1.

Fernandez v De la Rosa 1 Phil 671

Facts:
The plaintiff' alleges that in January, 1900, he entered into a verbal agreement with the
defendant to form a partnership for the purchase of cascoes and the carrying on of the business
of letting the same for hire in Manila, the defendant to buy the cascoes and each partner to
furnish for that purpose such amount of money as he could, the profits to be divided
proportionately;
that in the same January the plaintiff furnished the defendant 300 pesos to purchase a
casco designated as No. 1515, which the defendant did purchase for 500 pesos of Doña Isabel
Vales, taking the title in his own name; that the plaintiff furnished further sums aggregating
about 300 pesos for repairs on this casco; that on the fifth of the following March he furnished
the defendant 825 pesos to purchase another casco designated as No. 2089, which the
defendant did purchase for 1,000 pesos of Luis R. Yangco, taking the title to this casco also in
his own name;
That in April the parties undertook to draw up articles of partnership for the purpose of
embodying the same in an authentic document, but that the defendant having proposed a draft
of such articles which differed materially from the terms of the earlier verbal agreement, and
being unwilling to include casco No. 2089 in the partnership, they were unable to come to any
understanding and no written agreement was executed; that the defendant having in the
meantime had the control and management of the two cascoes, the plaintiff made a demand
for an accounting upon him, which the defendant refused to render, denying the existence of
the partnership altogether.
The defendant admits that the project of forming a partnership in the casco business in
which he was already engaged to some extent individually was discussed between himself and
the plaintiff in January, 1900, and earlier, one Marcos Angulo, who was a partner of the plaintiff
in a bakery business, being also a party to the negotiations, but he denies that any agreement
was ever consummated. He denies that the plaintiff furnished any money in January, 1900, for
the purchase of casco No. 1515, or for repairs on the same, but claims that he borrowed 300
pesos on his individual account in January from the bakery firm. The 825 pesos, which he
admits he received from the plaintiff March 5, he claims was for the purchase of casco No.
1515, which he alleged was bought March 12, and he alleges that he never received anything
from the defendant toward the purchase of casco No. 2089. He claims to have paid, exclusive of
repairs, 1,200 pesos for the first casco and 2,000 pesos for the second one.
Some general conclusions stated by the Supreme Court:
The plaintiff presented in evidence the following receipt: "I have this day received from
D. José Fernandez eight hundred and twenty-five pesos for the cost of a casco which we are to
purchase in company. Manila, March 5, 1900. Francisco de la Rosa." The authenticity of this
receipt is admitted by the defendant.
At some time subsequently to the failure of the attempt to agree upon partnership
articles and after the defendant had been operating the cascoes for some time, the defendant
returned to the plaintiff 1,125 pesos, in two different sums, one of 300 and one of 825 pesos.
Plaintiff states that both sums were received with an express reservation on his part of all his
rights as a partner. We find this to be the fact.

Issue:
Whether or not (1) a partnership exist between the parties? (2) If such partnership
existed, was it terminated as a result of the act of the defendant in receiving back the 1,125
pesos?
Held:
(1) Yes. "Partnership is a contract by which 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." (Civil Code, art. 1665.) The essential points upon which the minds of
the parties must meet in a contract of partnership are, therefore, (1) mutual contribution to a
common stock, and (2) a joint interest in the profits. If the contract contains these two
elements the partnership relation results, and the law itself fixes the incidents of this relation if
the parties fail to do so. (Civil Code, secs. 1689, 1695.)
We have found as a fact that money was furnished by the plaintiff and received by the
defendant with the understanding that it was to be used for the purchase of the cascoes in
question. This establishes the first element of the contract, namely, mutual contribution to a
common stock.
The second element, namely, the intention to share profits, appears to be an
unavoidable deduction from the fact of the purchase of the cascoes in common, in the absence
of any other explanation of the object of the parties in making the purchase in that form, and, it
may be added, in view of the admitted fact that prior to the purchase of the first casco the
formation of a partnership had been a subject of negotiation between them. If, for instance, it
were shown that the object of the parties in purchasing in company had been to make a more
favorable bargain for the two cascoes than they could have done by purchasing them
separately, and that they had no ulterior object except to effect a division of the common
property when once they had acquired it, the affectio societatis would be lacking and the
parties would have become joint tenants only; but, as nothing of this sort appears in the case,
we must assume that the object of the purchase was active use and profit and not mere passive
ownership in common. It is thus apparent that a complete and perfect contract of partnership
was entered into by the parties.
 The execution of a written agreement was not necessary in order to give efficacy to the
verbal contract of partnership as a civil contract, the contributions of the partners not having
been in the form of immovables or rights in immovables. (Civil Code, art. 1667
(2) No. There was no intention on the part of the plaintiff in accepting the money to
relinquish his rights as a partner, nor is there any evidence that by anything that he said or by
anything that he omitted to say he gave the defendant any ground whatever to believe that he
intended to relinquish them. On the contrary he notified the defendant that he waived none of
his rights in the partnership. Nor was the acceptance of the money an act which was in itself
inconsistent with the continuance of the partnership relation, as would have been the case had
the plaintiff withdrawn his entire interest in the partnership. There is, therefore, nothing upon
which a waiver, either express or implied, can be predicated.
The defendant might have himself terminated the partnership relation at any time, if he
had chosen to do so, by recognizing the plaintiff's right in the partnership property and in the
profits. Having failed to do this he cannot be permitted to force a dissolution upon his
copartner upon terms which the latter is unwilling to accept. We see nothing in the case which
can give the transaction in question any other aspect than that of the withdrawal by one
partner with-the consent of the other of a portion of the common capital.
