G.R. No. L-9996 October 15, 1957 4.
7 4. That on April 28, 1944 they purchased from the Insular Investments
EUFEMIA EVANGELISTA, MANUELA EVANGELISTA, and FRANCISCA
EVANGELISTA, petitioners,
vs.
THE COLLECTOR OF INTERNAL REVENUE and THE COURT OF TAX
APPEALS, respondents.
Santiago F. Alidio and Angel S. Dakila, Jr., for petitioner.
Office of the Solicitor General Ambrosio Padilla, Assistant Solicitor General
Esmeraldo Umali and Solicitor Felicisimo R. Rosete for Respondents.
CONCEPCION, J.:
This is a petition filed by Eufemia Evangelista, Manuela Evangelista and Francisca
Evangelista, for review of a decision of the Court of Tax Appeals, the dispositive
part of which reads:
FOR ALL THE FOREGOING, we 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, inclusive, in accordance with the respondent's assessment
for the same in the total amount of P6,878.34, which is hereby affirmed
and the petition for review filed by petitioner is hereby dismissed with
costs against petitioners.
It appears from the stipulation submitted by the parties:
1. That the petitioners borrowed from their father the sum of
P59,1400.00 which amount together with their personal monies was used
by them for the purpose of buying real properties,.
2. That on February 2, 1943, they bought from Mrs. Josefina Florentino a
lot with an area of 3,713.40 sq. m. including improvements thereon from
the sum of P100,000.00; this property has an assessed value of
P57,517.00 as of 1948;
3. That on April 3, 1944 they purchased from Mrs. Josefa Oppus 21
parcels of land with an aggregate area of 3,718.40 sq. m. including
improvements thereon for P130,000.00; this property has an assessed
value of P82,255.00 as of 1948;
1
Inc., a lot of 4,353 sq. m. including improvements thereon for
P108,825.00. This property has an assessed value of P4,983.00 as of 1948;
5. That on April 28, 1944 they bought form Mrs. Valentina Afable a lot of
8,371 sq. m. including improvements thereon for P237,234.34. This
property has an assessed value of P59,140.00 as of 1948;
6. That in a document dated August 16, 1945, 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 tenants; to sign all
letters, contracts, etc., for and in their behalf, and to endorse and deposit
all notes and checks for them;
7. That after having bought the above-mentioned real properties the
petitioners had the same rented or leases to various tenants;
8. That from the month of March, 1945 up to an including December,
1945, the total amount collected as rents on their real properties was
P9,599.00 while the expenses amounted to P3,650.00 thereby leaving
them a net rental income of P5,948.33;
9. That on 1946, they realized a gross rental income of in the sum of
P24,786.30, out of which amount was deducted in the sum of P16,288.27
for expenses thereby leaving them a net rental income of P7,498.13;
10. That in 1948, they realized a gross rental income of P17,453.00 out of
the which amount was deducted the sum of P4,837.65 as expenses,
thereby leaving them a net rental income of P12,615.35.
It further appears that on September 24, 1954 respondent Collector of Internal
Revenue demanded the payment of income tax on corporations, real estate
dealer's fixed tax and corporation residence tax for the years 1945-1949,
computed, according to assessment made by said officer, as follows:
 Said letter of demand and corresponding assessments were delivered to
INCOME TAXES
petitioners on December 3, 1954, whereupon they instituted the present case in
1945 14.84 the Court of Tax Appeals, with a prayer that "the decision of the respondent
contained in his letter of demand dated September 24, 1954" be reversed, and
1946 1,144.71 that they be absolved from the payment of the taxes in question, with costs
against the respondent.
1947 10.34
After appropriate proceedings, the Court of Tax Appeals the above-mentioned
1948 1,912.30 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
1949 1,575.90 instance of the petitioners.

Total including surcharge and compromise P6,157.09

The issue in this case whether petitioners are subject to the tax on corporations
provided for in section 24 of Commonwealth Act. No. 466, otherwise known as the
REAL ESTATE DEALER'S FIXED TAX
National Internal Revenue Code, as well as to the residence tax for corporations
1946 P37.50 and the real estate dealers fixed tax. With respect to the tax on corporations, the
issue hinges on the meaning of the terms "corporation" and "partnership," as used
1947 150.00 in section 24 and 84 of said Code, the pertinent parts of which read:

1948 150.00 SEC. 24. Rate of tax on corporations.—There shall be levied, assessed,
collected, and paid annually upon the total net income received in the
1949 150.00 preceding taxable year from all sources by every corporation organized
in, or existing under the laws of the Philippines, no matter how created or
Total including penalty P527.00 organized but not including duly registered general co-partnerships
(compañias colectivas), a tax upon such income equal to the sum of the
RESIDENCE TAXES OF CORPORATION following: . . .

1945 P38.75
SEC. 84 (b). The term 'corporation' includes partnerships, no matter how
created or organized, joint-stock companies, joint accounts (cuentas en
1946 38.75
participacion), associations or insurance companies, but does not include
1947 38.75 duly registered general copartnerships. (compañias colectivas).

1948 38.75 Article 1767 of the Civil Code of the Philippines provides:

1949 38.75 By the contract of partnership two or more persons bind themselves to
contribute money, properly, or industry to a common fund, with the
Total including surcharge P193.75 intention of dividing the profits among themselves.

