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SOURCES OF PHILIPPINE PARTNERSHIP LAW

INTRODUCTION TO THE GENERAL
CONCEPTS OF AGENCY, TRUSTS AND The source of our provisions in partnership is the Uniform Partnership
Act (UPA) of the United States, when it comes to the general
PARTNERSHIPS partnership. Then we have the Uniform Limited Partnership Act
(ULPA), when it comes to limited partnership.
HISTORICAL BACKGROUND
SIGNIFICANT DISTINCTIONS BETWEEN CIVIL PARTNERSHIPS
Code of Hammurabi AND COMMERCIAL PARTNERSHIPS
Partnership is an ancient form of business enterprise, and
special laws governing partnerships date as far back as 2300 Before the New Civil Code, Civil Partnership was distinguished from
BC, when the Code of Hammurabi explicitly regulated the Commercial Partnership.
relations between partners.
COMMERCIAL PARTNERSHIP CIVIL PARTNERSHIP
11th Century Registration was essential for Whereas it was the mere
In the eleventh century partnerships were introduced into Europe the coming into existence of meeting of the minds for civil
through Italy when Europe was experiencing increased trade. Of commercial partnership and the partnership.
primary importance was renewed contact with the Eastern acquisition of juridical
Mediterranean, through which Western merchants became personality.
aware of the business practices and commercial legal codes of In commercial partnership, they Whereas the civil partners are
Byzantium and the Islamic states. From the former, they were are solidarily and subsidiarily primarily but only jointly liable
familiarized with the commercial laws of Rome as reflected in the liable for partnership debts for partnership debt
Justinian Code, and from both they acquired the merchant law therefore they have the benefit
and its institutions. of excussion.
In commercial partnership, The Civil Partnership is
merchants are subject to the governed by the Spanish Civil
Commenda Contract
Code of Commerce provisions Code
Regarding partnerships, Western merchants borrowed the
commenda. The commenda contract had a sedentary investor,
When we adopted the new civil code, the provisions on commercial
known as the commendator, who advanced capital to a traveling
partnership were all repealed, so it is now one and the same with the
associate, known as a tractator. Its essential feature was that the
partnership under the New Civil Code. Article 45 and 46 gave this
commendator risked only the capital advanced because he was
partnership a juridical personality. So in essence, hindi the same
not liable for any other losses. The contract ended when profits
person under the law.
were distributed after the merchant returned. As private
partnerships carrying limited liability were unknown in classical
Art. 45. Juridical persons mentioned in Nos. 1 and 2 of the
Rome, the origin of the commenda is believed to be either
preceding article are governed by the laws creating or recognizing
Byzantium or Arabia. them.

The Compagna Private corporations are regulated by laws of general application on

The compagna was introduced into Italy in the same period as the subject.
the commenda. It was loosely based on the Roman societas,
which included any association formed to exploit capital and Partnerships and associations for private interest or purpose
labor. Whereas a societas partner was unable to bind his are governed by the provisions of this Code concerning
copartners for debts or to alienate any property for more than his partnerships.
share, partners belonging to a compagna were each responsible
individually for the debts of the firm, and each could contractually Art. 46. Juridical persons may acquire and possess property of all
bind the whole firm. kinds, as well as incur obligations and bring civil or criminal actions,
in conformity with the laws and regulations of their organization.
At first the compagna was based solely on the family, but
TRI-LEVEL EXISTENCE OF THE PARTNERSHIPS
increasingly it included outsiders, though in Venice family-based
partnerships persisted well into the sixteenth century. Large
1. It is a contractual relationship between and among the
partnerships were particularly vulnerable to agency and
partners;
managerial difficulties. Banking partnerships were among the
2. It creates a multi-leveled contractual relations among various
largest, having several distant branches specifically located to
parties as a medium of doing business through a separate
best service the financial needs of overland trade.
juridical personality;
3. It is a business enterprise, a business venture, or what is
Industrial Revolution
termed as a going concern.
England enacted the English Partnership Law. The concept of
this English Partnership Law is similar to the Commenda in that
there is limited liability. The Americans, also codified it but they GENERAL PROVISIONS ON
have both general and limited liability – Universal Limited
Partnership Act. PARTNERSHIPS
CONTRACT OF PARTNERSHIP
NOTE: The origin of partnership is actually based on necessity.
Article 1767. By the contract of partnership two or more persons
bind themselves to contribute money, property, or industry to a
common fund, with the intention of dividing the profits among
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themselves.