2. Evangelista v Collector of Internal Revenue 102 Phil 140
Facts:
This is a petition, filed by petitioners Evangelista, for review of a decision of the Court of
Tax Appeals, the dispositive part of which reads:
"FOR ALL THE FOREGOING, we hold that the petitioners are liable for the income tax,
real estate dealer's tax and the residence tax for the years 1945 to 1949, inclusive, in
accordance with the respondent's assessment for the same in the total amount of P6,878.34.”
Petitioners borrowed from their father the sum of P59,140.00 which amount together
with their personal monies was used by them for the purpose of buying real properties. They
bought various real estate properties including improvements thereon.
They appointed their brother Simeon Evangelista ith full power to lease, to collect rents,
to issue receipts, to bring suits, to sign letters and contracts, and to indorse and deposit notes
and checks. That after having bought the above-mentioned real properties, the petitioners had
the same rented or leased to various tenants; in 1948 they realized a gross rental income of
P17,453.00 out of the which amount was deducted the sum of P4,837.65 as expenses, thereby
leaving them a net rental income of P12,615.35.
On September 24, 1954, respondent Collector of Internal Revenue demanded the
payment of income tax on corporations, real estate dealer's fixed tax and corporation residence
tax for the years 1945-1949.
 Letter of Demand was delivered to petitioners which they instituted to the Court of Tax
Appeals, with a prayer that "the decision of the respondent contained in his letter of be
reversed, and that they be absolved from the payment of the taxes in question, with costs
against the respondent. The Court of Tax Appeals rendered the above-mentioned decision for
the respondent.
Petitioners insist, however, that they are mere co-owners, not copartners, for, in
consequence of the acts performed by them, a legal entity, with a personality independent of
that of its members, did not come into existence, and some of the characteristics of
partnerships are lacking in the case at bar. This pretense was correctly rejected by the Court of
Tax Appeals.
Issue:
Whether or not petitioners are subject to the tax on corporations provided for in section
24 of Commonwealth Act No. 466, otherwise known as the National Internal Revenue Code, as
well as to the residence tax for corporations and the real estate dealers' fixed tax.
Held:
Yes. To begin with, the tax in question is one imposed upon "corporations", which,
strictly speaking, are distinct and different from "partnerships". When our Internal Revenue
Code includes "partnerships" among the entities subject to the tax on "corporations", said Code
must allude, therefore, to organizations which are not necessarily "partnerships", in the
technical sense of the term. Thus, for instance, section 24 of said Code exempts from the
aforementioned tax "duly registered general
General partnerships are businesses where each partner has total liability for the debts and actions of
the partnership as a whole. Each partner can take part in the daily management of the partnership
and they share equally in the profits of the business. Each partner has unlimited liability for the
actions of the partnership, which includes the actions of the other partners.partnerships",

which constitute precisely one of the most typical forms of partnerships in this jurisdiction.
Likewise, as defined in section 84(b) of said Code, "the term corporation includes partnerships,
no matter how created or organized." This qualifying expression clearly indicates that a joint
venture need not be undertaken in any of the standard forms, or in conformity with the usual
requirements of the law on partnerships, in order that one could be deemed constituted for
purposes of the tax on corporations. Again, pursuant to said section 84(b), the term
'corporation" includes, among other, "joint accounts, (cuentas en participación)" and
"associations", none of which has a legal personality of its own, independent of that of its
members. Accordingly, the lawmaker could not have regarded that personality as a condition
essential to the existence of the partnerships therein referred to. In fact, as above stated, "duly
registered general copartnerships"—which are possessed of the aforementioned personality—
have been expressly excluded by law (sections 24 and 84 [b]) from the connotation of the term
"corporation." It may not be amiss to add that petitioners' allegation to the effect that their
liability in connection with the leasing of the lots above referred to, under the management of
one person—even if true, on which we express no opinion—tends to increase the similarity
between the nature of their venture and that of corporations, and is, therefore, an additional
argument in favor of the imposition of said tax on corporations.
For purposes of the tax on corporations, our National Internal Revenue Code, includes
these partnerships with the exception only of duly registered general copartnerships—within
the purview of the term "corporation" It is, therefore, clear to our mind that petitioners
herein constitute a partnership, insofar as said Code is concerned, and are subject to the
income tax for corporations.
As regards the residence tax for corporations, "section 2 of Commonwealth Act No. 465
provides in part: "Entities liable to residence tax.—Every corporation, no matter how created or
organized, whether domestic or resident foreign, engaged in or doing business in the
Philippines shall pay an annual residence tax of five pesos and an annual additional tax which, in
no case, shall exceed one thousand pesos, in accordance with the following schedule: * * *
"The term 'corporation' as used in this Act includes joint-stock company, partnership, joint
account (cuentas en participación), association or insurance company, no matter how created
or organized."
Lastly, the records show that petitioners have habitually engaged in leasing the
properties above mentioned for a period of over twelve years, and that the yearly gross rentals
of said properties from 1945 to 1948 ranged from P9,599 to P17,453. Thus, they are subject to
the tax provided in section 193 (q) of our National Internal Revenue Code, for "real estate
dealers," inasmuch as, pursuant to section 194 (s) thereof: " 'Real estate dealer' includes any
person engaged in the business of buying, selling, exchanging, leasing, or renting property or his
own account as principal and holding himself out as a full or parttime dealer in real estate or as
an owner of rental property or properties rented or offered to rent for an aggregate amount of
three thousand pesos or more a year.
