partnership agreement;
• to pay the plaintiffs their lawful shares and participation in the net profits of the business.

ISSUE:
 IS A PARTNERSHIP a FORMED WHERE MEMBERS OF THE SAME FAMILY BIND THEMSELVES TO
CONTRIBUTE MONEY TO A COMMON FUND WITH THE INTENTION OF DIVIDING THE PROFITS
AMONG THEMSELVES?

HELD:
YES. The Joint Affidavit of April 11, 1966 (Exhibit A), clearly stipulated by the members of the
same family that the P15,000.00 advance rental due to them from SHELL shall augment
their "capital investment" in the operation of the gasoline station.

other evidence in the record:

⁃ Petitioner submitted to private respondents periodic accounting of the business.
⁃ Petitioner gave a written authority to private respondent Remedios Estanislao, his sister, to
examine and audit the books of their "common business" (aming negosyo).

⁃ Respondent Remedios assisted in the running of the business.

HEIRS OF JOSE LIM v. JULIET VILLA LIM, GR No. 172690, 2010-03-03

Facts:
Petitioners are the heirs of the late Jose Lim (Jose)
Jose's widow Cresencia Palad (Cresencia); and their children Elenito, Evelia, Imelda, Edelyna and
Edison
They filed a Complaint[4] 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
Sometime in 1980, Jose, together with his friends Jimmy Yu (Jimmy) and Norberto Uy
(Norberto), formed a partnership to engage in the trucking business.
hey 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
Thereafter, Jose's heirs, including Elfledo, and partners agreed to... continue the business under
the management of Elfledo.
Petitioners also 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.
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.
Respondent traversed petitioners' allegations and claimed that Elfledo was himself a partner of
Norberto and Jimmy.
Respondent also stressed that Jose left no properties that Elfledo could have held in trust.
Respondent maintained that all the... properties involved in this case were purchased and
acquired through her and her husband's joint efforts and hard work, and without any
participation or contribution from petitioners or from Jose.
Respondent submitted that these are conjugal partnership properties; and thus, she... had the
right to refuse to render an accounting for the income or profits of their own business.
RTC rendered its decision in favor of petitioners... to submit an accounting of all incomes,
profits and rentals received by her from said properties
Aggrieved, respondent appealed to the CA.
he CA reversed and set aside the RTC's decision, dismissing petitioners' complaint for lack of
merit.
petitioners argue that according to the testimony of Jimmy, the sole surviving partner, Elfledo
was not a partner; and that he and Norberto entered into a partnership with Jose.
Issues:
who between Jose and Elfledo... was the "partner" in the trucking business.
Ruling:
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.
Art. 1769. In determining whether a partnership exists, these rules shall apply:
(1) Except as provided by Article 1825, persons who are not partners as to each other are not
partners as to third persons;
(2) Co-ownership or co-possession does not of itself establish a partnership, whether such co-
owners or co-possessors do or do not share any profits made by the use of the property;
(3) 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;
(4) The receipt by a person of a share of the profits of a business is a prima facie evidence that
he is a partner in the business, but no such inference shall be drawn if such profits were
received in payment:
(a) As a debt by installments or otherwise;
(b) As wages of an employee or rent to a landlord;
(c) As an annuity to a widow or representative of a deceased partner;
(d) As interest on a loan, though the amount of payment vary with the profits of the business;
(e) As the consideration for the sale of a goodwill of a business or other property by
installments or otherwise.
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;[15] (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;[16] (3) all of
the properties, particularly the nine trucks of the partnership, 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;[17] and
(5) none of the petitioners, as heirs of Jose, the alleged partner, demanded periodic accounting
from Elfledo during his lifetime.
Principles:
Heirs of Tan Eng Kee,[18] a demand... for periodic accounting is evidence of a partnership.

SEVILLA v. CA
G.R. Nos. L-41182-3; April 15, 1988
Ponente: J. Sarmiento

FACTS:

On Oct. 19, 1960, the Tourist World Service, Inc. leased an office at Mabini St., Manila for the
former's use as a branch office. When the branch office was opened, the same was run by the
herein appellant Lina O. 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.
dated Dec. 2, 1961, 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.

ISSUE:
Whether the act of Tourist World Service in abolishing its Ermita branch proper

HELD:

No, the act of Tourist World Service in abolishing its Ermita branch is not proper.

The Supreme Court held that when the petitioner, Lina Sevilla, agreed to manage Tourist World
Service, Inc.'s Ermita office, she must have done so pursuant to a contract of agency.

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,
presumed 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 parties
had contemplated a principal-agent relationship, rather than a joint management or a
partnership.

But unlike simple grants of a power of attorney, the agency that we hereby declare to be
compatible with the intent of the parties, cannot be revoked at will. The reason is that it is one
coupled with an interest, the agency having been created for the mutual interest of the agent
and the principal. Accordingly, the revocation complained of should entitle the petitioner, Lina
Sevilla, to damages
 G.R. No. 134559 December 9, 1999

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.

SY vs. COURT OF APPEALS

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.

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 addressedto
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.

Fernando Santos vs Spouses Arsenio and Nieves Reyes

Facts:

This is a petition for review on certiorari assailing CA decision which affirmed the RTC decision.
Santos and Nieves Reyes verbally agreed that Santos would act as financier while Nieves and
Meliton Zabat would act as solicitors for membership and collectors of loan payment. 70% of the
profits would go to Santos while Nieves and Zabat would get 15% each.
It was a lending venture business.

Nieves introduced Gragera of Monte Maria Corp, who obtained short term loans for the
partnership in consideration of commissions. In 1986, Nieves and Zabat executed an agreement
which formalized their earlier verbal agreement. But, Santis and Nieves later discovered that
Zabat engaged in the same lending business. Hence, Zabat was expelled from the partnership. On
June 1987, Santos filed a complaint for recovery of sum of money and damages against the
respondents, alleging them as employees who misappropriated the funds. Respondents assert
they were partners and not mere employees. Santos claimed that after discovery of Zabat's
activities, he ceased infusing funds thereby extinguishing the partnership.
Issue:
Whether or not the parties' relationship was one of partnership or of employer-employee

Held:
Yes they were partners. 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. The "Articles of Agreement" stipulated that the signatories shall
share the profits of the business in a 70-15-15 manner, with petitioner getting the lion's
share. This stipulation clearly proved the establishment of a partnership.

Indeed, the partnership was established to engage in a money-lending business, despite the fact
that it was formalized only after the Memorandum of Agreement had been signed by petitioner
and Gragera.

