Evangelista vs CIR purpose was to engage in real estate transactions for monetary gain and then divide

Facts: the same among themselves

 Eufemia, Manuela, and Francisca (Petitioners) all surname Evangelista
borrowed money from their father together with their moneys, they use it for
the purpose of buying real properties.
 Petitioner bought properties from Florentino, Oppus, Insular investment inc.,
Afable.
 Petitioners appointed their brother, Simeon, to manage the properties with
full power to lease, collect and receive rents, issue receipts, in default of
such payment to bring a suits against the tenants.
 The CIR demanded payment of income tax corporation, real estate dealer’s
fixed tax and corporation residence tax.
 The said assessment was delivered to the petitioner because of it they file a
petitioner for review before the CTA.
CTA ruled in favor of CIR.
Petitioner argued that they are only co-owner, and not co-partners.
Issue:
W/N the petitioners are co-partners.
Held: YES
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. hey invested the same, not merely not merely in one transaction, but in
a series of transactions.
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. the
properties have been under the management of one person, namely Simeon
Evangelista. 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.
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.

With respect to the tax on corporations, the issue hinges on the meaning of the terms
"corporation" and "partnership," as used in section 24 and 84 of said Code, the
pertinent parts of which read:
SEC. 24. Rate of tax on corporations.—There shall be levied, assessed, collected,
and paid annually upon the total net income received in the preceding taxable year
from all sources by every corporation organized in, or existing under the laws of the
Philippines, no matter how created or organized but not including duly registered
general co-partnerships (compañias colectivas), a tax upon such income equal to the
sum of the following: . . .
SEC. 84 (b). The term 'corporation' includes partnerships, no matter how created or
organized, joint-stock companies, joint accounts (cuentas en participacion),
associations or insurance companies, but does not include duly registered general
copartnerships. (compañias colectivas).
Article 1767 of the Civil Code of the Philippines provides:

By the contract of partnership two or more persons bind themselves to contribute

money, properly, or industry to a common fund, with the intention of dividing the profits
among themselves.

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 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
LAGUNA TRANSPORTATION V SSS
PETITIONER: LAGUNA TRANSPORTATION CO., INC
RESPONDENT: SOCIAL SECURITY SYSTEM
DATE: April 28, 1960
PONENTE: BARRERA, J
TOPIC:
FACTS:
 Petitioner Laguna Transpo filed with CFI Laguna praying that an order be
issued:
o Declaring that it is not bound to register as a member of
respondent SSS
o Therefore, not obliged to pay to the latter the contributions
required under the Social Security Act.
SSS filed an answer, praying for its dismissal
 Due to petitioner's failure to exhaust administrative remedies,
 and for a declaration that petitioner is covered by said Act,
o since the latter's business has been in operation for at least 2
years prior to September 1, 1957.
Stipulation of facts:
 Petitioner is a domestic corporation duly organized and existing under the
laws of the Philippines, office in Binan
 That respondent is an agency created under Republic Act No. 1161, as
amended by Republic Act No. 1792
o Respondent has served notice upon the petitioner requiring it to
register as member of the System and to remit the premiums due
from all the employees
o Beginning the month of September, 1957
 A corporation Binan Transportation Co. sold parts of the lines and
equipment to certain people (Mercado, Mata and Cruz)
 After the sale it the said vendees formed an unregistered partnership under
the name of Laguna Transportation Company
o continued to operate the lines and equipment bought from the
Biñan Transportation Company
 They later on organized corporation known as the Laguna Transportation
Company, Inc., which was registered with the Securities and Exchange
Commission
o Which was registered with the Securities and Exchange
Commission on June 20, 1956
o They continued the business of the unregistered partnership
 August 30, 1957 an Employee's Data Record . . . and a supplemental
Information Sheet
 Prior to Nov 11, 1957 plaintiff requested for exemption from coverage by the
System on the ground that it started operation only on June 20, 1956 – but
SSS notified that it was covered
RTC, declared petitioner was an employer engaged in business as common carrier
which had been in operation for at least two years prior to the enactment of Republic
Act No. 1161 as amended by Republic Act 1792 – SUBJECT TO COMPULSARY
REGISTRATION
ISSUE: WON LAGUNA TRANSPORTATION IS SUBJECT TO COMPULSARY
REGISTRATION
HELD: YES
It is undisputed that the Laguna Tranpo Co, unregistered partnership commenced the
operation of its business as a common carrier on April 1, 1949.
They later converted to a corporate entity by registering its articles of incorporation
with SEC
 The firm name "Laguna Transportation Company" was not altered, except
with the addition of the word "Inc." to indicate that petitioner was duly
incorporated under existing laws.
 Continued same transportation business of the unregistered partnership
There was, in effect, only a change in the form of the organization of the entity
engaged in the business of transportation of passengers.
 Said entity as an employer engaged in business, was already in operation
for at least 3 years prior to the enactment of the Social Security Act on June
18, 1954 and for at least two years prior to the passage of the amendatory
act on June 21, 1957
 While it is true that a corporation once formed is conferred a juridical
personality separate and district from the persons composing it, it is but a
legal fiction introduced for purposes of convenience and to subserve the
ends of justice.
o The concept cannot be extended to a point beyond its reasons
and policy, and when invoked in support of an end subversive of
this policy, will be disregarded by the courts
To adopt petitioner's argument would defeat, rather than promote, the ends for which
the Social Security Act was enacted.
 An employer could easily circumvent the statute by simply changing his
form of organization every other year, and then claim exemption from
contribution to the System as required.
o On the theory that, as a new entity, it has not been in operation
for a period of at least 2 years.
 Petitioner admitted that as an employer engaged in the business of a
common carrier, its operation commenced on April 1, 1949 while it was a
 partnership and continued by the corporation upon its formation on June 20,
1956.
o No mention whatsoever is made either in the pleadings or in the
stipulation of facts that the lines and equipment of the
unregistered partnership had been sold and transferred to the
corporation, petitioner herein.

This omission, to our mind, clearly indicates that there was, in fact, no transfer of
interest, but a mere change in the form of the organization of the employer engaged in
the transportation business, i.e., from an unregistered partnership to that of a
corporation.

Tuason vs. Bolanos


PLAINTIFF: J. M. Tuason & Co. represented by Managing Partner Gregoria
Araneta
DEFENDANT: Quirino Bolaños
DATE: May 28, 1954
PONENTE: Reyes, J.
TOPIC:
Facts:
 This is a case wherein the Petitioner filed a complaint for recovery of
possession for a registered land located in Tatalon, Quezon City
o The complaint was amended 3times with respect to the extent
and description of the land, from 13 reduced to 6 hectares
 In the respondents’ complaint, through its surveyor, they pointed out that the
lot occupied was 13hectares
o In his answer, sets up the defense of prescription and that they
have been in open, continuous, exclusive and public and
notorious possession of the land in dispute since time in-memorial
o Also alleged that the petitioner obtained such land through, fraud
or error without knowledge or interest either personal by plaintiff
or its predecessor in interest
o Prayed for dismissal – DENIED
is that an action be brought in the name of, but not necessarily by, the real party in
interest. (Section 2, Rule 2.)
In fact the practice is for an attorney-at-law to bring the action, that is to file the
complaint, in the name of the plaintiff. That practice appears to have been followed in
this case, since the complaint is signed by the law firm of Araneta and Araneta,
"counsel for plaintiff" and commences with the statement "comes now plaintiff, through
its undersigned counsel." It is true that the complaint also states that the plaintiff is
"represented herein by its Managing Partner Gregorio Araneta, Inc.", another
corporation, but there is nothing against one corporation being represented by another
person, natural or juridical, in a suit in court.
The contention that Gregorio Araneta, Inc. can not act as managing partner for plaintiff
on the theory that it is illegal for two corporations to enter into a partnership is without
merit, for the true rule is that "though a corporation has no power to enter into a
partnership, it may nevertheless enter into a joint venture with another where the
nature of that venture is in line with the business authorized by its charter." (Wyoming-
Indiana Oil Gas Co. vs. Weston, 80 A. L. R., 1043, citing 2 Fletcher Cyc. of Corp.,
1082.)
There is nothing in the record to indicate that the venture in which plaintiff is
represented by Gregorio Araneta, Inc. as "its managing partner" is not in line with the
corporate business of either of them.