Two or more persons may also form a partnership for the exercise
of a profession.

Article 1767 defines the contract of partnership.

“By contract of partnership…”

It is a contract. A nominate contract which is governed by the specific
provisions on such contracts (and the general principles of ObliCon
suppletorily).

“by two or more persons…”

It must be atleast two persons

“bind themselves…”
There is a commitment, an intention to form a partnership

“to contribute money, property or industry…””

Money is segregated from property because money is the more liquid
asset.

“to a common fund with the intention of diving profits among

themselves”
Whatever they contribute becomes the ownership of all. Without the
intention to divide the profit among themselves, there can be no
partnership.

“Two or more persons may also form a partnership for the exercise of
a profession.”
There can be a partnership for the exercise of profession, also known
as a general professional partnership. This is separated because some
professions are not for profit.

CHARACTERISTICS OF PARTNERSHIP

1. Consensual – it is perfected by mere consent, that is, upon

the express or implied agreement of two or more persons;
2. Nominate – it has a special name or designation in our law;
3. Bilateral – it is entered into by two or more persons and the
rights and obligations arising therefrom are always
reciprocal;
4. Onerous – each of the parties aspires to procure for himself
a benefit through the giving of something;
5. Commutative – the undertaking of each of the partners is
considered as the equivalent of that of the others;
6. Principal – it does not depend for its existence or validity
upon some other contracts; and
7. Preparatory – it is entered into as a means to an end, i.e., to
engage in business or specific venture for the realization of
profits with the view of dividing them among the contracting
parties.