Saludo, Jr. vs. Philippine National Bank [G.R. No. 193138, August 20, 2018]

FACTS
: Records show that on June 11, 1998, Saludo Agpalo Fernandez and Aquino Law
Office entered into a Contract of Lease with PNB, whereby the latter agreed to lease 632
square meters of the second floor of the PNB Financial Center Building in Quezon City
for a period of three years and for a monthly rental fee of P189,600.00. The rental fee
is subject to a yearly escalation rate of 10%. SAFA Law Office then occupied the leased
premises and paid advance rental fees and security deposit in the total amount of
P1,137,600.00

On August 1, 2001, the Contract of Lease expired. According to PNB, SAFA Law
Office continued to occupy the leased premises until February 2005, but discontinued
paying its monthly rental obligations after December 2002. Consequently, PNB sent a
demand letter dated July 17, 2003 for SAFA Law Office to pay its outstanding unpaid
rents in the amount of P4,648,086.34. PNB sent another letter demanding the payment
of unpaid rents in the amount of P5,856,803.53 which was received by SAFA Law Office
on November 10, 2003. In a letter to PNB dated June 9, 2004, SAFA Law Office expressed
its intention to negotiate. In February 2005, SAFA Law Office vacated the leased
premises. PNB sent a demand letter dated July 7, 2005 requiring the firm to pay its rental
arrears in the total amount of P10,951,948.32. In response, SAFA Law Office sent a letter
dated June 8, 2006, proposing a settlement. PNB, however, declined the settlement
proposal in a letter dated July 17, 2006, stating that it was not amenable to
the settlement's terms. PNB then made a final demand for SAFA Law Office to pay its
outstanding rental obligations in the amount of P25,587,838.09. On September 1, 2006,
Saludo, in his capacity as managing partner of SAFA Law Office, filed an amended
complaint for accounting and/or recomputation of unpaid rentals and damages
against PNB in relation to the Contract of Lease. On October 4, 2006, PNB filed a motion
to include an indispensable party as plaintiff, praying that Saludo be ordered to amend
anew his complaint to include SAFA Law Office as principal plaintiff. PNB argued that
the lessee in the Contract of Lease is not Saludo but SAFA Law Office, and that Saludo
merely signed the Contract of Lease as the managing partner of the law firm. Thus, SAFA
Law Office must be joined as a plaintiff in the complaint because it is considered an
indispensable party under Section 7, Rule 3 of the Rules of Court.
RTC denied PNB’s motion to include SAFA Law Office as plaintiff. CA affirmed.

ISSUES
:

WoN SAFA Law Office is a sole proprietorship

o
NO, it is a partnership. Here, absent evidence of an earlier agreement, SAFA Law
Office was constituted as a partnership at the time its partners signed the Articles
of Partnership wherein they bound themselves to establish a partnership for the
practice of law, contribute capital and industry for the purpose, and receive
compensation and benefits in the course of its operation. The opening paragraph of the
Articles of Partnership reveals the unequivocal intention of its signatories to form a
partnership.

The subsequent registration of the Articles of Partnership with the SEC, on the
other hand, was made in compliance with Article 1772 of the Civil Code, since the
initial capital of the partnership was P500,000.00.

o
The other provisions of the Articles of Partnership also positively identify
SAFA Law Office as a partnership. It constantly used the words "partners" and
"partnership." It designated Saludo, Jr. Saludo as managing partner, and Attys. Ruben E.
Agpalo, Filemon L. Fernandez, and Amado D. Aquino as industrial partners.[49] It also
provided for the term of the partnership, distribution of net profits and losses, and
management of the firm in which "the partners shall have equal interest in the conduct
of [its] affairs." Moreover, it provided for the cause and manner of dissolution of the
partnership. These provisions would not have been necessary if what had been
established was a sole proprietorship. Indeed, it may only be concluded from the
circumstances that, for all intents and purposes, SAFA Law Office is a partnership
created and organized in accordance with the Civil Code provisions on partnership.
o
Saludo asserts that SAFA Law Office is a sole proprietorship on the basis of
the MOU executed by the partners of the firm.
The MOU evinces the parties' intention to entirely shift any liability that may be incurred
by SAFA Law Office in the course of its operation to Saludo, who shall also receive all
the remaining assets of the firm upon its dissolution. This MOU, however, does not serve
to convert SAFA Law Office into a sole proprietorship. As discussed, SAFA Law Office was
manifestly established as a partnership based on the Articles of Partnership. The MOU,
from its tenor, reinforces this fact. It did not change the nature of the organization of
SAFA Law Office but only excused the industrial partners from liability.

The MOU is an agreement forged under the foregoing provision. Consequently, the sole
liability being undertaken by Saludo serves to bind only the parties to the MOU, but
never third persons like PNB.

WoN SAFA Law Office has a separate and distinct juridical personality

o
YES. Having settled that SAFA Law Office is a partnership, we hold that it
acquired juridical personality by operation of law.
o
In holding that SAFA Law Office, a partnership for the practice of law, is not
a legal entity, the CA cited the case of
Petition for Authority to Continue Use of the Firm Name "Sycip, Salazar, Feliciano,
Hernandez & Castillo"
(
Sycip
case) wherein the Court held that "[a] partnership for the practice of law is not a legal
entity. It is a mere relationship or association for a particular purpose. x x x It is not a
partnership formed for the purpose of carrying on trade or business or of holding
property." These are direct quotes from the US case of
In re Crawford's Estate
. We hold, however, that our reference to this US case is an
obiter dictum
which cannot serve as a binding precedent.

The main issue raised for the court's determination in the Sycip case is whether the two
Saludo, Jr. law firms may continue using the names of their deceased partners in
their respective firm names.

o
Moreover, reference of the
Sycip
case to the
In re Crawford's Estate
case was made without a full consideration of the nature of a law firm as a partnership
possessed with legal personality under our Civil Code.
First
, we note that while the Court mentioned that a partnership for the practice of law is
not a legal entity, it also identified Saludo, Jr. law firms as partnerships over whom Civil
Code provisions on partnership apply. The Court thus cannot hold that a partnership for
the practice of law is not a legal entity without running into conflict with Articles 44 and
1768 of the Civil Code which provide that a partnership has a juridical personality
separate and distinct from that of each of the partners.

Second
, our law on partnership does not exclude partnerships for the practice of law from
its coverage. Article 1767 of the Civil Code provides that "[t]wo or more persons may
also form a partnership for the exercise of a profession." Article 1783, on the other
hand, states that "[a] particular partnership has for its object determinate things, their
use or fruits, or a specific undertaking, or the exercise of a profession or vocation." Since
the law uses the word "profession" in the general sense, and does not distinguish which
professional partnerships are covered by its provisions and which are not, then no valid
distinction may be made.
o
Finally, we stress that unlike Philippine law, American law does not treat of
partnerships as forming a separate juridical personality for all purposes. In the case of
Bellis v. United States
, the US Supreme Court stated that law firms, as a form of partnership, are generally
regarded as distinct entities for specific purposes, such as employment, capacity to be
sued, capacity to hold title to property, and more. State and federal laws, however, do
not treat partnerships as distinct entities for all purposes.