TOTAL TAXES DUE P6,878.34.

Pursuant to the 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
2
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 not something they found already in existence.
It was not property inherited by them pro indiviso. They created it
purposely. What is more they jointly borrowed a substantial portion
thereof in order to establish said common fund.
2. They invested the same, not merely not merely in one transaction, but
in a series of transactions. On February 2, 1943, they bought a lot for
P100,000.00. On April 3, 1944, they purchased 21 lots for P18,000.00.
This was soon followed on April 23, 1944, by the acquisition of another
real estate for P108,825.00. Five (5) days later (April 28, 1944), they got a
fourth lot for P237,234.14. The number of lots (24) acquired and
transactions undertaken, as well as the brief interregnum between each,
particularly the last three purchases, is strongly indicative of a pattern or
common design that was not limited to the conservation and
preservation of the aforementioned common fund or even of the
property acquired by the petitioners in February, 1943. In other words,
one cannot but perceive a character of habitually peculiar to business
transactions engaged in the purpose of gain.
3. 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, who, from 1945 to 1948 inclusive, paid the
total sum of P70,068.30 by way of rentals. Seemingly, the lots are still
being so let, for petitioners do not even suggest that there has been any
change in the utilization thereof.
4. Since August, 1945, the properties have been under the management
of one person, namely Simeon Evangelista, with full power to lease, to
collect rents, to issue receipts, to bring suits, to sign letters and contracts,
and to indorse and deposit notes and checks. Thus, the affairs relative to
said properties have been handled as if the same belonged to a
corporation or business and enterprise operated for profit.
3
5. The foregoing conditions have existed for more than ten (10) years, or,
to be exact, over fifteen (15) years, since the first property was acquired,
and over twelve (12) years, since Simeon Evangelista became the
manager.
6. Petitioners have not testified or introduced any evidence, either on
their purpose in creating the set up already adverted to, or on the causes
for its continued existence. They did not even try to offer an explanation
therefor.
Although, taken singly, they might not suffice to establish the intent necessary to
constitute a partnership, the collective effect of these circumstances is such as to
leave no room for doubt on the existence of said intent in petitioners herein. Only
one or two of the aforementioned circumstances were present in the cases cited
by petitioners herein, and, hence, those cases are not in point.
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. This pretense was
correctly rejected by the Court of Tax Appeals.
To begin with, the tax in question is one imposed upon "corporations", which,
strictly speaking, are distinct and different from "partnerships". When our Internal
Revenue Code includes "partnerships" among the entities subject to the tax on
"corporations", said Code must allude, therefore, to organizations which are not
necessarily "partnerships", in the technical sense of the term. Thus, for instance,
section 24 of said Code exempts from the aforementioned tax "duly registered
general partnerships which constitute precisely one of the most typical forms of
partnerships in this jurisdiction. Likewise, as defined in section 84(b) of said Code,
"the term corporation includes partnerships, no matter how created or organized."
This qualifying expression clearly indicates that a joint venture need not be
undertaken in any of the standard forms, or in conformity with the usual
requirements of the law on partnerships, in order that one could be deemed
constituted for purposes of the tax on corporations. Again, pursuant to said
section 84(b), the term "corporation" includes, among other, joint accounts,
(cuentas en participation)" and "associations," none of which has 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 [b] 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 corporations, and is, therefore, an
additional argument in favor of the imposition of said tax on corporations.
Under the Internal Revenue Laws of the United States, "corporations" are taxed
differently from "partnerships". By specific provisions of said laws, such
"corporations" include "associations, joint-stock companies and insurance
companies." However, the term "association" is not used in the aforementioned
laws.
. . . in any narrow or technical sense. It includes any organization, created
for the transaction of designed affairs, or the attainment of some object,
which like a corporation, continues notwithstanding that its members or
participants change, and the affairs of which, like corporate affairs, are
conducted by a single individual, a committee, a board, or some other
group, acting in a representative capacity. It is immaterial whether such
organization is created by an agreement, a declaration of trust, a statute,
or otherwise. It includes a voluntary association, a joint-stock corporation
or company, a 'business' trusts a 'Massachusetts' trust, a 'common law'
trust, and 'investment' trust (whether of the fixed or the management
type), an interinsuarance exchange operating through an attorney in fact,
a partnership association, and any other type of organization (by
whatever name known) which is not, within the meaning of the Code, a
trust or an estate, or a partnership. (7A Mertens Law of Federal Income
Taxation, p. 788; emphasis supplied.).
Similarly, the American Law.
. . . provides its own concept of a partnership, under the term 'partnership
'it includes not only a partnership as known at common law but, as well, a
syndicate, group, pool, joint venture or other unincorporated
organizations which carries on any business financial operation, or
