LITONJUA v.

LITONJUA
FACTS:
Aurelio and Eduardo are brothers. In 1973, Aurelio alleged that Eduardo entered into
a contract of partnership with him. Aurelio showed as evidence a letter sent to him by
Eduardo that the latter is allowing Aurelio to manage their family business if
Eduardo!s away" and in e#change thereof he will be giving Aurelio $1 million or 1%&
e'uity, whichever is higher. A memorandum was subse'uently made for the said
partnership agreement. (he memorandum this time stated that in e#change of
Aurelio, who )ust got married, retaining his share in the family business movie
theatres, shipping and land development" and some other immovable properties, he
will be given $1 *illion or 1%& e'uity in all these businesses and those to be
subse'uently ac'uired by them whichever is greater.
In 199+ however, the relationship between the brothers went sour. And so Aurelio
demanded an accounting and the li'uidation of his share in the partnership. Eduardo
did not heed and so Aurelio sued Eduardo.
ISSUE, -hether or not there e#ists a partnership.
HELD: No. (he partnership is void and legally none#istent. (he documentary
evidence presented by Aurelio, i.e. the letter from Eduardo and the *emorandum, did
not prove partnership.
(he 1973 letter from Eduardo on its face, contains typewritten entries, personal in
tone, but is unsigned and undated. As an unsigned document, there can be no
'uibbling that said letter does not meet the public instrumentation re'uirements
e#acted under Article 1771 how partnership is constituted" of the .ivil .ode.
*oreover, being unsigned and doubtless referring to a partnership involving more
than $3,%%%.%% in money or property, said letter cannot be presented for
notari/ation, let alone registered with the 0ecurities and E#change .ommission
0E.", as called for under the Article 177+ capitali/ation of a partnership" of the
.ode. And inasmuch as the inventory re'uirement under the succeeding Article 1773
goes into the matter of validity when immovable property is contributed to the
partnership, the ne#t logical point of in'uiry turns on the nature of Aurelio!s
contribution, if any, to the supposed partnership.
(he *emorandum is also not a proof of the partnership for the same is not a public
instrument and again, no inventory was made of the immovable property and no
inventory was attached to the *emorandum. Article 1773 of the .ivil .ode re'uires
that if immovable property is contributed to the partnership an inventory shall be had
and attached to the contract.
AFISCO Insurance Corporation v. CA
G.R. No. !"#$ Jan. !$% &&&Justice 'an(ani)an
Facts:

$ursuant to 1reinsurance treaties,2 a number of local insurance 3rms formed
themselves into a 1pool2 in order to facilitate the handling of business contracted
with a non resident foreign reinsurance company. After assessing their submitted
3nancial statement, the 4I5 .ommissioner re'uired them to pay de3ciency ta#es on
the ground that they have formed an unregistered partnership ta#able as a
corporation
A6I0.7, there was no partnership, (he reinsurance policies were written by them
individually and separately, (heir liability was limited to the e#tent of their allocated
share in the original ris8s thus reinsured, (hey did not share the same ris8 or solidary
liability, (here was no common fund, (he e#ecutive board of the pool did not e#ercise
control and management of its funds, unli8e the board of directors of a corporation,
(he 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
.A, a partnership was formed
Issue: -79 the pool or clearing house was a partnership or association sub)ect to
ta# as a corporation, it is. (he $hilippine legislature included in the concept of
corporations those entities that resembled them such as unregistered partnerships
and associations. $arenthetically, the 9:5.!s inclusion of such entities in the ta# on
corporations was made even clearer by the (a# 5eform Act of 1997, which amended
the (a# .ode
0., the term partnership includes syndicate, group, pool, )oint venture and other
unincorporated organi/ation, through or by means of which any business, 3nancial
operation, or venture is carried on Evangelista v. .ollector of Internal 5evenue"
Art. 17;7 of the .ivil .ode, re'uisite of a contract of partnership, (wo or more
persons mutually contribute to a common fund, -ith the intention to divide the
pro3ts among themselves .*eanwhile, an association implies associates who enter
into a )oint enterprise for the transaction of business.
-here several local insurance ceding companies enter into pool agreements or an
association that would handle all the insurance business covered under their 'uota
share reinsurance treaty and surplus reinsurance treaty with a non<resident foreign
reinsurance company, the resulting pool have a common fund and functions through
an e#ecutive board and its wor8 in indispensable, bene3cial and economically useful
to the business of the ceding companies and the foreign 3rm such circumstances
indicate a partnership or an association covered by 0ec. 9I5..