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PARTNERSHIP AS A MEDIUM OF DOING BUSINESS
Article 1768. The partnership has a juridical personality separate
and distinct from that of each of the partners, even in case of failure
to comply with the requirements of article 1772, first paragraph.
Doctrine of Separate Juridical Personality
As an independent juridical person a partnership may enter into
contracts, acquire and possess property of all kinds in its name, as well
as incur obligations and bring civil or criminal actions. Thus, a
partnership may be declared insolvent even if the partners are not. It
may enter into contracts and may sue and be sued in its firm name or
by its duly authorized representative.
A partnership is a juridical person by virtue of the Civil Code. (Article
46)
Does it have the same rights and obligations as a natural person?
In the eyes of the law, it is given the rights of a person. It does have
rights that are similar to a natural person, but there are also rights that
are given to natural persons that cannot be given to it.
Importance of having a separate juridical personality for
businesses
It allows the owners to segregate or separate the assets and
obligations of the partnerships as to those that they have personally.
Aguila VS CA
Facts:
Felicidad Abrogar entered into a MOA with A.C. Aguila & Sons, a
partnership engaged in lending activities. The agreement was for
the property owned by Abrogar to be sold to the partnership with
the right to repurchase for 200,000 with the condition that upon
failure to redeem the property a new cert of title would be issued in
the name of the partnership. So a deed of absolute sale was
executed and since there was failure to redeem a new cert of title
was issued and the partnership thereafter demanded that Abrogar
vacate the said property.
Abrogar filed a petition for declaration of nullity of the deed of
absolute sale with the RTC against Alfredo Aguila.
Aguila contended that he is not the real party in interest and that it
should be A.C. Aguila & Co., (the partnership) against which the
case should have been brought.
Issue: WON Alfredo Aguila is the real party in interest against
whom the action should be prosecuted.
Ruling: NO.
Under Art. 1768 of the Civil Code, a partnership has a juridical
personality separate and distinct from that of each of the partners.
The partners cannot be held liable for the obligations of the
partnership unless it is shown that the legal fiction of a different
juridical personality is being used for fraudulent, unfair, or illegal
purposes. In this case, Abrogar has not shown that A.C. Aguila &
Sons, Co., as a separate juridical entity, is being used for
fraudulent, unfair, or illegal purposes. Moreover, the title to the
subject property is in the name of A.C. Aguila & Sons, Co. and the
Memorandum of Agreement was executed between private
respondent, with the consent of her late husband, and A. C. Aguila
& Sons, Co., represented by petitioner. Hence, it is the partnership,
not its officers or agents, which should be impleaded in any
litigation involving property registered in its name. A violation of this
rule will result in the dismissal of the complaint.
Thus the Court concluded that petitioner is not the real party in
interest against whom the action should be prosecuted.
Partnership as a business enterprise
It is a going concern and has the element of habituality. Partners are
equity holders (one who has a stake in the company).
Villareal VS Ramirez
Facts:
Luzviminda J. Villareal, Carmelito Jose and Jesus Jose formed a
partnership for the operation of a restaurant and catering business.
Respondent Donaldo Efren C. Ramirez belatedly joined as a
partner his capital contribution having been paid by his parents,
who are also respondents in this case.
The restaurant eventually closed down and the respondents
requested for the return of their 1/3 share in the equity of the
partnership. When the request was left unheeded they filed a
complaint for the collection of sum of money from petitioners.
Take note: Computation of CA as to the amount to be refunded to
respondents.
Issue: Whether petitioners are liable to respondents for the latter's
share in the partnership. NO.
Ruling:
Respondents have no right to demand from petitioners the return of
their equity share. Except as managers of the partnership,
petitioners did not personally hold its equity or assets. "The
partnership has a juridical personality separate and distinct from
that of each of the partners." Since the capital was contributed to
the partnership, not to petitioners, it is the partnership that must
refund the equity of the retiring partners.
Since it is the partnership, as a separate and distinct entity, that
must refund the shares of the partners, the amount to be refunded
is necessarily limited to its total resources. In other words, it can
only pay out what it has in its coffers, which consists of all its
assets. However, before the partners can be paid their shares, the
creditors of the partnership must first be compensated. After all the
creditors have been paid, whatever is left of the partnership assets
becomes available for the payment of the partners' shares.
This case shows that partners are equity holders.
Equity interest – means that as a partner, you absorb all the losses
and you gain all the profits
Rules to determine existence of partnership
In general to establish the existence of a partnership all of its essential
features or characteristics must be shown as being present. In case of