WoN SAFA is the real party-in-interest

o
YES. SAFA Law Office is the party that would be benefited or injured by the judgment
in the suit before the RTC. Particularly, it is the party interested in the accounting and/or
recomputation of unpaid rentals and damages in relation to the contract of lease. It is
also the party that would be liable for payment to PNB of overdue rentals, if that claim
would be proven. This is because it is the one that entered into the contract of lease
with PNB. As an entity possessed of a juridical personality, it has concomitant rights and
obligations with respect to the transactions it enters into. Equally important, the general
rule under Article 1816 of the Civil Code is that partnership assets are primarily liable
for the contracts entered into in the name of the partnership and by a person authorized
to act on its behalf. All partners, including industrial ones, are only liable pro rata
with all their property after all the partnership assets have been exhausted.
o
Considering that SAFA Law Office is primarily liable under the contract of lease, it is the
real party-in-interest that should be joined as plaintiff in the RTC case.
NOTES
: Petition
DENIED
. Saludo, Jr. is hereby ordered to amend his complaint to include SAFA Law Office
as plaintiff in Civil Case No. 06-678 pending before Branch 58 of the Regional Trial Court
of Makati City, it being the real party-in- interest.

Art 1768

LILIBETH SUNGA-CHAN v. CA, GR No. 164401, 2008-06-25

Facts:
In 1977, Chua and Jacinto Sunga formed a partnership to engage in the marketing of liquefied
petroleum gas. For convenience, the business, pursued under the name, Shellite Gas Appliance
Center (Shellite), was registered as a sole proprietorship in the name of Jacinto, albeit the...
partnership arrangement called for equal sharing of the net profit.
After Jacinto's death in 1989, his widow, petitioner Cecilia Sunga, and married daughter,
petitioner Lilibeth Sunga-Chan, continued with the business without Chua's consent. Chua's
subsequent repeated demands for accounting and winding up went unheeded, prompting him
to file on
June 22, 1992 a Complaint for Winding Up of a Partnership Affairs, Accounting, Appraisal and
Recovery of Shares and Damages with Writ of Preliminary Attachment... f the RTC in Sindangan,
Zamboanga del Norte
After trial, the RTC rendered, on October 7, 1997, judgment finding for Chua, as plaintiff a quo.
The RTC's decision would subsequently be upheld by the CA in CA-G.R. CV No. 58751 and by
this Court... issue declaring the October 7, 1997 RTC decision final and executory as of
December 20, 2001.
writ of execution could not be immediately implemented
Chua, inter alia, asked the trial court to commission a certified public accountant (CPA) to
undertake the accounting work and inventory... of the partnership assets if petitioners refuse to
do it within the time set by the court
Subsequently, the RTC admitted and approved the computation of claims in view of petitioners'
failure and refusal, despite notice, to... appear and submit an accounting report... petitioners,
on September 24, 2002, submitted their own CPA- certified valuation and accounting report.
limited Chua's entitlement from the winding up of partnership affairs to an aggregate amount
of PhP 3,154,736.65... only
Chua, on the other hand, submitted a new computation... this time applying simple interest
PhP
8,733,644.75
RTC issued a Resolution... approving the new computation of claims Chua submitted
Petitioners sought reconsideration, but their motion was denied by the RTC... the sheriff of
Manila levied upon petitioner Sunga-Chan's property... over which a building leased to the
Philippine National Bank (PNB) stood
In the auction sale of the levied lot, Chua, with a tender of PhP 8 million,[21] emerged as the
winning bidder.
On April 11, 2005, the RTC, via a Resolution, confirmed the sheriff's final deed of sale, ordered
the Registry of Deeds of Manila to cancel TCT No. 208782, and granted a writ of possession[23]
in favor of Chua.
On May 31, 2005, the Court issued a TRO,[25] enjoining the RTC and the sheriff from enforcing
the April 11, 2005 writ of possession and the May 24, 2005 Notice to Vacat
Issues:
Whether or not the Regional Trial Court can [impose] interest on a final judgment of
unliquidated claims.
Whether or not the Sheriff can enforce the whole divisible obligation under judgment only
against one Defendant.
Whether or not the absolute community of property of spouses Lilibeth Sunga Chan with her
husband Norberto Chan can be lawfully made to answer for the liability of Lilibeth Chan under
the judgment.[19]
Ruling:
DIRECTING them to render an accounting in acceptable form under accounting procedures and
standards of the properties, assets, income and profits of [Shellite] since the time of death of
Jacinto L. Sunga,... ORDERING them to return and restitute to the partnership any and all
properties, assets, income and profits they misapplied and converted to their own use and
advantage that legally pertain to the plaintiff
DIRECTING them to restitute and pay to the plaintiff ½ shares and interest of the plaintiff in the
partnership of the listed properties, assets and good will
ORDERING them to pay the plaintiff earned but unreceived income and profits from the
partnership from 1988 to May 30, 1992, when the plaintiff learned of the closure of the store
the sum of P35,000.00 per month, with legal rate of interest until fully... paid;
ORDERING them to wind up the affairs of the partnership and terminate its business activities
pursuant to law, after delivering to the plaintiff all the ½ interest
Lilibeth Sunga-Chan guilty of breach of trust and in bad faith and hold them liable to... as moral
and exemplary damages
Petitioners, by not appearing on the hearing dates... are deemed to have waived their right to
interpose any... objection to the computation of claims thus submitted by Chua
The 12% interest added on the amounts due is proper as the unwarranted keeping by
petitioners of Chua's money passes as an involuntary loan and forbearance of money.
Petitioners had more than enough time to question the award and it is now too late in... the
day to change what had become final and executory
"shares and interests" mentioned therein refers not to an imposition of interest for use of
money in a loan or credit, but to a legal share or right... imposition of interest on the
partnership assets... does not simply mean restoration but also reparation for the injury or
damage committed against the rightful owner of... the property.
Under the circumstances surrounding the case, we hold that the obligation of petitioners is
solidary for several reasons.
As it were, the continuance of the business and... management of Shellite by petitioners against
the will of Chua gave rise to a solidary obligation, the acts complained of not being severable in
nature.
Indeed, it is well-nigh impossible to draw the line between when the liability of one petitioner
ends and the liability of the... other starts. In this kind of situation, the law itself imposes
solidary obligation. Art. 1207 of the Civil Code thus provides:
Any suggestion that the obligation to undertake an inventory, render an accounting of
partnership assets, and to wind up the partnership affairs is divisible ought to be dismissed.
the duty of petitioners to remit to Chua his half interest and share of the total partnership
assets proceeds from petitioners'... indivisible obligation to render an accounting and inventory
of such assets... considering the impossibility of quantifying how much of the partnership assets
or profits was misappropriated by each petitioner.
Given the solidary liability of petitioners to satisfy the judgment award, respondent sheriff
cannot really be faulted for levying upon and then selling at public auction the property of
petitioner Sunga-Chan to answer for the whole obligation of petitioners
The fact that the... levied parcel of land is a conjugal or community property, as the case may
be, of spouses Norberto and Sunga-Chan does not per se vitiate the levy and the consequent
sale of the property.
Verily, said property is not among those exempted from execution under Section
13,[37] Rule 39 of the Rules of Court.
Parenthetically, the records show that spouses Sunga-Chan and Norberto were married on
February 4, 1992, or after the effectivity of the Family Code on August 3, 1988. Withal, their
absolute community property may be held liable for the obligations contracted by either
spouse.
Specifically, Art. 94 of said Code pertinently provides:
Absent any indication otherwise, the use and appropriation by petitioner Sunga-Chan of the
assets of Shellite even after the business was discontinued on May 30, 1992 may reasonably be
considered to have been used for her and her husband's benefit.
AFFIRMED with the modification that the approved claim of respondent Chua is... hereby
corrected and adjusted to cover only the aggregate amount of PhP 5,529,392.52;
Subject to the payment by respondent Chua of PhP 2,470,607.48 to petitioner Sunga-Chan, the
Resolution dated April 11, 2005 of the RTC, confirming the sheriff's final deed of sale of the
levied property, ordering the Registry of Deeds of Manila to cancel TCT No. 208782, and...
issuing a writ of possession in favor of respondent Chua, is AFFIRMED; and
Principles:
Petitioners, citing Article 2213[28] of the Civil Code, fault the trial court for imposing, in the
execution of its final judgment, interests on what they considered as unliquidated claims.
Third on the petitioners' list of unliquidated claims is the yet-to-be established value of the one-
half partnership share and interest adjudicated to Chua, which, they submit, must first be
determined with reasonable certainty in a judicial proceeding.
The term "forbearance," within the context of usury law, has been described as a contractual
obligation of a lender or creditor to refrain, during a given period of time, from requiring the
borrower or debtor to repay the loan or debt then due and payable.[
There... is solidary liability only when the obligation expressly so states, or when the law or the
nature of the obligation requires solidarity.
Art. 94. The absolute community of property shall be liable for:
(1) x x x x
(2) All debts and obligations contracted during the marriage by the designated administrator-
spouse for the benefit of the community, or by both spouses, or by one spouse with the
consent of the other.
(3) Debts and obligations contracted by either spouse without the consent of the other to the
extent that the family may have been benefited. (Emphasis ours.)