 RTC ruled in favor of Petitioner

o Ordered the respondent to restore the possession to petitioner
 Respondent appealed directly to the SC
o That the RTC was incorrect in not dismissing the case on the
ground that the case was not brought by the real property in
interest
o The contention that Gregoria Araneta Inc. cannot act as
managing partner for the petitioner on the theory that it is illegal
for 2 corporations to enter into a partnership
 It may nevertheless enter into a joint venture with
another where the nature of that venture is inline with
the business authorized by its charter
 There is nothing in the record that to indicate that the
venture in which petitioner is represented by Gregoria
Araneta Inc. as “its managing partner” is not in line with
the corporate business of either of them

Issue: W/N a corporation may enter into a joint venture with another corporation, YES
W/N Gregoria Araneta may propery represent the petitioner, YES

Ruling:

There is nothing to the contention that the present action is not brought by the real
party in interest, that is, by J. M. Tuason and Co., Inc. What the Rules of Court require

G.R. No. L-4811 July 31, 1953
CHARLES F. WOODHOUSE, plaintiff-appellant, vs.
FORTUNATO F. HALILI, defendant-appellant.
FACTS:
Woodhouse entered into a written agreement to enter into a
partnership with the defendant, the most important provisions of
which are:
(1) that they shall organize a partnership for the bottling and
distribution of Mission soft drinks, plaintiff to act as industrial
partner or manager, and the defendant as a capitalist, furnishing
the capital necessary therefor;
(2) that the defendant was to decide matters of general policy
regarding the business, while the plaintiff was to attend to the
operation and development of the bottling plant;
(3) that the plaintiff was to secure the Mission Soft Drinks
franchise for and in behalf of the proposed partnership; and
(4) that the plaintiff was to receive 30 per cent of the net profits of
the business.
Prior to entering into this agreement, plaintiff had informed the
Mission Dry Corporation of Los Angeles, California, U.S.A.,
manufacturers of the bases and ingredients of the beverages
bearing its name, that he had interested a prominent financier in
the business and requested, in order that he may close the deal
with him, that the right to bottle and distribute be granted him for
a limited time. Pursuant for this request, plaintiff was given "a
thirty-days" option on exclusive bottling and distribution rights for
the Philippines"
When defendant learned in Los Angeles that plaintiff did not have
the exclusive franchise which he pretended he had and which he
had agreed to transfer to the partnership, his spontaneous reaction
was to reduce plaintiff's share form 30 per cent to 15 per cent. On
December 10, 1947, a franchise agreement was entered into and
defendant was granted by Mission the exclusive right, license, and
authority to produce, bottle, distribute, and sell Mission beverages
in the Philippines. Plaintiff reported for duty in January, 1948, but
operations were not begun until the first week of February, 1948.
In January plaintiff was given as advance, on account of profits,
the sum of P2,000, besides the use of a car; in February, 1948,
also P2,000, and in March only P1,000. The car was withdrawn
from plaintiff on March 9, 1948.
When the bottling plant was already on operation, plaintiff
demanded of defendant that the partnership papers be executed.
Defendant promised to do so after the sales of the product had
been increased to P50,000. As nothing definite was forthcoming,
after this condition was attained, and as defendant refused to give
further allowances to plaintiff, the latter caused his attorneys to
take up the matter with the defendant with a view to a possible
settlement. as none could be arrived at, the present action was
instituted.
Plaintiff, in his complaint, asks for:
 The execution of the contract of partnership, an accounting of
the profits, and a share thereof of 30 per cent, as well as
damages in the amount of P200,000. In his answer
Defendant alleges by way of defense:
 That defendant's consent to the agreement, was secured by the
representation of plaintiff that he was the owner, or was about to
become owner of an exclusive bottling franchise, which
representation was false, and plaintiff did not secure the
franchise, but was given to defendant himself;
 That defendant did not fail to carry out his undertakings, but that
it was plaintiff who failed;
 That plaintiff agreed to contribute the exclusive franchise to the
partnership, but plaintiff failed to do so.
 He is entitled to P200,000 damages by way of counterclaim.
CFI – In favor of plaintiff. It held that the execution of the contract
of partnership could not be enforced upon the parties, but it also
held that the defense of fraud (by the defendant) was not proved.
Both parties have appealed.
Issue/s:
 W/N defendant is guilty of false representation that he had an
exclusive franchise
 If yes, did fraud annulled the agreement to form a partnership
 Can the plaintiff ask for the enforcement of the partnership
agreement

Held:
Yes, there is false representation by the defendant however, this
does not annul the contract to enter into partnership since the
fraud is incidental and not causal.
The belief that plaintiff had an exclusive franchise is not the
primary consideration to for defendant to enter into the
partnership agreement. It was only incidental, in the sense that it
was considered by the defendant in giving the plaintiff 30% share
in the profits.
Plaintiff cannot ask for the enforcement of the contract against the
will of defendant.
Discussion on False Representation:
Plaintiff’s counsel testified that Woodhouse presented himself as
being the exclusive grantee of a franchise, as a matter of fact, the
first draft of agreement prepared by him expressly states that
plaintiff had the exclusive franchise. It can also be easily gleaned
from the plaintiff’s letters and his own testimony. In his letter to
Mission Dry Corporation, he said:
I would propose that you grant me the exclusive bottling and
distributing rights for a limited period of time, during which I may
consummate my plants. . . .
When the plaintiff went to see the defendant (and at that time he
had already the option), he must have exultantly told defendant
that he had the authority already. It is improbable and incredible
for him to have disclosed the fact that he had only an option to the
exclusive franchise, which was to last thirty days only, and still
more improbable for him to have disclosed that, at the time of the
signing of the formal agreement, his option had already expired.
Had he done so, he would have destroyed all his bargaining power
and authority, and in all probability lost the deal itself.
The learned trial judge reasons in his decision that the assistance
of counsel in the making of the contract made fraud improbable.
Not necessarily, because the alleged representation took place
before the conferences were had, in other words, plaintiff had
already represented to defendant, and the latter had already
believed in, the existence of plaintiff's exclusive franchise before
the formal negotiations, and they were assisted by their lawyers
only when said formal negotiations actually took place.
Furthermore, plaintiff's attorney testified that plaintiff had said that
he had the exclusive franchise; and defendant's lawyer testified
that plaintiff explained to him, upon being asked for the franchise,
that he had left the papers evidencing it.
From all the foregoing, Supreme Court conclude that plaintiff did
actually represent to defendant that he was the holder of the
exclusive franchise. The defendant was made to believe, and he
actually believed, that plaintiff had the exclusive franchise.
Defendant would not perhaps have gone to California and incurred
expenses for the trip, unless he believed that plaintiff did have that
exclusive privilege, and that the latter would be able to get the
same from the Mission Dry Corporation itself. Plaintiff knew what
defendant believed about his (plaintiff's) exclusive franchise, as he
induced him to that belief, and he may not be allowed to deny that
defendant was induced by that belief.
Discussion on effect of fraud to the contract:
Art. 1270 of the Spanish Civil Code distinguishes two kinds of
(civil) fraud, the causal fraud, which may be a ground for the
annulment of a contract, and the incidental deceit, which only
renders the party who employs it liable for damages. This Court
had held that in order that fraud may vitiate consent, it must be
the causal (dolo causante), not merely the incidental (dolo
causante), inducement to the making of the contract. The
defendant was led to the belief that plaintiff had the exclusive
franchise, but that the same was to be secured for or transferred
to the partnership. The plaintiff no longer had the exclusive
franchise, or the option thereto, at the time the contract was
perfected. But while he had already lost his option thereto (when
the contract was entered into), the principal obligation that he
assumed or undertook was to secure said franchise for the
partnership, as the bottler and distributor for the Mission
Dry Corporation. If he was guilty of a false representation, this
was not the causal consideration, or the principal inducement, that
led plaintiff to enter into the partnership agreement.
But, on the other hand, this supposed ownership of an exclusive
franchise was actually the consideration or price plaintiff gave in
exchange for the share of 30 percent granted him in the net profits
of the partnership business. Defendant agreed to give plaintiff 30
per cent share in the net profits because he was transferring his
exclusive franchise to the partnership. Thus, in the draft prepared
by plaintiff's lawyer, the following provision exists:
3. That the MANAGER, upon the organization of the said
corporation, shall forthwith transfer to the said corporation his
exclusive right to bottle Mission products and to sell them
throughout the Philippines. As a consideration for such
transfer, the CAPITALIST shall transfer to the Manager fully
paid non assessable shares of the said corporation . . .
twenty-five per centum of the capital stock of the said
corporation.
While the representation that plaintiff had the exclusive franchise
did not vitiate defendant's consent to the contract, it was used by
plaintiff to get from defendant a share of 30 per cent of the net
profits; in other words, by pretending that he had the exclusive
franchise and promising to transfer it to defendant, he obtained
the consent of the latter to give him (plaintiff) a big slice in the net
profits. This is the dolo incidente defined in article 1270 of
the Spanish Civil Code, because it was used to get the other
party's consent to a big share in the profits, an incidental
matter in the agreement.
May the agreement be carried out or executed? NO.
There is no merit in the claim of plaintiff that the partnership was
already a fait accompli from the time of the operation of the plant,
as it is evident from the very language of the agreement that the
parties intended that the execution of the agreement to form a
partnership was to be carried out at a later date. They expressly
agreed that they shall form a partnership. As a matter of fact,
from the time that the franchise from the Mission Dry Corporation
was obtained in California, plaintiff himself had been demanding
that defendant comply with the agreement. And plaintiff's present
action seeks the enforcement of this agreement. Plaintiff's claim,
therefore, is both inconsistent with their intention and incompatible
with his own conduct and suit.
The defendant may not be compelled against his will to carry out
the agreement nor execute the partnership papers. Under the
Spanish Civil Code, the defendant has an obligation to do, not to
give. The law recognizes the individual's freedom or liberty to do
an act he has promised to do, or not to do it, as he pleases. It falls
within what Spanish commentators call a very personal act (acto
personalismo), of which courts may not compel compliance, as it is
considered an act of violence to do so.