doubt article 1769 shall apply. This article seeks to exclude from the
category of a partnership certain features enumerated therein which by
themselves are not indicative of the existence of a partnership (Take
note: Not exclusive.)
Article 1769. In determining whether a partnership exists, these
rules shall apply:
(1) Except as provided by article 1825, persons who are not
partners as to each other are not partners as to third persons;
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(2) Co-ownership or co-possession does not of itself establish a
partnership, whether such-co-owners or co-possessors do or do not
share any profits made by the use of the property;
(3) The sharing of gross returns does not of itself establish a
partnership, whether or not the persons sharing them have a joint or
common right or interest in any property from which the returns are
derived;
(4) The receipt by a person of a share of the profits of a business is
prima facie evidence that he is a partner in the business, but no
such inference shall be drawn if such profits were received in
payment:
(a) As a debt by installments or otherwise;
(b) As wages of an employee or rent to a landlord;
(c) As an annuity to a widow or representative of a deceased
partner;
(d) As interest on a loan, though the amount of payment vary with
the profits of the business;
(e) As the consideration for the sale of a goodwill of a business or
other property by installments or otherwise.
(1) Except as provided by article 1825…
Partnership is a matter of intention, each partner giving his consent to
become a partner. However whether a partnership exists between the
parties is a factual matter. Where parties declare they are not partners,
this as a rule settles the question between themselves but where a
person misleads third persons into believing that they are partners in a
non-existent partnership they become subject to liabilities of partners
(doctrine of estoppel)
Whether or not the parties called the relationship or believe it to be a
partnership is immaterial. Thus with the exception of partnership by
estoppel, a partnership cannot exist as to third persons if no contract of
partnership has been entered into between the parties themselves.
(2) Co-ownership
Obillos vs CIR
Facts:
Jose Obillos Sr transferred his rights to 2 lots to his four children.
The Torrens titles issued to them shows that they were co-owners
of the two lots. The lots were then sold by the petitioners (the
children) to Walled City Securities Corporation and Olga Cruz
Canda. They treated the profit as a capital gain and paid an income
tax thereon.
The CIR required the petitioners to pay corporate income tax on
the total profit in addition to individual income tax on their shares.
The Commissioner acted on the theory that the petitioners had
formed an unregistered partnership or joint venture within the
meaning of the Tax Code.
Issue: WON petitioners formed a partnership under article 1767 of
the Civil Code. NO.
Ruling:
The Court held that it is error to consider the petitioners as having
formed a partnership under article 1767 of the Civil Code simply
because they allegedly contributed to buy the two lots, resold the
same and divided the profit among themselves.
As testified by Jose Obillos, Jr., they had no such intention. They
were co-owners pure and simple. To consider them as partners
would obliterate the distinction between a co-ownership and a
partnership. The petitioners were not engaged in any joint venture
by reason of that isolated transaction.
Their original purpose was to divide the lots for residential
purposes. If later on they found it not feasible to build their
residences on the lots because of the high cost of construction,
then they had no choice but to resell the same to dissolve the co-
ownership. The division of the profit was merely incidental to the
dissolution of the co-ownership which was in the nature of things a
temporary state.
Article 1769(3) of the Civil Code provides that "the sharing of gross
returns does not of itself establish a partnership, whether or not the
persons sharing them have a joint or common right or interest in
any property from which the returns are derived". There must be an
unmistakable intention to form a partnership or joint venture.*
The judgment of the Tax Court is reversed and set aside. The
assessments are cancelled.
Compared to Ona vs CIR
Obillos Case distinguished from Gatchalian vs CIR
Such intent (to form a partnership) was present in Gatchalian vs.
Collector of Internal Revenue, where 15 persons contributed small
amounts to purchase a two-peso sweepstakes ticket with the
agreement that they would divide the prize. The ticket won the third
prize of P50,000. The 15 persons were held liable for income tax as an
unregistered partnership.
Compared to Reyes vs CIR
Reyes vs CIR
Facts:
The petitioners in this case are father and son who purchased a lot
and building, the initial payment shared equally by them. The
administration of the building was then entrusted to an
administrator who collected the rents, kept its books and records
and performed such other functions necessary for the conservation
and preservation of the building. Petitioners divided equally the
income of operation and maintenance.
CIR assessed the petitioners with income tax due "from the
partnership formed" by petitioners.
The CTA sustained the action of CIR applying the leading case of
Evangelista v. Collector of Internal Revenue wherein in that case
there were several circumstances which led the court to hold the