VILLAREAL V. RAMIREZ
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.

Campos Rueda & Co v Pacific Commercial (44 Phil 916)

Facts:
Campos, Rueda & Co., a limited partnership, is indebted to the appellants: Pacific Commercial
Co. , Asiatic Petroleum Co, and International Banking Corporation amounting to not less than
P1,000.00 (which were not paid more than 30 days prior to the date of the filing by petitioners
of the application for voluntary insolvency).
The trial court denied their petition on the ground that it was not proven, nor alleged, that the
members of the firm were insolvent at the time the application was filed. It also held that the
partners are personally and solidarily liable for the consequences of the transactions of the
partnership.

Issue:
Whether or not a limited partnership may be held to have committed an act of insolvency.

Held:
Yes. A limited partnership’s juridical personality is different from the personality of its
members. On general principle, the limited partnership must answer for and suffer the
consequence of its acts. Under our Insolvency Law, one of the acts of bankruptcy upon w/c an
adjudication of involuntary insolvency can be predicated is the failure to pay obligations.
The failure of Campos, Rueda & Co., to pay its obligations constitutes an act w/c is specifically
provided for in the Insolvency Law for declaration of involuntary insolvency. The petitioners
have a right to a judicial decree declaring the involuntary insolvency of said partnership.

Commissioner of Internal Revenue vs.

William j. Suter and the Court of Tax Appeals
G.R. No. L-25532, February 28, 1969
Facts:
A limited partnership, named "William J. Suter 'Morcoin' Co., Ltd.," was formed on 30 Sep-
tember 1947 by William J. Suter as the general partner, and Julia Spirig and Gustav Carlson, as
the
limited partners. The partners contributed, respectively, P20,000.00, P18,000.00 and P2,000.00
to
the partnership. On 1 October 1947, the limited partnership was registered with the Securities
and
Exchange Commission.
In 1948, general partner Suter and limited partner Spirig got married and, thereafter, on 18
December 1948, limited partner Carlson sold his share in the partnership to Suter and his wife.
The
sale was duly recorded with the Securities and Exchange Commission on 20 December 1948.
The limited partnership had been filing its income tax returns as a corporation, without ob-
jection by the Commissioner of Internal Revenue, until in 1959 when the latter, in an
assessment,
consolidated the income of the firm and the individual incomes of the partners-spouses Suter
and
Spirig resulting in a determination of a deficiency income tax against respondent Suter in the
amount of P2,678.06 for 1954 and P4,567.00 for 1955. Partner-Spouses Suter protested the
assess-
ment.
Issue:
Whether or not the partnership was dissolved after the marriage of the partners, William J.
Suter and Julia Spirig Suter and the subsequent sale to them by the remaining partner, Gustav
Carl-
son?
Ruling:
William J. Suter "Morcoin" Co., Ltd. was not a universal partnership, but a particular one
since the contributions of the partners were fixed sums of money, P20,000.00 by William Suter
and
P18,000.00 by Julia Spirig and neither one of them was an industrial partner. It follows that the
firm
was not a partnership that spouses were forbidden to enter by Article 1677 of the Civil Code of
1889
(now Article 1782 of the New Civil Code).
Nor could the subsequent marriage of the partners operate to dissolve it, such marriage not
being one of the causes provided for that purpose by law. The capital contributions of partners
William J. Suter and Julia Spirig were separately owned and contributed by them before their
mar-
riage; and after they were joined in wedlock, such contributions remained their respective
separate
property under the Spanish Civil Code (Article 1396)

AGUILA, JR. v. COURT OF APPEALS 316 SCRA 246 (1999)