venture, and which is not, within the meaning of the Code, a trust, estate,
or a corporation. . . (7A Merten's Law of Federal Income taxation, p. 789;
emphasis supplied.)
4
The term 'partnership' includes a syndicate, group, pool, joint venture or
other unincorporated organization, through or by means of which any
business, financial operation, or venture is carried on, . . .. ( 8 Merten's
Law of Federal Income Taxation, p. 562 Note 63; emphasis supplied.) .
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 of 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.
(emphasis supplied.)
Considering that the pertinent part of this provision is analogous to that of section
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.
Lastly, the records show that petitioners have habitually engaged in leasing the
properties above mentioned for a period of over twelve years, and that the yearly
gross rentals of said properties from June 1945 to 1948 ranged from P9,599 to
P17,453. Thus, they are subject to the tax provided in section 193 (q) of our
National Internal Revenue Code, for "real estate dealers," inasmuch as, pursuant
to section 194 (s) thereof:
 'Real estate dealer' includes any person engaged in the business of
buying, selling, exchanging, leasing, or renting property or his own
account as principal and holding himself out as a full or part time dealer
in real estate or as an owner of rental property or properties rented or
offered to rent for an aggregate amount of three thousand pesos or more
a year. . . (emphasis supplied.)
Wherefore, the appealed decision of the Court of Tax appeals is hereby affirmed
with costs against the petitioners herein. It is so ordered.
G.R. NOS. 166299-300 December 13, 2005
AURELIO K. LITONJUA, JR., Petitioner,
vs.
EDUARDO K. LITONJUA, SR., ROBERT T. YANG, ANGLO PHILS. MARITIME, INC.,
CINEPLEX, INC., DDM GARMENTS, INC., EDDIE K. LITONJUA SHIPPING AGENCY,
INC., EDDIE K. LITONJUA SHIPPING CO., INC., LITONJUA SECURITIES, INC.
(formerly E. K. Litonjua Sec), LUNETA THEATER, INC., E & L REALTY, (formerly E &
L INT’L SHIPPING CORP.), FNP CO., INC., HOME ENTERPRISES, INC., BEAUMONT
DEV. REALTY CO., INC., GLOED LAND CORP., EQUITY TRADING CO., INC., 3D
CORP., "L" DEV. CORP, LCM THEATRICAL ENTERPRISES, INC., LITONJUA SHIPPING
CO. INC., MACOIL INC., ODEON REALTY CORP., SARATOGA REALTY, INC., ACT
THEATER INC. (formerly General Theatrical & Film Exchange, INC.), AVENUE
REALTY, INC., AVENUE THEATER, INC. and LVF PHILIPPINES, INC., (Formerly VF
PHILIPPINES), Respondents.
DECISION
GARCIA, J.:
In this petition for review under Rule 45 of the Rules of Court, petitioner Aurelio K.
Litonjua, Jr. seeks to nullify and set aside the Decision of the Court of Appeals (CA)
dated March 31, 20041 in consolidated cases C.A. G.R. Sp. No. 76987 and C.A. G.R.
SP. No 78774 and its Resolution dated December 07, 2004,2 denying petitioner’s
motion for reconsideration.
The recourse is cast against the following factual backdrop:
5
Petitioner Aurelio K. Litonjua, Jr. (Aurelio) and herein respondent Eduardo K.
Litonjua, Sr. (Eduardo) are brothers. The legal dispute between them started
when, on December 4, 2002, in the Regional Trial Court (RTC) at Pasig City, Aurelio
filed a suit against his brother Eduardo and herein respondent Robert T. Yang
(Yang) and several corporations for specific performance and accounting. In his
complaint,3 docketed as Civil Case No. 69235 and eventually raffled to Branch 68
of the court,4 Aurelio alleged that, since June 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.5 The same complaint also contained the following material averments:
3.01 On or about 22 June 1973, [Aurelio] and Eduardo entered into a joint
venture/partnership for the continuation of their family business and common
family funds ….
3.01.1 This joint venture/[partnership] agreement was contained in a
memorandum addressed by Eduardo to his siblings, parents and other
relatives. Copy of this memorandum is attached hereto and made an integral part
as Annex "A" and the portion referring to [Aurelio] submarked as Annex "A-1".
3.02 It was then agreed upon between [Aurelio] and Eduardo that in consideration
of [Aurelio’s] retaining his share in the remaining family businesses (mostly, movie
theaters, shipping and land development) 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. . . .
4.01 … from 22 June 1973 to about August 2001, or [in] a span of 28 years,
[Aurelio] and Eduardo had accumulated in their joint venture/partnership various
assets including but not limited to the corporate defendants and [their] respective
assets.
4.02 In addition . . . the joint venture/partnership … had also acquired [various
other assets], but Eduardo caused to be registered in the names of other parties….
xxx xxx xxx
4.04 The substantial assets of most of the corporate defendants consist of real
properties …. A list of some of these real properties is attached hereto and made
an integral part as Annex "B".
xxx xxx xxx
5.02 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].
xxx xxx xxx
5.05 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 …. (Emphasis in the original; underscoring and words in bracket added.)
For ease of reference, Annex "A-1" of the complaint, which petitioner asserts to
have been meant for him by his brother Eduardo, pertinently reads:
10) JR. (AKL) [Referring to petitioner Aurelio K. Litonjua]:
You have now your own life to live after having been married. ….
I am trying my best to mold you the way I work so you can follow the pattern ….
You will be the only one left with the company, among us brothers and I will ask
you to stay as I want you to run this office every time I am away. I want you to run
it the way I am trying to run it because I will be all alone and I will depend entirely
to you (sic). My sons will not be ready to help me yet until about maybe 15/20
years from now. Whatever is left in the corporation, I will make sure that you get
ONE MILLION PESOS (P1,000,000.00) or ten percent (10%) equity, whichever is
greater. We two will gamble the whole thing of what I have and what you are