Accordingly, a pool of individual real property owners dealing in real estate business
was considered a corporation for purposes of the tax in Sec. 24 of the Tax Code.
3. Tocao v CA 342 SCRA 20
Facts:
This is a petition for review of the Decision of the Court of Appeals, affirming the
Decision of the Regional Trial Court of Makati that there was indeed an “oral partnership
agreement between the plaintiff and the defendants.
Private respondent Nenita A. Anay met petitioner William T. Belo, through her former
employer in Bangkok. Belo introduced Anay to petitioner Marjorie Tocao, who conveyed her
desire to enter into a joint venture with her for the importation and local distribution of kitchen
cookwares. Belo volunteered to finance the joint venture and assigned to Anay the job of
marketing the product considering her experience and established relationship with West Bend
Company, a manufacturer of kitchen wares in Wisconsin, U.S.A.
Under the joint venture, Belo acted as capitalist, Tocao as president and general
manager, and Anay as head of the marketing department and later, vice-president for sales.
Anay organized the administrative staff and sales force while Tocao hired and fired employees,
determined commissions and/or salaries of the employees, and assigned them to different
branches.
The parties agreed further that Anay would be entitled to: (1) ten percent (10%) of the
annual net profits of the business; (2) overriding commission of six percent (6%) of the overall
weekly production; (3) thirty percent (30%) of the sales she would make; and (4) two percent
(2%) for her demonstration services. The agreement was not reduced to writing on the strength
of Belo’s assurances that he was sincere, dependable and honest when it came to financial
commitments.
Anay having secured the distributorship of cookware products from the West Bend
Company and organized the administrative staff and the sales force, the cookware business
took off successfully. They operated under the name of Geminesse Enterprise, a sole
proprietorship registered in Marjorie Tocao’s name, with office at 712 Rufino Building, Ayala
Avenue, Makati City. Belo made good his monetary commitments to Anay.
On October 9, 1987, Anay learned that Marjorie Tocao had signed a letter addressed to
the Cubao sales office to the effect that she was no longer the vice-president of Geminesse
Enterprise. The following day, October 10, she received a note from Lina T. Cruz, marketing
manager, that Marjorie Tocao had barred her from holding office and conducting
demonstrations in both Makati and Cubao offices.
Anay filed Civil Case No. 88-509, a complaint for sum of money with damages against
Marjorie D. Tocao and William Belo before the RTC. The trial court held that there was indeed
an "oral partnership agreement between the plaintiff and the defendants and award damages.
The Court of Appeals affirmed the lower court’s decision but reduced the amount of damages
awarded.
Issue:
Whether or not there was no business partnership between petitioners and private
respondent Anay who is, therefore, not entitled to the damages awarded by the Court of
Appeals.
Held:
 The issue of whether or not a partnership exists is a factual matter which are within the
exclusive domain of both the trial and appellate courts. This Court cannot set aside factual
findings of such courts absent any showing that there is no evidence to support the conclusion
drawn by the court a quo. In this case, both the trial court and the Court of Appeals are one in
ruling that petitioners and private respondent established a business partnership. This Court
finds no reason to rule otherwise.
To be considered a juridical personality, a partnership must fulfill these requisites: (1)
two or more persons bind themselves to contribute money, property or industry to a
common fund; and (2) intention on the part of the partners to divide the profits among
themselves. It may be constituted in any form; a public instrument is necessary only where
immovable property or real rights are contributed thereto. This implies that since a contract
of partnership is consensual, an oral contract of partnership is as good as a written one.
Where no immovable property or real rights are involved, what matters is that the parties
have complied with the requisites of a partnership. The fact that there appears to be no
record in the Securities and Exchange Commission of a public instrument embodying the
partnership agreement pursuant to Article 1772 of the Civil Code 17 did not cause the
nullification of the partnership. The pertinent provision of the Civil Code on the matter states:
Art. 1768. The partnership has a juridical personality separate and distinct from that of
each of the partners, even in case of failure to comply with the requirements of article 1772,
first paragraph.
Petitioners admit that private respondent had the expertise to engage in the business of
distributorship of cookware. Private respondent contributed such expertise to the partnership
and hence, under the law, she was the industrial or managing partner. It was through her
reputation with the West Bend Company that the partnership was able to open the business of
distributorship of that company’s cookware products; it was through the same efforts that the
business was propelled to financial success. Petitioner Tocao herself admitted private
respondent’s indispensable role in putting up the business when, upon being asked if private
respondent held the positions of marketing manager and vice-president for sales.
While it is true that the receipt of a percentage of net profits constitutes only prima
facie evidence that the recipient is a partner in the business, the evidence in the instant case at
bar controverts an employeremployee relationship between the parties.—The business venture
operated under Geminesse Enterprise did not result in an employer-employee relationship
between petitioners and private respondent. While it is true that the receipt of a percentage of
net profits constitutes only prima facie evidence that the recipient is a partner in the business,
the evidence in the case at bar controverts an employeremployee relationship between the
parties. In the first place, private respondent had a voice in the management of the affairs of
the cookware distributorship, including selection of people who would constitute the
administrative staff and the sales force. Secondly, petitioner Tocao’s admissions militate against
an employer-employee relationship. She admitted that, like her who owned Geminesse
Enterprise, private respondent received only commissions and transportation and
representation allowances and not a fixed salary.
