Ortega vs.
CA Whether or not CA has erred in holding that the
G.R. No. 109248 July 3, 1995
Petitioner was a partner in BITO, MISA & LOZADA,
a duly registered law firm since June 1977.
However, on 1988, petitioner wrote the respondents
a letter stating that he is withdrawing and retiring
from the firm BITO, MISA AND LOZADA. He also
said that he wants to have proper liquidation of his
participation, talk about the mechanics of liquidation
and of his interest with the 2 floors of their building.
He further states that the partnership has ceased to
be mutually satisfactory because of interpersonal
conflict or that the working conditions of our
employees including the assistant attorneys or due
to interpersonal.
This prompted the petitioner to file with the
Commission's Securities Investigation and Clearing
Department (SICD) a petition for dissolution and
liquidation of partnership. The hearing officer
rendered a decision ruling that the withdrawal of the
petitioner did not dissolve the partnership.
However, on appeal, the SEC en banc reversed the
decision of the Hearing Officer and held that the
withdrawal of Attorney Misa had dissolved the
partnership of "Bito, Misa & Lozada."
The Commission ruled that, being a partnership at
will, the law firm could be dissolved by any partner
at any time, such as by his withdrawal therefrom,
regardless of good faith or bad faith, since no
partner can be forced to continue in the partnership
against his will.
The Court of Appeals, finding no reversible error on
the part of respondent Commission, AFFIRMED he
SEC decision and order appealed from.
ISSUES:
partnership of Bito, Misa & Lozada is a partnership
at will;
 Whether or not CA has erred in holding that the
withdrawal of private respondent dissolved the
partnership regardless of his good or bad faith; and
 
Whether or not CA has erred in holding that private
respondent's demand for the dissolution of the
partnership so that he can get a physical partition of
partnership was not made in bad faith.
 
HELD: NO
 
The birth and life of a partnership at will is
predicated on the mutual desire and consent of the
partners. The right to choose with whom a
person wishes to associate himself is the very
foundation and essence of that partnership. Its
continued existence is, in turn, dependent on the
constancy of that mutual resolve, along with each
partner's capability to give it, and the absence of a
cause for dissolution provided by the law itself. Any
one of the partners may, at his sole pleasure,
dictate a dissolution of the partnership at will.
Neither would the presence of a period for its
specific duration or the statement of a particular
purpose for its creation prevent the dissolution
of any partnership by an act or will of a partner.
Among partners, mutual agency arises and the
doctrine of delectus personae allows them to
have the power, although not necessarily the right,
to dissolve the partnership. An unjustified dissolution
by the partner can subject him to a possible action
for damages.
 
The dissolution of a partnership is the change in the
relation of the parties caused by any partner ceasing
to be associated in the carrying on, as might be
distinguished from the winding up of, the business.
Upon its dissolution, the partnership continues and
its legal personality is retained until the complete
winding up of its business culminating in its
termination.
The Court accord to the CA and the respondent
Commission on their common factual finding, that
Attorney Misa did not act in bad faith. Public
respondents viewed his withdrawal to have been
spurred by "interpersonal conflict" among the
partners.
It would not be right to let any of the partners remain
in the partnership under such an atmosphere of
animosity; certainly, not against their will. For as
long as the reason for withdrawal of a partner is not
contrary to the dictates of justice and fairness, nor
for the purpose of unduly visiting harm and damage
upon the partnership, bad faith cannot be said to
characterize the act.
NAVARRO vs CA
  
FACTS: Petitioners filed with respondent court a
petition for annulment of the trial court's decision,
claiming that the trial judge erred in declaring the
non-existence of a partnership, contrary to the
evidence on record.
 
The appellate court, as aforesaid, outrightly
dismissed the petition due to absence of extrinsic or
collateral fraud, observing further that an appeal
was the proper remedy.
 
Now in the petition before the Court, petitioners
claim that the trial judge ignored evidence that
would show that the parties "clearly intended to
form, and (in fact) actually formed a verbal
partnership engaged in the business of Air Freight
Service Agency in Bacolod.
 
The antecedent facts are:
 
Private respondent Olivia V. Yanson and Petitioner
Lourdes Navarro were engaged in the business of
Air Freight Service Agency. Pursuant to the
Agreement which they entered, they agreed to
operate the said Agency.
 
It is the Private Respondent Olivia Yanson who
supplies the necessary equipment and money used
in the operation of the agency. Her brother in the
person of Atty. Rodolfo Villaflores was the manager
thereof while petitioner Lourdes Navarro was the
Cashier.   As a premise, Article 1767 of the New Civil Code
 
In compliance to her obligation as stated in their
agreement, private respondent brought into their
business certain chattels or movables or personal
properties. However, those personal properties
remain to be registered in her name.  Among the
provisions stipulated in their agreement is the equal
sharing of whatever proceeds realized from their
business.   A cursory examination of the evidences presented
 
However, sometime on July 23, 1976, private
respondent Olivia V. Yanson, in order for her to
recover the above mentioned personal properties
which she brought into their business, filed a
complaint against petitioner Lourdes Navarro for
"Delivery of Personal Properties With Damages and
with an application for a writ of replevin. Private
respondents' application for a writ of replevin was
later approved/granted by the trial court.  any sharing of proceeds by way of advances
 
For her defense, petitioner Navarro argue that she
and private respondent Yanson actually formed a
verbal partnership which was engaged in the
business of Air Freight Service Agency. She
contended that the decision sustaining the writ of
replevin is void since the properties belonging to the
partnership do not actually belong to any of the
parties until the final disposition and winding up of
the partnership.
 
ISSUES:
 
1.     W/O there was a partnership that existed
between the parties?
 
2. W/O the properties that were commonly used in
the operation of Allied Air Freight belonged to the
alleged partnership business?
 
HELD:
 
1. NO. There was no partnership existed
between the parties.
defines the contract of partnership to quote:
 
Art. 1767. By the contract of partnership two or
more persons bind themselves to contribute money,
property, or industry to a common fund, with the
intention of dividing the proceeds among
themselves.
 
no proof that a partnership, whether oral or written
had been constituted at the inception of this
transaction.
True it is that even up to the filing of this complaint
those movables brought by the plaintiff for the use in
the operation of the business remain registered in
her name.  While there may have been co-
ownership or co-possession of some items and/or
received by both plaintiff and the defendant, these
are not indicative and supportive of the existence of
any partnership between them.  her estate was instituted. Later, Lorenzo T. Oña the
 
Corollary to Art. 1767 is the provision in determining
whether a partnership exist as so provided under
Article 1769.
 
Art. 1769 par. 2 provides: Co-ownership or
co-possession does not of itself establish a
partnership, whether such co-owners or co-
possessors do or do not share any profits
made by the use of the property”
 
Even the books and records retrieved by the
Commissioner appointed by the Court did not show
proof of the existence of a partnership as
conceptualized by law. Such that if assuming that
there were profits realized in 1975 after the two-year
deficits were compensated, this could only be
subject to an equal sharing consonant to the
agreement to equally divide any profit realized.
However, this Court cannot overlook the fact that
the Audit Report of the appointed Commissioner
was not highly reliable in the sense that it was more
of his personal estimate of what is available on
hand. Besides, the alleged profits was a difference
found after valuating the assets and not arising from
the real operation of the business. In accounting
procedures, strictly, this could not be profit but a net
worth.
 
2.   In view of the above factual findings of the Court
it follows inevitably therefore that there being no
partnership that existed, any dissolution,
liquidation or winding up is beside the point.  As
to the properties sought to be recovered, the
Court sustains the possession by plaintiff of all
equipments and chattels recovered by virtue of
the Writ of Replevin.
 