entitled to. …. It will be you and me alone on this. If ever I pass away, I want you to
take care of all of this. You keep my share for my two sons are ready take over but
give them the chance to run the company which I have built.
xxx xxx xxx
6
Because you will need a place to stay, I will arrange to give you first ONE
HUNDRED THOUSANDS PESOS: (P100, 000.00) in cash or asset, like Lt. Artiaga so
you can live better there. The rest I will give you in form of stocks which you can
keep. This stock I assure you is good and saleable. I will also gladly give you the
share of Wack-Wack …and Valley Golf … because you have been good. The rest
will be in stocks from all the corporations which I repeat, ten percent (10%)
equity. 6
On December 20, 2002, Eduardo and the corporate respondents, as defendants a
quo, filed a joint ANSWER With Compulsory Counterclaim denying under oath the
material allegations of the complaint, more particularly that portion thereof
depicting petitioner and Eduardo as having entered into a contract of partnership.
As affirmative defenses, Eduardo, et al., apart from raising a jurisdictional matter,
alleged that the complaint states no cause of action, since no cause of action may
be derived from the actionable document, i.e., Annex "A-1", being void under the
terms of Article 1767 in relation to Article 1773 of the Civil Code, infra. It is further
alleged that whatever undertaking Eduardo agreed to do, if any, under Annex "A-
1", are unenforceable under the provisions of the Statute of Frauds. 7
For his part, Yang - who was served with summons long after the other defendants
submitted their answer – moved to dismiss on the ground, inter alia, that, as to
him, petitioner has no cause of action and the complaint does not state
any.8 Petitioner opposed this motion to dismiss.
On January 10, 2003, Eduardo, et al., filed a Motion to Resolve Affirmative
Defenses.9 To this motion, petitioner interposed an Opposition with ex-Parte
Motion to Set the Case for Pre-trial.10
Acting on the separate motions immediately adverted to above, the trial court, in
an Omnibus Order dated March 5, 2003, denied the affirmative defenses and,
except for Yang, set the case for pre-trial on April 10, 2003.11
In another Omnibus Order of April 2, 2003, the same court denied the motion of
Eduardo, et al., for reconsideration12 and Yang’s motion to dismiss. The following
then transpired insofar as Yang is concerned:
1. On April 14, 2003, Yang filed his ANSWER, but expressly reserved the right to
seek reconsideration of the April 2, 2003 Omnibus Order and to pursue his failed
motion to dismiss13 to its full resolution.
2. On April 24, 2003, he moved for reconsideration of the Omnibus Order of April
2, 2003, but his motion was denied in an Order of July 4, 2003.14
3. On August 26, 2003, Yang went to the Court of Appeals (CA) in a petition
for certiorari under Rule 65 of the Rules of Court, docketed as CA-G.R. SP No.
78774,15 to nullify the separate orders of the trial court, the first denying his
motion to dismiss the basic complaint and, the second, denying his motion for
reconsideration.
Earlier, Eduardo and the corporate defendants, on the contention that grave
abuse of discretion and injudicious haste attended the issuance of the trial court’s
aforementioned Omnibus Orders dated March 5, and April 2, 2003, sought relief
from the CA via similar recourse. Their petition for certiorari was docketed as CA
G.R. SP No. 76987.
Per its resolution dated October 2, 2003,16 the CA’s 14th Division ordered the
consolidation of CA G.R. SP No. 78774 with CA G.R. SP No. 76987.
Following the submission by the parties of their respective Memoranda of
Authorities, the appellate court came out with the herein assailed Decision dated
March 31, 2004, finding for Eduardo and Yang, as lead petitioners therein,
disposing as follows:
WHEREFORE, judgment is hereby rendered granting the issuance of the writ of
certiorari in these consolidated cases annulling, reversing and setting aside the
assailed orders of the court a quo dated March 5, 2003, April 2, 2003 and July 4,
2003 and the complaint filed by private respondent [now petitioner Aurelio]
against all the petitioners [now herein respondents Eduardo, et al.] with the
court a quo is hereby dismissed.
SO ORDERED.17 (Emphasis in the original; words in bracket added.)
Explaining its case disposition, the appellate court stated, inter alia, that the
alleged partnership, as evidenced by the actionable documents,
Annex "A" and "A-1" attached to the complaint, and upon which petitioner solely
predicates his right/s allegedly violated by Eduardo, Yang and the corporate
defendants a quo is "void or legally inexistent".
In time, petitioner moved for reconsideration but his motion was denied by the CA
in its equally assailed Resolution of December 7, 2004.18 .
7
Hence, petitioner’s present recourse, on the contention that the CA erred:
A. When it ruled that there was no partnership created by the actionable
document because this was not a public instrument and immovable properties
were contributed to the partnership.
B. When it ruled that the actionable document did not create a demandable right
in favor of petitioner.
C. When it ruled that the complaint stated no cause of action against [respondent]
Robert Yang; and
D. When it ruled that petitioner has changed his theory on appeal when all that
Petitioner had done was to support his pleaded cause of action by another legal
perspective/argument.
The petition lacks merit.
Petitioner’s demand, as defined in the petitory portion of his complaint in the trial
court, 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. 19
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.20 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.21 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. 22
The underlying issue that necessarily comes to mind in this proceedings is whether
or not petitioner and respondent Eduardo are partners in the theatre, shipping
and realty business, as one claims but which the other denies. And the issue