Evangelista & Co vs Abad Santos
Facts:
 Co-partnership was formed between Domingo, Conchita, and Leonarda as
capitalist partner. In the amended Articles of Co-partnership Abad Santos
was included as an Industrial Partner.
 In the amended Articles of Co-Partnership the profit and loss will be equally
divided among the first three partners, in the proportion of 70% and 30% will
be to Abad Santos.
 Abad Santos filed a case against the Petitioners.
Abad Santos: alleging that the partnership, which was also made a party-defendant,
had been paying dividends to the partners except to her; and that notwithstanding her
demands the defendants had refused and continued to refuse and let her examine the
partnership books or to give her information regarding the partnership affairs to pay
her any share in the dividends declared by the partnership.
Petitioners’ answer: denied ever having declared dividends or distributed profits of the
partnership; denied likewise that the plaintiff ever demanded that she be allowed to
examine the partnership books. the amended Articles of Co-partnership did not
express the true agreement of the parties, which was that the plaintiff was not an
industrial partner; that she did not in fact contribute industry to the partnership; and
that her share of 30% was to be based on the profits which might be realized by the
partnership only until full payment of the loan which it had obtained in December, 1955
from the Rehabilitation Finance Corporation in the sum of P30,000, for which the
plaintiff had signed a promisory note as co-maker and mortgaged her property as
security.
CFI ruled in favor of Abad Santos saying that she is an industrial partner. It affirmed by
the CA
Issue:
W/N Abad Santos is an industrial partner in Evangelista & Co.
Held: YES
One cannot read Abad Santos's testimony just quoted without gaining the very definite
impression that, even as she was and still is a Judge of the City Court of Manila, she
has rendered services for Petitioners without which they would not have had the
wherewithal to operate the business for which Petitioner company was organized.
Article 1767 of the New Civil Code which provides that "By 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, 'does not
specify the kind of industry that a partner may thus contribute, hence the said services
may legitimately be considered as Abad Santos's contribution to the common fund.
Another article of the same Code relied upon Petitioners reads:
'ART. 1789. An industrial partner cannot engage in business for himself, unless the
partnership expressly permits him to do so; and if he should do so, the capitalist
partners may either exclude him from the firm or avail themselves of the benefits
which he may have obtained in violation of this provision, with a right to damages in
either case.'
It is not disputed that the provision against the industrial partner engaging in business
for himself seeks to prevent any conflict of interest between the industrial partner and
the partnership, and to insure faithful compliance by said partner with this prestation.
There is no pretense, however, even on the part of Abad Santos is engaged in any
business antagonistic to that of Petitioner company, since being a Judge of one of the
branches of the City Court of Manila can hardly be characterized as a business. That
Abad Santos has faithfully complied with her prestation with respect to Petitioners is
clearly shown by the fact that it was only after filing of the complaint in this case and
the answer thereto Petitioners exercised their right of exclusion under the codal art
just mentioned by alleging in their Supplemental Answer dated June 29, 1964 — or
after around nine (9) years from June 7, 1955 — subsequent to the filing of
defendants' answer to the complaint, defendants reached an agreement whereby the
herein plaintiff been excluded from, and deprived of, her alleged share, interests or
participation, as an alleged industrial partner, in the defendant partnership and/or in its
net profits or income, on the ground plaintiff has never contributed her industry to the
partnership, instead she has been and still is a judge of the City Court (formerly
Municipal Court) of the City of Manila, devoting her time to performance of her duties
as such judge and enjoying the privilege and emoluments appertaining to the said
office, aside from teaching in law school in Manila, without the express consent of the
herein defendants' (Record On Appeal, pp. 24-25). Having always knows Abad Santos
as a City judge even before she joined Petitioner company on June 7, 1955 as an
industrial partner, why did it take Petitioners many yearn before excluding her from
said company as aforequoted allegations? And how can they reconcile such exclusive
with their main theory that Abad Santos has never been such a partner because "The
real agreement evidenced by Exhibit "A" was to grant Abad Santos a share of 30% of
the net profits which the Petitioner partnership may realize from June 7, 1955, until the
mortgage of P30,000.00 obtained from the Rehabilitation Finance Corporal shall have
been fully paid."
What has gone before persuades us to hold with the lower Court that Abad Santos is
an industrial partner of Petitioner company, with the right to demand for a formal
accounting and to receive her share in the net profit that may result from such an
accounting, which right Petitioners take exception under their second assigned error.
Our said holding is based on the following article of the New Civil Code:
'ART. 1899. Any partner shall have the right to a formal account as to partnership
affairs:
(1) If he is wrongfully excluded from the partnership business or possession of its
property by his co-partners;
(2) If the right exists under the terms of any agreement;
(3) As provided by article 1807;
(4) Whenever other circumstance render it just and reasonable.

MORAN V CA
PETITIONER: ISABELO MORAN, JR
RESPONDENT: THE HON. COURT OF APPEALS
PRIVATE REPSPONDENT: MARIANO E. PECSON
DATE: October 31, 1984
PONENTE: GUTIERREZ, JR., J
TOPIC:
FACTS:
 Pecson and Moran entered into an agreement whereby both would
contribute P15,000 each for the purpose of printing 95,000 posters
(featuring the delegates to the 1971 Constitutional Convention)
o Moran actually supervising the work; that Pecson would receive a
commission of P l,000 a month starting on April 15, 1971 up to
December 15, 1971 – only few posters were printed
o December 15, 1971, a liquidation of the accounts in the
distribution and printing of the 95,000 posters would be made
o Pecson gave Moran P10,000 for which the latter issued a receipt
o May 28, 1971, Moran executed in favor of Pecson a promissory
note in the amount of P20,000 payable in two equal installments
Pecson filed with the CFI an action for recovery of sum of money
(1) on the alleged partnership agreement, the return of his contribution of P10,000.00,
payment of his share in the profits that the partnership would have earned, and,
payment of unpaid commission;
(2) on the alleged promissory note, payment of the sum of P20,000.00; and,
(3) moral and exemplary damages and attorney's fees.
There is no dispute over the nature of the agreement between the parties is a contract
of partnership.
 Private respondent alleged that he was induced by the petitioner to enter
into a partnership with him.
The rule is, when a partner who has undertaken to contribute a sum of money fails to
do so, he becomes a debtor of the partnership for whatever he may have promised
to contribute and for interests and damages from the time he should have complied
with his.
Article 1797 of the Civil Code
 Being a contract of partnership, each partner must share in the profits and
losses of the venture
o Even with an assurance made by one of the partners that they
would earn a huge amount of profits
o In the absence of fraud, the other partner cannot claim a right to
recover the highly speculative profits
In this case, on an investment of P15,000.00, the respondent was supposed to earn a
guaranteed P1,000.00 a month for eight months and around P142,500.00 on 95,000
posters costing P2.00 each but 2,000 of which were sold at P5.00 each.
The failure of the Commission on Elections to proclaim all the 320 candidates of the
Constitutional Convention on time was a major factor.
 The petitioner undesirable his best business judgment and felt that it would
be a losing venture to go on with the printing of the agreed 95,000 copies of
the posters.