; Any one of the partners may, at his sole pleasure, dictate a dissolution of the partnership at
will, though he must, however, act in good faith, not that the attendance of bad faith can
prevent the dissolution of the partnership but that it can result in a liability for damages; An
unjustified dissolution by a partner can subject him to action for damages.——Since the
partnership created by petitioners and private respondent has no fixed term and is therefore a
partnership at will predicated on their mutual desire and consent, it may be dissolved by the
will of a partner. Thus: “x x x. 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 cause for dissolution provided by the law itself. Verily, any one of
the partners may, at his sole pleasure, dictate a dissolution of the partnership at will. He must,
however, act in good faith, not that the attendance of bad faith can prevent the dissolution of
the partnership but that it can result in a liability for damages.” An unjustified dissolution by a
partner can subject him to action for damages because by the mutual agency that arises in a
partnership, the doctrine of delectus personae allows the partners to have the power, although
not necessarily the right to dissolve the partnership.
4. Ang Pue & Co. v Sec. of Commerce and Industry 5 SCRA 645
Facts:
On May 1, 1953, Ang Pue and Tan Siong, both Chinese citizens, organized the
partnership Ang Pue & Company for a term of five years from May 1, 1953, extendible by
their mutual consent. The purpose of the partnership was "to maintain the business of general
merchandising, buying and selling at wholesale and retail, particularly of lumber, hardware and
other construction materials for commerce, either native or foreign." The corresponding
articles of partnership were registered in the Office of the Securities & Exchange Commission
on June 16, 1953.
On June 19, 1954 Republic Act No. 1180 was enacted to regulate the retail business. It
provided, among other things that, after its enactment, a partnership not wholly formed by
Filipinos could continue to engage in the retail business until the expiration of its term.
On April 15, 1958—prior to the expiration of the five year term of the partnership Ang
Pue & Company, but after the enactment of the Republic Act 1180, the partners already
mentioned amended the original articles of partnership so as to extend the term of life of the
partnership to another five years. When the amended articles were presented for registration
in the Office of the Securities & Exchange Commission on April 16, 1958, registration was
refused upon the ground that the extension was in violation of the aforesaid Act.
Issue:
 Whether or not the agreement in the articles of partnership to extend the term of its life
is an absolute right/property right of which the partners cannot be deprived without due
process or without their consent.
Held:
No. The agreement in the articles of partnership to extend the term of its life is not a
property right and it must be deemed subject to the law existing at the time when the partners
came to agree regarding the extension. In the case at bar, when the partners amended the
articles of partnership, the provisions of Republic Act 1180 were already in force, and there can
be not the slightest doubt that the right claimed by appellants to extend the original term of
their partnership to another five years would be in violation of the clear intent and purpose of
said Act.
To organize a corporation or partnership that could claim a juridical personality of its
own and transact business as such, is not a matter of absolute right but a privilege which may
be enjoyed only under such terms as the state may deem necessary to impose.
5. Afisco Insurance Corp. v CA 302 SCRA 13
Facts:
The petitioners are 41 non-life insurance corporations, organized and existing under
the laws of the Philippines. Upon issuance by them of Erection, Machinery Breakdown, Boiler
Explosion and Contractors’ All Risk insurance policies, the petitioners on August 1, 1965
entered into a Quota Share Reinsurance Treaty and a Surplus Reinsurance Treaty with
Munich, a non-resident foreign insurance corporation. The reinsurance treaties required
petitioners to form a pool. Accordingly, a pool composed of the petitioners was formed on the
same day.
The pool of machinery insurers submitted a financial statement and filed an
“Information Return of Organization Exempt from Income Tax” for the year ending in 1975,
on the basis of which it was assessed by the Commissioner of Internal Revenue deficiency
corporate taxes and withholding on dividends paid to Munich and to the petitioners,
respectively.
These assessments were protested by the petitioners through its auditors SGV and Co.
The Commissioner of Internal Revenue denied the protest and ordered the petitioners,
assessed as “Pool of Machinery Insurers,” to pay deficiency income tax, interest, and
withholding tax.
The CA ruled in the main that the pool of machinery insurers was a partnership taxable
as a corporation, and that the latter’s collection of premiums on behalf of its members, the
ceding companies, was taxable income. It added that prescription did not bar the Bureau of
Internal Revenue (BIR) from collecting the taxes due, because “the taxpayer cannot be located
at the address given in the information return filed.” Hence, this Petition for Review before us.
Petitioners contend that the Court of Appeals erred in finding that the pool or clearing
house was an informal partnership, which was taxable as a corporation under the NIRC. They
point out that the reinsurance policies were written by them “individually and separately,” and
that their liability was limited to the extent of their allocated share in the original risks thus
reinsured. Hence, the pool did not act or earn income as a reinsurer. Its role was limited to its
principal function of “allocating and distributing the risk(s) arising from the original insurance
among the signatories to the treaty or the members of the pool based on their ability to absorb
the risk(s) ceded[;] as well as the performance of incidental functions, such as records,
maintenance, collection and custody of funds, etc.” Petitioners belie the existence of a
partnership in this case, because (1) they, the reinsurers, did not share the same risk or
solidary liability; (2) there was no common fund; (3) the executive board of the pool did not
exercise control and management of its funds, unlike the board of directors of a corporation;
and (4) the pool or clearing house “was not and could not possibly have engaged in the
business of reinsurance from which it could have derived income for itself.”