bearing on the first assigned error relates to the question of what legal provision is
applicable under the premises, petitioner seeking, as it were, to enforce the
actionable document - Annex "A-1" - which he depicts in his complaint to be the
contract of partnership/joint venture between himself and Eduardo. Clearly, then,
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.
The CA, addressing the foregoing query, correctly stated that petitioner’s
contribution consisted of immovables and real rights. Wrote that court:
A further examination of the allegations in the complaint would show that
[petitioner’s] contribution to the so-called "partnership/joint venture" was his
supposed share in the family business that is consisting of movie theaters,
shipping and land development under paragraph 3.02 of the complaint. In other
words, his contribution as a partner in the alleged partnership/joint venture
consisted of immovable properties and real rights. …. 23
8
Significantly enough, petitioner matter-of-factly concurred with the appellate
court’s observation that, prescinding from what he himself alleged in his basic
complaint, his contribution to the partnership consisted of his share in the Litonjua
family businesses which owned variable immovable properties. Petitioner’s
assertion in his motion for reconsideration24 of the CA’s decision, that "what was
to be contributed to the business [of the partnership] was [petitioner’s] industry
and his share in the family [theatre and land development] business" leaves no
room for speculation as to what petitioner contributed to the perceived
partnership.
Lest it be overlooked, the contract-validating inventory requirement under Article
1773 of the Civil Code applies as long real property or real rights are initially
brought into the partnership. In short, it is really of no moment which of the
partners, or, in this case, who between petitioner and his brother Eduardo,
contributed immovables. In context, the more important consideration is that real
property was contributed, in which case an inventory of the contributed property
duly signed by the parties should be attached to the public instrument, else there
is legally no partnership to speak of.
Petitioner, in an obvious bid to evade the application of Article 1773, argues that
the immovables in question were not contributed, but were acquired after the
formation of the supposed partnership. Needless to stress, the Court cannot
accord cogency to this specious argument. For, as earlier stated, petitioner himself
admitted contributing his share in the supposed shipping, movie theatres and
realty development family businesses which already owned immovables even
before Annex "A-1" was allegedly executed.
Considering thus the value and nature of petitioner’s alleged contribution to the
purported partnership, the Court, even if so disposed, cannot plausibly extend
Annex "A-1" the legal effects that petitioner so desires and pleads to be given.
Annex "A-1", in fine, cannot support the existence of the partnership sued upon
and sought to be enforced. The legal and factual milieu of the case calls for this
disposition. 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 ₱3,000.00, in which case a public instrument shall be
necessary.25 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.
Given the foregoing perspective, what the appellate court wrote in its assailed
Decision26 about the probative value and legal effect of Annex "A-1" commends
itself for concurrence:
Considering that the allegations in the complaint showed that [petitioner]
contributed immovable properties to the alleged partnership, the "Memorandum"
(Annex "A" of the complaint) 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. (Underscoring and words in bracket added.)
Likewise well-taken are the following complementary excerpts from the CA’s
equally assailed Resolution of December 7, 200427 denying petitioner’s motion for
reconsideration:
Further, We conclude that despite glaring defects in the allegations in the
complaint as well as the actionable document attached thereto (Rollo, p. 191), the
[trial] court did not appreciate and apply the legal provisions which were brought
to its attention by herein [respondents] in the their pleadings. In our evaluation of
[petitioner’s] complaint, the latter alleged inter alia to have contributed
immovable properties to the alleged partnership but the actionable document is
not a public document and there was no inventory of immovable properties
signed by the parties. Both the allegations in the complaint and the actionable
documents considered, it is crystal clear that [petitioner] has no valid or legal right
which could be violated by [respondents]. (Words in bracket added.)
Under the second assigned error, it is petitioner’s posture that Annex "A-1",
assuming its inefficacy or nullity as a partnership document, nevertheless created
demandable rights in his favor. As petitioner succinctly puts it in this petition:
9
43. Contrariwise, this actionable document, especially its above-quoted provisions,
established an actionable contract even though it may not be a partnership. This
actionable contract is what is known as an innominate contract (Civil Code, Article
1307).
44. It may not be a contract of loan, or a mortgage or whatever, but surely the
contract does create rights and obligations of the parties and which rights and
obligations may be enforceable and demandable. Just because the relationship
created by the agreement cannot be specifically labeled or pigeonholed into a
category of nominate contract does not mean it is void or unenforceable.
Petitioner has thus thrusted the notion of an innominate contract on this Court -
and earlier on the CA after he experienced a reversal of fortune thereat - as an
afterthought. The appellate court, however, cannot really be faulted for not
yielding to petitioner’s dubious stratagem of altering his theory of joint
venture/partnership to an innominate contract. For, at bottom, the appellate