petitioners liable for tax on corporations.
Petitioners maintain the view that the Evangelista ruling does not
apply because the situation is dissimilar
Issue:
WON the petitioners should be subjected to tax on corporations.
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Ruling:
It may be said that there could be a differentiation made between
the circumstances and those existing in the present case. It does
not suffice though to preclude the applicability of the Evangelista
decision. Petitioners could harp on these being only one
transaction. They could stress that an affidavit of one of them found
in the Bureau of Internal Revenue records would indicate that their
intention was to house in the building acquired by them the
respective enterprises, coupled with a plan of effecting a division in
10 years. It is a little surprising then that while the purchase was
made on October 31, 1950 and their brief as petitioners filed on
October 20, 1965, almost 15 years later, there was no allegation
that such division as between them was in fact made. Moreover,
the facts as found and as submitted in the brief made clear that the
building in question continued to be leased by other parties with
petitioners dividing "equally the income ... after deducting the
expenses of operation and maintenance ..." Differences of such
slight significance do not call for a different ruling.
The basic test of partnership is whether the business is carried on
in behalf of the person sought to be held liable.
Sharing of profits as owner – it is not nearly the sharing of profits but
the sharing of them as co-owner of the business or undertaking that
makes one partner.
Test: Does the recipient have an equal voice as proprietor in the
conduct and control of the business? Does he own a share of the
profits as proprietor of the business producing them?
One must have an interest with another in the profits of a business.
Burden of Proof and Presumption
The burden of proving the existence of a partnership rests on the
parties having the affirmative of that issue. The existence of a
partnership must be proved and will not be presumed. The law
presumes that those acting as partners have entered into a contract of
partnership. Where the law presumes the existence of partnership the
burden of proving is on the party denying its existence. When a party is
shown to exist the presumption is that it continues and the burden of
proof is on the person asserting its termination.
One who alleges the partnership cannot prove it merely by evidence of
an agreement using the term “partner”. Non-use of the term, however,
is entitled to weight. The question of whether a partnership exists is not
always dependent upon the personal arrangement or understanding of
the parties. Parties intending to do a thing which in law constitutes
partnership are partners.
Legal Intention is the Crux of the Partnership
Parties may call themselves partners but their contract may be
adjudged something quite different. Conversely, parties may expressly
state that theirs is not a partnership yet the law may determine
otherwise on the basis of legal intent. However courts will be
influenced to some extent by what the party's call their contract.
Tests and Incidents of Partnership
In determining whether a partnership exists, it is important to
distinguish between tests or indicia and incidents of partnership.
Only those terms of a contract upon which the parties have reached an
actual understanding either explicitly or impliedly, may afford a test by
which to ascertain the legal nature of the contract
Incidents of a partnership
1. The partners share in profits and losses
2. They have equal rights in the management and conduct off
the partnership business
3. Every partner is an agent of the partnership and entitled to
bind the others by his acts. He may also be liable for the
entire partnership obligations
4. All partners are personally liable for the debts of the
partnership with their separate property except that limited
partners are not bound beyond the amount of their
investment
5. A fiduciary relationship exists between the partners
6. On dissolution the partnership is not terminated but
continues until the winding up of partnership is completed
such incidents may be modified by stipulation of the partners
Bastida vs Menzi & Co
Facts:
Menzi & Co., Inc. was a corporation organized for purpose of
importing and selling general merchandise, including fertilizers and
fertilizer ingredients.
The plaintiff, Bastida, who had had some experience in mixing and
selling fertilizer, offered to assign to Menzi & Co., Inc., his contract
with the Philippine Sugar Centrals Agency and to supervise the
mixing of the fertilizer and to obtain other orders for fifty per cent of
the net profits that Menzi & Co., might derive therefrom. This was
accepted by the corporation.
Pursuant to the verbal agreement, plaintiff and defendant
corporation later on entered into a written contract Bastida was to
receive as compensation for his said services 35 per cent of the
net profits derived from the sale of the fertilizers prepared by him
during the period of the contract.
Prior to the expiration of the contract the manager of Menzi & Co.
Inc., notified the plaintiff that the contract for his services would not
be renewed. Menzi & Co., Inc., prepared a balance sheet and a
profit and loss statement as a basis of settlement, but the plaintiff
refused to accept it, and filed a complaint against the corporation.
The trial court held that the contract entered into by the parties,