Facts:
Alfredo N. Aguilar, Jr. (petitioner) is the manager of A.C. Aguila & Sons, Co., a
partnership engaged in lending activities. Felicidad S. Vda. de Abrogar (private
respondent) and her late husband, Ruben M. Abrogar, were the registered owners
of a house and lot, covered by Transfer Certificate of Title No. 195101, in Marikina,
Metro Manila. On April 18, 1991, private respondent, with the consent of her late
husband, and A.C. Aguila & Sons, Co., represented by petitioner, entered into a
Memorandum of Agreement which provided that A.C. Aguila & Sons, Co. shall buy
the property from private respondent for P200,000 subject to an option to repurchase for
P230,000 (valid for 90 days), etc. On the same day, the parties likewise executed a
deed of absolute sale, dated June 11, 1991, wherein private respondent, with
the consent of her late husband, sold the subject property to A.C. Aguila & Sons,
Co., represented by petitioner, for P200,000,00. In a special power of attorney
dated the same day, April 18, 1991, private respondent authorized petitioner to
cause the cancellation of TCT No. 195101 and the issuance of a new certificate of
title in the name of A.C. Aguila and Sons, Co., in the event she failed to redeem the
subject property as provided in the Memorandum of Agreement. Private respondent
failed to redeem the property. Pursuant to the special power of attorney
mentioned above, petitioner caused the cancellation of TCT No. 195101 and the
issuance of a new certificate of title in the name of A.C. Aguila and Sons, Co.
Private respondent then received a letter dated August 10, 1991 from Atty.
Lamberto C. Nanquil, counsel for A.C. Aguila & Sons, Co., demanding that she
vacate the premises within 15 days after receipt of the letter and surrender its possession
peacefully to A.C. Aguila & Sons, Co. Otherwise, the latter would bring the
appropriate action in court. Upon the refusal of private respondent to vacate
the subject premises, A.C. Aguila & Sons, Co. filed an ejectment case against her in
the Metropolitan Trial Court, Branch 76, Marikina, Metro Manila. MeTC, Marikina,
MM (April 3, 1992): Ruled in favor of A.C. Aguila & Sons, Co. Private respondent
appealed to RTC Pasig, CA, and then SC but she still lost. Private respondent then
filed a petition for declaration of nullity of a deed of sale filed by Felicidad S. Vda.
de Abrogar against Alfredo N. Aguila, Jr. She alleged that the signature of her
husband on the deed of sale was a forgery because he was already dead when the
deed was supposed to have been executed on June 11,1991.
•RTC,Marikina,MM(April11,1995):Dismissed. • CA(November29,1990):Reversed
ruling of the RTC. Hence, this petition for review on certiorari. Petitioner now
contends that: (1) he is not the real party in interest but A.C. Aguila & Co., against
which this case should have been brought; (2) the judgment in the ejectment case
is a bar to the filing of the complaint for declaration of nullity of a deed of sale in this case;
and (3) the contract between A.C. Aguila & Sons, Co. and private respondent is a
pacto de retro sale and not an equitable mortgage as held by the appellate court.

Issue:
Whether the real party in interest is A.C. Aguila & Co. and not petitioner. –
YES

Ratio:
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, private respondent 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. and the Memorandum of Agreement was
executed between private respondent, with the consent of her late husband, and
A.C. Aguila & Sons, Co., represented by petitioner. Hence, 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.

ART 1769

HEIRS OF TAN ENG KEE vs.CA

HEIRS OF TAN ENG KEE vs.CA 341 SCRA 740, G.R. No. 126881, October 3, 2000
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 establish a partnership. In the absence
of evidence, we cannot accept as an established 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.

OÑA V. COMMISSIONER OF INTERNAL REVENUE

OÑA V. COMMISSIONER OF INTERNAL REVENUE
G.R. No. L-19342; May 25, 1972
Ponente: J. BARREDO

FACTS:

Julia Buñales died on March 23, 1944, leaving as heirs her surviving spouse, Lorenzo T.
Oña and her five children

Because three of the heirs, namely Luz, Virginia and Lorenzo, Jr., all surnamed Oña, were
still minors when the project of partition was approved, Lorenzo T. Oña, their father and
administrator of the estate, filed a petition in Civil Case No. 9637 of the Court of First Instance of
Manila for appointment as guardian of said minors. On November 14, 1949, the Court appointed
him guardian of the persons and property of the aforenamed minors.

The project of partition shows that the heirs have undivided one-half (1/2) interest in ten
parcels of land with a total assessed value of P87,860.00, six houses with a total assessed value
of P17,590.00 and an undetermined amount to be collected from the War Damage Commission.

Although the project of partition was approved by the Court on May 16, 1949, no attempt
was made to divide the properties therein listed. Instead, the properties remained under the
management of Lorenzo T. Oña who used said properties in business by leasing or selling them
and investing the income derived therefrom and the proceeds from the sales thereof in real
properties and securities. As a result, petitioners' properties and investments gradually increased
from P105,450.00 in 1949 to P480,005.20 in 1956.

From said investments and properties petitioners derived such incomes as profits from
installment sales of subdivided lots, profits from sales of stocks, dividends, rentals and interests
The said incomes are recorded in the books of account kept by Lorenzo T. Oña, where the
corresponding shares of the petitioners in the net income for the year are also known
 On the basis of the foregoing facts, respondent (Commissioner of Internal Revenue)
decided that petitioners formed an unregistered partnership and therefore, subject to the
corporate income tax.

ISSUE:
Whether the petitioners formed an unregistered partnership

HELD:

Yes, the petitioners formed an unregistered partnership.

The Supreme Court held that that instead of actually distributing the estate of the deceased
among themselves pursuant to the project of partition approved in 1949, "the properties
remained under the management of Lorenzo T. Oña who used said properties in business by
leasing or selling them and investing the income derived therefrom and the proceeds from the
sales thereof in real properties and securities. It is thus incontrovertible that petitioners did not,
contrary to their contention, merely limit themselves to holding the properties inherited by them.
Indeed, it is admitted that during the material years herein involved, some of the said properties
were sold at considerable profit, and that with said profit, petitioners engaged, thru Lorenzo T.
Oña, in the purchase and sale of corporate securities. It is likewise admitted that all the profits
from these ventures were divided among petitioners proportionately in accordance with their
respective shares in the inheritance.

As already indicated, for tax purposes, the co-ownership of inherited properties is automatically
converted into an unregistered partnership the moment the said common properties and/or the
incomes derived therefrom are used as a common fund with intent to produce profits for the
heirs in proportion to their respective shares in the inheritance as determined in a project
partition either duly executed in an extrajudicial settlement or approved by the court in the
corresponding testate or intestate proceeding.

Obillos et al vs. CIR/CA

GRN – L68118 October 29, 1985
Aquino, J.:

FACTS:
Petitioners sold the lots they inherited from their father and derived a total profit of P33,584
for each of them. They treated the profit as capital gain and paid an income tax thereof. The CIR
required petitioners to pay corporate income tax on their shares, .20% tax fraud surcharge and
42% accumulated interest. Deficiency tax was assessed on the theory that they had formed an
unregistered partnership or joint venture.
ISSUE:
Whether or not partnership was formed by the siblings thus be assessed of the corporate tax.

RULING:
Petitioners were co-owners and to consider them partners would obliterate the distinction
between co-ownership and partnership. The petitioners were not engaged in any joint venture
by reason of that isolated transaction.