OÑA vs CIR
FACTS: Julia Buñales died in 1944, leaving as heirs
her surviving spouse, Lorenzo T. Oña and her five
children. In 1948, a civil case for the settlement of
surviving spouse was appointed administrator of the
estate of said deceased. Because three of the heirs,
were still minors when the project of partition was
approved, Lorenzo T. Oña, their father and
administrator of the estate was appointed by the
Court as their guardian.
Although the project of partition was approved by
the Court, no attempt was made to divide the
properties therein listed. Instead, the properties
remained under the management of Lorenzo T. Oña
who used said properties in business by leasing or
selling them and investing the income derived
therefrom and the proceeds from the sales thereof
in real properties and securities. As a result,
petitioners' properties and investments gradually
increased from P105,450.00 in 1949 to P480,005.20
in 1956.
From said investments and properties petitioners
derived such incomes as profits from installment
sales of subdivided lots, profits from sales of stocks,
dividends, rentals and interests. The said incomes
are recorded in the books of account kept by
Lorenzo T. Oña where the corresponding shares of
the petitioners in the net income for the year are
also known. Every year, petitioners returned for
income tax purposes their shares in the net income
derived from said properties and securities and/or
from transactions involving them. However,
petitioners did not actually receive their shares in
the yearly income. The income was always left in
the hands of Lorenzo T. Oña who, as heretofore
pointed out, invested them in real properties and
securities.
On the basis of the foregoing facts, respondent CIR
decided that petitioners formed an unregistered
partnership and therefore, subject to the corporate
income tax, pursuant to Section 24, in relation to
Section 84(b), of the Tax Code.
ISSUE: Whether or not the petitioners formed an
unregistered partnership.
RULING: YES. The petitioners formed an
unregistered partnership.
From the moment petitioners allowed not only the
incomes from their respective shares of the
inheritance but even the inherited properties
themselves to be used by Lorenzo T. Oña as a
common fund in undertaking several transactions or
in business, with the intention of deriving profit to be
shared by them proportionally, such act was
tantamount to actually contributing such incomes to
a common fund and, in effect, they thereby formed
an unregistered partnership within the purview of the
above-mentioned provisions of the Tax Code.
For tax purposes, the co-ownership of inherited
properties is automatically converted into an
unregistered partnership the moment the said
common properties and/or the incomes derived
therefrom are used as a common fund with intent to
produce profits for the heirs in proportion to their
respective shares in the inheritance as determined
in a project partition either duly executed in an
extrajudicial settlement or approved by the court in
the corresponding testate or intestate proceeding.
The reason for this is simple. From the moment of
such partition, the heirs are entitled 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
intervention of the other heirs, and, accordingly he
becomes liable individually for all taxes in
connection therewith. If after such partition, he
allows his share to be held in common with his co-
heirs under a single management to be used with
the intent of making profit thereby in proportion to
his share, there can be no doubt that, even if no
document or instrument were executed for the
purpose, for tax purposes, at least, an unregistered
partnership is formed. This is exactly what
happened to petitioners in this case.
When our Internal Revenue Code includes
"partnerships" among the entities subject to the tax
on "corporations", said Code must allude, therefore,
to organizations which are not necessarily
"partnerships", in the technical sense of the term.
Thus, for instance, section 24 of said Code exempts
from the aforementioned tax "duly registered
general partnerships," which constitute precisely
one of the most typical forms of partnerships in this
jurisdiction. Likewise, as defined in section 84(b) of
said Code, "the term corporation includes
partnerships, no matter how created or organized."
This qualifying expression clearly indicates that a
joint venture need not be undertaken in any of the
standard forms, or in confirmity with the usual
requirements of the law on partnerships, in order
that one could be deemed constituted for purposes
of the tax on corporation.
In connection with the assertion that, if there was an
unregistered partnership, the holding should be
limited to the business engaged in apart from the
properties inherited by petitioners. In other words,
the taxable income of the partnership should be
limited to the income derived from the acquisition
and sale of real properties and corporate securities
and should not include the income derived from the
inherited properties. It is admitted that the inherited
properties and the income derived therefrom were
used in the business of buying and selling other real
properties and corporate securities. Accordingly, the
partnership income must include not only the
income derived from the purchase and sale of other
properties but also the income of the inherited
properties.
BASTIDA VS. MENZI & Co., INC.
G.R. No. L-35840 / March 31, 1933
FACTS: The plaintiff in this case claimed that he
and the respondent entered into a partnership
contract. Hence, they were partners.
The facts state that pursuance with the contract,
plaintiff, and defendant Menzi & Co., Inc., began to
manufacture prepared fertilizers, the former
superintending the work of actual preparation, and
the latter, through defendants J.M. Menzi and P. C.
Schlobohm, managing the business and opening an
account entitled "FERTILIZERS" on the books of the
defendant Menzi & Co., Inc., where all the accounts
of the partnership business were supposed to be
kept; the plaintiff had no participation in the making
of these entries, which were wholly in the
defendants' charge, under whose orders every entry
was made.
However, according to defendant,  Menzi & CO.,
Inc., and the plaintiff entered into an employment
agreement since plaintiff represented that he had
had much experience in the mixing of fertilizers, to
superintend the mixing of the ingredients in the
manufacture of prepared fertilizers in its fertilizer
department and to obtain orders for such prepared
fertilizers subject to its approval, for a compensation
of 50 per cent of the net profits which it might derive
from the sale of the fertilizers prepared by him, and
that said Francisco Bastida worked under said
agreement until April 27, 1922, and received the
compensation agreed upon for his services.
That on the said 27th of April, 1922, the said Menzi
& Co., Inc., and the said Francisco Bastida made
and entered into the written agreement, which is
marked Exhibit A, and made a part of the amended
complaint in this case, whereby they mutually
agreed that the employment of the said Francisco
Bastida by the said Menzi & Co., Inc., in the
capacity stated, should be for a definite period of
five years from that date and under the other terms
and conditions stated therein, but with the
understanding and agreement that the said
Francisco Bastida should receive as compensation
for his said services only 35 per cent of the net
profits derived from the sale of the fertilizers
prepared by him during the period of the contract
instead of 50 per cent of such profits, as provided in
his former agreement; that the said Francisco
Bastida was found to be incompetent to do anything
in relation to its said fertilizer business with the
exception of over-seeing the mixing of the
ingredients in the manufacture of the same, and on
or about the month of December, 1922, the
defendant, Menzi & Inc., in order to make said
business successful, was obliged to and actually did
assume the full management and direction of said
business.
In its decision, the Court of First Instance of Manila
held that the contract entered into by the parties,
evidenced by Exhibit A, as a contract of general
regular commercial partnership, wherein Menzi &
Co., Inc., was the capitalist, and the plaintiff, the
industrial partner.
Unsatisfied with the outcome, Menzi & Co., Inc., one
of the defendants, appealed from a decision of the
Court of First Instance of Manila.
 ISSUE: Whether or not the defendants and plaintiff
are partners.
HELD: NO.
After considering the evidence and the arguments of
counsel, we are unanimously of the opinion that
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 co-partnership.
Exhibit A, as appears from the statement of facts,
was in effect a continuation of the verbal agreement
between the parties, whereby the plaintiff worked for
the defendant corporation for one-half of the net
profits derived by the corporation from certain
fertilizer contracts.
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, Exhibit A, and for four
years the plaintiff never made any objection.
On the contrary he approved and signed every year
the balance sheet and the profit and loss statement.
It was only when plaintiff's contract was about to
expire and the defendant corporation had notified
him that it would not renew it that the plaintiff began
to make objections.
The trial court relied on 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 a fixed salary and a small
percentage of the net profits, he was to receive 35
per cent of the net profits as compensation for his
services.
Menzi & Co., Inc., was to advanced him P300 a
month on account of his participation in the profits. It
will be noted that no provision was made for
reimbursing Menzi & Co., Inc., in case there should
be no net profits at the end of the year. It is now well
settled that the old rule that sharing profits as profits
made one a partner is overthrown. (Mechem,
second edition, p. 89.)
It is nowhere stated in Exhibit A that the parties
were establishing a partnership or intended to
become partners. Great stress in laid by the trial
judge and plaintiff's attorneys on the fact that in
the sixth paragraph of Exhibit A the phrase "en
sociedad con" is used in providing that
defendant corporation not engage in the
business of prepared fertilizers except in
association with the plaintiff (en sociedad con).
The fact is that en sociedad con as there used
merely means en reunion con or in association
with, and does not carry the meaning of "in
partnership with".
 ROJAS vs.  MAGLANA
FACTS: Maglana and Rojas executed their Articles
of Co-Partnership called Eastcoast Development
Enterprises (EDE) with only the two of them as
partners., EDE was duly registered with SEC with
an indefinite term of existence.
One of the purposes of EDE was to "apply or secure
timber and/or minor forests products licenses and
concessions over public and/or private forest lands
and to operate, develop and promote such forests
rights and concessions."
A duly registered Articles of Co-Partnership was
filed together with an application for a timber
concession covering the area located at Cateel and
Baganga, Davao with the Bureau of Forestry which
was approved and a timber license was duly issued
and became the basis of subsequent renewals
made for and in behalf of EDE.
Under the said Articles of Co-Partnership, Maglana
shall manage the business affairs of the partnership,
including marketing and handling of cash and is
authorized to sign all papers and instruments
relating to the partnership, while appellant Rojas
shall be the logging superintendent and shall
manage the logging operations of the partnership. It
is also provided in the said articles of co-partnership
that all profits and losses of the partnership shall be
divided share and share alike between the partners.
During the period from January 14, 1955 to April 30,
1956, there was no operation of said partnership.
Because of the difficulties encountered, Rojas and
Maglana decided to avail of the services of
Pahamotang as industrial partner.
Subsequently, Maglana, Rojas and Pahamotang
executed their Articles of Co-Partnership under the
same firm name EDE (the same was unregistered).
Aside from the purpose (to hold and secure renewal
of timber license) and the term (fixed to thirty (30)
years) of the second partnership, everything else is
the same with the first partnership.
The second partnership started its operation and
was, in fact, able to ship logs and realize profits.
However, later, Pahamotang, Maglana and Rojas
executed a document entitled "CONDITIONAL
SALE OF INTEREST IN THE PARTNERSHIP,
EASTCOAST DEVELOPMENT ENTERPRISE”
agreeing among themselves that Maglana and
Rojas shall purchase the interest, share and
participation in the Partnership of Pahamotang. It
was also agreed in the said instrument that after
payment to Pahamotang including the amount of
loan secured by Pahamotang in favor of the
partnership, the Maglana and Rojas shall become
the owners of all equipment contributed by
Pahamotang and EDE, the name also given to the
second partnership, be dissolved. Pahamotang was
then paid and had withdrawen from the partnership.
The partnership was continued by Maglana and
Rojas without the benefit of any written agreement
or reconstitution of their written Articles of
Partnership.
Rojas then left and abandoned the partnership as
he entered into a management contract with another
logging enterprise, the CMS Estate, Inc. He
withdrew his equipment from the partnership for use
in the newly acquired area. The equipment
withdrawn were his supposed contributions to the
first partnership and was transferred to CMS Estate,
Inc. by way of chattel mortgage.
Maglana wrote Rojas reminding the latter of his
obligation to contribute, either in cash or in
equipment, to the capital investments of the
partnership as well as his obligation to perform his
duties as logging superintendent. Rojas told
Maglana that he will not be able to comply with the
promised contributions and he will not work as
logging superintendent. Maglana then told Rojas
that the latter's share will just be 20% of the net
profits. Meanwhile, Rojas took funds from the
partnership more than his contribution. Thus, in a
letter, Maglana notified Rojas that he dissolved the
partnership.
Rojas filed an action before the CFI of Davao
against Maglana for the recovery of properties,
accounting, receivership and damages. The motion
to dismiss the complaint filed by Maglana was
denied.
Lower court: Dismissed the complaint and
rendered judgment declaring that, among others,
the nature of the partnership and the legal relations
of Maglana and Rojas after Pahamotang retired
from the second partnership to be one of a de facto
and at will
Hence, the instant appeal.
Rojas insists that the registered partnership under
the firm name of EDE has not been novated,
superseded and/or dissolved by the unregistered
articles of co-partnership among Rojas, Maglana
and Pahamotang, and accordingly, the terms and
stipulations of said registered Articles of Co-
Partnership should govern the relations between
him and Maglana; that upon withdrawal of Agustin
Pahamotang from the unregistered partnership, the
legally constituted partnership EDE continues to
govern the relations between them and it was legal
error to consider a de facto partnership between
said two partners or a partnership at will. Hence, the
letter of Maglana, did not legally dissolve the
registered partnership between them, being in
contravention of the partnership agreement agreed
upon and stipulated in their Articles of Co-
Partnership. Rather, he is entitled to the rights
enumerated in Article 1837 of the Civil Code and to
the sharing profits between them of "share and
share alike" as stipulated in the registered Articles of
Co-Partnership.
ISSUE: WON the nature of the partnership and legal
relationship of Maglana and Rojas is one of de facto
and at will.
RULING: No.
Under the circumstances, the relationship of Rojas
and Maglana after the withdrawal of Pahamotang
can neither be considered as a De Facto
Partnership, nor a Partnership at Will, for there is an
existing partnership duly registered.
After a careful study of the records as against the
conflicting claims of Rojas and Maglana, it appears
evident that it was not the intention of the
partners to dissolve the first partnership, upon
the constitution of the second one, which they
unmistakably called an "Additional Agreement."
Except for the fact that they took in one industrial
partner; gave him an equal share in the profits and
fixed the term of the second partnership to thirty (30)
years, everything else was the same. Thus, they
adopted the same name, EDE, they pursued the
same purposes and the capital contributions of
Rojas and Maglana as stipulated in both
partnerships call for the same amounts.
Just as important is the fact that all subsequent
renewals of the issued Timber License were
secured in favor of the First Partnership, the original
licensee. To all intents and purposes therefore, the
First Articles of Partnership were only amended, in
the form of Supplementary Articles of Co-
Partnership which was never registered.
Otherwise stated, even during the existence of the
second partnership, all business transactions were
carried out under the duly registered articles. As
found by the trial court, it is an admitted fact that
even up to now, there are still subsisting obligations
and contracts of the latter. No rights and obligations
accrued in the name of the second partnership
except in favor of Pahamotang which was fully paid
by the duly registered partnership.
On the other hand, there is no dispute that the
second partnership was dissolved by common
consent. Said dissolution did not affect the first
partnership which continued to exist.
Significantly, Maglana and Rojas agreed to
purchase the interest, share and participation in the
second partnership of Pahamotang and that
thereafter, the two (Maglana and Rojas) became the
owners of equipment contributed by Pahamotang.
Even more convincing, is the fact that Maglana
wrote Rojas, reminding the latter of his obligation to
contribute either in cash or in equipment, to the
capital investment of the partnership as well as his
obligation to perform his duties as logging
superintendent.
This reminder cannot refer to any other but to the
provisions of the duly registered Articles of Co-
Partnership.
As earlier stated, Rojas replied that he will not be
able to comply with the promised contributions and
he will not work as logging superintendent.
By such statements, it is obvious that Roxas
understood what Maglana was referring to and left
no room for doubt that both considered themselves
governed by the articles of the duly registered
partnership.
SARDANE vs. CA
FACTS: Private Respondent (Acojedo) brought an
action in the City Court of Dipolog for collection of a
sum of P5,217.25 based on promissory notes (PN)
executed by petitioner (Sardane) in favor of the
Acojedo. The respondent demanded the payment of
the total amount of P5,217.25. Because of the
failure of the petitioner to heed the demands
extrajudicially made by the private respondent, the
latter was constrained to bring an action for
collection of sum of money.
Petitioner contended that the PN was not his
personal debt to Acojedo but expenses between him
and appellee. The Trial court concluded that the
promissory notes involved were merely receipts for
the contributions to said partnership.
The Court of Appeals held that the promissory notes
are insufficient to prove that a partnership existed
between the private parties hereto.
Issue: Whether or not there is partnership
Held: No. The Court concurs with CA that PM’s are
insufficient proofs of a partnership.
As manager of the basnig Sarcado naturally some
degree of control over the operations and
maintenance thereof had to be exercised by herein
petitioner. The fact that he had received 50% of the
net profits does not conclusively establish that he
was a partner of the private respondent herein.
Article 1769(4) of the Civil Code is explicit that while
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, no such inference shall be drawn if
such profits were received in payment as wages of
an employee. Furthermore, herein petitioner had no
voice in the management of the affairs of the
basnig. 
There are other considerations noted by respondent
Court which negate herein petitioner's pretension
that he was a partner and not a mere employee
indebted to the present private respondent. Thus, in
an action for damages filed by herein private
respondent against the North Zamboanga Timber
Co., Inc. arising from the operations of the business,
herein petitioner did not ask to be joined as a party
plaintiff.
Also, although he contends that herein private
respondent is the treasurer of the alleged
partnership, yet it is the latter who is demanding an
accounting.
The advertence of the Court of First Instance to the
fact that the casco bears the name of herein
petitioner disregards the finding of the respondent
Court that it was just a concession since it was he
who obtained the engine used in the Sardaco from
the Department of Local Government and
Community Development. Further, the use by the
parties of the pronoun "our" in referring to "our
basnig, our catch", "our deposit", or "our boseros"
was merely indicative of the camaraderie and not
evidentiary of a partnership, between them.
CIR vs SUTER
Facts: A limited partnership, named "William J.
Suter 'Morcoin' Co., Ltd.," was formed on 30
September 1947 by William J. Suter as the general
partner, and Julia Spirig and Gustav Carlson, as the
limited partners. The partners contributed,
respectively, P20,000.00, P18,000.00 and
P2,000.00 to the partnership. On 1 October 1947,
the limited partnership was registered with the
Securities and Exchange Commission.
In 1948, general partner Suter and limited partner
Spirig got married and, thereafter, on 18 December
1948, limited partner Carlson sold his share in the
partnership to Suter and his wife. The sale was duly
recorded with the Securities and Exchange
Commission on 20 December 1948. The limited
partnership had been filing its income tax returns as
a corporation, without objection by the
Commissioner of Internal Revenue, until in 1959
when the latter, in an assessment, consolidated the
income of the firm and the individual incomes of the
partners-spouses Suter and Spirig resulting in a
determination of a deficiency income tax against
respondent Suter in the amount of P2,678.06 for
1954 and P4,567.00 for 1955. Partner-Spouses
Suter protested the assessment.
Issue: Whether or not the partnership was dissolved
after the marriage of the partners, William Suter and
Julia Spirig Suter and the subsequent sale to them
by the remaining partner, Gustav Carlson?
Ruling: NO
William J. Suter "Morcoin" Co., Ltd. was not a
universal partnership, but a particular one since the
contributions of the partners were fixed sums of
money, P20,000.00 by William Suter and
P18,000.00 by Julia Spirig and neither one of them
was an industrial partner. It follows that the firm was
not a partnership that spouses were forbidden to
enter by Article 1677 of the Civil Code of 1889 (now
Article 1782 of the New Civil Code).
Nor could the subsequent marriage of the partners
operate to dissolve it, such marriage not being one
of the causes provided for that purpose by law. The
capital contributions of partners William J. Suter and
Julia Spirig were separately owned and contributed
by them before their marriage; and after they were
joined in wedlock, such contributions remained their
respective separate property under the Spanish Civil
Code (Article 1396).
SEVILLA vs CA
FACTS: On October 19, 1960, Mrs. Segundina
Noguera and the Tourist World Service, Inc.,
represented by Mr. Eliseo Canilao entered a
contract where the latter leased the premises of the
former as a branch office.
 