Issue:
Whether or not the Clearing House, acting as a mere agent and performing strictly
administrative functions, and which did not insure or assume any risk in its own name, was a
partnership or association subject to tax as a corporation.
Held:
Supreme Court sustain the ruling of the Court of Appeals that the pool is taxable as a
corporation, and that the government’s right to assess and collect the taxes had not prescribed.
Article 1767 of the Civil Code recognizes the creation of a contract of partnership when
‘‘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.” Its requisites are:
“(1) mutual contribution to a common stock, and (2) a joint interest in the profits.” In other
words, a partnership is formed when persons contract “to devote to a common purpose either
money, property, or labor with the intention of dividing the profits between themselves.”
Meanwhile, an association implies associates who enter into a “joint enterprise x x x for the
transaction of business.
In the case before us, the ceding companies entered into a Pool Agreement or an
association that would handle all the insurance businesses covered under their quota-share
reinsurance treaty and surplus reinsurance treaty with Munich. The following unmistakably
indicates a partnership or an association covered by Section 24 of the NIRC:
 The pool has a common fund, consisting of money and other valuables that are
deposited in the name and credit of the pool. This common fund pays for the administration
and operation expenses of the pool.
The pool functions through an executive board, which resembles the board of directors
of a corporation, composed of one representative for each of the ceding companies.
True, the pool itself is not a reinsurer and does not issue any insurance policy; however,
its work is indispensable, beneficial and economically useful to the business of the ceding
companies and Munich, because without it they would not have received their premiums. The
ceding companies share ‘‘in the business ceded to the pool’’ and in the ‘‘expenses’’ according
to a ‘‘Rules of Distribution’’ annexed to the Pool Agreement. Profit motive or business is,
therefore, the primordial reason for the pool’s formation.
6. Oña v Commissioner of Internal Revenue 45 SCRA 74
Facts:
Julia Bunales died in 1944, leaving as heirs her surviving spouse. Lorenzo T. Oña and her
five children. In 1948, Civil Case was instituted in the Court of First Instance of Manila for the
settlement of her estate. Later, Lorenzo T. Oña, the surviving spouse was appointed
administrator of the estate of said deceased. In 1949, the administrator submitted the project
of partition, which was approved by the Court. Because three of the heirs, namely Luz, Virginia
and Lorenzo, Jr., all surnamed Oña, were still minors when the project of partition was
approved, Lorenzo T. Oña, their father and administrator of the estate filed a petition as
guardian of said minors. This was granted.
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.
On the basis of the foregoing facts, respondent (Commissioner of Internal Revenue)
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.
Accordingly, he assessed against the petitioners the amounts of P8,092.00 and P13,899.00 as
corporate income taxes for 1955 and 1956, respectively. Petitioners protested against the
assessment and asked for reconsideration of the ruling of respondent that they have formed an
unregistered partnership. Finding no merit in petitioners’ request, respondent denied it.
Issue:
 Whether or not petitioners be considered as co-owners of the properties inherited by
them from the deceased Julia Buñales and the profits derived from transactions involving the
same, or, must they be deemed to have formed an unregistered partnership subject to tax
under Sections 24 and 84(b) of the National Internal Revenue Code
Held:
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 extra-judicial settlement or approved by the court in the
corresponding testate or intestate proceeding. The reason 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.
7. Lim Tong Lim v Phil Fishing Gear Industries, Inc. 317 SCRA 728
Facts:
Petitioner Lim Tong Lim requested Peter Yao who was engaged in commercial fishing to
join him, while Antonio Chua was already Yao’s partner; After convening for a few times, Lim,
Chua, and Yao verbally agreed to acquire two fishing boats, the FB Lourdes and the FB Nelson
for the sum of P3.35 million; They borrowed P3.25 million from Jesus Lim, brother of Petitioner
Lim Tong Lim, to finance the venture;
On behalf of “Ocean Quest Fishing Corporation,” Antonio Chua and Peter Yao entered
into a Contract dated February 7, 1990, 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 buyers, however, failed to pay for the fishing nets and the floats; hence, private
respondent filed a collection suit against Chua, Yao and Petitioner Lim Tong Lim with a prayer
for a writ of preliminary attachment. The suit was brought against the three in their capacities
as general partners, on the allegation that “Ocean Quest Fishing Corporation” was a
nonexistent corporation as shown by a Certification from the Securities and Exchange
Commission. The lower court issued a Writ of Preliminary Attachment, which the sheriff
enforced by attaching the fishing nets on board F/B Lourdes.
 Instead of answering the Complaint, Chua filed a Manifestation admitting his liability
and requesting a reasonable time within which to pay. He also turned over to respondent some
of the nets which were in his possession. Peter Yao filed an Answer, after which he was deemed
to have waived his right to cross-examine witnesses and to present evidence on his behalf,
because of his failure to appear in subsequent hearings.
Lim Tong Lim, on the other hand, filed an Answer with Counterclaim and Crossclaim and
moved for the lifting of the Writ of Attachment.
The trial court maintained the Writ, and upon motion of private respondent, ordered
the sale of the fishing nets at a public auction. Philippine Fishing Gear Industries won the
bidding and deposited with the said court the sales proceeds of P900,000. The Trial Court ruled
that Philippine Fishing Gear Industries was entitled to the Writ of Attachment and that Chua,
Yao and Lim, as general partners, were jointly liable to pay respondent.
Issue:
Whether or not by their acts, Lim, Chua and Yao could be deemed to have entered into
a partnership.