was a contract of general regular commercial partnership, wherein
Menzi & Co., Inc., was the capitalist, and the plaintiff, the industrial
partner
Issue:
WON the relationship between the parties is that of partners. NO.
Ruling:
Under the facts of this case the relationship established between
Menzi & Co. and by the plaintiff was to receive 35 per cent of the
net profits of the fertilizer business of Menzi & Co., Inc., in
compensation for his services of supervising the mixing of the
fertilizers. Neither the provisions of the contract nor the conduct of
the parties prior or subsequent to its execution justified the finding
that it was a contract of copartnership. The written agreement was
in effect a continuation of the verbal agreement between the
parties. Plaintiff was paid his share of the profits from those
transactions after Menzi & Co., Inc., had deducted the same items
of expense which he now protests. Plaintiff never made any
objection to defendant's manner of keeping the accounts or to the
charges. The business was continued in the same manner under
the written agreement, and for four years the plaintiff never made
any objection.
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Article 116 of the Code of Commerce, which provides that articles
of association by which two or more persons obligate themselves
to place in a common fund any property, industry, or any of these
things, in order to obtain profit, shall be commercial, no matter what
its class may be, provided it has been established in accordance
with the provisions of this Code; but in the case at bar there was no
common fund, that is, a fund belonging to the parties as joint
owners or partners. The business belonged to Menzi & Co., Inc.
The plaintiff was working for Menzi & Co., Inc. Instead of receiving
a fixed salary or, he was to receive 35 per cent of the net profits as
compensation for his services.
It is nowhere stated in the agreement that the parties were
establishing a partnership or intended to become partners.
Heirs of Tang Eng Kee vs CA
Facts:
The heirs of Tan Eng Kee, filed suit against the decedent's brother
Tan Eng Lay for the accounting, liquidation and winding up of the
alleged partnership formed after World War II between Tan Eng
Kee and Tan Eng Lay. It was alleged that Tan Eng Kee and Tan
Eng Lay, entered into a partnership engaged in the business of
selling lumber and hardware and construction supplies under the
name "Benguet Lumber" which they jointly managed until Tan Eng
Kee's death. However, they claimed that Tan Eng Lay and his
children caused the conversion of the partnership "Benguet
Lumber" into a corporation called "Benguet Lumber Company."
The incorporation was purportedly a ruse to deprive Tan Eng Kee
and his heirs of their rightful participation in the profits of the
business.
Tang Eng Lay claimed that Tan Eng Kee was a mere employee of
Benguet Lumber.
Issue:
WON Tang Eng Kee was a partner
Ruling: NO
A contract of partnership is defined by law as one where:
. . . two or more persons bind themselves to contribute money,
property, or industry to a common fund, with the intention of
dividing the profits among themselves.
Two or more persons may also form a partnership for the exercise
of a profession.
Thus, in order to constitute a partnership, it must be established
that (1) two or more persons bound themselves to contribute
money, property, or industry to a common fund, and (2) they intend
to divide the profits among themselves. The agreement need not
be formally reduced into writing, since statute allows the oral
constitution of a partnership, save in two instances: (1) when
immovable property or real rights are contributed, and (2) when the
partnership has a capital of three thousand pesos or more.
The best evidence would have been the contract of partnership
itself, or the articles of partnership but there is none. The evidence
presented by petitioners falls short of the quantum of proof required
to establish a partnership.
Tan Eng Kee never asked for an accounting
Besides, it is indeed odd, if not unnatural, that despite the forty
years the partnership was allegedly in existence, Tan Eng Kee
never asked for an accounting. The essence of a partnership is
that the partners share in the profits and losses. Each has the right
to demand an accounting as long as the partnership exists. A
demand for periodic accounting is evidence of a partnership.
During his lifetime, Tan Eng Kee appeared never to have made
any such demand for accounting from his brother, Tan Eng Lay.
The private respondents presented payrolls purporting to show that
Tan Eng Kee was an ordinary employee of Benguet Lumber but
the authenticity of these documents were questioned by the
petitioners.
But still the Court ruled that Tan Eng Kee was only an employee,
not a partner. Even if the payrolls as evidence were discarded,
petitioners would still be back to square one, so to speak, since
they did not present and offer evidence that would show that Tan
Eng Kee received amounts of money allegedly representing his
share in the profits of the enterprise. Petitioners failed to show how
much their father, Tan Eng Kee, received, if any, as his share in
the profits of Benguet Lumber Company for any particular period.
Hence, they failed to prove that Tan Eng Kee and Tan Eng Lay
intended to divide the profits of the business between themselves,
which is one of the essential features of a partnership.
Where circumstances taken singly may be inadequate to prove the