In the said contract, the herein appellant Sevilla held
herself solidarily liable with Tourist World for
monthly rent. 
 
When the branch office was opened, the same was
run by the herein appellant Sevilla payable to
Tourist World Service Inc. by any airline for any fare
brought in on the efforts of Mrs. Lina Sevilla, 4%
was to go to Lina Sevilla and 3% was to be withheld
by the Tourist World Service, Inc.
 
On or about November 24, 1961, the Tourist World
Service, Inc. appears to have been informed that
Lina Sevilla was connected with a rival firm, the
Philippine Travel Bureau, and, since the branch
office was any how losing, the Tourist World Service
considered closing down its office.
This was firmed up by two resolutions of the board
of directors of Tourist World Service, Inc. dated Dec.
2, 1961, the first abolishing the office of the
manager and vice-president of the Tourist World
Service, Inc., Ermita Branch, and the second,
authorizing the corporate secretary to receive the
properties of the Tourist World Service then located
at the said branch office. 
 
It further appears that on Jan. 3, 1962, the contract
with the appellees for the use of the Branch Office
premises was terminated and while the effectivity
thereof was Jan. 31, 1962, the appellees no longer
used it. Because of this, and to comply with the
mandate of the Tourist World Service, the corporate
secretary Gabino Canilao went over to the branch
office, and, finding the premises locked, and, being
unable to contact Lina Sevilla, he padlocked the
premises on June 4, 1962 to protect the interests of
the Tourist World Service. 
When neither the appellant Lina Sevilla nor any of
her employees could enter the locked premises, a
complaint was filed by the herein appellants against
the appellees with a prayer for the issuance of
mandatory preliminary injunction. Both appellees
answered with counterclaims. 
ISSUE: Whether or not Sevilla and Tourist World
Service, Inc. were engaged in a partnership
 
HELD: The Supreme Court held that when the
petitioner, Lina Sevilla, agreed to manage Tourist
World Service, Inc.'s Ermita office, she must have
done so pursuant to a contract of agency. It is the
essence of this contract that the agent renders
services "in representation or on behalf of another.”  
In the case at bar, Sevilla solicited airline fares, but
she did so for and on behalf of her principal, Tourist
World Service, Inc. As compensation, she received
4% of the proceeds in the concept of commissions.
And as we said, Sevilla herself, based on her letter
of November 28, 1961, presumed her principal's
authority as owner of the business undertaking. 
The Court is convinced that the ties had
contemplated a principal-agent relationship, rather
than a joint management or a partnership.

