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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 profits among themselves. Two or more persons may also for a partnership for the exercise of a profession. Evangelista, et al v. CIR Facts: Eufemia Evangelista, Manuela Evangelista and Francisca Evangelista (Petitioners) borrowed money from their father and with their personal money used it to purchase real properties. a) Feb. 2, 1943 lot including improvements from Mrs. Josefina Florentino. b) April 3, 1944 21 parcels of land including improvements from Mrs. Josefa Oppus. c) April 28, 1944 lot including improvements from Insular Investments Inc. d) April 28, 1944 lot including improvements from Mrs. Valentina Afable. After buying the properties, they rented and leased it to various tenants. In a document dated Aug. 16, 1945, they appointed their brother, Simeon Evangelista to manage the properties with the power: a) To lease; b) To collect and receive rents; c) To bring suits against the defaulting tenants; d) To sign all letters, contracts, etc. for and in their behalf; and e) To endorse and deposit all notes and checks for them. In a letter, the Collector of Internal Revenue (CIR; Respondent) demanded payment of income tax on corporations, real estate dealers fixed tax and corporation residence tax. The petitioners filed a petition praying that they be absolved from payment of the taxes, among their arguments being that they are mere co-owners, not co-partners, 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. Issue: Whether petitioners are subject to the tax on corporations as provided in section 24 of Commonwealth Act No. 468 (National Internal Revenue Code, as well as to residence tax for corporations? Sec. 24, National Internal Revenue Code: Rate of tax on corporations. There shall be levied, assessed, collected, and paid annually upon the total net income received in the preceding taxable year from all sources by every corporation organized in, or existing under the laws of the Philippines, no matter how created or organized but not including duly registered general co-partnerships, a tax upon such income equal to the sum of the following XXX Ruling: Yes. The petitioners are subject to the taxes the CIR is demanding them to pay. Sec. 84(b), National Internal Revenue Code: The term corporation includes partnerships, no matter how created or organized, joint-stock companies, joint accounts, associations or insurance companies, but does not include duly registered general copartnerships. 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 profits among themselves. o 2 Essential Elements of a Partnership: 1) Agreement to contribute money, property or industry to a common fund; and Present in case Petitioners have agreed to, and did contribute money and property to a common fund. 2) Intent to divide the profits among the contracting parties. Also present Court was satisfied that the purpose of petitioners was to engage in real estate transactions for monetary gain and then divide it among themselves for the following reasons taken together: 1) Common fund was purposely created, jointly borrowing a substantial portion of it. 2) They invested the common fund in a series of transactions. o The number of lots (24) acquired and transactions undertaken as well as the brief interregnum between each is strongly indicative of a pattern or common design that was not limited to the conservation and preservation of the common fun or even the property acquired. 3) The lots were not devoted to residential purposes or to other personal uses but instead, was leased to several persons who paid rentals. 4) Properties were under the management of one person, Simeon, with full power to lease, collect rents, issue receipts, bring suits, sign letters and contracts, and indorse and deposit notes and checks. Affairs of the

properties have been handled as if the same belonged to a corporation or business and enterprise operated for profit. 5) Conditions have existed for over 15 years. 6) Petitioners have not introduce evidence on their purpose on creating the set up. When the National Internal Revenue Code includes partnerships among the entities subject to tax on corporations, it refers to organizations not necessarily partnerships in the technical sense of the term. o Sec. 84 defined corporation as including partnerships, no matter how created o 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. o Personality is not an essential condition to the existence of the partnerships referred to. o In fact, duly registered general copartnerships which are possessed of the aforementioned personality have been expressly excluded by Sec. 24 and 84(b) from the connotation of the term corporation. In American Law, partnership includes not only a partnership as known at common law, but as well as, a syndicate, group, pool, joint venture, or other unincorporated organization which carries on any business financial operation, or venture, which is not, within the meaning of the Code, a trust, estate or a corporation. Finally, as regards the residence tax for corporations required by Commonwealth Act No. 465, the said law is analogous to Sec. 24 and 84(b) of the National Internal Revenue Code.

Art. 1771: A partnership may be constituted in any form, except where immovable property or real rights are contributed thereto, in which case a public instrument is necessary. Fernandez v. Dela Rosa Facts: o Jose Fernandez (Petitioner) and Francisco Dela Rosa (Respondent) entered a verbal agreement to form a partnership for the purchase of cascoes and the carrying on of the business of letting the same for hire in Manila, Dela Rosa 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. o Dela Rosa purchased a casco designated as No.1515 for P500 from Dona Isabel Vales and Fernandez furnished P300 for its repairs. o Dela Rosa took the title of the casco in his own name. nd o A 2 casco, designated as No. 2089, was purchased by Dela Rosa, also in his own name. o Parties undertook to draw up articles of partnership for the purpose of embodying it in an authentic document, but because Dela Rosa proposed a draft which materially differed from the terms of the verbal agreement and refused to include casco No. 2089 in the partnership, they were unable to come to any understanding and no written agreement was executed. o When Fernandez demanded an accounting, Dela Rosa refused and denied the existence of the partnership. Issue: Did a partnership exist between the parties? Ruling: Yes. A complete and perfect contract of partnership was entered into the parties. o 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. o Elements of a partnership: 1) Mutual contribution of a common stock; and This element was present Money was furnished by Fernandez and received by Dela Rosa with the understanding that it was to be used for the purchase of the 2 cascoes. 2) Joint interest in the profits. 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 st the parties in making the purchase in that form, and that prior to the purchase of the 1 cascoe, the formation of a partnership had been the subject of negotiation between them. o 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 contribution of the partners not having been in the form of immovable or rights in immovable.