Art 1769… 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 partnership or joint
venture.

Art 1770

DELUAO v. CASTEEL
G.R. No. L-21906; December 24, 1968
Ponente: J. Castro

FACTS:

In 1940 Nicanor Casteel unsuccessfully registered a fishpond in a big tract of swampy land, 178.76
hectares, in the then sitio of Malalag, municipality of Padada, Davao for 3 consecutive times
because the Bureau of Fisheries did not act upon his previous applications. Despite the said
rejection, Casteel did not lose interest. Because of the threat poised upon his position by the
other applicants who entered upon and spread themselves within the area, Casteel realized the
urgent necessity of expanding his occupation thereof by constructing dikes and cultivating
marketable fishes. But lacking financial resources at that time, he sought financial aid from his
uncle Felipe Deluao.

Moreover, upon learning that portions of the area applied for by him were already occupied by
rival applicants, Casteel immediately filed a protest. Consequently, two administrative cases
ensued involving the area in question.

However, despite the finding made in the investigation of the above administrative cases, the
Director of Fisheries nevertheless rejected Casteel's application on October 25, 1949, required
him to remove all the improvements which he had introduced on the land, and ordered that the
land be leased through public auction

On November 25, 1949 Inocencia Deluao (wife of Felipe Deluao) as party of the first part, and
Nicanor Casteel as party of the second part, executed a contract — denominated a "contract of
service". On the same date the above contract was entered into, Inocencia Deluao executed a
special power of attorney in favor of Jesus Donesa
On November 29, 1949 the Director of Fisheries rejected the application filed by Felipe Deluao
on November 17, 1948. Unfazed by this rejection, Deluao reiterated his claim over the same area
in the two administrative cases and asked for reinvestigation of the application of Nicanor Casteel
over the subject fishpond.

The Secretary of Agriculture and Natural Resources rendered a decision ordering Casteel to be
reinstated in the area and that he shall pay for the improvement made thereupon.

Sometime in January 1951 Nicanor Casteel forbade Inocencia Deluao from further administering
the fishpond, and ejected the latter's representative (encargado), Jesus Donesa, from the
premises.

ISSUE:
Whether the reinstatement of Casteel over the subject land constitute a dissolution of the
partnership between him and Deluao

HELD:

Yes, the reinstatement of Casteel dissolved his partnership with Deluao.

The Supreme Court ruled that the arrangement under the so-called "contract of service"
continued until the decision both dated Sept. 15, 1950 were issued by the Secretary of Agriculture
and Natural Resources in DANR Cases 353 and 353-B.

This development, by itself, brought about the dissolution of the partnership. Since the
partnership had for its object the division into two equal parts of the fishpond between the
appellees and the appellant after it shall have been awarded to the latter, and therefore it
envisaged the unauthorized transfer of one half thereof to parties other than the applicant
Casteel, it was dissolved by the approval of his application and the award to him of the fishpond.

The approval was an event which made it unlawful for the members to carry it on in partnership.
Moreover, subsequent events likewise reveal the intent of both parties to terminate the
partnership because each refused to share the fishpond with the other.

ART 1773

Agad v. Mabato, G.R. No. L-24193

EN BANC
[G.R. No. L-24193. June 28, 1968.]

MAURICIO AGAD, plaintiff-appellant, vs. SEVERINO MABATO & MABATO & AGAD COMPANY,
defendants-appellees.

Angeles, Maskariño & Associates for plaintiff-appellant.

Victorio S. Advincula for defendants-appellees.

SYLLABUS

1. CIVIL LAW; PARTNERSHIP; PURPOSE TO "OPERATE A FISHPOND"; APPLICABILITY OF ART.

1773 N.C.C. — Where a partnership was formed "to operate a fishpond", not to "engage in a
fishpond business", and the partners contributed P1,000.00 each as their share, Art. 1773 of the
Civil Code does not apply, it appearing that neither a fishpond nor a real right thereto was
contributed to the partnership or become a part of the capital thereof, even if a fishpond or a
real right thereto could become part of its assets.

DECISION

CONCEPCION, J p:

In this appeal, taken by plaintiff Mauricio Agad, from an order of dismissal of the Court of First
Instance of Davao, we are called upon to determine the applicability of Article 1773 of our Civil
Code to the contract of partnership on which the complaint herein is based.

Alleging that he and defendant Severino Mabato are — pursuant to a public instrument dated
August 29, 1952, copy of which is attached to the complaint as Annex "A" — partners in a
fishpond business, to the capital of which Agad contributed P1,000, with the right to receive
50% of the profits; that from 1952 up to and including 1956, Mabato who handled the
partnership funds, had yearly rendered accounts of the operations of the partnership; and that,
despite repeated demands, Mabato had failed and refused to render accounts for the years
1957 to 1963, Agad prayed in his complaint against Mabato and Mabato & Agad Company, filed
on June 9, 1964, that judgment be rendered sentencing Mabato to pay him (Agad) the sum of
P14,000, as his share in the profits of the partnership for the period from 1957 to 1963, in
addition to P1,000 as attorney's fees, and ordering the dissolution of the partnership, as well as
the winding up of its affairs by a receiver to be appointed therefor.

In his answer, Mabato admitted the formal allegations of the complaint and denied the
existence of said partnership, upon the ground that the contract therefor had not been
perfected, despite the execution of Annex "A", because Agad had allegedly failed to give his
P1,000 contribution to the partnership capital. Mabato prayed, therefore, that the complaint
be dismissed; that Annex "A" be declared void ab initio; and that Agad be sentenced to pay
actual, moral and exemplary damages, as well as attorney's fees.
Subsequently, Mabato filed a motion to dismiss, upon the ground that the complaint states no
cause of action and that the lower court had no jurisdiction over the subject matter of the case,
because it involves principally the determination of rights over public lands. After due hearing,
the court issued the order appealed from, granting the motion to dismiss the complaint for
failure to state a cause of action. This conclusion was predicated upon the theory that the
contract of partnership, Annex "A", is null and void, pursuant to Art. 1773 of our Civil Code,
because an inventory of the fishpond referred in said instrument had not been attached
thereto. A reconsideration of this order having been denied, Agad brought the matter to us for
review by record on appeal.

Articles 1771 and 1773 of said Code provide:

"Art. 1771. 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.

"Art. 1773. A contract of partnership is void, whenever immovable property is contributed

thereto, if inventory of said property is not made, signed by the parties, and attached to the
Public instrument."