SUNGA-CHAN VS. LAMBERTO CHUA
FACTS: Lamberto T. Chua (hereafter respondent)
filed a complaint against Lilibeth Sunga Chan
(hereafter petitioner Lilibeth) and Cecilia Sunga
(hereafter petitioner Cecilia), daughter and wife of
the deceased Jacinto L. Sunga (hereafter Jacinto),
for "Winding Up of Partnership Affairs, Accounting,
Appraisal and Recovery of Shares”
In 1977, he verbally entered into a partnership with
Jacinto in the distribution of Shellane Liquefied
Petroleum Gas (LPG) in Manila, named as “shellite
gas appliance center”, under the name of Jacinto as
a sole proprietorship.
Chua delivered his contribution at 100,000, while
Jacinto also contributed the same amount, with the
intention that the profits would be equally divided
between them. The partnership allegedly had
Jacinto as manager, assisted by Josephine Sy
(hereafter Josephine), a sister of the wife
respondent, Erlinda Sy. As compensation, Jacinto
would receive a manager's fee or remuneration of
10% of the gross profit and Josephine would receive
10% of the net profits, in addition to her wages and
other remuneration from the business.
While Jacinto furnished respondent with the
merchandise inventories, balance sheets and net
worth of Shellite from 1977 to 1989, respondent
however suspected that the amount indicated in
these documents were understated and
undervalued by Jacinto and Josephine for their own
selfish reasons and for tax avoidance.
Upon Jacinto's death in the later part of 1989, his
surviving wife, petitioner Cecilia and particularly his
daughter, petitioner Lilibeth, took over the
operations, control, custody, disposition and
management of Shellite without respondent's
consent. Despite respondent's repeated demands
upon petitioners for accounting, inventory, appraisal,
winding up and restitution of his net shares in the
partnership, petitioners failed to comply. Petitioner
Lilibeth allegedly continued the operations of
Shellite, converting to her own use and advantage
its properties.
On January 30, 1993, petitioners filed their Answer
with Compulsory Counter-claims, contending that
they are not liable for partnership shares,
unreceived income/profits, interests, damages and
attorney's fees
ISSUE: Whether or not a partnership may only be
shown and established through a written document,
so as to render inadmissible the testimonies of
respondent and his witness proving the existence of
partnership, inadmissible
RULING: No.
A partnership may be constituted in any form,
except where immovable property of real rights
are contributed thereto, in which case a public
instrument shall necessary.
Hence, based on the intention of the parties, as
gathered from the facts and ascertained from their
language and conduct, a verbal contract of
partnership may arise. The essential profits that
must be proven to that a partnership was agreed
upon are (1) mutual contribution to a common stock,
and (2) a joint interest in the profits.
Understandably so, in view of the absence of the
written contract of partnership between respondent
and Jacinto, respondent resorted to the introduction
of documentary and testimonial evidence to prove
said partnership.
The crucial issue to settle then is to whether or not
the "Dead Man's Statute" applies to this case so as
to render inadmissible respondent's testimony and
that of his witness, Josephine.
The "Dead Man's Statute" provides that if one party
to the alleged transaction is precluded from
testifying by death, insanity, or other mental
disabilities, the surviving party is not entitled to the
undue advantage of giving his own uncontradicted
and unexplained account of the transaction. But
before this rule can be successfully invoked to bar
the introduction of testimonial evidence, it is
necessary that:
1. The witness is a party or assignor of a party to
case or persons in whose behalf a case in
prosecuted.
2. The action is against an executor or administrator
or other representative of a deceased person or a
person of unsound mind;
3. The subject-matter of the action is a claim or
demand against the estate of such deceased person
or against person of unsound mind;
4. His testimony refers to any matter of fact of which
occurred before the death of such deceased person
or before such person became of unsound mind."
Two reasons forestall the application of the "Dead
Man's Statute" to this case.
First, petitioners filed a compulsory counterclaim
against respondents in their answer before the trial
court, and with the filing of their counterclaim,
petitioners themselves effectively removed this case
from the ambit of the "Dead Man's Statute". Well
entrenched is the rule that when it is the executor or
administrator or representatives of the estates that
sets up the counterclaim, the plaintiff, herein
respondent, may testify to occurrences before the
death of the deceased to defeat the counterclaim.
Moreover, as defendant in the counterclaim,
respondent is not disqualified from testifying as to
matters of facts occurring before the death of the
deceased, said action not having been brought
against but by the estate or representatives of the
deceased.
Second, the testimony of Josephine is not covered
by the "Dead Man's Statute" for the simple reason
that she is not "a party or assignor of a party to a
case or persons in whose behalf a case is
prosecuted." Records show that respondent offered
the testimony of Josephine to establish the
existence of the partnership between respondent
and Jacinto. Petitioners' insistence that Josephine is
the alter ego of respondent does not make her an
assignor because the term "assignor" of a party
means "assignor of a cause of action which has
arisen, and not the assignor of a right assigned
before any cause of action has arisen." Plainly then,
Josephine is merely a witness of respondent, the
latter being the party plaintiff.
We are not convinced by petitioners' allegation that
Josephine's testimony lacks probative value
because she was allegedly coerced coerced by
respondent, her brother-in-law, to testify in his favor,
Josephine merely declared in court that she was
requested by respondent to testify and that if she
were not requested to do so she would not have
testified. We fail to see how we can conclude from
this candid admission that Josephine's testimony is
involuntary when she did not in any way
categorically say that she was forced to be a
witness of respondent.
Also, the fact that Josephine is the sister of the wife
of respondent does not diminish the value of her
testimony since relationship per se, without more,
does not affect the credibility of witnesses.
Petitioners' reliance alone on the "Dead Man's
Statute" to defeat respondent's claim cannot prevail
over the factual findings of the trial court and the
Court of Appeals that a partnership was established
between respondent and Jacinto. Based not only on
the testimonial evidence, but the documentary
evidence as well, the trial court and the Court of
Appeals considered the evidence for respondent as
sufficient to prove the formation of partnership,
albeit an informal one.
Re prescription: No prescription. the action for
accounting filed by respondents three (3) years after
Jacinto's death was well within the prescribed
period.
The Civil Code provides that an action to enforce an
oral contract prescribes in six (6) years   while the
right to demand an accounting for a partner's
interest as against the person continuing the
business accrues at the date of dissolution, in the
absence of any contrary agreement.
Considering that the death of a partner results in the
dissolution of the partnership, in this case, it was
Jacinto's death that respondent as the surviving
partner had the right to an account of his interest as
against petitioners.
It bears stressing that while Jacinto's death
dissolved the partnership, the dissolution did not
immediately terminate the partnership.
The Civil Code expressly provides that upon
dissolution, the partnership continues and its legal
personality is retained until the complete winding up
of its business, culminating in its termination.
J. TIOSEJO INVESTMENT CORP. vs.
SPOUSES ANG
Facts:
December 28, 1995 – J Tiosejo Investment Corp.
entered into Joint Venture Agreement (JVA) with
Primetown Property Group, Inc. (PPGI).
Purpose: for the development of a residential
condominium project (The Meditel)
Where? / Subject Property: on the J Tiosejo
Investment Corp’s 9,502 square meter property
along Samat St., Highway Hills, Mandaluyong
City.
The provisions of the JVA are as follows:
   J Tiosejo Investment Corp. (JTIC)
contributes their property to the joint venture
  Primetown Property Group, Inc. (PPGI)
undertaking to develop the condominium
 The developed units shall be shared by
JTIC and PPGI at a ratio of 17%-83%,
respectively.
While both parties were allowed, at their own
individual responsibility, to pre-sell the units
pertaining to them, PPGI further undertook to use all
proceeds from the pre-selling of its saleable units for
the completion of the Condominium Project.”
June 17, 1996 – Housing and Land Use Regulatory
Board (HLURB) issued License to Sell No. 96-06-
2854 in favor of JTIC and PPGI as project owners.
February 5, 1997 – By virtue of the HLURB License
to sell, PPGI executed Contracts to Sell with
Spouses Benjamin and Eleanor Ang.
 Subject Properties: 
1. Contract to Sell No. 0212: 35.45-square
meter condominium unit denominated as
Unit A-1006, for the agreed contract price
of P52,597.88 per square meter or a total
P2,077,334.25.
 
2. Contract to Sell No. 0214: 12.50 square
meter parking space identified as Parking
Slot No. 0405, for the stipulated
consideration of P26,400.00 square meters
or a total of P313,500.00.
February 5, 1997 - Sps. Ang filed against JTIC and
PPGI the complaint for the rescission of the
aforesaid Contracts to Sell docketed before the
HLURB as HLURB Case No. REM 072199-10567.
          Contentions:
 they were assured by JTIC and PPGI that
the subject condominium unit and parking
 space would be available for turn-over and
occupancy in December 1998
 In view of the non-completion of the project
according to said representation, Sps. Ang
instructed JTIC and PPGI to stop depositing
the post-dated checks they issued and to
cancel said Contracts to Sell; and
 despite several demands, petitioner and
PPGI have failed and refused to refund the
P611,519.52 they already paid under the
circumstances.
 
Prayers:
 refund of said amount and interests thereon
at the rate of 12% per annum
 
 grant of their claims for moral and
exemplary damages as well as attorney’s
fees and the costs.
 September 7, 1999 – PPGI denied the material
allegation of Sps. Ang’s complaint.
 Contentions:
 delay in the completion of the project was
attributable to the economic crisis which
affected the country at the time;
 that the unexpected and unforeseen
inflation as well as increase in interest rates
and cost of building materials constitute
force majeure and were beyond its control;
 They offered several alternatives to its
buyers like respondents for a transfer of
their investment to its other feasible projects
and for the amounts they already paid to be
considered as partial payment for the
replacement unit/s; and,
   that the complaint was prematurely filed in
view of the on-going negotiations it is
undertaking with its buyers and prospective
joint venture partners.
Prayers:
 ü  dismissal of the complaint,
 ü  readjustment of the contract price
 ü  grant of its counterclaims for attorney’s
fees and litigation expenses.
5 February 2002, amended 20 May 2002  - JTIC
specifically denied the material allegations of the
complaint in separate answer.
Contentions:
  its prestation under the JVA consisted in
contributing the property on which The
Meditel was to be constructed,
   by the terms of the JVA, each party was
individually responsible for the marketing
and sale of the units pertaining to its share;
   that not being privy to the Contracts to Sell
executed by PPGI and Sps. Ang, it did not
receive any portion of the payments made
by the latter; and,
  without any contributory fault and
negligence on its part, PPGI breached its
undertakings under the JVA by failing to
complete the condominium project.
 Prayers:
  dismissal of the complaint
  grant of its counterclaims for exemplary
damages, attorney’s fees, litigation
expenses and the costs
 full reimbursement of any sum it may be
adjudged liable to pay respondents (JTIC
interposed a cross-claim against PPGI for
this)
July 30, 2003 – HLURB Arbiter San Vicente
declared the subject Contracts to Sell cancelled and
rescinded on account of the non-completion of the
condominium project.
JTIC and PPGI (as co-owners of the condo project;
their JVA created a partnership liability), were
ordered to pay:
 a) Sps. Ang’s claim for refund of the
P611,519.52 they paid, with interest at the rate of
12% per annum from 5 February 1997;
b)  damages in the sum of P75,000.00;
c) attorney’s fees in the sum of P30,000.00;
d) the costs; and,
e) an administrative fine in the sum of P10,000.00 for
violation of Sec. 20 in relation to Sec. 38 of
Presidential Decree No. 957.
September 14, 2003 - The HLURB Board of
Commissioners (2nd division) modified HLURB
Arbiter’s decision to grant JTIC’s cross-claim, to wit:
“xxx
Ordering respondent Primetown to reimburse the
entire amount which the respondent Corporation will
be constrained to pay the complainants.
Xxx”
Motion for reconsideration was denied.
February 28, 2005 – JTIC filed a Notice of Appeal,
docketed before the Office of the President.
March 3, 2005 -  The Office of the President issued
an order directing petitioner to submit its appeal
memorandum within 15 days from receipt thereof.
March 3, 2005- March 28, 2005 – The OP granted
several extensions to JTIC to file their appeal
memorandum. Sps. Ang filed their opposition on
April 7, 2005.
October 25, 2005 - the OP rendered a decision
dismissing JTIC’s appeal
  the latter’s appeal memorandum was filed
out of time
  
