ARBES V. POLISTICO
CA
G.R. NO. 31057
SEPTEMBER 7, 1929
FACTS:
An association called “Turnuhan Polistico & Co” was deemed by the court-appointed
commissioner, to which the court declared as well, as an unlawful partnership. The
defendants objected to the trial court’s report. Consequently, they filed a motion for a
charitable institution to be included as a party defendant applying the provisions of
Art. 1666 of the NCC which provides:
“A partnership must have a lawful object and must be established for the common
benefit of the partners. When the dissolution of an unlawful partnership is decreed,
the profits shall be given to charitable institutions of the domicile of the partnership,
or, in default of such, to those of the province.”
ISSUE:
WON a charitable institution can be a party defendant based on the provisions of Art.
1666
HELD:
NO, the application for the said article is improper because an unlawful partnership is
a void contract, and as such, no right or cause of action can flow from it.
In reference to Manresa, an unlawful partnership should not be able to recover
profits since in the eyes of the law, the partnership had not come into existence and
that no judicial action may flow from the contract. However, such members may
recover what they have contributed not on the basis of the contract, but on the basis
of the mere contribution they have made on the capital and to disable them to do so
would be an unjust sanction.
If the partnership has no valid existence, if it is considered juridically non-existent,
the contract entered into can have no legal effect; and in that case, how can it give
rise to an action in favor of the partners to judicially demand from the manager or the
administrator of the partnership capital, each one's contribution? The partner who
limits himself to demanding only the amount contributed by him need not resort to
the partnership contract on which to base his action.
ALFREDO N. AGUILA v.
GR No. 127347
Novermber 25, 1999
FACTS:
Petitioner is the manager of A.C. Aguila & Sons, Co., a partnership engaged in
lending activities. Private respondent and her late husband, Ruben M. Abrogar, were
the registered owners of a house and lot in Marikina, Metro Manila. On April 18,
1991, private respondent, with the consent of her late husband and A.C. Aguila &
Sons, Co., represented by petitioner, entered into a Memorandum of Agreement. On
the same day, the parties likewise executed a deed of absolute sale wherein private
respondent, with the consent of her late husband, sold the subject property to A.C.
Aguila & Sons, Co. In a special power of attorney, private respondent authorized
petitioner to cause the cancellation of TCT and the issuance of a new certificate of
title in the name of A.C. Aguila and Sons, Co., in the event she failed to redeem the
subject property as provided in the Memorandum of Agreement.
Private respondent failed to redeem the property, and the TCT was cancelled. Upon
the refusal of private respondent to vacate the subject premises, A.C. Aguila & Sons,
Co. filed an ejectment case against her. Private respondent then filed a petition for
declaration of nullity of a deed of sale with the Regional Trial Court. She alleged that
the signature of her husband on the deed of sale was a forgery because he was
already dead.
ISSUE:
WON the petitioner is not the real party in interest, but A.C. Aguila & Co., against
which this case should have been brought
RULING:
YES, petitioner is not the real party in interest against whom this action should be
prosecuted makes it unnecessary to discuss the other issues raised by him in this
appeal.
Under Art. 1768 of the Civil Code, a partnership "has a juridical personality separate
and distinct from that of each of the partners." The partners cannot be held liable for
the obligations of the partnership unless it is shown that the legal fiction of a different
juridical personality is being used for fraudulent, unfair, or illegal purposes. In this
case, private respondent has not shown that A.C. Aguila & Sons, Co., as a separate
juridical entity, is being used for fraudulent, unfair, or illegal purposes.
Moreover, the title to the subject property is in the name of A.C. Aguila & Sons, Co. RULING:
and the Memorandum of Agreement was executed between private respondent, with
YES, for tax purposes, the co-ownership of inherited properties is automatically
the consent of her late husband, and A.C. Aguila & Sons, Co., represented by
converted into an unregistered partnership the moment the said common properties
petitioner. Hence, it is the partnership, not its officers or agents, which should be
and/or the incomes derived therefrom are used as a common fund with intent to
impleaded in any litigation involving property registered in its name. A violation of this
produce profits for the heirs in proportion to their respective shares in the inheritance
rule will result in the dismissal of the complaint. 
as determined in a project partition either duly executed in an extrajudicial settlement
OÑA VS. Commissioner of Internal Revenue or approved by the court in the corresponding testate or intestate proceeding.
G.R. NO. L-19342
The reason is simple. From the moment of such partition, the heirs are entitled
May 25, 1972
already to their respective definite shares of the estate and the incomes thereof, for
each of them to manage and dispose of as exclusively his own without the
FACTS:
intervention of the other heirs, and, accordingly, he becomes liable individually for all
Julia Buñales died leaving as heirs her surviving spouse, Lorenzo Oña and her five taxes in connection therewith. If after such partition, he allows his share to be held in
children. A civil case was instituted for the settlement of her state, in which Oña was common with his co-heirs under a single management to be used with the intent of
appointed administrator and later on the guardian of the three heirs who were still making profit thereby in proportion to his share, there can be no doubt that, even if
minors when the project for partition was approved. This shows that the heirs have no document or instrument were executed, for the purpose, for tax purposes, at
undivided ½ interest in 10 parcels of land, 6 houses and money from the War least, an unregistered partnership is formed.