Held:
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,” as their
contribution to such fund could be an intangible like credit or industry.
From the factual findings of both lower courts, 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.
8. Heirs of Tan Eng Kee v Court of Appeals 341 SCRA 740
Facts:
Following the death of Tan Eng Kee, Matilde Abubo, the common-law spouse of the
decedent, joined by their six children collectively known as herein petitioners HEIRS OF TAN
ENG KEE, filed suit against the decedent’s brother TAN ENG LAY on for accounting, liquidation
and winding up of the alleged partnership formed after World War II between Tan Eng Kee and
Tan Eng Lay. Petitioners filed an amended complaint impleading private respondent herein
BENGUET LUMBER COMPANY, as represented by Tan Eng Lay.
The complaint principally alleged that after the second World War, Tan Eng Kee 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 Eng Kee’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 Eng Kee 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 Trial Court rendered judgement in favor of the herein petitioners. Judgement
among others: a. Declaring that Benguet Lumber is a joint venture which is akin to a particular
partnership;
b. Declaring that the deceased Tan Eng Kee and Tan Eng Lay are joint adventurers and/or
partners in a business venture and/or particular its and/or losses of the business venture or
particular partnership;
e. Ordering the defendant Tan Eng Lay and/or the President and/or General Manager of
Benguet Lumber Company, Inc. to render an accounting of all the assets of Benguet Lumber
Company, Inc. so the plaintiffs know their proper share in the business;
Private respondent sought relief before the Court of Appeals, which rendered the
assailed decision reversing the judgment of the trial court. Petitioners’ motion for
reconsideration was denied by the Court of Appeals. Hence, the present petition.
As a side-bar to the proceedings, petitioners filed Criminal Case against Tan Eng Lay and
Wilborn Tan for the use of allegedly falsified documents in a judicial proceeding as a support to
the claim that Tan Eng Kee was a mere employee of Benguet Lumber.
Issue:
Whether or not Tan Eng Kee and Tan Eng Lay were partners in Benguet Lumber.
Held:
The Supreme Court affirmed in toto to the decision of Court of Appeals that there is no
partnership. In reversing the trial court, the Court of Appeals ruled, to wit: We note that the
Court a quo over extended the issue because while the plaintiffs mentioned only the existence
of a partnership, the Court in turn went beyond that by justifying the existence of a joint
venture.
When mention is made of a joint venture, it would presuppose parity of standing
between the parties, equal proprietary interest and the exercise by the parties equally of the
conduct of the business, thus: x x x x x x
We have the admission that the father of the plaintiffs was not a partner of the Benguet
Lumber before the war. The appellees however argued that this is because during the war, the
entire stocks of the pre-war Benguet Lumber were confiscated if not burned by the Japanese.
After the war, because of the absence of capital to start a lumber and hardware business, Lay
and Kee pooled the proceeds of their individual businesses earned from buying and selling
military supplies, so that the common fund would be enough to form a partnership, both in the
lumber and hardware business. That Lay and Kee actually established the Benguet Lumber in
Baguio City, was even testified to by witnesses. Because of the pooling of resources, the
postwar Benguet Lumber was eventually established. That the father of the plaintiffs and Lay
were partners, is obvious from the fact that: (1) they conducted the affairs of the business
during Kee’s lifetime, jointly, (2) they were the ones giving orders to the employees, (3) they
were the ones preparing orders from the suppliers, (4) their families stayed together at the
Benguet Lumber compound, and (5) all their children were employed in the business in
different capacities. It is obvious 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
[citation omitted]. Also, the exhibits support the establishment of only a proprietorship.
Tan Eng Lay consistently testified that he had his business and his brother had his, that it
was only later on that his said brother, Tan Eng Kee, came to work for him. Be that as it may,
co-ownership or co-possession (specifically here, of the G.I. sheets) is not an indicium of the
existence of a partnership. Besides, it is indeed odd, if not unnatural, that despite the forty
years the partnership was allegedly in existence, Tan Eng Kee never asked for an accounting.
The essence of a partnership is that the partners share in the profits and losses.
Each has the right to demand an accounting as long as the partnership exists. We have
allowed a scenario wherein “[i]f excellent relations exist among the partners at the start of the
business and all the partners are more interested in seeing the firm grow rather than get
immediate returns, a deferment of sharing in the profits is perfectly plausible.” But in the
situation in the case at bar, the deferment, if any, had gone on too long to be plausible. A
person is presumed to take ordinary care of his concerns.
 A demand for periodic accounting is evidence of a partnership. During his lifetime, Tan
Eng Kee appeared never to have made any such demand for accounting from his brother, Tang
Eng Lay. Private respondents, evidenced by the payroll showed that Tan Eng Kee was an
ordinary employee of Benguet Lumber.
In the light of the aforequoted legal provision, we conclude that Tan Eng Kee was only
an employee, not a partner. Even if the payrolls as evidence were discarded, petitioners would
still be back to square one, so to speak, since they did not present and offer evidence that
would show that Tan Eng Kee received amounts of money allegedly representing his share in
the profits of the enterprise. Petitioners failed to show how much their father, Tan Eng Kee,
received, if any, as his share in the profits of Benguet Lumber Company for any particular
period. Hence, they failed to prove that Tan Eng Kee and Tan Eng Lay intended to divide the
profits of the business between themselves, which is one of the essential features of a
partnership.