HLURB Board committed no grave abuse
of discretion in rendering the appealed
decision.
May 23, 2006 - CA issued the herein assailed
resolution.
JTIC’s motion denied for being filed late. Motion for
reconsideration was denied for lack of merit
 ISSUE:
1.     WON CA ERRED IN AFFIRMING THE
HLURB BOARD’S DECISION INSOFAR AS IT
FOUND JTIC SOLIDARILY LIABLE WITH
PRIMETOWN TO PAY SPOUSES ANG
DAMAGES, ATTORNEY’S FEES AND THE
COST OF THE SUIT
RULING:  HLURB Arbiter and Board correctly
held JTIC liable alongside PPGI for Sps. Ang’s
claims & the HLURB administrative fine.
By the express terms of the JVA, it appears that
JITC not only retained ownership of the property
pending completion of the condominium project but
had also bound itself to answer liabilities
proceeding from contracts entered into by PPGI
with third parties.
Article VIII, Section 1 of the JVA distinctly
provides as follows:
“Section 1. Rescission and damages.—Non-
performance by either party of its obligations
under this Agreement shall be excused when the
same is due to Force Majeure.
 Xxx
In any case, the Owner shall respect and strictly
comply with any covenant entered into by the
Developer and third parties with respect to any of its
units in the Condominium Project.
Xxx
 Petitioner cannot avoid liability by claiming
that it was not in any way privy to the Contracts
to Sell executed by PPGI and respondents.
 A joint venture is considered in this jurisdiction as
a form of partnership and is, accordingly,
governed by the law of partnerships.
under Article 1824 of the Civil Code of the
Philippines, all partners are solidarily liable with
the partnership for everything chargeable to the
partnership, including loss or injury caused to a
third person or penalties incurred due to any
wrongful act or omission of any partner acting in the
ordinary course of the business of the partnership or
with the authority of his co-partners.
Whether innocent or guilty, all the partners are
solidarily liable with the partnership itself.
LIM TONG LIM vs. PHILIPPINE FISHING GEAR
INDUSTRIES, INC.
FACTS: On behalf of "Ocean Quest Fishing
Corporation," Antonio Chua and Peter Yao entered
into a Contract for the purchase of fishing nets of
various sizes from the Philippine Fishing Gear
Industries, Inc. (herein respondent). They claimed
that they were engaged in a business venture with
Petitioner Lim Tong Lim, who however was not a
signatory to the agreement. The total price of the
nets amounted to P532,045. Four hundred pieces of
floats worth P68,000 were also sold to the
Corporation.
The buyers, however, failed to pay for the fishing
nets and the floats; hence, private respondents filed
a collection suit against Chua, Yao and Petitioner
Lim Tong Lim. The suit was brought against the
three in their capacities as general partners.
Both RTC and CA ruled that Chua, Yao and Lim, as
general partners, were jointly liable to pay
respondent. RTC ruled that there was partnership
based on the compromise agreement. CA held that
all the defendants including herein appellant Lim
Tong Lim undertook a partnership for a specific
undertaking, that is for commercial fishing.
Obviously, the ultimate undertaking of the
defendants was to divide the profits among
themselves which is what a partnership essentially
is.
Petitioner disclaims any direct participation in the
purchase of the nets, alleging that the negotiations
were conducted by Chua and Yao only, and that he
has not even met the representatives of the
respondent company. Petitioner further argues that
he was a lessor, not a partner.
ISSUE: Whether by their acts, Lim, Chua and Yao
could be deemed to have entered into a partnership.
RULING: Yes. A partnership may be deemed to
exist among parties who agree to borrow money to
pursue a business and to divide the profits or losses
that may arise therefrom, even if it is shown that
they have not contributed any capital of their own to
a "common fund." Their contribution may be in the
form of credit or industry, not necessarily cash or
fixed assets. Being partner, they are all liable for
debts incurred by or on behalf of the partnership.
The liability for a contract entered into on behalf of
an unincorporated association or ostensible
corporation may lie in a person who may not have
directly transacted on its behalf, but reaped benefits
from that contract.
It is clear that Chua, Yao and Lim had decided to
engage in a fishing business, which they started by
buying boats worth P3.35 million, financed by a loan
secured from Jesus Lim who was petitioner's
brother. In their Compromise Agreement, they
subsequently revealed their intention to pay the loan
with the proceeds of the sale of the boats, and to
divide equally among them the excess or loss.
These boats, the purchase and the repair of which
were financed with borrowed money, fell under the
term "common fund" under Article 1767. The
contribution to such fund need not be cash or fixed
assets; it could be an intangible like credit or
industry. That the parties agreed that any loss or
profit from the sale and operation of the boats would
be divided equally among them also shows that they
had indeed formed a partnership.
Moreover, it is clear that the partnership extended
not only to the purchase of the boat, but also to that
of the nets and the floats. The fishing nets and the
floats, both essential to fishing, were obviously
acquired in furtherance of their business. It would
have been inconceivable for Lim to involve himself
so much in buying the boat but not in the acquisition
of the aforesaid equipment, without which the
business could not have proceeded.
PAUL MACDONALD, ET. AL. VS. THE NATIONAL
CITY BANK OF NEW YORK
FACTS: “STASIKINOCEY is a partnership doing
business at No. 58, Aurora Boulevard, San Juan,
Rizal, and formed by Alan W. Gorcey, Louis F. da
Costa, Jr., William Kusik and Emma Badong
Gavino. This partnership was denied registration in
the Securities and Exchange Commission, and
while it is confusing to see in this case that the
CARDINAL RATTAN, sometimes called the
CARDINAL RATTAN FACTORY, is treated as a
copartnership, of which Defendants Gorcey and da
Costa are considered general partners, as alleged in
various instruments appearing of record, said
Cardinal Rattan is merely the business name or
style used by the partnership Stasikinocey.
“Prior to June 3, 1949, Defendant Stasikinocey had
an overdraft account with The National City Bank of
New York, a foreign banking association duly
licensed to do business in the Philippines. On June
3, 1949, the overdraft showed a balance of
P6,134.92 against the Defendant Stasikinocey or
the Cardinal Rattan, which account, due to the
failure of the partnership to make the required
payment, was converted into an ordinary loan for
which the corresponding promissory ‘joint note non-
negotiable’ was executed on June 3, 1949, by Louis
F. da Costa for and in the name of the Cardinal
Rattan, Louis F. da Costa and Alan Gorcey . This
promissory note was secured on June 7, 1949, by a
chattel mortgage executed by Louis F. da Costa, Jr.,
General Partner for and in the name of
Stasikinocey, alleged to be a duly registered
Philippine partnership, doing business under the
name and style of Cardinal Rattan, with principal
office at 69 Riverside, San Juan, Rizal.
During the subsistence of the loan, transfers were
made by the partnership Stasikinocey to William
Shaeffer, from the latter to Paul McDonald, and from
Paul McDonald to Benjamin Gonzales, of the
vehicles previously pledged by Stasikinocey to the
respondent. Respondent bank, upon learning these,
filed an action against Stasikinocey and its alleged
partners Gorcey and Da Costa, as well as Paul
McDonald and Benjamin Gonzales, to recover its
credit and to foreclose the corresponding chattel
mortgage. McDonald and Gonzales were made
Defendants because they claimed to have a better
right over the pledged vehicle.
After trial the Court of First Instance of Manila
rendered judgment in favor of the Respondent,
annulling the sale of the vehicles in question to
Benjamin Gonzales.
Only Paul McDonald and Benjamin Gonzales
appealed to the Court of Appeals which decided in
favor of Appellant William Shaeffer, with Alan W.
Gorcey and Louis F. da Costa, Jr., Thus this appeal
by certiorari.
ISSUE/S: 
1. WON an unregistered commercial
partnership having no juridical personality
can have a domicile so that the registration
of a chattel mortgage therein is notice to the
world
2. Does only one of several ‘partners’ of an
unregistered commercial partnership have
authority, by himself alone, to execute a
valid chattel mortgage over property owned
by the unregistered commercial
partnership?
RULING: 
1. YES
While an unregistered commercial partnership has
no juridical personality, nevertheless, where two or
more persons attempt to create a partnership failing
to comply with all the legal formalities, the law
considers them as partners and the association is a
partnership in so far as it is a favorable to third
persons, by reason of the equitable principle of
estoppel. In Jo Chung Chang vs. Pacific
Commercial Co., it was held “that although the
partnership with the firm name of ‘Teck Seing and
Co. Ltd.,’ could not be regarded as a partnership de
jure, yet with respect to third persons it will be
considered a partnership with all the consequent
obligations for the purpose of enforcing the rights of
such third persons.” Da Costa and Gorcey cannot
deny that they are partners of the partnership
Stasikinocey, because in all their transactions with
the Respondent they represented themselves as
such. Petitioner McDonald cannot disclaim
knowledge of the partnership Stasikinocey because
he dealt with said entity in purchasing two of the
vehicles in question through Gorcey and Da Costa.
As was held in Behn Meyer & Co. vs. Rosatzin,
where a partnership not duly organized has been
recognized as such in its dealings with certain
persons, it shall be considered as “partnership by
estoppel” and the persons dealing with it are
estopped from denying its partnership existence.
The sale of the vehicles in question being void as to
Petitioner McDonald, the transfer from the latter to
Petitioner Benjamin Gonzales is also void, as the
buyer cannot have a better right than the seller.
It results that if the law recognizes a defectively
organized partnership as de facto as far as third
persons are concerned, for purposes of its de facto
existence it should have such attribute of a
partnership as domicile. In Hung-Man Yoc vs.
Kieng-Chiong-Seng, it was held that although “it has
no legal standing, it is a partnership de facto and the
general provisions of the Code applicable to all
partnerships apply to it.” The registration of the
chattel mortgage in question with the Office of the
Register of Deeds of Rizal, the residence or place of
business of the partnership Stasikinocey being San
Juan, Rizal, was therefore in accordance with
section 4 of the Chattel Mortgage Law.
2. YES
In view of the conclusion that Stasikinocey is a de
facto partnership, and Da Costa appears as a co-
manager in the letter of Gorcey to the Respondent
and in the promissory note executed by Da Costa,
and that even the partners considered him as such,
as stated in the affidavit of April 21, 1948, to the
effect that “That we as the majority partners hereby
agree to appoint Louis da Costa co-managing
partner of Alan W. Gorcey, duly approved managing
partner of the said firm,” the “partner” who executed
the chattel mortgage in question must be deemed to
be so fully authorized. Section 6 of the Chattel
Mortgage Law provides that when a partnership is a
party to the mortgage, the affidavit may be made
and subscribed by one member thereof. In this case
the affidavit was executed and subscribed by Da
Costa, not only as a partner but as a managing
partner.
E. S. LYONS vs. C. W. ROSENSTOCK
FACTS: Then an action was instituted in the Court
of First Instance of the City of Manila, by E. S. Lyons
against C. W. Rosenstock, as executor of the estate
of H. W. Elser, deceased, consequent upon the
taking of an appeal by the executor from the
allowance of the claim sued upon by the committee
on claims in said estate. The purpose of the action
is to recover four hundred forty-six and two thirds
shares of the stock of J. K. Pickering & Co., Ltd.,
together with the sum of about P125,000,
representing the dividends which accrued on said
stock prior to October 21, 1926, with lawful interest.
Prior to his death, Henry W. Elser had been a
resident of the City of Manila where he was
engaged during the years with which we are here
concerned in buying, selling, and administering real
estate. In several ventures which he had made in
buying and selling property of this kind the plaintiff,
E. S. Lyons, had joined with him, the profits being
shared by the two in equal parts.  
In the spring of 1920 the attention of Elser was
drawn to a piece of land, containing about 1,500,000
square meters, near the City of Manila, and he
discerned therein a fine opportunity for the
promotion and development of a suburban
improvement. This property, which will be herein
referred to as the San Juan Estate, was offered by
its owners for P570,000. To afford a little time for
maturing his plans, Elser purchased an option on
this property for P5,000, and when this option was
about to expire without his having been able to raise
the necessary funds, he paid P15,000 more for an
extension of the option, with the understanding in
both cases that, in case the option should be
exercised, the amounts thus paid should be credited
as part of the first payment. The amounts paid for
this option and its extension were supplied by Elser
entirely from his own funds. In the end he was able
from his own means, and with the assistance which
he obtained from others, to acquire said estate. The
amount required for the first payment was