CFI, It is clear that by virtue of the partnership agreement entered into by the parties-
plaintiff and defendant the plaintiff did contribute P10,000.00, and another sum of
P7,000.00 for the Voice of the Veteran or Delegate Magazine.
 The defendant was able to print 2,000 copies only authorized of which,
however, were sold at P5.00 each.

 Plaintiff failed to give his full contribution of P15,000.00.

o Thus, each party is entitled to rescind the contract which right is
implied in reciprocal obligations under Article 1385 of the Civil
Code where under 'rescission creates the obligation to return the
things which were the object of the contract ...

CA, Isabelo C. Moran, Jr. to pay plaintiff- appellant Mariano E. Pecson

ISSUE: WON THE AWARD IS HIGHLY SPECULATIVE


The Leyte-Samar vs. Cea
PLAINTIFF: The Leyte-Samar Sales Co (LESSCO), Raymundo Tomassi
DEFENDANT: Sulpicio Cea Judge, Olegario Lastrilla
DATE: May 20, 1953
PONENTE: Bengzon, J.
TOPIC:
Facts:
 This is a case wherein a suit for damages were filed by Petitioner LESSCO
and Raymond Tomassi against Far Eastern Lumber & Commercial Co
(unregistered commercial partnership called FELCO), Arnold Hall, Fred
Brown, Jean Roxas, judgment against defendants jointly and severally for
the amount of 31k plus costs
o The CA confirmed the awards
 The decision becoming final the sheriff sold at auction
to Robert Fore and Pepito Asturias “the the rights,
interests, titles, and participation” of the defendants in
certain buildings and properties described in the
certificate, for a toal price of 8k
 BUT, Olegario Lastrilla filed the case in motion wherein he claimed to be the
owner by purchase of all the “shares and interests” of defendant Fred Brown
in FELCO and requested “under the law of preference of credits”
o That the sheriff be required to retain his possession so much of
the deeds of the auction sale as may be necessary “to pay his
right”
 The Judge granted Lastrilla’s motion – ordered the Sheriff to reatian 17% of
the money “for delivery to the assignee, administrator or receiver” of the
FELCO
o Modified its order that Lastrilla was entitled to 17% of the
properties sold
(17%), the resulting situation would be — at most — that the purchasers Dorfe and
Austrias will have to recognized dominion of Lastrillas over 17 per cent of the
properties awarded to them. So Lastrilla acquired no right to demand any part of the
money paid by Dorfe and Austrias to he sheriff any part of the money paid by Dorfe
and Austrias to the sheriff for the benefit of FELCO and Tomassi, the plaintiffs in that
case, for the reason that, as he says, his shares (acquired from Brown) could not have
been and were not auctioned off to Dorfe and Austrias.
Supposing however that Lastrillas shares have been actually (but unlawfully) sold by
the sheriff (at the instance of plaintiffs) to Dorfe and Austrias, what is his remedy?
Section 15, Rule 39 furnishes the answer.
Precisely, respondents argue, Lastrilla vindicated his claim by proper
action, i.e., motion in the case. We ruled once that "action" in this section means
action as defined in section 1, Rule 2. Anyway his remedy is to claim "the property",
not the proceeds of the sale, which the sheriff is directed by section 14, Rule 39 to
deliver unto the judgment creditors.
In other words, the owner of property wrongfully sold may not voluntarily come to
court, and insist, "I approve the sale, therefore give me the proceeds because I am the
owner". The reason is that the sale was made for the judgment creditor (who paid for
the fees and notices), and not for anybody else.
On this score the respondent judge's action on Lastrilla's motion should be declared
as in excess of jurisdiction, which even amounted to want of jurisdiction, which even
amounted to want of jurisdiction, considering specially that Dorfe and Austrias, and the
defendants themselves, had undoubtedly the right to be heard—but they were not
notified.

Issue: W/N Lastrilla can claim from the proceeds of the sale, NO

Ruling:

If he was a creditor of the FELCO, perhaps or maybe. But he was no. the partner of a
partnership is not a creditor of such partnership for the amount of his shares.

Lastrilla's theory, and the lower court's seems to be: inasmuch as Lastrilla had
acquired the shares of Brown is September, 1949, i.e., before the auction sale and he
was not a party to the litigation, such shares could not have been transferred to Dorfe
and Austrilla.
Granting arguendo that the auction sale and not included the interest or portion of the
FELCO properties corresponding to the shares of Lastrilla in the same partnership

G.R. No. L-25532 February 28, 1969
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.
WILLIAM J. SUTER and THE COURT OF TAX APPEALS,
respondents.
Facts:
A limited partnership, named "William J. Suter 'Morcoin' Co., Ltd.,"
was formed by William J. Suter as the general partner, and Julia
Spirig and Gustav Carlson, as the limited partners. The firm
engaged, among other activities, in the importation, marketing,
distribution and operation of automatic phonographs, radios,
television sets and amusement machines, their parts and
accessories.
After a year, general partner Suter married limited partner Spirig.
Thereafter, limited partner Carlson sold his share in the
partnership to Suter and his wife. Hence, it was only the spouses
left in the partnership.
The limited partnership had been filing its income tax returns as a
corporation for 10 yrs. until in 1959 when CIR, in an assessment,
consolidated the income of the limited partnership with the
individual incomes of the spouses. This resulted 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.
Respondent Suter questioned the assessment. Unable to secure a
reconsideration, he appealed to the Court of Tax Appeals, which
rendered a decision reversing that of the Commissioner of Internal
Revenue (no deficiency tax).
CIR filed a petition for review of the tax court's decision. CIR
contended that:
 The marriage of Suter and Spirig and their subsequent
acquisition of the interests of remaining partner Carlson in the
partnership dissolved the limited partnership; and
 If they did not, the fiction of juridical personality of the
partnership should be disregarded for income tax purposes
because the spouses have exclusive ownership and control of
the business; (PIERCING THE CORPORATE VEIL)
Respondent Suter is of the position that he is not bound to include
in his individual return the income of the limited partnership
because:
 His marriage with limited partner Spirig and their acquisition of
Carlson's interests in the partnership in 1948 is not a ground for
dissolution of the partnership, either in the Code of Commerce
or in the New Civil Code; and
Issue/s:
(a) W/N the corporate personality of the limited partnership should
be disregarded for income tax purposes, considering that
respondent and his wife, actually formed a single taxable unit; and
(b) W/N the partnership was dissolved after the marriage of the
partners
Held:
Petition is without merit. Suter is not bound to include the income
of the partnership to his income for tax purposes. The partnership
was not dissolved by the partners’ marriage.
The idea that the limited partnership has been dissolved by
operation of law because of the marriage of the general partner to
the limited partner 1 year after the partnership was organized is
rested by CIR upon the Tolentino’s opinion in Commentaries and
Jurisprudence on Commercial Laws of the Philippines, Vol. 1, 4th
Ed., page 58, that reads as follows:
A husband and a wife may not enter into a contract of general
co-partnership, because under the Civil Code, which applies in
the absence of express provision in the Code of Commerce,
persons prohibited from making donations to each other are
prohibited from entering into universal partnerships. It follows that
the marriage of partners necessarily brings about the dissolution
of a pre-existing partnership.
But William J. Suter "Morcoin" Co., Ltd. was not a
universal/general partnership, but a particular one. As
appears from Articles 1674 and 1675 of the Spanish Civil Code, of
1889 (which was the law in force when the subject firm was
organized in 1947), a universal partnership requires either that the
object of the association be all the present property of the
partners, as contributed by them to the common fund, or else "all
that the partners may acquire by their industry or work during the
existence of the partnership".
William J. Suter "Morcoin" Co., Ltd. was not such a
universal partnership, since the contributions of the
partners were fixed sums of money and neither one of them
was an industrial partner. It follows that William J. Suter
"Morcoin" Co., Ltd. was not a partnership that spouses were
forbidden to enter the Civil Code of 1889.
Nor could the subsequent marriage of the partners operate to
dissolve it, such marriage not being one of the causes provided for
that purpose either by the Spanish Civil Code or the Code of
Commerce.
The appellant's view, that by the marriage of both partners the
company became a single proprietorship, is equally erroneous. The
capital contributions of partners William J. Suter and Julia Spirig
were separately owned and contributed by them before their
marriage; and after they were joined in wedlock, such
contributions remained their respective separate property under
the Spanish Civil Code
It is the basic tenet of the Spanish and Philippine law that the
partnership has a juridical personality of its own, distinct and
separate from that of its partners. The limited partnership's
separate individuality makes it impossible to equate its income
with that of the component members.
As to the second contention of CIR: The rulings cited by the
petitioner as basis for disregarding the fiction of legal personality
of the corporations involved therein are not applicable to the
present case. The corporations, in the cases cited, merely served
as business conduits or alter egos of the stockholders, a factor that
justified a disregard of their corporate personalities for tax
purposes. This is not true in the present case. Here, the limited
partnership is not a mere business conduit of the partner-spouses;
it was organized for legitimate business purposes; it conducted its
own dealings with its customers prior to appellee's marriage, and
had been filing its own income tax returns as such independent
entity. The change in its membership, brought about by the
marriage of the partners and their subsequent acquisition of all
interest therein, is no ground for withdrawing the partnership from
the coverage of the tax code, requiring it to pay separate income
tax. As far as the records show, the partners did not enter into
matrimony and thereafter buy the interests of the remaining
partner with the premeditated scheme or design to use the
partnership as a business conduit to dodge the tax laws.
Regularity, not otherwise (fraud), is presumed.