court’s certiorari jurisdiction was circumscribed by what was alleged to have been
the order/s issued by the trial court in grave abuse of discretion. As respondent
Yang pointedly observed,28 since the parties’ basic position had been well-defined,
that of petitioner being that the actionable document established a
partnership/joint venture, it is on those positions that the appellate court
exercised its certiorari jurisdiction. Petitioner’s act of changing his original theory
is an impermissible practice and constitutes, as the CA aptly declared, an
admission of the untenability of such theory in the first place.
[Petitioner] is now humming a different tune . . . . In a sudden twist of stance, he
has now contended that the actionable instrument may be considered
an innominate contract. xxx Verily, this now changes [petitioner’s] theory of the
case which is not only prohibited by the Rules but also is an implied admission that
the very theory he himself … has adopted, filed and prosecuted before the
respondent court is erroneous.
Be that as it may . …. We hold that this new theory contravenes [petitioner’s]
theory of the actionable document being a partnership document. If anything, it is
so obvious we do have to test the sufficiency of the cause of action on the basis of
partnership law xxx.29 (Emphasis in the original; Words in bracket added).
But even assuming in gratia argumenti that Annex "A-1" partakes of a perfected
innominate contract, petitioner’s complaint would still be dismissible as against
Eduardo and, more so, against Yang. It cannot be over-emphasized that petitioner
points to Eduardo as the author of Annex "A-1". Withal, even on this consideration
alone, petitioner’s claim against Yang is doomed from the very start.
As it were, the only portion of Annex "A-1" which could perhaps be remotely
regarded as vesting petitioner with a right to demand from respondent Eduardo
the observance of a determinate conduct, reads:
xxx You will be the only one left with the company, among us brothers and I will
ask you to stay as I want you to run this office everytime I am away. I want you to
run it the way I am trying to run it because I will be alone and I will depend entirely
to you, My sons will not be ready to help me yet until about maybe 15/20 years
from now. Whatever is left in the corporation, I will make sure that you get ONE
MILLION PESOS (P1,000,000.00) or ten percent (10%) equity, whichever is greater.
(Underscoring added)
It is at once apparent that what respondent Eduardo imposed upon himself under
the above passage, if he indeed wrote Annex "A-1", is a promise which is not to be
performed within one year from "contract" execution on June 22, 1973.
Accordingly, the agreement embodied in Annex "A-1" is covered by the Statute of
Frauds and ergo unenforceable for non-compliance therewith.30 By force of the
statute of frauds, an agreement that by its terms is not to be performed within a
year from the making thereof shall be unenforceable by action, unless the same,
or some note or memorandum thereof, be in writing and subscribed by the party
charged. Corollarily, no action can be proved unless the requirement exacted by
the statute of frauds is complied with.31
Lest it be overlooked, petitioner is the intended beneficiary of the P1 Million or
10% equity of the family businesses supposedly promised by Eduardo to give in
the near future. Any suggestion that the stated amount or the equity component
of the promise was intended to go to a common fund would be to read something
not written in Annex "A-1". Thus, even this angle alone argues against the very
idea of a partnership, the creation of which requires two or more contracting
minds mutually agreeing to contribute money, property or industry to a common
fund with the intention of dividing the profits between or among themselves. 32
In sum then, the Court rules, as did the CA, that petitioner’s complaint for specific
performance anchored on an actionable document of partnership which is legally
inexistent or void or, at best, unenforceable does not state a cause of action as
against respondent Eduardo and the corporate defendants. And if no of action can
successfully be maintained against respondent Eduardo because no valid
partnership existed between him and petitioner, the Court cannot see its way
10
clear on how the same action could plausibly prosper against Yang. Surely, Yang
could not have become a partner in, or could not have had any form of business
relationship with, an inexistent partnership.
As may be noted, petitioner has not, in his complaint, provide the logical nexus
that would tie Yang to him as his partner. In fact, attendant circumstances would
indicate the contrary. Consider:
1. Petitioner asserted in his complaint that his so-called joint venture/partnership
with Eduardo was "for the continuation of their family business and common
family funds which were theretofore being mainly managed by Eduardo." 33 But
Yang denies kinship with the Litonjua family and petitioner has not disputed the
disclaimer.
2. In some detail, petitioner mentioned what he had contributed to the joint
venture/partnership with Eduardo and what his share in the businesses will be. No
allegation is made whatsoever about what Yang contributed, if any, let alone his
proportional share in the profits. But such allegation cannot, however, be made
because, as aptly observed by the CA, the actionable document did not contain
such provision, let alone mention the name of Yang. How, indeed, could a person
be considered a partner when the document purporting to establish the
partnership contract did not even mention his name.
3. Petitioner states in par. 2.01 of the complaint that "[he] and Eduardo are
business partners in the [respondent] corporations," while "Bobby is his and
Eduardo’s partner in their Odeon Theater investment’ (par. 2.03). This means that
the partnership between petitioner and Eduardo came first; Yang became their
partner in their Odeon Theater investment thereafter. Several paragraphs later,