Damage Commission.
For purposes of the tax on corporations, our National Internal Revenue Code
Although the project of partition was approved by the Court, no attempt was made to includes these partnerships —
divide the properties and they remained under the management of Oña who used
 The term “partnership” includes a syndicate, group, pool, joint venture or other
said properties in business by leasing or selling them and investing the income
unincorporated organization, through or by means of which any business, financial
derived therefrom and the proceeds from the sales thereof in real properties and
operation, or venture is carried on… (8 Merten’s Law of Federal Income Taxation, p.
securities. As a result, petitioners’ properties and investments gradually increased.
562 Note 63; emphasis ours.)
Petitioners returned for income tax purposes their shares in the net income but they
did not actually receive their shares because this left with Oña who invested them. with the exception only of duly registered general copartnerships — within the
purview of the term “corporation.” It is, therefore, clear to our mind that petitioners
The Commissioner of Internal Revenue decided that petitioners formed an
herein constitute a partnership, insofar as said Code is concerned, and are subject to
unregistered partnership and therefore, subject to the corporate income tax,
the income tax for corporations. 
particularly for years 1955 and 1956. Petitioners asked for reconsideration, which
was denied hence this petition for review from CTA’s decision.  
ISSUE:   
WON THE PETITIONERS FORMED AN UNREGISTERED PARTNERSHIP AND
THUS SUBJECT TO CORPORATE INCOME TAX
 Heirs of Lim v. Lim
G.R. No. 172690
March 3, 2010
FACTS:
Jose, together with Jimmy Yu and Norberto Yu formed a partnership to engage in a
trucking business. After a year, Jose died leaving the heirs of Jose including Elfledo
Lim, wherein the latter continued with the management of the trucking business.
Eventually, Lim died. Thus, the heirs of Jose filed a complaint for their share in the
profits as heirs of Jose and the proper accounting of the partnership from when Jose
died and Elfledo handled the partnership. They aver, based on the testimony of the
only surviving partner of the business, Jimmy Yu, that Elfledo was not a partner in
the business.
However, Elfledo contended that he was indeed a partner on the following basis:
1. Jose himself gave Elfledo P50,000.00 as a share in the partnership;
2. Elfledo ran the affairs of the partnership, wielding absolute control, power,
and authority, without any intervention or opposition whatsoever from any of
the petitioners;
3. Elfledo did not receive any wages or salaries;
4. that the heirs failed to demand periodic accounting from Elfledo during his
lifetime; and
5. all the properties of the business were registered under the name of Elfledo.
ISSUE:
WON Elfledo is a partner in the business
RULING:
YES, Elfledo was indeed a partner in the business. To note, the Court mentioned its
ruling in Heirs of Tan Eng Kee v. Court of Appeals, where it cited Article 1769 of the
Civil Code, which provides:
Art. 1769. In determining whether a partnership exists, these rules shall apply:
(1) Except as provided by Article 1825, persons who are not partners as to each
other are not partners as to third persons;
(2) Co-ownership or co-possession does not of itself establish a partnership, whether
such co-owners or co-possessors do or do not share any profits made by the use of
the property;
(3) The sharing of gross returns does not of itself establish a partnership, whether or
not the persons sharing them have a joint or common right or interest in any property
from which the returns are derived;
(4) The receipt by a person of a share of the profits of a business is a prima facie
evidence that he is a partner in the business, but no such inference shall be drawn if
such profits were received in payment:
(a) As a debt by installments or otherwise;
(b) As wages of an employee or rent to a landlord;
(c) As an annuity to a widow or representative of a deceased partner;
(d) As interest on a loan, though the amount of payment vary with the profits of the
business;
(e) As the consideration for the sale of a goodwill of a business or other property by
installments or otherwise.
Applying the legal provision to the facts of this case, the following circumstances
tend to prove that Elfledo was himself the partner of Jimmy and Norberto.
Furthermore, petitioners failed to adduce any evidence to show that the real and
personal properties acquired and registered in the names of Elfledo and respondent
formed part of the estate of Jose, having been derived from Jose's alleged
partnership with Jimmy and Norberto. It is notable too that Jose Lim died when the
partnership was barely a year old, and the partnership and its business not only
continued but also flourished.
RULING:
NO,  it is error to consider the petitioners as having formed a partnership under
article 1767 of the Civil Code simply because they allegedly contributed P178,708 to
buy the two lots, resold the same, and divided the profit among themselves.
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.
In the case-at-bar, 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. Thus, to regard the petitioners as having formed
a taxable unregistered partnership would result in oppressive taxation and confirm
the dictum that the power to tax involves the power to destroy.