In re petition for the authority to use in the firm name “Ozaeta”
Facts:
 Two separate petitions were filed before the SC by the surviving partners of
Atty. Alexander Sycip, who died on May 5, 1975 and the surviving partners
of Atty Herminio Ozaeta, who died on Feb. 14, 1976.  They are praying that
they be allowed to continue using, in the names of their firms, the names of
partners who had passed away.
Arguments of Petitioners:
 Under the law, a partnership is not prohibited from continuing its business
under a firm name which includes the name of a deceased partner; in fact,
Article 1840 of the Civil Code explicitly sanctions the practice when it
provides in the last paragraph that: The use by the person or partnership
continuing the business of the partnership name, or the name of a
deceased partner as part thereof, shall not of itself make the individual
property of the deceased partner liable for any debts contracted by such
person or partnership.
 the legislature has authorized the adoption of firm names without any
restriction as to the use, in such firm name, of the name of a deceased
partner.
 The Canons of Professional Ethics are not transgressed by the continued
use of the name of a deceased partner in the firm name of a law partnership
because Canon 33 of the Canons of Professional Ethics adopted by the
American Bar Association declares that: The continued use of the name of a
deceased or former partner when permissible by local custom, is not
unethical but care should be taken that no imposition or deception is
practiced through this use.
 There is no possibility of imposition or deception because the deaths of their
respective deceased partners were well-publicized in all newspapers of
general circulation for several days
 No local custom prohibits the continued use of a deceased partner's name
in a professional firm's name
Issue:
W/N Petitioners are allowed to used the name of the deceased partners in their law
firms.
Held: NO
Inasmuch as "Sycip, Salazar, Feliciano, Hernandez and Castillo" and "Ozaeta,
Romulo, De Leon, Mabanta and Reyes" are partnerships, the use in their partnership
names of the names of deceased partners will run counter to Article 1815 of the Civil
Code which provides:
Art. 1815. Every partnership shall operate under a firm name, which may or may not
include the name of one or more of the partners.
Those who, not being members of the partnership, include their names in the firm
name, shall be subject to the liability, of a partner.
It is clearly tacit in the above provision that names in a firm name of a partnership
must either be those of living partners and. in the case of non-partners, should be
living persons who can be subjected to liability. In fact, Article 1825 of the Civil Code
prohibits a third person from including his name in the firm name under pain of
assuming the liability of a partner. The heirs of a deceased partner in a law firm cannot
be held liable as the old members to the creditors of a firm particularly where they are
non-lawyers. Thus, Canon 34 of the Canons of Professional Ethics "prohibits an
agreement for the payment to the widow and heirs of a deceased lawyer of a
percentage, either gross or net, of the fees received from the future business of the
deceased lawyer's clients, both because the recipients of such division are not lawyers
and because such payments will not represent service or responsibility on the part of
the recipient. " Accordingly, neither the widow nor the heirs can be held liable for
transactions entered into after the death of their lawyer-predecessor. There being no
benefits accruing, there ran be no corresponding liability.
Prescinding the law, there could be practical objections to allowing the use by law
firms of the names of deceased partners. The public relations value of the use of an
old firm name can tend to create undue advantages and disadvantages in the practice
of the profession. An able lawyer without connections will have to make a name for
himself starting from scratch. Another able lawyer, who can join an old firm, can
initially ride on that old firm's reputation established by deceased partners.
In regards to the last paragraph of Article 1840 of the Civil Code cited by
petitioners, supra, the first factor to consider is that it is within Chapter 3 of Title IX of
the Code entitled "Dissolution and Winding Up." The Article primarily deals with the
exemption from liability in cases of a dissolved partnership, of the individual property
of the deceased partner for debts contracted by the person or partnership which
continues the business using the partnership name or the name of the deceased
partner as part thereof. What the law contemplates therein is a hold-over situation
preparatory to formal reorganization.
Secondly, Article 1840 treats more of a commercial partnership with a good will to
protect rather than of a professional partnership, with no saleable good will but whose
reputation depends on the personal qualifications of its individual members. Thus, it
has been held that a saleable goodwill can exist only in a commercial partnership and
cannot arise in a professional partnership consisting of lawyers.
As a general rule, upon the dissolution of a commercial partnership the succeeding
partners or parties have the right to carry on the business under the old name, in the
absence of a stipulation forbidding it, (s)ince the name of a commercial partnership is
a partnership asset inseparable from the good will of the firm.
On the other hand,
... a professional partnership the reputation of which depends or; the individual skill of
the members, such as partnerships of attorneys or physicians, has no good win to be
distributed as a firm asset on its dissolution, however intrinsically valuable such skill
and reputation may be, especially where there is no provision in the partnership
agreement relating to good will as an asset.

CAMPOS RUEDA V PACFIC COMMERCIAL
PETITIONER: INVOLUNTARY INSOLVENCY OF CAMPOS RUEDA & CO.
RESPONDENT: PACIFIC COMMERCIAL CO., ASIATIC PETROLEUM CO., and
INTERNATIONAL BANKING CORPORATION
DATE: August 28, 1922
PONENTE: ROMUALDEZ, J
TOPIC:
FACTS:
 A motion was presented by the appellants praying this court that this case
be considered purely a moot question now
o Subsequent from the decision appealed from partnership Campos
Rueda & Co., voluntarily filed an application for a judicial decree
adjudging itself insolvent
The question raised in this case is not purely moot one.
 The fact that a man was insolvent on a certain day does not justify an
inference that he was sometime prior thereto.
 A decree of insolvency begins to operate on the date it is issued.
Campos Rueda Co. was adjudged insolvent December 1921.
On the other hand, it is July 1922 as stated in the motion
 We find that this limited partnership was, and is, indebted to the appellants
in various sums amounting to not less than P1,000
o which were not paid more than thirty days prior to the date of the
filing by the petitioners of the application for involuntary
insolvency now before us
RTC, denied motion on the ground it was not proven, nor alleged, that the members of
the aforesaid firm were insolvent at the time the application was filed
 Partners are solidary liable for the transactions
o Cannot be adjudged insolvent so long as the partners are not
alleged and proven to be insolvent
ISSUE: WON A LIMITED PARTNERSHIP which has failed to pay its obligation
with three creditors for more than thirty days, may be held to have committed an
act of insolvency, and thereby be adjudged insolvent against its will.
HELD: YES
Limited partnership is considered as a juridical entity for all intents and purposes,
which personality is recognized in all its acts and contracts
 This being so, being an entity different from its members it must answer for,
and suffer, the consequence of its acts as such an entity capable of being
the subject of rights and obligations.
The limited partnership of Campos Rueda & Co. Failed to pay its obligations with three
creditors for a period of more than thirty days.
 Such failure constitutes, under our Insolvency Law, one of the acts of
bankruptcy upon which an adjudication of involuntary insolvency can be
predicated, this partnership must suffer the consequences of such a failure,
and must be adjudged insolvent.
In some courts in the US it held that a partnership may not be adjudged insolvent in an
involuntary insolvency proceeding unless all of its members are insolvent, while others
have maintained a contrary view.
 The American common law, partnerships have no juridical personality
independent from that of its members
There being no similar rule in our insolvency law and the juridical personality of limited
partnership being recognized by our statutes from their formation in all their acts and
contracts.
 The decision of American courts on this point can have no application in this
jurisdiction
Under this view it is unnecessary to discuss the other points raised by the parties,
although in the particular case under consideration it can be added that the liability of
the limited partners for the obligations and losses of the partnership is limited to the
amounts paid or promised to be paid into the common fund except when a limited
partner should have included his name or consented to its inclusion in the firm name
 Therefore, it having been proven that the partnership Campos Rueda & Co.
failed for more than thirty days to pay its obligations to the petitioners the
Pacific Commercial Co. the Asiatic Petroleum Co. and the International
Banking Corporation,
o The case comes under paragraph 11 of section 20 of Act No.
1956, and consequently the petitioners have the right to a judicial
decree declaring the involuntary insolvency of said partnership.