however, petitioner would contradict himself by alleging that his "investment and
that of Eduardo and Yang in the Odeon theater business has expanded through a
reinvestment of profit income and direct investments in several corporation
including but not limited to [six] corporate respondents" This simply means that
the "Odeon Theatre business" came before the corporate respondents.
Significantly enough, petitioner refers to the corporate respondents as "progeny"
of the Odeon Theatre business.34
Needless to stress, petitioner has not sufficiently established in his complaint the
legal vinculum whence he sourced his right to drag Yang into the fray. The Court of
Appeals, in its assailed decision, captured and formulated the legal situation in the
following wise:
[Respondent] Yang, … is impleaded because, as alleged in the complaint, he is a
"partner" of [Eduardo] and the [petitioner] in the Odeon Theater Investment
which expanded through reinvestments of profits and direct investments in
several corporations, thus:
xxx xxx xxx
Clearly, [petitioner’s] claim against … Yang arose from his alleged partnership with
petitioner and the …respondent. However, there was NO allegation in the
complaint which directly alleged how the supposed contractual relation was
created between [petitioner] and …Yang. More importantly, however, the
foregoing ruling of this Court that the purported partnership between [Eduardo] is
void and legally inexistent directly affects said claim against …Yang. Since
[petitioner] is trying to establish his claim against … Yang by linking him to the
legally inexistent partnership . . . such attempt had become futile because there
was NOTHING that would contractually connect [petitioner] and … Yang. To
establish a valid cause of action, the complaint should have a statement of fact
upon which to connect [respondent] Yang to the alleged partnership between
[petitioner] and respondent [Eduardo], including their alleged investment in the
Odeon Theater. A statement of facts on those matters is pivotal to the complaint
as they would constitute the ultimate facts necessary to establish the elements of
a cause of action against … Yang. 35
Pressing its point, the CA later stated in its resolution denying petitioner’s motion
for reconsideration the following:
xxx Whatever the complaint calls it, it is the actionable document attached to the
complaint that is controlling. Suffice it to state, We have not ignored the
actionable document … As a matter of fact, We emphasized in our decision … that
insofar as [Yang] is concerned, he is not even mentioned in the said actionable
document. We are therefore puzzled how a person not mentioned in a document
purporting to establish a partnership could be considered a partner. 36 (Words in
bracket ours).
The last issue raised by petitioner, referring to whether or not he changed his
theory of the case, as peremptorily determined by the CA, has been discussed at
length earlier and need not detain us long. Suffice it to say that after the CA has
ruled that the alleged partnership is inexistent, petitioner took a different tack.
Thus, from a joint venture/partnership theory which he adopted and consistently
pursued in his complaint, petitioner embraced the innominate contract theory.
Illustrative of this shift is petitioner’s statement in par. #8 of his motion for
11
reconsideration of the CA’s decision combined with what he said in par. # 43 of
this petition, as follows:
8. Whether or not the actionable document creates a partnership, joint venture,
or whatever, is a legal matter. What is determinative for purposes of sufficiency of
the complainant’s allegations, is whether the actionable document bears out an
actionable contract – be it a partnership, a joint venture or whatever or some
innominate contract … It may be noted that one kind of innominate contract is
what is known as du ut facias (I give that you may do).37
43. Contrariwise, this actionable document, especially its above-quoted provisions,
established an actionable contract even though it may not be a partnership. This
actionable contract is what is known as an innominate contract (Civil Code, Article
1307).38
Springing surprises on the opposing party is offensive to the sporting idea of fair
play, justice and due process; hence, the proscription against a party shifting from
one theory at the trial court to a new and different theory in the appellate
court.39 On the same rationale, an issue which was neither averred in the
complaint cannot be raised for the first time on appeal. 40 It is not difficult,
therefore, to agree with the CA when it made short shrift of petitioner’s
innominate contract theory on the basis of the foregoing basic reasons.
Petitioner’s protestation that his act of introducing the concept of innominate
contract was not a case of changing theories but of supporting his pleaded cause
of action – that of the existence of a partnership - by another legal
perspective/argument, strikes the Court as a strained attempt to rationalize an
untenable position. Paragraph 12 of his motion for reconsideration of the CA’s
decision virtually relegates partnership as a fall-back theory. Two paragraphs later,
in the same notion, petitioner faults the appellate court for reading, with myopic
eyes, the actionable document solely as establishing a partnership/joint venture.
Verily, the cited paragraphs are a study of a party hedging on whether or not to
pursue the original cause of action or altogether abandoning the same, thus:
12. Incidentally, assuming that the actionable document created a partnership
between [respondent] Eduardo, Sr. and [petitioner], no immovables were
contributed to this partnership. xxx
14. All told, the Decision takes off from a false premise that the actionable
document attached to the complaint does not establish a contractual relationship
between [petitioner] and … Eduardo, Sr. and Roberto T Yang simply because his
document does not create a partnership or a joint venture. This is … a myopic
reading of the actionable document.