In the instant case, we find private respondent’s arguments to be well-taken. Where
circumstances taken singly may be inadequate to prove the intent to form a partnership,
nevertheless, the collective effect of these circumstances may be such as to support a finding of
the existence of the parties’ intent. 36 Yet, in the case at bench, even the aforesaid
circumstances when taken together are not persuasive indicia of a partnership. They only tend
to show that Tan Eng Kee was involved in the operations of Benguet Lumber, but in what
capacity is unclear. We cannot discount the likelihood that as a member of the family, he
occupied a niche above the rank-and-file employees. He would have enjoyed liberties otherwise
unavailable were he not kin, such as his residence in the Benguet Lumber Company compound.
He would have moral, if not actual, superiority over his fellow employees, thereby entitling him
to exercise powers of supervision. It may even be that among his duties is to place orders with
suppliers. Again, the circumstances proffered by petitioners do not provide a logical nexus to
the conclusion desired; these are not inconsistent with the powers and duties of a manager,
even in a business organized and run as informally as Benguet Lumber Company. There being
no partnership, it follows that there is no dissolution, winding up or liquidation to speak of.
Partnership and Joint Venture Disinguished
The trial court determined that Tan Eng Kee 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 may be likened to a particular partnership; The legal concept of a joint
venture is of common law origin and has no precise legal definition, but it has been generally
understood to mean an organization formed for some temporary purpose. It is hardly
distinguishable from the partnership, since their elements are similar—community of interest in
the business, sharing of profits and losses, and a mutual right of control. The main distinction
cited by most opinions in common law jurisdiction is that the partnership contemplates a
general business with some degree of continuity, while the joint venture is formed for the
execution of a single transaction, and is thus of a temporary nature.
This observation is not entirely accurate in this jurisdiction, since under the Civil Code, a
partnership may be particular or universal, and a particular partnership may have for its object
a specific undertaking. (Art. 1783, Civil Code). It would seem therefore that under Philippine
law, a joint venture is a form of partnership and should thus be governed by the law of
partnerships. The Supreme Court has however recognized a distinction between these two
business forms, and has held that although a corporation cannot enter into a partnership
contract, it may however engage in a joint venture with others.
9. Escolastico Duterte Y Rosales v Rallos 2 Phil 509
Facts:
The plaintiff and appellant, Duterte claimed that he, defendant Rallos and one Castro
were partners in the management of a cockpit. The defendant denied this. The court found that
no such partnership existed and ordered judgment for the defendant.
Duterte has brought here the evidence on which the court below based its finding. We
have examined the evidence and are of the opinion that said finding, so far as the existence of
the copartnership to September 1, 1901, is concerned, is plainly and manifestly against the
evidence.
Evidence are documents written by the defendant and sent to the plaintiff. It is not
contradicted that the plaintiff demanded by letter of the defendant a settlement of their
accounts. In one of the letters, it Rallos mentioned “I have done you a favor in admitting you
into the cockpit partnership, as the only manner in which I might collect what you owe me”
In the preceding year, the defendant sent to the plaintiff statements of the business for
the months of June, July, and August. They are in legal effect the same.
That the plaintiff rendered services in the management of the cockpit, and that the
defendant paid him money on account of the cockpit.
According to Rallos: “The profits were divided. A portion was given to two friends,
Señores Duterte and Castro, but not as partners. A portion was given to Señor Duterte solely
because he was a friend who aided and encouraged the cockpit. I did not have an agreement
with them.”
 We have, then, the testimony of the plaintiff that he made a verbal contract of
partnership with the defendant for this business, uncontradicted evidence that he performed
services in connection with it; that the defendant paid him the money on account thereof and
sent him accounts for three months showing his interest to be one-third of the profits in
addition to the $5 each day, and wrote him a letter in which he said that he admitted the
plaintiff into the partnership in order to collect what the plaintiff owed him on another
transaction.

Issue:
Whether or not a partnership between Duterte and Rallos exist.
Held:
Yes. An agreement between two persons to operate a cockpit, by which one is to
contribute his services and the other to provide the capital, the profits to be divided between
them, constitutes a partnership.
The reason which the defendant gives for paying the plaintiff money is not credible. We
see no way of explaining the accounts submitted by the defendant to plaintiff on any theory
other than that there was a partnership between them up to September 1, 1901, at least. The
letter of the defendant, in which he says that he admitted the plaintiff into the partnership, can
be explained on no other theory. That there was an agreement to share the profits is clearly
proved by the accounts submitted. The plaintiff testified that the profits and losses were to be
shared equally. But even omitting this testimony, the case is covered by article 1689 of the Civil
Code, which provides that, in the absence of agreement as to the losses, they shall be shared as
the gains are.
10. Estanislao, Jr. v CA 160 SCRA 830
Facts:
Petitioner and private respondents are brothers and sisters who are co-owners of certain lots in
Quezon City which were then being leased to the Shell Company of the Philippines Limited
(SHELL). They agreed to open and operate a gas station thereat to be known as Estanislao Shell
Service Station with an initial investment of Pl5.000.00 to be taken from the advance rentals
due to them from SHELL for the occupancy of the said lots owned in common by them. A joint
affidavit was executed by them on April 11, 1966 which was prepared by Atty. Democrito
Angeles. It is stipulated by the parties that the P15,000.00 advance rental due to them from
SHELL shall augment their “capital investment” in the operation of the gasoline station, which
advance rentals shall be credited as rentals from May 25, 1966 up to four and one-half months
or until 10 October 1966, more or less covering said Pl5,000.00.