P150,000, and as Elser had available only about
P120,000, including the P20,000 advanced upon the
option, it was necessary to raise the remainder by
obtaining a loan for P50,000.
To complete the remainder, Elser obtained the loan
of P50,000 from lender, Uy Siuliong. Uy Siuliong,
insisted that he should procure the signature of the
Fidelity & Surety Co. on the note to be given for said
loan. But before signing the note with Elser and his
associates, the Fidelity & Surety Co. insisted upon
having security for the liability thus assumed by it.
To meet this requirements Elser mortgaged to the
Fidelity & Surety Co. the equity of redemption in the
property owned by himself and Lyons on Carriedo
Street.
The financing of the purchase of the San Juan
Estate, apart from the modest financial participation
of his three associates in the San Juan deal, was
the work of Elser accomplished entirely upon his
own account.
The case for the plaintiff supposes that, when Elser
placed a mortgage for P50,000 upon the equity of
redemption in the Carriedo property, Lyons, as half
owner of said property, became, as it were,
involuntarily the owner of an undivided interest in
the property acquired partly by that money; and it is
insisted for him that, in consideration of this fact, he
is entitled to the four hundred forty-six and two-
thirds shares of J. K. Pickering & Company, with the
earnings thereon, as claimed in his complaint.
Upon hearing the cause the trial court absolved the
defendant executor from the complaint, and the
plaintiff appealed.
ISSUE: Whether or not Lyons, as half owner of
Carredo property, became, as it were, involuntarily
the owner of an undivided interest in the acquired
property.  
RULING: In the purely legal aspect of the case, the
position of the appellant is, in our opinion,
untenable. If Elser had used any money actually
belonging to Lyons in this deal, he would under
article 1724 of the Civil Code and article 264 of the
Code of Commerce, be obligated to pay interest
upon the money so applied to his own use. Under
the law prevailing in this jurisdiction a trust does not
ordinarily attach with respect to property acquired by
a person who uses money belonging to another
(Martinez vs. Martinez, 1 Phil., 647; Enriquez vs.
Olaguer, 25 Phil., 641.). Of course, if an actual
relation of partnership had existed in the money
used, the case might be difference; and much
emphasis is laid in the appellant's brief upon the
relation of partnership which, it is claimed, existed.
But there was clearly no general relation of
partnership, under article 1678 of the Civil Code. It
is clear that Elser, in buying the San Juan Estate,
was not acting for any partnership composed of
himself and Lyons, and the law cannot be distorted
into a proposition which would make Lyons a
participant in this deal contrary to his express
determination.
It seems to be supposed that the doctrines of equity
worked out in the jurisprudence of England and the
United States with reference to trust supply a basis
for this action. The doctrines referred to operate,
however, only where money belonging to one
person is used by another for the acquisition of
property which should belong to both; and it takes
but little discernment to see that the situation here
involved is not one for the application of that
doctrine, for no money belonging to Lyons or any
partnership composed of Elser and Lyons was in
fact used by Elser in the purchase of the San Juan
Estate. Of course, if any damage had been caused
to Lyons by the placing of the mortgage upon the
equity of redemption in the Carriedo property,
Elser's estate would be liable for such damage. But
it is evident that Lyons was not prejudice by that act.
The appellee insist that the trial court committed
error in admitting the testimony of Lyons upon
matters that passed between him and Elser while
the latter was still alive. While the admission of this
testimony was of questionable propriety, any error
made by the trial court on this point was error
without injury, and the determination of the question
is not necessary to this decision. We therefore pass
the point without further discussion.
The judgment appealed from will be affirmed, and it
is so ordered, with costs against the appellant.
TORRES vs CA
FACTS: Sisters Antonia Torres and Emeteria Baring
(petitioners) entered into a "joint venture agreement"
with Manuel Torres (respondent) for the
development of a parcel of land into a subdivision.
Pursuant thereto, they executed a Deed of Sale
covering the said parcel of land in favor of the
respondent, who then had it registered in his name.
By mortgaging the property, respondent obtained
from Equitable Bank a loan which, under the Joint
Venture Agreement, 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.
According to petitioners, the project failed because
of “respondent’s lack of funds or means and skills."
They add that respondent used the loan not for the
development of the subdivision, but in furtherance of
his own company, Universal Umbrella Company.
On the other hand, respondent alleged that he used
the loan to implement the Agreement. With the said
amount, he was able to effect the survey and the
subdivision of the lots. He secured the Lapu Lapu
City Council's approval of the subdivision project
which he advertised in a local newspaper. He also
caused the construction of roads, curbs and gutters.
Likewise, he entered into a contract with an
engineering firm for the building of sixty low-cost
housing units and actually even set up a model
house on one of the subdivision lots. Respondent
claimed that the subdivision project failed, however,
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. Despite his
requests, petitioners refused to cause the clearing of
the claims, thereby forcing him to give up on the
project.
Thereafter, they filed the present civil case which,
upon respondent's motion, was later dismissed by
the trial court. On appeal, however, the appellate
court remanded the case for further proceedings.
Thereafter, the RTC dismissed the complaint. In
affirming the trial court, the Court of Appeals 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.
Hence, this Petition.
Petitioners deny having formed a partnership with
respondent. They contend that the Joint Venture
Agreement and the earlier Deed of Sale, both of
which were the bases of the appellate court's finding
of a partnership, were void. In the same breath,
however, they assert that under those very same
contracts, respondent is liable for his failure to
implement the project. Because the agreement
entitled them to receive 60 percent of the proceeds
from the sale of the subdivision lots, they pray that
respondent pay them damages equivalent to 60
percent of the value of the property. 9
ISSUE: WON the transaction between the
petitioners and respondent was that of a joint
venture/partnership.
RULING: Yes. The transaction between the
petitioners and respondent was that of a joint
venture/partnership.
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
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.  of Property, and their contribution cannot prejudice
It should be stressed that the parties implemented
the contract. Thus, petitioners transferred the title to
the land to facilitate its use in the name of the
respondent. On the other hand, respondent caused
the subject land to be mortgaged, the proceeds of
which were used for the survey and the subdivision
of the land. As noted earlier, he developed the
roads, the curbs and the gutters of the subdivision
and entered into a contract to construct low-cost
housing units on the property.
Respondent's actions clearly belie petitioners'
contention that he made no contribution to the
partnership. Under Article 1767 of the Civil Code, a
partner may contribute not only money or property,
but also industry.
Under Article 1315 of the Civil Code, contracts bind
the parties not only to what has been expressly
stipulated, but also to all necessary consequences
thereof. Courts are not authorized to extricate
parties from the necessary consequences of their
acts, and the fact that the contractual stipulations
may turn out to be financially disadvantageous will
not relieve parties thereto of their obligations. They
cannot now disavow the relationship formed from
such agreement due to their supposed
misunderstanding of its terms.
Petitioners argue that the Joint Venture Agreement
is void under Article 1773 of the Civil Code. They
contend that since the parties did not make, sign or
attach to the public instrument an inventory of the
real property contributed, the partnership is void.
We clarify. 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, 12 "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
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. 13 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.
Petitioners also contend that the Joint Venture
Agreement is void under Article 1422 14 of the Civil
Code, because it is the direct result of an earlier
illegal contract, which was for the sale of the land
without valid consideration.
This argument is puerile. The Joint Venture
Agreement clearly states that the consideration for
the sale was the expectation of profits from the
subdivision project. Its first stipulation states that
petitioners did not actually receive payment for the
parcel of land sold to respondent. Consideration,
more properly denominated as cause, can take
different forms, such as the prestation or promise of
a thing or service by another. 15
In this case, the cause of the contract of sale
consisted not in the stated peso value of the land,
but in the expectation of profits from the subdivision
project, for which the land was intended to be used.
As explained by the trial court, "the land was in
effect given to the partnership as [petitioner's]
participation therein. . . . There was therefore a
consideration for the sale, the [petitioners] acting in
the expectation that, should the venture come into
fruition, they [would] get sixty percent of the net
profits."
AGUILA VS. CA
Facts: In April 1991, the spouses Ruben and
Felicidad Abrogar entered into a loan agreement
with a lending firm called A.C. Aguila & Sons, Co., a
partnership. The loan was for P200k. To secure the
loan, the spouses mortgaged their house and lot
located in a subdivision. The terms of the loan
further stipulates that in case of non-payment, the
property shall be automatically appropriated to the
partnership and a deed of sale be readily executed
in favor of the partnership. She does have a 90 day
redemption period.Ruben died, and Felicidad failed
to make payment. She refused to turn over the
property and so the firm filed an ejectment case
against her (wherein she lost). She also failed to
redeem the property within the period stipulated.
She then filed a civil case against Alfredo Aguila,
manager of the firm, seeking for the declaration of
nullity of the deed of sale. The RTC retained the
validity of the deed of sale. The Court of Appeals
reversed the RTC. The CA ruled that the sale is void
for it is a pactum commissorium sale which is
prohibited under Art. 2088 of the Civil Code (note
the disparity of the purchase price, which is the loan
amount, with the actual value of the property which
is after all located in a subdivision
Issue: Whether or not Aguila Jr. is the real party in
interest?
Ruling: Aguila Jr. is not the real party in interest.
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.10 In this case, private respondent
has not shown that A.C. Aguila & Sons, Co., as a
separate juridical entity, is being used for fraudulent,
unfair, or illegal purposes. Moreover, the title to the
subject property is in the name of A.C. Aguila &
Sons, Co. and the Memorandum of Agreement was
executed between private respondent, with the
consent of her late husband, and A. C. Aguila &
Sons, Co., represented by petitioner. Hence, it is the
partnership, not its officers or agents, which should
be impleaded in any litigation involving property
registered in its name. A violation of this rule will
result in the dismissal of the complaint.11 We
cannot understand why both the Regional Trial
Court and the Court of Appeals sidestepped this
issue when it was squarely raised before them by
petitioner.
Our conclusion that 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.
Rufino Tan vs Del Rosario
GR No. 109289 October 3, 1994
xxx
Carag vs Del Rosario
G.R. No. 109446 October 3, 1994
FACTS: These two consolidated special civil actions
for prohibition challenge, in G.R. No. 109289, the
constitutionality of Republic Act No. 7496, also
commonly known as the Simplified Net Income
Taxation Scheme ("SNIT"), amending certain
provisions of the National Internal Revenue Code
and, in G.R. No. 109446, the validity of Section 6,
Revenue Regulations No. 2-93, promulgated by
public respondents pursuant to said law. The
petitioners in both cases claim to be taxpayers
adversely affected by the continued implementation
of the amendatory legislation.  There is no distinction in income tax liability between
In the first case, petitioners posit that RA 7496 is
unconstitutional as it allegedly violates certain
provisions of the Constitution. They also contends
that the title of HB 34314, progenitor of RA 7496, is
deficient for being merely entitled, "Simplified Net
Income Taxation Scheme for the Self-Employed
and Professionals Engaged in the Practice of their
Profession" when the full text of the title actually
reads, 'An Act Adopting the Simplified Net Income
Taxation Scheme For The Self-Employed and
Professionals Engaged In The Practice of Their
Profession, Amending Sections 21 and 29 of the
National Internal Revenue Code,' as amended.
Petitioners also contend it violated due process.  the context of, and so legally contemplated as,
 