LI* TONG LI* v. '+i,ippine Fis+in( Gear &&&
FACTS:
It was established that :im (ong :im re'uested $eter =ao to engage in commercial
3shing with him and one Antonio .hua. (he three agreed to purchase two 3shing
boats but since they do not have the money they borrowed from one >esus :im
brother of :im (ong :im". (hey again borrowed money and they agreed to purchase
3shing nets and other 3shing e'uipments. 9ow, =ao and .hua represented
themselves as acting in behalf of 17cean ?uest 6ishing .orporation2 7?6." they
contracted with $hilippine 6ishing @ear Industries $6@I" for the purchase of 3shing
nets amounting to more than $A%%8.
(hey were however unable to pay $6@I and so they were sued in their own names
because apparently 7?6. is a non<e#istent corporation. .hua admitted liability and
as8ed for some time to pay. =ao waived his rights. :im (ong :im however argued that
he!s not liable because he was not aware that .hua and =ao represented themselves
as a corporationB that the two acted without his 8nowledge and consent.
ISSUE: -hether or not :im (ong :im is liable.
HELD: -es. 6rom the factual 3ndings of both lower courts, it is clear that .hua, =ao
and :im had decided to engage in a 3shing business, which they started by buying
boats worth $3.3A million, 3nanced by a loan secured from >esus :im. In their
.ompromise Agreement, they subse'uently revealed their intention to pay the loan
with the proceeds of the sale of the boats, and to divide e'ually among them the
e#cess or loss. (hese boats, the purchase and the repair of which were 3nanced with
borrowed money, fell under the term 1common fund2 under Article 17;7. (he
contribution to such fund need not be cash or 3#ed assetsB it could be an intangible
li8e credit or industry. (hat the parties agreed that any loss or pro3t from the sale and
operation of the boats would be divided e'ually among them also shows that they
had indeed formed a partnership.
:im (ong :im cannot argue that the principle of corporation by estoppels can only be
imputed to =ao and .hua. Cn'uestionably, :im (ong :im bene3ted from the use of
the nets found in his boats, the boat which has earlier been proven to be an asset of
the partnership. :im, .hua and =ao decided to form a corporation. Although it was
never legally formed for un8nown reasons, this fact alone does not preclude the
liabilities of the three as contracting parties in representation of it. .learly, under the
law on estoppel, those acting on behalf of a corporation and those bene3ted by it,
8nowing it to be without valid e#istence, are held liable as general partners.
Evan(e,ista% et a,. v. CIR% GR No. L.&&&"% Octo)er $% &$#
Facts:
Derein petitioners see8 a review of .(A!s decision holding them liable for
income ta#, real estate dealer!s ta# and residence ta#. As stipulated, petitioners
borrowed from their father a certain sum for the purpose of buying real properties.
-ithin 6ebruary 19E3 to April 199E, they have bought parcels of land from diFerent
persons, the management of said properties was charged to their brother 0imeon
evidenced by a document. (hese properties were then leased or rented to various
tenants.
7n 0eptember 19AE, .I5 demanded the payment of income ta# on
corporations, real estate dealer!s 3#ed ta#, and corporation residence ta# to which
the petitioners see8 to be absolved from such payment.

Issue: -hether petitioners are sub)ect to the ta# on corporations.

Ru,in(:
(he .ourt ruled that with respect to the ta# on corporations, the issue hinges
on the meaning of the terms 1corporation2 and 1partnership2 as used in 0ection +E
provides that a ta# shall be levied on every corporation no matter how created or
organi/ed e#cept general co<partnerships" and GE provides that the term corporation
includes among others, partnership" of the 9I5.. $ursuant to Article 17;7, 9..
provides for the concept of partnership", its essential elements are, a" an
agreement to contribute money, property or industry to a common fundB and b"
intent to divide the pro3ts among the contracting parties.