The issue before us hinges on whether or not "immovable property or real rights" have been
contributed to the partnership under consideration. Mabato alleged and the lower court held
that the answer should be in the affirmative, because "it is really inconceivable how a
partnership engaged in the fishpond business could exist without said fishpond property (being)
contributed to the partnership." It should be noted, however, that, as stated in Annex "A" the
partnership was established "to operate a fishpond", not to "engage in a fishpond business".
Moreover, none of the partners contributed either a fishpond or a real right to any fishpond.
Their contributions were limited to the sum of P1,000 each. Indeed, Paragraph 4 of the Annex
"A" provides:

"That the capital of the said partnership is Two Thousand (P2,000.00) Pesos Philippine
Currency, of which One Thousand (P1,000.00) pesos has been contributed by Severino Mabato
and One Thousand (P1,000.00) Pesos has been contributed by Mauricio Agad.

xxx xxx xxx"

The operation of the fishpond mentioned in Annex "A" was the purpose of the partnership.
Neither said fishpond nor a real right thereto was contributed to the partnership or became
part of the capital thereof, even if a fishpond or a real right thereto could become part of its
assets.

WHEREFORE, we find that said Article 1773 of the Civil Code is not in point and that, the order
appealed from should be, as it is hereby set aside and the case remanded to the lower court for
further proceedings, with the costs of this instance against defendant- appellee, Severino
Mabato. It is so ordered.

G.R. No. 101847 May 27, 1993 LOURDES NAVARRO AND MENARDO NAVARRO, petitioners,
vs. COURT OF APPEALS, JUDGE BETHEL KATALBAS-MOSCARDON, Presiding Judge, Regional
Trial Court of Bacolod City, Branch 52, Sixth Judicial Region and Spouses OLIVIA V. YANSON
AND RICARDO B. YANSON,respondents.

FACTS:

Private respondent Olivia V. Yanson and Petitioner Lourdes Navarro were engaged in the business
of Air Freight Service Agency. Pursuant to the Agreement which they entered, they agreed to
operate the said Agency; It is the Private Respondent Olivia Yanson who supplies the necessary
equipment and money used in the operation of the agency. Her brother in the person of Atty.
Rodolfo Villaflores was the manager thereof while petitioner Lourdes Navarro was the Cashier;
In compliance to her obligation as stated in their agreement, private respondent brought into
their business certain chattels or movables or personal properties. However, those personal
properties remain to be registered in her name; Among the provisions stipulated in their
agreement is the equal sharing of whatever proceeds realized from their business; However,
sometime on July 23, 1976, private respondent Olivia V. Yanson, in order for her to recovery the
above mentioned personal properties which she brought into their business, filed a complaint
against petitioner Lourdes Navarro for "Delivery of Personal Properties With Damages and with
an application for a writ of replevin. Private respondents' application for a writ of replevin was
later approved/granted by the trial court. For her defense, petitioner Navarro argue that she and
private respondent Yanson actually formed a verbal partnership which was engaged in the
business of Air Freight Service Agency. She contended that the decision sustaining the writ of
replevin is void since the properties belonging to the partnership do not actually belong to any
of the parties until the final disposition and winding up of the partnership.

ISSUE:
1. Whether or not there was a partnership that existed between the parties.
2. Whether the properties that were commonly used in the operation of Allied Air Freight
belonged to the alleged partnership business.

RULING:

Article 1767 of the New Civil Code defines the contract of partnership: Art. 1767. 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 proceeds among themselves. A cursory
examination of the evidences presented no proof that a partnership, whether oral or written had
been constituted. In fact, those movables brought by the plaintiff for the use in the operation of
the business remain registered in her name. While there may have been co-ownership or co-
possession of some items and/or any sharing of proceeds by way of advances received by both
plaintiff and the defendant, these are not indicative and supportive of the existence of any
partnership between them. Art. 1769 par. 2 provides: Co-ownership or co-possession does not
of itself establish a partnership, whether such co-owners or co-possessors do or do not share any
profits made by the use of the property” Besides, the alleged profit was a difference found after
valuating the assets and not arising from the real operation of the business. In accounting
procedures, strictly, this could not be profit but a net worth.

OSCAR ANGELES and EMERITA ANGELES

vs
. THE HON. SECRETARY OF JUSTICE and FELINO MERCADO
G.R. No. 142612. July 29, 2005Carpio, J.
FACTS:
On 19 November 1996, the Angeles spouses filed a criminal complaint for estafa against
Mercado, the brother-in-law of the Angelesspouses, being married to Emerita Angeles’ sister
Laura.Angeles spouses claimed that in November 1992, Mercado convinced them to enter into
a contract of antichresis, colloquially known as
sanglaang-perde
, covering eight parcels of land planted with fruit-bearing lanzones trees located in Nagcarlan,
Laguna and owned byJuana Suazo. The contract of antichresis was to last for five years with
P210,000 as consideration. As the Angeles spouses stay inManila during weekdays and go
to Laguna only on weekends, the parties agreed that Mercado would administer the lands
andcomplete the necessary paperwork. After three years, the Angeles spouses asked for an
accounting from Mercado. Mercado explainedthat the subject land earned P

46,210 in 1993, which he used to buy more lanzones trees. Mercado also reported that the
trees bore nofruit in 1994. Mercado gave no accounting for 1995. The Angeles spouses claim
that only after this demand for an accounting did theydiscover that Mercado had put the
contract of
sanglaang-perde
over the subject land under Mercado and his spouse’s names.On the other hand, Mercado
claimed that there exists an industrial partnership, colloquially known as
sosyo industrial
, between him andhis spouse as industrial partners and the Angeles spouses as the financiers.
This industrial partnership had existed since 1991, beforethe contract of antichresis over the
subject land. As the years passed, Mercado used his and his spouse’s earnings as part of
thecapital in the business transactions which he entered into in behalf of the Angeles
spouses. It was their practice to enter into businesstransactions with other people under the
name of Mercado because the Angeles spouses did not want to be identified as the financiers.
ISSUES:
1.Whether a partnership existed between the Angeles spouses and Mercado
2.Whether there was misappropriation by Mercado of the proceeds of the lanzones
HELD:
1.YES. The Angeles spouses’ position that there is no partnership because
o f t h e l a c k o f a p u b l i c i n s t r u m e n t i n d i c a t i n g t h e same and a lack of registration
with the Securities and Exchange Commission (“SEC”) holds no water. First, the Angeles
spousescontributed money to the partnership and not immovable property. Second, mere
failure to register the contract of partnership with theSEC does not invalidate a contract that
has the essential requisites of a partnership. The purpose of registration of the contract
of partnership is to give notice to third parties. Failure to register the contract of partnership
does not affect the liability of the partnershipand of the partners to third persons. Neither does
such failure to register affect the partnership’s juridical personality. A partnershipmay exist
even if the partners do not use the words “partner” or “partnership.”Indeed, the Angeles
spouses admit to facts that prove the existence of a partnership: a contract showing a sosyo
industrial
or industrialpartnership, contribution of money and industry to a common fund, and division of
profits between the Angeles spouses and Mercado.