Tai Tong Chuache vs. Insurance Commission
PLAINTIFF: Tai Tong Chuache & Co.
DEFENDANT: The Insurance Commission and Travellers Multi-Indemnity
Corporation
DATE: February 29, 1988
PONENTE: Gancayco, J.
TOPIC:
Facts:
 This is a case wherein Azucena Palomo bought a parcel of land and
building from Rolando Gonzales and assumed a mortgage of the building in
favor of S.S.S. which was insured with S.S.S. Accredited Group of Insurers
 That on April 19, 1975 – Palomo obtained a loan from Tai Tong Chuache in
the amount of 100k and to secure it, the land and the building was
mortgaged
 That on June 11. 1975, Pedro Palomo secured a Fire Insurance Policy
covering the building for 50k with Zenith Insurance Corporation
 That on July 16, 1975, another Fire Insurance Policy was produced from
Philippine British Assurance Company, covering the same building for 50k
and the contents thereof for 70k
 The building and the contents were totally razed by fire
 Based on the computation of the loss, including the Travellers Multi-
Indemnity, respondent Zenith Insurance Corporation, Phil. British Assurance
and S.S.S. Group of Accredited Insurers – paid their shares of the loss – but
was refused was demanded by the respondent to pay a higher amount –
also refused
 Phil. British, Zenith denied liability on the ground that the claim of the
complainants had already been waived, extinguished or paid – both
companies set up a counter claim
 Travellers Insurance, on its part, admitted the issuance of a Policy and
alleged defenses  that Fire Policy, covering the furniture and building of
complainants was secured by a certain Arsenio Chua and that the premium
due on the fire policy was paid by Arsenio Chua.
 Tai Tong Chuache & Co. also  filed a complaint in intervention claiming the
proceeds of the fire Insurance Policy issued by respondent Travellers Multi-
Indemnity.
 As adverted to above respondent Insurance Commission dismissed
spouses Palomos' complaint on the ground that the insurance policy subject
of the complaint was taken out by Tai Tong Chuache & Company, for its
own interest only as mortgagee of the insured property and thus
complainant as mortgagors of the insured property have no right of action
against the respondent. It likewise dismissed petitioner's complaint in
intervention in the following words:
 From the above decision, only intervenor Tai Tong Chuache filed a motion
for reconsideration but it was likewise denied hence, the present petition.
Issue: W/N Tai Tong Chuache is a proper party in this case, YES
Ruling:
It was based on the inference that the credit secured by the mortgaged property was
already paid by the Palomos before the said property was gutted down by fire. The
foregoing conclusion was arrived at on the basis of the certification issued by the then
Court of First Instance of Davao, Branch II that in a certain civil action against the
Palomos, Antonio Lopez Chua stands as the complainant and not petitioner Tai Tong
Chuache & Company.
Respondent Insurance Commission absolved respondent insurance company from
liability on the basis of the certification issued by the then Court of First Instance of
Davao, Branch II, that in a certain civil action against the Palomos, Arsenio Lopez
Chua stands as the complainant and not Tai Tong Chuache. From said evidence
respondent commission inferred that the credit extended by herein petitioner to the
Palomos secured by the insured property must have been paid. Such is a glaring error
which this Court cannot sanction. Respondent Commission's findings are based upon
a mere inference.
Public respondent argues however, that if the civil case really stemmed from the loan
granted to Azucena Palomo by petitioner the same should have been brought by Tai
Tong Chuache or by its representative in its own behalf. From the above premise
respondent concluded that the obligation secured by the insured property must have
been paid.
The premise is correct but the conclusion is wrong. Citing Rule 3, Sec. 2 respondent
pointed out that the action must be brought in the name of the real party in interest.
We agree. However, it should be borne in mind that petitioner being a partnership may
sue and be sued in its name or by its duly authorized representative. The fact that
Arsenio Lopez Chua is the representative of petitioner is not questioned. Petitioner's
declaration that Arsenio Lopez Chua acts as the managing partner of the partnership
was corroborated by respondent insurance company. Thus Chua as the managing
partner of the partnership may execute all acts of administration including the right to
sue debtors of the partnership in case of their failure to pay their obligations when it
became due and demandable. Or at the very least, Chua being a partner of petitioner
Tai Tong Chuache & Company is an agent of the partnership. Being an agent, it is
understood that he acted for and in behalf of the firm. Public respondent's allegation
that the civil case flied by Arsenio Chua was in his capacity as personal creditor of
spouses Palomo has no basis.

G.R. No. 78133 October 18, 1988
MARIANO P. PASCUAL and RENATO P. DRAGON, petitioners,
vs. THE COMMISSIONER OF INTERNAL REVENUE and COURT
OF TAX APPEALS, respondents.
FACTS:
In 1965, petitioners bought two parcels of land from Santiago
Bernardino, et al. and on 1966, they bought another three parcels
of land from Juan Roque.
The first two parcels of land were sold by petitioners in 1968 to
Marenir Development Corporation, while the three parcels of land
were sold by petitioners to Erlinda Reyes and Maria Samson in
1970.
Petitioners realized a net profit in the sale made in 1968 in the
amount of P165,224.70, while they realized a net profit of
P60,000.00 in the sale made in 1970. The corresponding capital
gains taxes were paid by petitioners in 1973 and 1974 by availing
of the tax amnesties granted in the said years.
1979 - petitioners were assessed and required to pay a total
amount of P107,101.70 as alleged deficiency corporate income
taxes for the years 1968 and 1970. Petitioners protested this
assessment claiming their availment of tax amnesty way back
1974.
CIR’s position:
 When petitioners sold the parcels of land in 1968
and 1970 they are considered co-owners in the real
estate transactions forming an unregistered
partnership or joint venture taxable as a corporation
under Section 20(b) and its income was subject to the
taxes prescribed under Section 24, both of the National
Internal Revenue Code
 That the unregistered partnership was subject to corporate
income tax as distinguished from profits derived from the
partnership by them which is subject to individual income
tax;
 That the availment of tax amnesty under P.D. No. 23, as
amended, by petitioners relieved petitioners of their
individual income tax liabilities but did not relieve them
from the tax liability of the unregistered partnership
Petitioners filed a petition for review with CTA whch affirmed CIR
decision (liable for deficiency tax)
ISSUE/s:
W/N the petitioners formed an unregistered partnership taxable as
a corporation in their transactions relating to the parcels of land.
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 dividing 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.
In the present case, there is no evidence that petitioners entered
into an agreement to contribute money, property or industry to a
common fund, and that they intended to divide the profits among
themselves. Respondent commissioner and/ or his representative
just assumed these conditions to be present on the basis of the
fact that petitioners purchased certain parcels of land and became
co-owners thereof.
Petitioners bought two (2) parcels of land in 1965. They did not
sell the same nor make any improvements thereon. In 1966, they
bought another three (3) parcels of land from one seller. It was
only 1968 when they sold the two (2) parcels of land after which
they did not make any additional or new purchase. The remaining
three (3) parcels were sold by them in 1970. The transactions
were isolated. The character of habituality peculiar to
business transactions for the purpose of gain was not
present.
CIR erred in relying with Evangelista case, In Evangelista, there
was a series of transactions where petitioners purchased twenty-
four (24) lots showing that the purpose was not limited to the
conservation or preservation of the common fund or even the
properties acquired by them. The character of habituality peculiar
to business transactions engaged in for the purpose of gain was
present.
The properties were leased out to tenants for several years. The
business was under the management of one of the partners. Such
condition existed for over fifteen (15) years. None of the
circumstances are present in the case at bar. The co-ownership
started only in 1965 and ended in 1970.
Concurring opinion of Mr. Justice Angelo Bautista in Evangelista
case (excerpt):
“Article 1769 of the new Civil Code lays down the rule for
determining when a transaction should be deemed a partnership or
a co-ownership. Said article paragraphs 2 and 3, provides;
(2) Co-ownership or co-possession does not 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;
This only means that, aside from the circumstance of profit, the
presence of other elements constituting partnership is necessary,
such as the clear intent to form a partnership, the existence of a
juridical personality different from that of the individual partners,
and the freedom to transfer or assign any interest in the property
by one with the consent of the others.
It is evident that an isolated transaction whereby two or more
persons contribute funds to buy certain real estate for profit in the
absence of other circumstances showing a contrary intention
cannot be considered a partnership.
In the present case, there is clear evidence of co-ownership
between the petitioners. There is no adequate basis to support the
proposition that they thereby formed an unregistered partnership.
The two isolated transactions whereby they purchased properties
and sold the same a few years thereafter did not thereby make
them partners. They shared in the gross profits as co- owners and
paid their capital gains taxes on their net profits and availed of the
tax amnesty thereby. Under the circumstances, they cannot be
considered to have formed an unregistered partnership which is
thereby liable for corporate income tax, as the respondent
commissioner proposes.
Fortis (Plaintiff/Appellee) vs Hermanos(Defendant/Appellant)
Facts:
 Plaintiff is an employee of the defendant during the year of 1900-1902. He
filed an action against the defendant to recover his salary in the year 1902.
He alleged that he is entitled of 5% of the net profits of the business of the
defendant.
 The contract that alleged by plaintiff was entered by him and Miguel
Gutierrez, a Manager in the Articles of Partnership. He had the full power to
transact all of the business of the defendants. As manager he (Miguel) had
the authority to make a contract of employment with the plaintiff.
 The lower court rendered the decision in favor of the Plaintiff and ordered
the defendant to pay the plaintiff.
 Defendant alleged that plaintiff becomes a co-partner of the defendant’s
business because of the contract it entered with Miguel.
Issue:
W/N Plaintiff becomes a co-partner in the business of the defendant.
Held: NO
It was a mere contract of employment. The plaintiff had no voice nor vote in the
management of the affairs of the company. The fact that the compensation received
by him was to be determined with reference to the profits made by the defendants in
their business did not in any sense make by a partner therein. The articles of
partnership between the defendants provided that the profits should be divided among
the partners named in a certain proportion. The contract made between the plaintiff
and the then manager of the defendant partnership did not in any way vary or modify
this provision of the articles of partnership. The profits of the business could not be
determined until all of the expenses had been paid. A part of the expenses to be paid
for the year 1902 was the salary of the plaintiff. That salary had to be deducted before
the net profits of the business, which were to be divided among the partners, could be
ascertained. It was undoubtedly necessary in order to determine what the salary of the
plaintiff was, to determine what the profits of the business were, after paying all of the
expenses except his, but that determination was not the final determination of the net
profits of the business. It was made for the purpose of fixing the basis upon which his
compensation should be determined.