It is of the opinion of the .ourt that the 3rst element is undoubtedly present for
petitioners have agreed to, and did, contribute money and property to a common
fund. As to the second element, the .ourt fully satis3ed that their purpose was to
engage in real estate transactions for monetary gain and then divide the same
among themselves as indicated by the following circumstances,
1. (he common fund was not something they found already in e#istence nor a
property inherited by them pro indiviso. It was created purposely, )ointly borrowing a
substantial portion thereof in order to establish said common fundB
+. (hey invested the same not merely in one transaction, but in a series of
transactions. (he number of lots ac'uired and transactions underta8e is strongly
indicative of a pattern or common design that was not limited to the conservation
and preservation of the aforementioned common fund or even of the property
ac'uired. In other words, one cannot but perceive a character of habitually peculiar
to business transactions engaged in the purpose of gainB
3. 0aid properties were not devoted to residential purposes, or to other personal
uses, of petitioners but were leased separately to several personsB
E. (hey were under the management of one person where the aFairs relative to
said properties have been handled as if the same belonged to a corporation or
business and enterprise operated for pro3tB
A. E#isted for more than ten years, or, to be e#act, over 3fteen years, since the
3rst property was ac'uired, and over twelve years, since 0imeon Evangelista became
the managerB
;. $etitioners have not testi3ed or introduced any evidence, either on their
purpose in creating the set up already adverted to, or on the causes for its continued
e#istence.
(he collective eFect of these circumstances is such as to leave no room for doubt on
the e#istence of said intent in petitioners herein.
Also, petitioners! argument that their being mere co<owners did not create a
separate legal entity was re)ected because, according to the .ourt, the ta# in
'uestion is one imposed upon HcorporationsH, which, strictly spea8ing, are distinct
and diFerent from HpartnershipsH. -hen the 9I5. includes HpartnershipsH among the
entities sub)ect to the ta# on HcorporationsH, said .ode must allude, therefore, to
organi/ations which are not necessarily HpartnershipsH, in the technical sense of the
term.
(he 'ualifying e#pression found in 0ection +E and GEb" clearly indicates that a )oint
venture need not be underta8en in any of the standard forms, or in conformity with
the usual re'uirements of the law on partnerships, in order that one could be deemed
constituted for purposes of the ta# on corporations. Accordingly, the lawma8er could
not have regarded that personality as a condition essential to the e#istence of the
partnerships therein referred to. 6or purposes of the ta# on corporations, 9I5.
includes these partnerships < with the e#ception only of duly registered general co
partnerships < within the purview of the term Hcorporation.H It is, therefore, clear that
petitioners herein constitute a partnership, insofar as said .ode is concerned and are
sub)ect to the income ta# for corporations.
As regards the residence of ta# for corporations 0ection + of .A 9o. E;A", it is
analogous to that of section +E and GE b" of the 9I5.. It is apparent that the terms
HcorporationH and HpartnershipH are used in both statutes with substantially the same
meaning. .onse'uently, petitioners are sub)ect, also, to the residence ta# for
corporations.
6inally, on the issues of being liable for real estate dealer!s ta#, they are also liable
for the same because the records show that they have habitually engaged in leasing
said properties whose yearly gross rentals e#ceeds $3,%%%.%% a year.
AGUILA /. CA
FACTS:
In April 1991, the spouses 5uben and 6elicidad Abrogar entered into a loan
agreement with a lending 3rm called A... Aguila I 0ons, .o., a partnership. (he loan
was for $+%%8. (o secure the loan, the spouses mortgaged their house and lot located
in a subdivision. (he 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 e#ecuted in favor of the partnership. 0he does have a 9% day
redemption period.
5uben died, and 6elicidad failed to ma8e payment. 0he refused to turn over the
property and so the 3rm 3led an e)ectment case against her wherein she lost". 0he
also failed to redeem the property within the period stipulated. 0he then 3led a civil
case against Alfredo Aguila, manager of the 3rm, see8ing for the declaration of nullity
of the deed of sale. (he 5(. retained the validity of the deed of sale. (he .ourt of
Appeals reversed the 5(.. (he .A ruled that the sale is void for it is a pactum
commissorium sale which is prohibited under Art. +%GG of the .ivil .ode 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: -hether or not the case 3led by 6elicidad shall prosper.
HELD: No. Cnfortunately, the civil case was 3led not against the real party in
interest. As pointed out by Aguila, he is not the real party in interest but rather it was
the partnership A... Aguila I 0ons, .o. (he 5ules of .ourt provide that 1every action
must be prosecuted and defended in the name of the real party in interest.2 A real
party in interest is one who would be bene3ted or in)ured by the )udgment, or who is
entitled to the avails of the suit. Any decision rendered against a person who is not a
real party in interest in the case cannot be e#ecuted. Dence, a complaint 3led against
such a person should be dismissed for failure to state a cause of action, as in the
case at bar.