Per the Court’s own count, petitioner used in his complaint the mixed words "joint
venture/partnership" nineteen (19) times and the term "partner" four (4) times.
He made reference to the "law of joint venture/partnership [being applicable] to
the business relationship … between [him], Eduardo and Bobby [Yang]" and to
his "rights in all specific properties of their joint venture/partnership". Given this
consideration, petitioner’s right of action against respondents Eduardo and Yang
doubtless pivots on the existence of the partnership between the three of them,
as purportedly evidenced by the undated and unsigned Annex "A-1". A void Annex
"A-1", as an actionable document of partnership, would strip petitioner of a cause
of action under the premises. A complaint for delivery and accounting of
partnership property based on such void or legally non-existent actionable
document is dismissible for failure to state of action. So, in gist, said the Court of
Appeals. The Court agrees.

WHEREFORE, the instant petition is DENIED and the impugned Decision and
Resolution of the Court of Appeals AFFIRMED.

Cost against the petitioner.

SO ORDERED.

12
EVANGELISTA vs. CIR and CA AURELIO LITONJUA JR VS EDUARDO LITONJUA SR. ET AL
G.R. No. L-9996, October 15, 1957 G.R. NOS. 166299-300 December 13, 2005

FACTS: Petitioners borrowed sum of money from their father and together with their own
personal funds they used said money to buy several real properties. They then appointed
their brother (Simeon) as manager of the said real properties with powers and authority to
sell, lease or rent out said properties to third persons. They realized rental income from the
said properties for the period 1945-1949. On September 24, 1954 respondent Collector of
Internal Revenue demanded the payment of income tax on corporations, real estate
dealer's fixed tax and corporation residence tax for the years 1945-1949. The letter of
demand and corresponding assessments were delivered to petitioners on December 3,
1954, 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 dated September 24,
1954" be reversed, and that they be absolved from the payment of the taxes in question.
CTA denied their petition and subsequent MR and New Trials were denied. Hence this
petition.
ISSUE: Whether or not petitioners have formed a partnership and consequently, are subject
to the tax on corporations provided for in section 24 of Commonwealth Act. No. 466,
otherwise known as the National Internal Revenue Code, as well as to the residence tax for
corporations and the real estate dealers fixed tax.
Business Organization – Partnership, Agency, Trust – Partnership, how formed
FACTS: Aurelio and Eduardo are brothers. In 1973, Aurelio alleged that Eduardo entered
into a contract of partnership with him. Aurelio showed as evidence a letter sent to him by
Eduardo that the latter is allowing Aurelio to manage their family business (if Eduardo’s
away) and in exchange thereof he will be giving Aurelio P1 million or 10% equity, whichever
is higher. A memorandum was subsequently made for the said partnership agreement. The
memorandum this time stated that in exchange of Aurelio, who just got married, retaining
his share in the family business (movie theatres, shipping and land development) and some
other immovable properties, he will be given P1 Million or 10% equity in all these
businesses and those to be subsequently acquired by them whichever is greater.
In 1992 however, the relationship between the brothers went sour. And so
Aurelio demanded an accounting and the liquidation of his share in the partnership.
Eduardo did not heed and so Aurelio sued Eduardo.
ISSUE: Whether or not there exists a partnership.

HELD: No. The partnership is void and legally nonexistent. The documentary evidence
HELD: YES. The essential elements of a partnership are two, namely: (a) an agreement to
presented by Aurelio, i.e. the letter from Eduardo and the Memorandum, did not prove
contribute money, property or industry to a common fund; and (b) intent to divide the
partnership. The 1973 letter from Eduardo on its face, contains typewritten entries,
profits among the contracting parties. The first element is undoubtedly present in the case
personal in tone, but is unsigned and undated. As an unsigned document, there can be no
at bar, for, admittedly, petitioners have agreed to, and did, contribute money and property
quibbling that said letter does not meet the public instrumentation requirements exacted
to a common fund. Upon consideration of all the facts and circumstances surrounding the
under Article 1771 (how partnership is constituted) of the Civil Code. Moreover, being
case, we are fully satisfied that their purpose was to engage in real estate transactions for
unsigned and doubtless referring to a partnership involving more than P3,000.00 in money
monetary gain and then divide the same among themselves, because of the following
or property, said letter cannot be presented for notarization, let alone registered with the
observations, among others: (1) Said common fund was not something they found already
Securities and Exchange Commission (SEC), as called for under the Article 1772
in existence; (2) They invested the same, not merely in one transaction, but in a series of
(capitalization of a partnership) of the Code. And inasmuch as the inventory requirement
transactions; (3) The aforesaid lots were not devoted to residential purposes, or to other
under the succeeding Article 1773 goes into the matter of validity when immovable
personal uses, of petitioners herein.
property is contributed to the partnership, the next logical point of inquiry turns on the
nature of Aurelio’s contribution, if any, to the supposed partnership.
Although, taken singly, they might not suffice to establish the intent necessary to
constitute a partnership, the collective effect of these circumstances is such as to leave no
The Memorandum is also not a proof of the partnership for the same is not a
room for doubt on the existence of said intent in petitioners herein. For purposes of the tax
public instrument and again, no inventory was made of the immovable property and no
on corporations, our National Internal Revenue Code, includes these partnerships — with
inventory was attached to the Memorandum. Article 1773 of the Civil Code requires that if
the exception only of duly registered general copartnerships — within the purview of the
immovable property is contributed to the partnership an inventory shall be had and
term "corporation." It is, therefore, clear to our mind that petitioners herein constitute a
attached to the contract.
partnership, insofar as said Code is concerned and are subject to the income tax for
corporations.

13