ROSARIO U. YULO, assisted by her husband JOSE C.

YULO v YANG CHIAO SENG

Facts:
 On June 17, 1945, Yang wrote to Rosario proposing the formation of a partnership between them to run and operate a
theatre on the premises occupied by former Cine Oro at Plaza Sta. Cruz, Manila. The relevant conditions of the offer
are:
o Yang guarantees Rosario a monthly participation of P3k payable quarterly in advance
o The partnership is for a period of 2.5yrs, but if the land is expropriated or rendered impracticable for the business,
or if the owner constructs a permanent building thereon, or Rosario’s right of lease is terminated by the owner,
then the partnership shall be terminated even if the period has not yet expired
o After Dec. 31, 1947 (end of the period), all improvements placed by the partnership shall belong to Rosario, but if
the partnership agreement is terminated before the lapse of 1.5yrs period under any of the causes mentioned in the
above condition, Yang has the right to remove and take away all improvements that the partnership may place
there
 Rosario accepted. Pursuant to the offer, the parties executed a partnership agreement establishing the “Yang &
Company, Limited,” which was to exist from July 1, 1945 to Dec. 31, 1947. It states that it will conduct and carry on
the business of operating a theatre for the exhibition of motion and talking pictures. The capital is fixed at P100k:
P80k to be furnished by Yang and P20k, by Rosario. All gains and profits are to be distributed among the partners in
the same proportion as their capital contribution and the liability of Rosario, in case of loss, shall be limited to her
capital contribution
 In June 1946, the parties executed a supplementary agreement, extending the partnership for 3 years (Jan. 1, 1948-
Dec. 31, 1950). The benefits are to be divided 50-50 and after Dec. 31, 1950, the building shall belong exclusively to
Rosario
 The land on which the theatre was constructed was leased by Rosario from Emilia Carrion Santa Marina and Maria
Carrion Santa Marina. In the contract of lease, it was stipulated that the lease shall continue for an indefinite period,
but that after 1 year, the lease may be cancelled by either party by written notice to the other party at least 90 days
before the date of cancellation. On April 12, 1949, the owners’ attorney notified Rosario of the owner's desire to
cancel the contract of lease on July 31. In view of this, the Yulos brought filed a case in the CFI Manila to declare the
lease of the premises. On Feb. 9, 1950, the Municipal Court Manila rendered judgment ordering the ejectment of the
partners. The judgment was appealed. In the CFI, the two cases were heard jointly, and judgment was rendered
dismissing the complaint of the Yulos, and declaring the contract of lease terminated as of July 31, 1949 and fixing
the reasonable monthly rentals at P100. Both parties appealed, but the CA affirmed on April 30, 1955
 Meanwhile, on Oct. 27, 1950, Rosario demanded from Yang her share in the profits. Yang answered saying that upon
the advice of his counsel, he had to suspend the payment of the rentals because of the pendency of the ejectment suit
against Rosario. He alleged that inasmuch as he is a sublessee and inasmuch as Rosario has not paid to the lessors the
rentals from Aug. 1949, he was retaining the rentals to make good to the landowners the rentals due from Rosario in
arrears
 Thus, Rosario instituted the present case on May 26, 1954, alleging:
o Existence of a partnership between her and Yang
o Yang has refused to pay her share from Dec. 1949 to Dec. 1950
o After Dec. 31, 1950, the partnership terminated, and thus, as she became the absolute owner of the building
o reasonable rental that Yang should pay from Jan. 1951 is P5k
o Yang has acted maliciously and refuses to pay her participation in the profits of the business amounting to P35k
from Nov. 1949 to Oct. 1950, and as a result, she has suffered damages of P160k and exemplary damages of P5k.
Thus, she prayed for the payment of the above sums plus P10k attorney's fees.
 In answer, Yang alleges:
o The real agreement between the him and Rosario is lease and not partnership
o Partnership was adopted as a subterfuge to get around the prohibition contained in the contract of lease against the
sublease of the said property
o The fair rental value of the land is only P1.1k
o (Counterclaim) by reason of an attachment issued against Yang’s property, he has suffered damages of P100k.
 During the first hearing on April 19, 1955, only Rosario appeared. The court heard Rosario’s evidence and thereafter
rendered judgment ordering Yang to pay to Rosario: P41k for her participation in the business up to Dec.1950, P5k as
monthly rental for the use and occupation of the building from Jan. 1, 1951 until he vacates, and P3k for the use and
occupation of the lobby from July 1, 1945 until he vacates.
 Upon motion for reconsideration, the TC reversed. In the motion, it is claimed that Yang failed to appear at the
hearing because of his honest belief that a joint petition for postponement filed by both parties, in view of a possible
amicable settlement, would be granted; and that in view of the decision of the CA in the mentioned two previous
cases, Rosario has no right to claim the participation in the profit of the business.
 A new trial was held. After trial, the court dismissed the complaint, holding that:
o It is not true that a partnership was created between the parties because Rosario has not actually contributed
o The real agreement between the parties is lease, and thus, Rosario did not share either in the profits or in the losses
of the business as required by Art. 1769
o The fact that Rosario was granted a “guaranteed participation” in the profits also belies the supposed existence of
a partnership
o As to the claim for damages for the refusal of Yang to allow the use of the supposed lobby of the theatre, it was
found after ocular inspection found that the said lobby was a very narrow space leading to the balcony of the
theatre which could not be used for business purposes under existing ordinances of the City of Manila because it
would constitute a hazard and danger to the patrons of the theatre
It also dismissed the counterclaim as Yang failed to present sufficient evidence. Hence this petition.

Relevant issue: WoN the TC erred in holding that the written contracts between the parties are of lease and not of
partnership – NO
 Art. 1767: Requisites of partnership: (1) two or more persons who bind themselves to contribute money, property, or
industry to a common fund; (2) intention on the part of the partners to divide the profits among themselves
 Rosario did not furnish the supposed P20k capital. She also did not furnish any help or intervention in the
management of the theatre. It also does not appear that she has ever demanded from Yang any accounting of the
expenses and earnings of the business. Were she really a partner, her first concern should have been to find out how
the business was progressing, whether the expenses were legitimate, whether the earnings were correct, etc. She was
absolutely silent with respect to any of the acts that a partner should have done; all that she did was to receive her
share of P3k/month, which cannot be interpreted in any manner except as a payment for the use of the premises which
she had leased from the owners.
 Rosario had always acted in accordance with the original letter of of June 17, 1945, which shows that both parties
considered this offer as the real contract between them
 Rosario claims P41k as representing her share or participation in the business from Dec. 1949. But the original letter
expressly states that the agreement between the parties was to end upon the termination of the right of Rosario to the
lease. Her right having terminated in July 1949 as found by the CA, the partnership agreement or the agreement for
her to receive a participation of P3k automatically ceased as of said date.

Issue: WoN the TC erred in setting aside its former decision and allowing a new trial – NO, it was for the interest of
justice because as that parties agreed to postpone the trial because of a probable amicable settlement, Rosario could not
take advantage of Yang’s absence at the time fixed for the hearing

Issue: WoN the TC erred in not striking out the evidence offered by Yang to prove that the relation between the parties is
one of the sublease and not of partnership – NO, it is justified by the express allegation in Yang’s answer that the
agreement set forth in the complaint was one of lease and not of partnership, and that the partnership formed was adopted
in view of a prohibition contained in Rosario’s lease against a sublease of the property.