Cnder Art. 17;G of the .ivil .ode, a partnership 1has a )uridical personality separate
and distinct from that of each of the partners.2 (he partners cannot be held liable for
the obligations of the partnership unless it is shown that the legal 3ction of a diFerent
)uridical personality is being used for fraudulent, unfair, or illegal purposes. In this
case, 6elicidad has not shown that A... Aguila I 0ons, .o., as a separate )uridical
entity, is being used for fraudulent, unfair, or illegal purposes. *oreover, the title to
the sub)ect property is in the name of A... Aguila I 0ons, .o. It is the partnership, not
its oJcers 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.
O0ILLOS v. CA
Facts:
7n *arch +, 1973 >ose 7billos, 0r. bought two lots with areas of 1,1+E and 9;3 s'uare
meters of located at @reenhills, 0an >uan, 5i/al. (he ne#t day he transferred his rights
to his four children, the petitioners, to enable them to build their residences. (he
(orrens titles issued to them showed that they were co<owners of the two lots. In
197E, or after having held the two lots for more than a year, the petitioners resold
them to the -alled .ity 0ecurities .orporation and 7lga .ru/ .anada for the total
sum of $313,%A%. (hey derived from the sale a total pro3t of $13E, 3E1.GG or $33,AGE
for each of them. (hey treated the pro3t as a capital gain and paid an income
ta# on one<half thereof or of $1;,79+. In April, 19G%, the .ommissioner of Internal
5evenue re'uired the four petitioners to pay corporate income ta# on the total pro3t
of $13E,33; in addition to individual income ta# on their shares thereof. (he
petitioners are being held liable for de3ciency income ta#es and penalties totalling
$1+7,7G1.7; on their pro3t of $13E,33;, in addition to the ta# on capital gains
already paid by them.

(he .ommissioner acted on the theory that the four petitioners had formed an
unregistered partnership or )oint venture (he petitioners contested the assessments.
(wo >udges of the (a# .ourt sustained the same. Dence, the instant appeal.
Issue: -hether or not the petitioners had indeed formed a partnership or )oint
venture and thus liable for corporate ta#.
He,1: (he 0upreme .ourt held that the petitioners should not be considered to have
formed a partnership )ust because they allegedly contributed $17G,7%G.1+ to buy the
two lots, resold the same and divided the pro3t among themselves. (o regard so
would result in oppressive ta#ation and con3rm the dictum that the power to ta#
involves the power to destroy. (hat eventuality should be obviated. As testi3ed by
>ose 7billos, >r., they had no such intention. (hey were co<owners pure and simple. (o
consider them as partners would obliterate the distinction between a co<ownership
and a partnership. (he petitioners were not engaged in any )oint venture by reason of
that isolated transaction.
LArticle 17;93" of the .ivil .ode provides that Hthe sharing of gross returns does not
of itself establish a partnership, whether or not the persons sharing them have a )oint
or common right or interest in any property from which the returns are derivedH.
(here must be an unmista8able intention to form a partnership or )oint venture.L
(heir original purpose was to divide the lots for residential purposes. If later on they
found it not feasible to build their residences on the lots because of the high cost of
construction, then they had no choice but to resell the same to dissolve the co<
ownership. (he division of the pro3t was merely incidental to the dissolution of the
co<ownership which was in the nature of things a temporary state. It had to be
terminated sooner or later. (hey did not contribute or invest additional M capital to
increase or e#pand the properties, nor was there an unmista8able intention to form
partnership or )oint venture.
-DE5E675E, the )udgment of the (a# .ourt is reversed and set aside. (he
assessments are cancelled. 9o costs.
All co<ownerships are not deemed unregistered partnership.N.o<7wnership who
own properties which produce income should not automatically be considered
partners of an unregistered partnership, or a corporation, within the purview of the
income ta# law. (o hold otherwise, would be to sub)ect the income of all
.o<ownerships of inherited properties to the ta# on corporations, inasmuch as if a
property does not produce an income at all, it is not sub)ect to any 8ind of income
ta#, whether the income ta# on individuals or the income ta# on corporation.
As compared to other cases,
.ommissioner of Internal 5ev
enue, :<193E+, *ay +A, 197+, EA 0.5A 7E, where after an e#tra)udicial settlement
the co<heirs used the inheritance or the incomes derived therefrom as a common
fund to produce pro3ts for themselves, it was held that they were ta#able as an
unregistered partnership.