DELUAO V STEEL
PETITIONER: INOCENCIA DELUAO and FELIPE DELUA
RESPONDENT: NICANOR CASTEEL and JUAN DEPRA
DATE: December 24, 1968
PONENTE: CASTRO, J
TOPIC:
FACTS:
 Nicanor Casteel 3 times filed fishpond application for a big tract of swampy
land in the then Sitio of Malalag, Davao – the two was not acted upon
 On the third application after a survey, was found to contain 178.76
hectares
o Upon investigation conducted by a representative of the Bureau
of Forestry, it was discovered that the area applied for was still
needed for firewood production.
Despite the said rejection, Casteel did not lose interest. Filed MR no action was taken
unless he filed a new application – so he filed another application.
 Several applications were submitted by other persons for portions of the
area covered by Casteel's application.
o Leoncio Aradillos filed his fishpond application 1202 covering 10
hectares of land found inside the area applied for by Casteel
o Victor D. Carpio filed on August 8, 1946 his fishpond application
762 over a portion of the land applied for by Casteel
o Felipe Deluao filed his own fishpond application for the area
covered by Casteel's application
 Poised upon his position by the above applicants, , Casteel realized the
urgent necessity of expanding his occupation by constructing dikes and
cultivating marketable fishes, in order to prevent old and new squatters from
usurping the land.
o But since lacking of financial resources he sought financial aid
from his uncle Felipe Deluao totalling more or less P27,000 with
which to finance the needed improvements on the fishpond
Upon learning that the area was occupied by his rival applicants Casteel immediately
filed the corresponding protests.
 Despite finding made in the investigation of the above administrative cases
that Casteel had already introduced improvements on portions of the area
The Director of Fisheries nevertheless rejected Casteel's application required him to
remove all the improvements he introduced and ordered that the land be leased
through public auction.
-- Casteel appealed to the Secretary of Agriculture
 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"
o That the Party of the First Part will finance as she has hereby
financed the sum 27k
 will be the administrator of the same she having
financed the construction and improvement of said
fishpond
o Second Part who renders only his services for the construction
and improvements of a fishpond
 Second Part will be the Manager and sole buyer of all
the produce of the fish that will be produced from said
fishpond
Inocencia Deluao executed a special power of attorney in favor of Jesus Donesa,
extending to the latter the authority.
 On November 29, 1949 the Director of Fisheries rejected the application
filed by Felipe Deluao – reiterated his claim and asked for reinvestigation –
subsequently withdrew
Casteel was reinstated.
 Nicanor Casteel forbade Inocencia Deluao from further administering the
fishpond, and ejected the latter's representative (encargado), Jesus
Donesa, from the premises.
Alleging violation of the contract of service filed an action befor4e the CFI for specific
performance and damages to honor the contract and to pay jointly and severally 20k
as damages.
 Plaintiffs filed an ex parte motion for the issuance of a preliminary injunction
o Praying that during the pendency of the case a preliminary
injunction be issued to restrain Casteel from doing the acts
complained of, and that after trial the said injunction be made
permanent.
RTC, GRANTED preliminary injunction
Casteel filed motion to dissolve injunction alleging that he was the lawful applicant and
occupant of the fishpond
  Defendants filed a joint motion to dismiss ground that the plaintiffs'
complaint failed to state a claim upon which relief may be granted.

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.
 Issue:
W/N partnership is void or the act of the partnership in furnishing electric current to the
franchise holder without previous approval of Public Service Commission render the
partnership void?

Ruling:

Validity of the Partnership. Partnership is valid. The fact of furnishing the current to the
holder of the franchise alone, without the previous approval of the Public Service
Commission, does not per se make the contract of partnership null and void from the
beginning and render the partnership entered into by the parties for the purpose also
void and non-existent

Disposal of Contributed Property to the Partnership. Facts show that parties

Lozana vs. Depakakibo
entered into the contract of partnership, Lozana contributing the amount of P18,
000, and there has not been liquidation prior to the sale of the contributed
PLAINTIFF: Mauro Lozana
properties: Buda Diesel Engine and 70 posts. It necessarily follows that the
DEFENDANT: Serafin Depakakibo
Buda diesel engine contributed by the plaintiff had become the property of the
DATE: April 27, 1960
partnership. As properties of the partnership, the same could not be disposed of
PONENTE: April 27, 1960
by the party contributing the same without the consent or approval of the
TOPIC:
partnership or of the other partner. (Clemente vs. Galvan, 67 Phil., 565)
Facts:

 Lozana and Depakakibo established a partnership for the purpose of

maintaining, operating, and distributing electric light and power in the
Municipality of Dumangas. The partnership is capitalized at the sum of P30,
000.00 where Lozana agreed to furnish 60% while Depakakibo, 40%.

 However, the franchise for venture in favor of Buenaflor was cancelled and
revoked by the Public Service Commission. Lozana thereafter sold
Generator Buda [Lozana’s contribution to the partnership; no liquidation
made] to Decologon. When the decision was appealed, a temporary
certificate of public convenience was issued in the name of Decolongon.
Depakakibo sold one Crossly Diesel Engine [Depakakibo’s contribution to
the partnership] to Spouses Jimenea and Harder.

 Lozana brought action against Depakakibo alleging the latter wrongfully

detained the Generator Buda and wooden posts to which he is entitled to
the possession of. Lozano prayed the properties be delivered back to him.

 CFI ordered sheriff to take possession of the properties and the delivery
thereof to Lozano. Depakakibo alleged properties have been contributed to
the partnership and therefor he is not unlawfully detaining them. In addition,
Lozano sold his contribution to partnership in violation of terms of their
agreement.

 CFI declared Lozano owner of and entitled to the equipment. Depakakibo

appealed decision to the Supreme Court.