In the second case, the petitioners contended that
public respondents exceeded their rule-making
authority in applying SNIT to general professional
partnerships.
 
The Solicitor General espouses the position taken
by the public respondents.
 
ISSUE: Whether or not RA 7496 and RR Nos. 2-93
are unconstitutional.
 
HELD: No. RA 7496 does not impose tax on single
proprietorships and professionals differently from
the manner it imposes the tax on corporations and
partnerships. Such system of income taxation has
long been the prevailing rule even prior to RA 7496.
Uniformity of taxation merely requires that all
subjects or objects of taxation, similarly situated, are
to be treated alike both in privileges and liabilities.
 
Also, the Court clarifies that a general professional
partnership is not itself an income taxpayer. The
income tax is imposed not on the professional
partnership, which is tax exempt, but on the partners
themselves in their individual capacity computed on
their distributive shares of partnership profits as
provided in Section 23 of the Tax Code.
 
a person who practices his profession alone or
individually and one who does it through partnership
with others in the exercise of a common profession.
Under the present income tax system all individuals
deriving income from any source whatsoever are
treated in almost invariably the same manner and
under a common set of rules.
 
The phrase "income taxpayers" is an all embracing
term used in the Tax Code, and it practically covers
all persons who derive taxable income. Partnerships
no matter how created or organized, are subject to
income tax which, for purposes of the above
categorization, are by law assimilated to be within
corporations.
 
Section 6 of Revenue Regulation No. 2-93 did not
alter, but merely confirmed, the above standing rule
as now modified by Republic Act No. 7496 on
basically the extent of allowable deductions
applicable to all individual income taxpayers on their
non-compensation income. There is no evident
intention of the law, either before or after the
amendatory legislation, to place in an unequal
footing or in significant variance the income tax
treatment of professionals who practice their
respective professions individually and of those who
do it through a general professional partnership.
MENDIOLA vs CA
Facts: Private respondent Pacific Forest
Resources, Phils., Inc. (Pacfor) is a corporation
organized and existing under the laws of California,
USA..
Private respondent Pacfor entered into a "Side
Agreement on Representative Office known as
Pacific Forest Resources (Phils.), Inc. with petitioner
Arsenio T. Mendiola(ATM). The Side Agreement
outlines the business relationship of the parties with
regard to the Philippine operations of Pacfor. Private
respondent will establish a Pacfor representative
office in the Philippines, to be known as Pacfor
Phils, and petitioner ATM will be its President.
Petitioner's base salary and the overhead
expenditures of the company shall be borne by the
representative office and funded by Pacfor/ATM,
since Pacfor Phils. is equally owned on a 50-50
equity by ATM and Pacfor-usa.
In July 2000, petitioner wrote the Vice President for
Asia of Pacfor, seeking confirmation of his 50%
equity of Pacfor Phils.  Private respondent Pacfor,
through its President, replied that petitioner is not a
part-owner of Pacfor Phils. because the latter is
merely Pacfor-USA's representative office and not
an entity separate and distinct from Pacfor-USA.
"It's simply a 'theoretical company' with the purpose
of dividing the income 50-50. Petitioner presumably
knew of this arrangement from the start, having
been the one to propose to private respondent
Pacfor the setting up of a representative office, and
"not a branch office" in the Philippines to save on
taxes.
Preventive suspension was made to petitioner for
allegations such as willful disobedience and
serious misconduct. Labor Arbiter Felipe Pati
ruled in favor of petitioner, finding there was
constructive dismissal.
Private respondent Pacfor appealed to the NLRC
which ruled in its favor. It held there was no
employer-employee relationship between the
parties. Based on the two agreements between the
parties, it concluded that petitioner is not an
employee of private respondent Pacfor, but a full co-
owner (50/50 equity). The CA upheld the ruling of
NLRC.
Issue: Whether the relationship of petitioner and
private respondent is of employee-employer
relationship or of partnership.
Held: The Court holds that petitioner is an employee
of private respondent Pacfor and that no
partnership or co-ownership exists between the
parties.
In a partnership, the members become co-owners of
what is contributed to the firm capital and of all
property that may be acquired thereby and through
the efforts of the members. The property or stock of
the partnership forms a community of goods, a
common fund, in which each party has a proprietary
interest. In fact, the New Civil Code regards a
partner as a co-owner of specific partnership
property. Each partner possesses a joint interest in
the whole of partnership property. If the relation
does not have this feature, it is not one of
partnership. This essential element, the community
of interest, or co-ownership of, or joint interest in
partnership property is absent in the relations
between petitioner and private respondent Pacfor.
Petitioner is not a part-owner of Pacfor Phils.
William Gleason, private respondent Pacfor's
President established this fact when he said that
Pacfor Phils. is simply a "theoretical company" for
the purpose of dividing the income 50-50. He
stressed that petitioner knew of this arrangement
from the very start, having been the one to propose
to private respondent Pacfor the setting up of a
representative office, and "not a branch office" in the
Philippines to save on taxes. Thus, the parties in
this case, merely shared profits. This alone does not
make a partnership.40
Besides, a corporation cannot become a member of
a partnership in the absence of express
authorization by statute or charter. This doctrine is
based on the following considerations: (1) that the
mutual agency between the partners, whereby the
corporation would be bound by the acts of persons
who are not its duly appointed and authorized
agents and officers, would be inconsistent with the
policy of the law that the corporation shall manage
its own affairs separately and exclusively; and, (2)
that such an arrangement would improperly allow
corporate property to become subject to risks not
contemplated by the stockholders when they
originally invested in the corporation. No such
authorization has been proved in the case at bar.
Angeles v. Secretary of Justice
G.R. No. 142612, 29 July 2005
Doctrine: The purpose of registration of the contract
of partnership with the SEC is to give notice to third
parties. Failure to register the contract of partnership
does not affect the liability of the partnership and of
the partners to third persons, nor does it affect the
partnership’s juridical personality. A partnership may
exist even if the partners do not use the words
“partner” or “partnership.”
FACTS: Angeles spouses filed a criminal complaint
for estafa against Mercado, their brother-in-law and
claimed that Mercado convinced them to enter into a
contract of antichresis, to last for 5 years, covering 8
parcels of land planted with fruit-bearing lanzones
trees in Nagcarlan, Laguna and owned by Juan
Sanzo. The parties agreed that Mercado would
administer the ands and complete the necessary
paperwork. However, after 3 years, the Angeles
spouses asked for an accounting from Mercado,
and they claim that only after this demand for an
accounting did they\ discover that Mercado had put
the contract of antichresis over the subject land
under Mercado and his spouse’s names.
On the other hand, Mercado denied the Angeles
spouses’ allegations and claimed that there exists
an industrial partnership, colloquially known as
sosyo industrial, between him and his spouse as
industrial partners and the Angeles spouses as
financiers, and that this had existed since 1991,
before the contract of antichresis over the subject
land. Mercado used his and his spouse’s earnings
as part of the capital in the business transactions
which he entered into in behalf of the Angeles
spouses. It was their practice to enter into business
transactions with other people under the name of
Mercado because the Angeles spouses did not want
to be identified as the financiers.
During the barangay conciliation proceedings, Oscar
Angeles stated that there was a written sosyo
industrial agreement: capital would come from the
Angeles spouses while the profit would be divided
evenly between Mercado and the Angeles spouses.
The Provincial Prosecution Office first
recommended the filing of a criminal information for
estafa, but after Mercado filed his counter-affidavit
and moved for reconsideration, issued an amended
resolution dismissing the complaint.
The Angeles spouses appealed to Sec. of Justice,
saying that the document evidencing the contract of
antichresis executed in the name of the Mercado
spouses, instead of the Angeles spouses, and that
such document alone proves Mercado’s
misappropriation of their P210, 000 which the Sec.
of Justice dismissed.
Accordingly, Angeles spouses failed to show
sufficient proof that Mercado deliberately deceived
them in the transaction. Mercado satisfactorily
explained that the Angeles spouses do not want to
be revealed as the financiers. Under the
circumstances, it was more likely that the Angeles
spouses knew from the very start that the
questioned document was not really in their names.
A partnership truly existed between the Angeles
spouses and Mercado, which was clear from the
fact that they contributed money to a common fund
and divided the profits among themselves. Angeles
spouses acknowledged their joint business venture
in the barangay conciliation proceedings although
they assailed the manner the business was
conducted.
Although the legal formalities for the formation were
not adhered to, the partnership relationship was
evident.
There is no estafa where money is delivered by a
partner to his co-partner on the latter’s
representation that the amount shall be applied to
the business of their partnership. In case of the
money received, the co-partner’s liability is civil in
nature.
ISSUE: Whether or not a partnership existed
between Mercado and the Angeles spouses – Yes
RULING: Angeles spouses allege that they had no
partnership with Mercado, relying on Arts. 1771 to
1773 of the Civil Code.
The Angeles spouses’ position that there is no
partnership because of the lack of a public
instrument indicating the same and a lack of
registration with the SEC holds no water since
they contributed money to the partnership and
not immovable property.
The court ruled that mere failure to register the
contract of partnership with the SEC does not
invalidate a contract that has the essential requisites
of a partnership. The purpose of registration is to
give notice to third parties. Failure to register does
not affect the liability of the partnership and of the
partners to third persons, nor does it affect the
partnership’s juridical personality. Furthermore, the
Angeles spouses admit to facts that prove the
existence of a partnership since there exist a
contract showing a sosyo industrial or industrial
partnership, contribution of money & industry to a
common fund and division of profits between the
Angeles spouses and Mercado.
HEIRS OF TAN ENG KEE vs.CA
Facts: After the second World War, Tan EngKee
and Tan Eng Lay, pooling their resources and
industry together, entered into a partnership
engaged in the business of selling lumber and
hardware and construction supplies. They named
their enterprise "Benguet Lumber" which they jointly
managed until Tan EngKee's death.
Petitioners herein averred that the business
prospered due to the hard work and thrift of the
alleged partners. However, they claimed that in
1981, Tan Eng Lay and his children caused the
conversion of the partnership "Benguet Lumber" into
a corporation called "Benguet Lumber Company."
The incorporation was purportedly a ruse to deprive
Tan EngKee and his heirs of their rightful
participation in the profits of the business.
Petitioners prayed for accounting of the partnership
assets, and the dissolution, winding up and
liquidation thereof, and the equal division of the net
assets of Benguet Lumber. The RTC ruled in favor
of petitioners, declaring that Benguet Lumber is a
joint venture which is akin to a particular
partnership. The Court of Appeals rendered the
assailed decision reversing the judgment of the trial
court.
Issue: Whether the deceased Tan EngKee and Tan
Eng Lay are joint venturers and/or partners in a
business venture and/or particular partnership called
Benguet Lumber and as such should share in the
profits and/or losses of the business venture or
particular partnership.
 