(his case is diFerent from 5eyes vs. .ommissioner of Internal 5evenue, +E 0.5A 19G,
where father and son purchased a lot and building, entrusted the administration of
the building to an administrator and divided e'ually the net income, and from
Evangelista vs. .ollector of Internal 5evenue, 1%+ $hil. 1E%, where the three
Evangelista sisters bought four pieces of real property which they leased to various
tenants and derived rentals therefrom. .learly, the petitioners in these two cases had
formed an unregistered partnership.
'ASCUAL v. Co22issioner o3 Interna,Revenue @.5. 9o. 7G133 7ctober 1G,
19GG
FACTS:
7n >une ++, 19;A, petitioners bought two +"parcels of land from 0antiago
4ernardino, et al. and on *ay +G, 19;;, they bought another three 3" parcels of land
from >uan 5o'ue. (he 3rst two parcels of land were sold by petitioners in 19;G to
*arenir Oevelopment .orporation, while the three parcels of land were sold by
petitioners to Erlinda 5eyes and *aria 0amson on *arch 19,197%. $etitioner reali/ed
a net pro3t in the sale made in 19;G in the amount of $1;A, ++E.7%, while they
reali/ed a net pro3t of $;%,%%% in the sale made in 197%. (he corresponding capital
gains ta#es were paid by petitioners in 1973 and 197E .5espondent .ommissioner
informed petitioners that in the years 19;G and 197%, petitioners as co<owners in the
real estate transactions formed an unregistered partnership or )oint venture ta#able
as a corporation under 0ection +%b"and its income was sub)ect to the ta#es
prescribed under 0ection +E, both of the 9ational Internal 5evenue .odeB that the
unregistered partnership was sub)ect to corporate income ta# as distinguished from
pro3ts derived from the partnership by them which is sub)ect to individual income
ta#.
ISSUE:
-hether petitioners formed an unregistered partnership sub)ect to corporate income
ta#partnership vs. co<ownership"
RULING:
Article 17;9 of the new .ivil .ode lays down the rule for determining when a
transaction should be deemed a partnership or a co<ownership .0aid article
paragraphs + and 3, provides,+" .o<ownership or co<possession does not itself
establish a partnership, whether such co<owners or co<possessors do or do not share
any pro3ts made by the use of the propertyB 3" (he sharing of gross returns does not
of itself establish a partnership, whether or not the persons sharing them have a )oint
or common right or interest in any property from which the returns are derivedB (he
sharing of returns does not in itself establish a partnership whether or not the
persons sharing therein have a )oint or common right or interest in the property.
(here must be a clear intent to form a partnership, the e#istence of a )uridical
personality diFerent from the individual partners, and the freedom of each party to
transfer or assign the whole property. In the present case, there is clear evidence of
co<ownership between the petitioners. (here is no ade'uate basis to support the
proposition that they thereby formed an unregistered partnership.
(he two isolated transactions whereby they purchased properties and sold the
same a few years thereafter did not thereby ma8e them partners. (hey shared in the
gross pro3ts as co< owners and paid their capital gains ta#es on their net pro3ts and
availed of the ta# amnesty thereby. Cnder the circumstances, they cannot be
considered to have formed an unregistered partnership which is thereby liable for
corporate income ta#, as the respondent commissioner proposes. And even assuming
for the sa8e of argument that such unregistered partnership appears to have been
formed, since there is no such e#isting unregistered partnership with a distinct
personality nor with assets that can be held liable for said de3ciency corporate
income ta#, then petitioners can be held individually liable as partners for this unpaid
obligation of the partnership.
HEIRS OF JOSE LI* v. JULIET LI*
FACTS:
In 19G%, the heirs of >ose :im alleged that >ose :im entered into a partnership
agreement with >immy =u and 9orberto Cy. (he three contributed $A%,%%%.%% each
and used the funds to purchase a truc8 to start their truc8ing business. A year later
however, >ose :im died. (he eldest son of >ose :im, ElPedo :im, too8 over the
truc8ing business and under his management, the truc8ing business prospered.
ElPedo was able to but real properties in his name. 6rom one truc8, he increased it to
9 truc8s, all truc8s were in his name however. De also ac'uired other motor vehicles
in his name.