ALBERT F. KIEL, plaintiff-appellee,
vs. ESTATE OF P. S. SABERT, defendant-appellant.
1910 - Kiel and P. S. Sabert entered into an agreement to develop
the Parang Plantation Company. Sabert was to furnish the
capital to run the plantation and Kiel was to manage it.
They were to share and share alike in the property. It seems
that this partnership was formed so that the land could be
acquired in the name of Sabert, Kiel being a German citizen and
not deemed eligible to acquire public lands in the Philippines.
1910-1917- Kiel worked upon and developed the plantation until
he was deported from the Philippines during the World War.
1919 – Sabert with four others, organized the Nituan Plantation
Company.
1922 - Sabert transferred all of his rights in two parcels of land
situated in the municipality of Parang, Province of Cotabato, to the
Nituan Plantation Company.
Kiel appears to have tried to secure a settlement from Sabert
evidenced by a letter dated June 6, 1918, where Sabert wrote Kiel
that he had offered "to sell all property that I have for P40,000 or
take in a partner who is willing to develop the plantation, to take
up the K. & S. debt no matter which way I will straighten out with
you."
Kiel filed an action against Sabert estate claiming his part on the
proceeds of the sale of the property or the sum of P20,000.
(40,000 / 2)
CIR disallowed the claim. On appeal to the Court of First Instance,
it found the existence of co - partnership between plaintiff and the
deceased Sabert and Kiel was allowed to recover P 20,000.
ISSUE:
W/N a partnership between Kiel and Sabert existed despite the
absence of any written agreement between them.
HELD:
A partnership was formed between Kiel and Sabert. Remanded to
lower court to determine value to be claimed.
The question is whether or not the alleged verbal copartnership
formed by Kiel and Sabert has been proved, if the testimony of
Kiel is to be eliminated and only consider the relevant testimony of
other witnesses.
Note: Kiel’s testimony was not considered because of the rule of
partnership that the declarations of one partner, not made in the
presence of his copartner, are not competent to prove the
existence of a partnership between them as against such other
partner, and that the existence of a partnership cannot be
established by general reputation, rumor, or hearsay.
The testimony of the plaintiff's witnesses, together with the
documentary evidence, leaves the firm impression with us that Kiel
and Sabert did enter into a partnership, and that they were to
share equally. Applying the tests as to the existence of
partnership, competent evidence exists establishing the
partnership. Even more primary than any of the rules of
partnership, is to seek out the intention of the parties, as
gathered from the facts and as ascertained from their
language and conduct, and then to give this intention effect.
The judgment handed down by the lower court, permitted the
plaintiff to recover from the estate the full amount claimed,
presumably on the assumption that Sabert having sold by property
to the Nituan Plantation Company for P40,000, Kiel should have
one-half of the same, or P20,000. There is, however, extant in the
record absolutely no evidence as to the precise amount received
by Sabert from the sale of this particular land.
Kiel, a foreigner, had no standing in court to ask for any part of
the land and in fact he does not do so; his only legal right is to ask
for an accounting of the partnership with reference to its
improvements and income since 1917 when Kiel left the
Philippines.
Kiel is not entitled to any share in the land itself, but he has clearly
shown his right to one-half of the value of the improvements and
personal property on the land as to the date upon which he left the
plantation. Such improvements and personal property include
buildings, coconut palms, and other plantings, cattle and other
animals, implements, fences, and other constructions, as well as
outstanding collectible credits, if any, belonging to the partnership.
The value of these improvements and of the personal property
cannot be ascertained from the record and the case must therefore
be remanded for further proceedings.
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. 1771, Civil Code). 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.

Agad(Plaintiff/Appellant) vs Mabato(Defendant/Appellee)
Facts:
 Agad and Mabato, pursuant in a public instrument, are partners in a
fishpond business. Agad contributed P1000 with the right to received 50%
of the profits.
 From 1952-1956 Mabato handled the partnership funds. Despite the
demands made by Agad to Mabato, the latter failed to render accounts for
the years 1957-1963. Hence, Agad filed a case against Mabato.
 Mabato’s defense that there is no contract of partnership because Agad
failed to give his P1000 contribution in the partnership capital.
The lower court dismissed that case on the ground that the complaint failed to state a
cause of action. It is concluded that that contract of partnership is null and void
because an inventory of the fishpond referred in said instrument had not been
attached thereto.
Issue:
whether or not "immovable property or real rights" have been contributed to the
partnership under consideration.
Held:
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 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.
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.

AURBACH V SANITARY WARES
PETITIONER: WOLRGANG AURBACH, JOHN GRIFFIN, DAVID P. WHITTINGHAM
and CHARLES CHAMSAY
RESPONDENT: SANITARY WARES MANUFACTURING CORPORATION
DATE: December 15, 1989
PONENTE: GUTIERREZ, JR., J
FACTS:
ASI, a foreign corporation domiciled in Delaware, United States entered into an
Agreement with Saniwares and some Filipino investors whereby ASI and the Filipino
investors agreed to... participate in the ownership of an enterprise which would
engage primarily in the business of manufacturing in the Philippines and selling here
and abroad vitreous china and sanitary wares.  The parties agreed that the business
operations in the
Philippines shall be carried on by an incorporated enterprise and that the name of the
corporation shall initially be "Sanitary Wares Manufacturing Corporation."
The management of the Corporation shall be vested in a Board of Directors, which
shall consist of nine individuals.  As long as American-Standard shall own at least
30% of the outstanding stock of the Corporation, three of the nine directors... shall be
designated by American-Standard, and the other six shall be designated by the other
stockholders of the Corporation.
Later, the 30% capital stock of ASI was increased to 40%.  The corporation was also
registered with the Board of Investments for availment of incentives with the condition
that at least 60% of the capital stock of the corporation shall be owned... by Philippine
nationals.
Unfortunately, with the business successes, there came a deterioration of the initially
harmonious relations between the two groups.  joint venture is formed for the execution of a single transaction, and is thus of a
According to the Filipino group, a basic disagreement was due to their desire to
expand the export operations of the company to which ASI objected as it apparently
had other subsidiaries or joint venture groups in the countries where Philippine exports
were... contemplated.
On March 8, 1983, the annual stockholders' meeting was held.
There were protests against the action of the Chairman and heated arguments
ensued.
These incidents triggered off the filing of separate petitions by the parties with the
Securities and Exchange Commission (SEC).  The first petition filed was for
preliminary injunction by Saniwares, Ernesto
V. Lagdameo, Baldwin Young, Raul A. Boncan, Ernesto R. Lagdameo, Jr., Enrique
Lagdameo and George F. Lee against Luciano Salazar and Charles Chamsay.
The second petition was for quo warranto and application for receivership by
Wolfgang Aurbach, John Griffin, David Whittingham, Luciano E. Salazar and Charles
Chamsay... against the group of Young and Lagdameo (petitioners in SEC Case No.
2417) and Avelino F. Cruz.
The two petitions were consolidated and tried jointly by a hearing officer who rendered
a decision upholding the election of the Lagdameo Group and dismissing the quo
warranto petition of Salazar and Chamsay.  The ASI
Group and Salazar appealed the decision to the SEC en banc which affirmed the
hearing officer's decision.
Issues:
"THE AMENDED DECISION OF THE RESPONDENT COURT, WHILE
RECOGNIZING THAT THE STOCKHOLDERS OF SANIWARES ARE DIVIDED INTO
TWO BLOCS, FAILS TO FULLY ENFORCE THE BASIC INTENT OF THE
AGREEMENT AND THE LAW.
whether it was a joint venture or a corporation
Ruling:
The rule is that whether the parties to a particular contract have thereby established
among themselves a joint venture or some other relation depends upon their actual
intention which is determined in accordance with the rules governing the interpretation
and... construction of contracts
In the instant cases, our examination of important provisions of the Agreement as well
as the testimonial evidence presented by the Lagdameo and Young Group shows that
the parties agreed to establish a joint venture and not a... corporation.
The history of the organization of Saniwares and the unusual arrangements which
govern its policy making body are all consistent with a joint venture and not with an
ordinary corporation.
Moreover, ASI in its communications referred to the enterprise as joint venture.  
Baldwin Young also testified that Section 16(c) of the Agreement that "Nothing herein
contained shall be construed to constitute any of the parties hereto partners or... joint
venturers in respect of any transaction hereunder" was merely to obviate the
possibility of the enterprise being treated as partnership for tax purposes and liabilities
to third parties.
The legal concept of a joint venture is of common law origin.  It has no precise legal
definition, but it has been generally understood to mean an organization formed for
some temporary purpose.
The main distinction cited by most opinions in common law... jurisdictions is that the
partnership contemplates a general business with some degree of continuity, while the
temporary nature.