Held: No, the Court held that there was no
partnership whatsoever.
Except for a firm name, there was no firm account,
no firm letterheads submitted as evidence, no
certificate of partnership, no agreement as to profits
and losses, and no time fixed for the duration of the
partnership. There was even no attempt to submit
an accounting corresponding to the period after the
war until Kee's death in 1984. It had no business
book, no written account nor any memorandum for
that matter and no license mentioning the existence
of a partnership.
Also, the trial court determined that Tan EngKee
and Tan Eng Lay had entered into a joint venture,
which it said is akin to a particular partnership. A
particular partnership is distinguished from a joint
adventure, to wit:
 (a) A joint adventure (an American concept
similar to our joint accounts) is a sort of informal
partnership, with no firm name and no legal
personality. In a joint account, the participating
merchants can transact business under their
own name, and can be individually liable
therefor.
(b) Usually, but not necessarily a joint adventure
is limited to a SINGLE TRANSACTION,
although the business of pursuing to a
successful termination may continue for a
number of years; a partnership generally relates
to a continuing business of various transactions
of a certain kind.
A joint venture "presupposes generally a parity of
standing between the joint co-ventures or partners,
in which each party has an equal proprietary interest
in the capital or property contributed, and where
each party exercises equal rights in the conduct of
the business.
The evidence presented by petitioners falls short of
the quantum of proof required to establish a
partnership.
In the absence of evidence, the Court cannot accept
as an established fact that Tan EngKee allegedly
contributed his resources to a common fund for the
purpose of establishing a partnership. Besides, it is
indeed odd, if not unnatural, that despite the forty
years the partnership was allegedly in existence,
Tan EngKee never asked for an accounting.
The essence of a partnership is that the partners
share in the profits and losses. Each has the right to
demand an accounting as long as the partnership
exists. A demand for periodic accounting is
evidence of a partnership. During his lifetime, Tan
EngKee appeared never to have made any such
demand for accounting from his brother, Tang Eng
Lay.
Thus, the Court concludes that Tan EngKee was
only an employee, not a partner since they did not
present and offer evidence that would show that Tan
EngKee received amounts of money allegedly
representing his share in the profits of the
enterprise. There being no partnership, it follows
that there is no dissolution, winding up or liquidation
to speak of.
LINTONJUA, JR VS LINTONJUA, SR
FACTS: Aurelio Litonjua and Eduardo Litonjua
executed a private document entering into a
partnership with Yang for the formation of a
Cineplex business. To this, Aurelio Litonjua would
act as an industrial partner and contribute his shares
in the Litonjua family businesses (theatres, shipping
land development).
After the relationship between the two brothers
became sour, Aurelio filed with the court for specific
performance of accounting for his share in the
business and the payment to him of such. Eduardo
contended that Aurelio had no cause of action such
that the agreement forming the partnership had not
been a public instrument, and as such, is void for
violating the provisions of Art. 1771, Art. 1772, Art.
1773 of the NCC.
ISSUES:
Is the partnership void?
May Aurelio demand specific performance of his
share in the partnership?
HELD:
1. Yes. The Court held that the partnership is void
precisely because of the legal provisions raised.
Aurelio contributed real rights to immovable
properties, which should be executed in a public
instrument.
Moreover, the contributions exceeded P3,000.00,
which should also be in a public instrument and
recorded with SEC.
Moreover, an inventory had to be made and hereby
attached to the public instrument. Furthermore, the
Court gave notice of the fact that Aurelio cannot
contend that the contributions of real property were
only made after the formation of the partnership as
evidence proves otherwise.
2. No. The Court held that the partnership is void,
and as such, Aurelio has no cause of action to
which to enforce specific performance.
FRANK S. BOURNS vs. D. M. CARMAN, ET AL.
 
FACTS: An action to recover the sum of $437.50
balance due on contract for the sawing of lumber for
the lumber yard of Lo-Chim-Lim was filed by Bourns
(Plaintiff).  The contract was entered into by Lo-
Chim-Lim acting in his own name with the plaintiff,
and it appears that Lo-Chim-Lim personally agreed
to pay for the work himself.  
 
It was found that "Lo-Chim-Lim, Vicente Palanca,
Go-Tuaco had a lumber yard in Calle Lemmery of
the city of Manila in the year 1904, and participated
in the profits and losses of business and that Lo-
Chim-Lim was managing partner of the said lumber
yard." In other words, coparticipants with the said
Lo-Chim-Lim in the business in question.
 
The plaintiff brought the action against Lo-Chim-Lim
and his co-defendants jointly, alleging that at that
time the contract was made, they were the joint
proprietors and operators of then said lumber yard
engaged in the purchase and sale of lumber under
the name and style of Lo-Chim-Lim , hence were
partners.
 
The lower court dismissed the action on the ground
that defendants D.M. Carman, Fulgencio and Tan-
Tongco, except Vicente Palance and Go-Tauco
were not the partners of Lo-Chim-Lim.
 
ISSUE: W/O the appellants are deemed partners of
Lo-Chim-Lim and hence liable to Bourns?
 
HELD: No.  should be accordingly dismissed.
It seems that the alleged partnership between Lo-
Chim-Lim and the appellants was formed by verbal
agreement only.
At least there is no evidence tending to show that
the said agreement was reduced to writing, or that it
was ever recorded in a public instrument.
 
Moreover, that partnership had no corporate name.
The plaintiff himself alleges in his complaint that the
partnership was engaged in business under the
name and style of Lo-Chim-Lim only, which
according to the evidence was the name of one of
the defendants. On the other hand, and this is very
important, it does not appear that there was any
mutual agreement, between the parties, and if there
were any, it has not been shown what the
agreement was. As far as the evidence shows it
seems that the business was conducted by Lo-
Chim-Lim in his own name, although he gave to the
appellants a share was has been shown with
certainty. The contracts made with the plaintiff were
made by Lo-Chim-Lim individually in his own name,
and there is no evidence that the partnership over
contracted in any other form. Under such
circumstances we find nothing upon which to
consider this partnership other than as a partnership
of cuentas en participacion.
 
Those who contract with the person under whose
name the business of such partnership of cuentas
en participacion is conducted, shall have only a right
of action against such person and not against the
other persons interested, and the latter, on the other
hand, shall have no right of action against the third
person who contracted with the manager unless
such manager formally transfers his right to them.
(Art 242 of the code Of Commerce.) It follows,
therefore that the plaintiff has no right to demand
from the appellants the payment of the amount
claimed in the complaint, as Lo-Chim-Lim was the
only one who contracted with him. the action of the
plaintiff lacks, therefore, a legal foundation and
PHILEX MINING CORPORATION vs. CIR
Facts: On April 16, 1971, petitioner Philex Mining
Corporation (Philex Mining), entered into an
agreement4 with Baguio Gold Mining Company
("Baguio Gold") for the former to manage and
operate the latter’s mining claim, known as the Sto.
Nino mine, located in Atok and Tublay, Benguet
Province. The parties’ agreement was denominated
as "Power of Attorney"
In the course of managing and operating the project,
Philex Mining made advances of cash and property
in accordance with paragraph 5 of the agreement.
However, the mine suffered continuing losses over
the years which resulted to petitioner’s withdrawal
as manager of the mine on January 28, 1982 and in
the eventual cessation of mine operations on
February 20, 1982.6
Thereafter, on September 27, 1982, the parties
executed a "Compromise with Dation in Payment" 7
wherein Baguio Gold admitted an indebtedness to
petitioner in the amount of P179,394,000.00 and
agreed to pay the same in three segments by first
assigning Baguio Gold’s tangible assets to
petitioner, transferring to the latter Baguio Gold’s
equitable title in its Philodrill assets and finally
settling the remaining liability through properties that
Baguio Gold may acquire in the future.
Issue:
1. WON the "Power of Attorney" executed by
petitioner and Baguio Gold was a partnership
agreement.
2. WON advances of cash and property made by
Philex Mining should be deducted as bad debt from
petitioners gross income.
Ruling:
1. YES. An examination of the "Power of Attorney"
reveals that a partnership or joint venture was
indeed intended by the parties.
Under a contract of partnership, two or more
persons bind themselves to contribute money,
property, or industry to a common fund, with the
intention of dividing the profits among themselves.15
While a corporation, like petitioner, cannot generally
enter into a contract of partnership unless authorized
by law or its charter, it has been held that it may
enter into a joint venture which is akin to a particular
partnership.
2. NO.  Petitioner cannot claim the advances as a
bad debt deduction from its gross income.
Deductions for income tax purposes partake of
the nature of tax exemptions and are strictly
construed against the taxpayer, who must prove
by convincing evidence that he is entitled to the
deduction claimed.27 In this case, petitioner failed
to substantiate its assertion that the advances
were subsisting debts of Baguio Gold that could
be deducted from its gross income.
Consequently, it could not claim the advances as
a valid bad debt deduction.