They agreed to help their brother, petitioner herein, by allowing him to operate and
manage the gasoline service station of the family. They negotiated with SHELL. For practical
purposes and in order not to run counter to the company’s policy of appointing only one
dealer. it was agreed that petitioner would apply for the dealership. Respondent Remedios
helped in co-managing the business with petitioner from May 3,1966 up to Februaryl6,1967.
On May 26, 1966, the parties herein entered into an Additional Cash Pledge Agreement
with SHELL wherein it was reiterated that the Pl5,000.00 advance rental shall be deposited with
SHELL to cover advances of fuel to petitioner as dealer with a proviso that said agreement
“cancels and supersedes the Joint Affidavit dated 11 April 1966 executed by the co-owners."
The private respondents and petitioners assigned to SHELL the monthly rentals due them
commencing the 24th of May 1966 until such time that the monthly rentals accumulated equal
Pl5,000.00 which private respondents agree to be a cash deposit of petitioner in favor of SHELL
to increase his credit limit as dealer. As above-stated it provided therein that “This agreement,
therefore, cancels and supersedes the Joint Affidavit dated 11 April 1966 executed by the
COOWNERS."
For sometime, the petitioner submitted financial statements regarding the operation of
the business to private respondents, but therafter petitioner failed to render subsequent
accounting. Hence through Atty. Angeles, a demand was made on petitioner to render an
accounting of the profits. A complaint was filed by private respondent but it was dismissed by
the temporary judge in the Trial Court. A motion for reconsideration was filed. The newly
appointed judge rendered another decision in favor of private respondents. Ordering
defendant:
a. Ordering the defendant to execute a public instrument embodying all the provisions
of the partnership agreement entered into between plaintiffs and defendant as
provided for in Article 1771, Civil Code of the Philippines;
b. Ordering the defendant to render a formal accounting of the business operation
from April 1969 up to the time this order is issued, the same to be subject to
examination and audit by the plaintiff;
c. Ordering the defendant to pay plaintiffs their lawful shares and participation in the
net profits of the business in the amount of P150,000.00, with interest thereon at
the rate of One (1%) Per Cent per month from date of demand until full payment
thereof;
On appeal to the Court of Appeals, it affirmed in toto the decision of the lower court. Hence this
appeal.
Issue:
Whether or not there is no partnership because of the stipulation cancelling and
superseding the previous joint affidavit, whatever partnership agreement there was in said
previous agreement had thereby been abrogated.
Held:
No. Petitioner contends that because of the said stipulation cancelling and superseding
that previous Joint Affidavit, whatever partnership agreement there was in said previous
agreement had thereby been abrogated. We find not merit in this argument. Said cancelling
provision was necessary for the Joint Affidavit speaks of P15,QOO.OO advance rentals starting
May 25, 1966 while the latter agreement also refers to advance rentals of the same amount
starting May 24,1966, There is, therefore, a duplication of reference to the Pl 5,000.00 hence
the need to provide in the subsequent document that it “cancels and supersedes” the previous
one. True it is that in the latter document, it is silent as to the statement in the Joint Affidavit
that the P15,000.00 represents the “capital investment” of the parties in the gasoline station
business and it speaks of petitioner as the sole dealer, but this is as it should be for in the latter
document SHELL was a signatory and it would be against its policy if in the agreement it should
be stated that the business is a partnership with private respondents and not a sole
proprietorship of petitioner.
Moreover other evidence in the record shows that there was in fact such partnership
agreement between the parties. This is attested by the testimonies of private respondent
Remedios Estanislao and Atty. Angeles. Petitioner submitted to private respondents’ periodic
accounting of the business. Petitioner gave a written authority to private respondent Remedios
Estanislao, his sister, to examine and audit the books of their “common business” (aming
negosyo). Respondent Remedios assisted in the running of the business. There is no doubt that
the parties hereto formed a partnership when they bound themselves to contribute money in a
common fund with the intention of dividing the profits among themselves. The sole dealership
by the petitioner and the issuance of all government permits and licenses in the name of
petitioner was in compliance with the afore-stated policy of SHELL and the understanding of
the parties of having only one dealer of the SHELL products.

FACTS:
Petitioner and private respondents are brothers and sisters who are co-owners of
certain which were then being leased to the Shell Company of the Philippines Limited (SHELL).
They agreed to open and operate a gas station thereat to be known as Estanislao Shell Service
Station with an initial investment of P15,000.00 to be taken from the advance rentals due to
them from SHELL for the occupancy of the said lots owned in common by them.

The parties herein entered into an Additional Agreement with a proviso that said agreement
cancels and supersedes the original agreement executed by the co-owners.
For sometime, the petitioner submitted financial statements regarding the operation of the
business to private respondents, but thereafter petitioner failed to render subsequent
accounting.

A demand was made on petitioner to render an accounting of the profits;  to execute a public
document embodying all the provisions of the partnership agreement; to pay the plaintiffs their
lawful shares and participation in the net profits of the business.

Issue:
Whether or not there is no partnership because of the stipulation cancelling and
superseding the previous joint affidavit, whatever partnership agreement there was in said
previous agreement had thereby been abrogated.
Held:
There is no doubt that the parties hereto formed a partnership when they bound
themselves to contribute money in a common fund with the intention of dividing the profits
among themselves. The sole dealership by the petitioner and the issuance of all government
permits and licenses in the name of petitioner was only to comply with the policy of SHELL and
the understanding of the parties of having only one dealer of the SHELL products.