intent to form a partnership, nevertheless, the collective effect of
these circumstances may be such as to support a finding of the
existence of the parties' intent. Yet, in the case at bench, even the
aforesaid circumstances when taken together are not persuasive
indicia of a partnership. They only tend to show that Tan Eng Kee
was involved in the operations of Benguet Lumber, but in what
capacity is unclear.
There being no partnership, it follows that there is no dissolution,
winding up or liquidation to speak of. Hence, the petition must fail.
Tocao VS CA
Facts:
Belo introduced Anay to Tocao who conveyed
Yulo vs Yang Chiao Seng
Facts:
Ona vs CIR
Evangelista VS CIR
Facts:
Eufemia, Manuela and Francisca Evangeista (sisters) borrowed
money from their father and this, together with their personal
monies were used for the purpose of buying real properties. After
purchasing properties, they leased them to various tenants and
appointed their brother, Simeon to administer the said properties.
The Collector of Internal Revenue demanded the payment of
income tax on corporations, real estate dealer's fixed tax and
corporation residence tax.
Issue:
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WON petitioners are subject to the tax on corporations
Ruling: YES
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 purpose was to engage in
real estate transactions for monetary gain and then divide the
same among themselves, for several reasons such as:
 The common fund was not something they found already
in existence; it was not inherited, they jointly borrowed to
establish the common fund;
 They invested the same, not merely not merely in one
transaction, but in a series of transactions;
 The lots were not devoted to residential purposes, or to
other personal uses, but were leased separately to
several persons
 The affairs relative to said properties have been handled
by a single person, Simeon, as if the same belonged to a
corporation or business and enterprise operated for profit
 These comditions have existed for more than 10 years
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.
Ona vs CIR
Torres vs CA
Facts:
Antonia Torres and Emeteria Baring entered into a JVA with
Respondent Manuel Torres for the development of a parcel of land
into a subdivision. Pursuant to the contract, they executed a Deed
of Sale covering the said parcel of land in favor of respondent, who
then had it registered in his name. By mortgaging the property,
respondent obtained a loan which was to be used for the
development of the subdivision. All three of them also agreed to
share the proceeds from the sale of the subdivided lots. However,
the project did not push through, and the land was subsequently
foreclosed by the bank. Petitioners blamed the respondent while
the respondent claimed that the subdivision project failed because
petitioners and their relatives had separately caused the
annotations of adverse claims on the title to the land, which
eventually scared away prospective buyers. Thereafter the
petitioners filed a civil case against the respondents.
The Court of Appeals, in affirming the Trial Court, held that
petitioners and respondent had formed a partnership for the
development of the subdivision. Thus, they must bear the loss
suffered by the partnership in the same proportion as their share in
the profits stipulated in the contract.
Issue:
Whether or not there existed a partnership between the petitioners
and respondent.
Ruling:
A reading of the terms embodied in the Agreement indubitably
shows the existence of a partnership pursuant to Article 1767 of
the Civil Code. Under the above-quoted Agreement, petitioners
would contribute property to the partnership in the form of land
which was to be developed into a subdivision; while respondent
would give, in addition to his industry, the amount needed for
general expenses and other costs. Furthermore, the income from
the said project would be divided according to the stipulated
percentage. Clearly, the contract manifested the intention of the
parties to form a partnership.
Petitioners argue that the Joint Venture Agreement is void
under Article 1773 of the Civil Code
First, Article 1773 was intended primarily to protect third persons.
Thus, the eminent Arturo M. Tolentino states that under the
aforecited provision which is a complement of Article 1771 "The
execution of a public instrument would be useless if there is no
inventory of the property contributed, because without its
designation and description, they cannot be subject to inscription in
the Registry of Property, and their contribution cannot prejudice
third persons. This will result in fraud to those who contract with the
partnership in the belief [in] the efficacy of the guaranty in which
the immovables may consist. Thus, the contract is declared void by
the law when no such inventory is made." The case at bar does not
involve third parties who may be prejudiced.
Second, petitioners themselves invoke the allegedly void contract
as basis for their claim that respondent should pay them 60 percent
of
the value of the property. They cannot in one breath deny the
contract and in another recognize it, depending on what
momentarily
suits their purpose. Parties cannot adopt inconsistent positions in
regard to a contract and courts will not tolerate, much less approve,
such practice.
In short, the alleged nullity of the partnership will not prevent courts
from considering the Joint Venture Agreement an ordinary contract
from which the parties' rights and obligations to each other may be
inferred and enforced.