2.NO. The Secretary of Justice adequately explained the alleged

m i s a p p r o p r i a t i o n b y M e r c a d o : “ T h e d o c u m e n t a l o n e , w h i c h was in the name of
[Mercado and his spouse], failed to convince us that there was deceit or false representation on
the part of [Mercado] that induced the [Angeles spouses] to part with their money. [Mercado]
satisfactorily explained that the [Angeles spouses]do not want to be revealed as the
financiers.”It was the practice to have all the contracts of antichresis of their partnership
secured in [Mercado’s] name as [the Angeles spouses] areapprehensive that, if they come out
into the open as financiers of said contracts, they might be kidnapped by the New People’s
Army or their business deals be questioned by the Bureau of Internal Revenue or worse, their
assets and unexplained income be sequestered,as Oscar Angeles was then working with the
government. Furthermore, accounting of the proceeds is not a proper subject for the present
case

AURELIO K. LITONJUA v. EDUARDO K. LITONJUA, GR NOS. 166299-300, 2005-12-13

Facts:
Petitioner Aurelio K. Litonjua, Jr. (Aurelio) and herein respondent Eduardo K. Litonjua, Sr.
(Eduardo) are brothers. The legal dispute between them started when, on
2002, in the
RTC
Aurelio filed a suit against his brother
Eduardo and... respondent Robert T. Yang (Yang) and several corporations for specific
performance and accounting.
In his complaint
Aurelio... alleged that, since
1973, he and Eduardo are into a joint venture/partnership arrangement in the Odeon Theater
business which had expanded thru investment in Cineplex, Inc., LCM Theatrical Enterprises,
Odeon Realty Corporation (operator of Odeon I and II theatres), Avenue
Realty, Inc., owner of lands and buildings, among other corporations. Yang is described in the
complaint as petitioner's and Eduardo's partner in their Odeon Theater investment.
The same complaint also contained the following material averments:
It was then agreed upon between [Aurelio] and Eduardo that in consideration of [Aurelio's]
retaining his share in the remaining family businesses... and contributing his industry to the
continued operation of... these businesses, [Aurelio] will be given P1 Million or 10% equity in all
these businesses and those to be subsequently acquired by them whichever is greater. . . .
In addition... the joint venture/partnership... had also acquired [various other assets], but
Eduardo caused to be registered in the names of other parties....
Sometime in 1992, the relations between [Aurelio] and Eduardo became sour so that [Aurelio]
requested for an accounting and liquidation of his share in the joint venture/partnership [but
these demands for complete accounting and liquidation were not heeded].
What is worse, [Aurelio] has reasonable cause to believe that Eduardo and/or the corporate
defendants as well as Bobby [Yang], are transferring... various real properties of the
corporations belonging to the joint venture/partnership to other parties in fraud of
[Aurelio]. In consequence, [Aurelio] is therefore causing at this time the annotation on the titles
of these real properties' a notice of lis pendens
Eduardo and the corporate respondents, as defendants a quo, filed a joint ANSWER... denying
under oath the material allegations of the complaint, more particularly that portion... depicting
petitioner... and Eduardo as having entered into a contract of partnership.
For his part, Yang... moved to dismiss on the ground... that... as to him, petitioner has no cause
of action and the complaint does not state any.
Petitioner's demand... in the petitory portion of his complaint... is for delivery or payment to
him, as Eduardo's and Yang's partner, of his partnership/joint venture share, after an
accounting has been duly conducted of what he deems to be... partnership/joint venture
property.
Issues:
whether or not petitioner and respondent Eduardo are partners in the theatre, shipping and
realty business
Ruling:
The petition lacks merit.
Petitioner's demand... in the petitory portion of his complaint... is for delivery or payment to
him, as Eduardo's and Yang's partner, of his partnership/joint venture share, after an
accounting has been duly conducted of what he deems to be... partnership/joint venture
property.
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 between them.
A contract of... partnership is defined by the Civil Code as one where two or more persons
bound themselves to contribute money, property, or industry to a common fund with the
intention of dividing the profits among themselves.
A joint venture, on the other hand, is... hardly distinguishable from, and may be likened to, a
partnership since their elements are similar, i.e., community of interests in the business and
sharing of profits and losses. Being a form of partnership, a joint venture is generally governed
by the law on... partnership.
Clearly,... a look at the legal provisions determinative of the existence, or defining the formal
requisites, of a partnership is indicated. Foremost of these are the following provisions of the
Civil Code:
Art. 1771. 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.
Art. 1772. Every contract of partnership having a capital of three thousand pesos or more, in
money or property, shall appear in a public instrument, which must be recorded in the Office of
the Securities and Exchange Commission.
Failure to comply with the requirement of the preceding paragraph shall not affect the liability
of the partnership and the members thereof to third persons.
Art. 1773. A contract of partnership is void, whenever immovable property is contributed
thereto, if an inventory of said property is not made, signed by the parties, and attached to the
public instrument.
Annex "A-1", on its face, contains typewritten entries, personal in tone, but is unsigned and
undated. As an unsigned document, there can be no quibbling that Annex "A-1" does not meet
the public instrumentation requirements exacted under Article 1771... of the Civil Code.
Moreover, being unsigned and doubtless referring to a partnership involving more than
P3,000.00 in money or property, Annex "A-1" cannot be presented for notarization, let alone
registered with the Securities and Exchange Commission (SEC), as... called for under the Article
1772 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... petitioner's contribution,
if any, to the supposed partnership.
A partnership may be constituted in any form, save when immovable property or real rights
are... contributed thereto or when the partnership has a capital of at least P3,000.00, in which
case a public instrument shall be necessary.
And if only to stress what has repeatedly been articulated, an inventory to be signed by the
parties and attached to... the public instrument is also indispensable to the validity of the
partnership whenever immovable property is contributed to it.
Considering that the allegations in the complaint showed that [petitioner] contributed
immovable properties to the alleged partnership, the "Memorandum"... which purports to
establish the said "partnership/joint venture" is NOT a public... instrument and there was NO
inventory of the immovable property duly signed by the parties. As such, the said
"Memorandum" ... is null and void for purposes of establishing the existence of a valid contract
of partnership. Indeed, because of the failure to comply with the... essential formalities of a
valid contract, the purported "partnership/joint venture" is legally inexistent and it produces no
effect whatsoever. Necessarily, a void or legally inexistent contract cannot be the source of any
contractual or legal right. Accordingly, the... allegations in the complaint, including the
actionable document attached thereto, clearly demonstrates that [petitioner] has NO valid
contractual or legal right which could be violated by the [individual respondents] herein. As a
consequence, [petitioner's] complaint does
NOT state a valid cause of action because NOT all the essential elements of a cause of action
are present.