In 1993, 9orberto Cy was 8illed. In 199A, ElPedo :im died of a heart attac8. ElPedo!s
wife, >uliet :im, too8 over the properties but she intimated to >immy and the heirs of
9orberto that she could not go on with the business. 0o the properties in the
partnership were divided among them.
9ow the other heirs of >ose :im, represented by Elenito :im, re'uired >uliet to do an
accounting of all income, pro3ts, and properties from the estate of ElPedo :im as
they claimed that they are co<owners thereof. >uliet refused hence they sued her.
(he heirs of >ose :im argued that ElPedo :im ac'uired his properties from the
partnership that >ose :im formed with 9orberto and >immy. In court, >immy =u
testi3ed that >ose :im was the partner and not ElPedo :im. (he heirs testi3ed that
ElPedo was merely the driver of >ose :im.
ISSUE: -ho is the 1partner2 between >ose :im and ElPedo :imQ
HELD, It is ElPedo :im based on the evidence presented regardless of >immy =u!s
testimony in court that >ose :im was the partner. If >ose :im was the partner, then the
partnership would have been dissolved upon his death in fact, though the 0. did not
say so, I believe it should have been dissolved upon 9orberto!s death in 1993". A
partnership is dissolved upon the death of the partner. 6urther, no evidence was
presented as to the articles of partnership or contract of partnership between >ose,
9orberto and >immy. Cnfortunately, there is none in this case, because the alleged
partnership was never formally organi/ed.
4ut at any rate, the 0upreme .ourt noted that based on the functions performed by
ElPedo, he is the actual partner.
(he following circumstances tend to prove that ElPedo was himself the partner of
>immy and 9orberto,
1." .resencia testi3ed that >ose gave ElPedo $A%,%%%.%%, as share in the partnership,
on a date that coincided with the payment of the initial capital in the partnershipB
+." ElPedo ran the aFairs of the partnership, wielding absolute control, power and
authority, without any intervention or opposition whatsoever from any of petitioners
hereinB
3." all of the properties, particularly the nine truc8s of the partnership, were
registered in the name of ElPedoB
E." >immy testi3ed that ElPedo did not receive wages or salaries from the partnership,
indicating that what he actually received were shares of the pro3ts of the businessB
and
A." none of the heirs of >ose, the alleged partner, demanded periodic accounting from
ElPedo during his lifetime. As repeatedly stressed in the case of Deirs of (an Eng Ree,
a demand for periodic accounting is evidence of a partnership.
6urthermore, petitioners failed to adduce any evidence to show that the real and
personal properties ac'uired and registered in the names of ElPedo and >uliet formed
part of the estate of >ose, having been derived from >ose!s alleged partnership with
>immy and 9orberto.
ElPedo was not )ust a hired help but one of the partners in the truc8ing business,
active and visible in the running of its aFairs from day one until this ceased
operations upon his demise. (he e#tent of his control, administration and
management of the partnership and its business, the fact that its properties were
placed in his name, and that he was not paid salary or other compensation by the
partners, are indicative of the fact that ElPedo was a partner and a controlling one at
that. It is apparent that the other partners only contributed in the initial capital but
had no say thereafter on how the business was ran. Evidently it was through Elfredo!s
eForts and hard wor8 that the partnership was able to ac'uire more truc8s and
otherwise prosper. Even the appellant participated in the aFairs of the partnership by
acting as the boo88eeper sans salary.
Li,i)et+ Sun(a.C+an v. La2)erto C+ua
FACTS: In 1977, .hua and >acinto 0unga verbally agreed to form a partnership for
the sale and distribution of 0hellane :$@s. (heir business was very pro3table but in
19G9 >acinto died. Cpon >acinto!s death, his daughter :ilibeth too8 over the business
as well as the business assets. .hua then demanded for an accounting but :ilibeth
8ept on evading him. In 199+ however, :ilibeth gave .hua $+%%8. 0he said that the
same represents a partial paymentB that the rest will come after she 3nally made an
accounting. 0he never made an accounting so in 199+, .hua 3led a complaint for
1-inding Cp of $artnership AFairs, Accounting, Appraisal and 5ecovery of 0hares and
Oamages with -rit of $reliminary Attachment2 against :ilibeth. :ilibeth in her
defense argued among others that .hua!s action has prescribed.
ISSUE: -hether or not .hua!s claim is barred by prescription.
HELD: No. (he action for accounting 3led by .hua three 3" years after >acinto!s
death was well within the prescribed period. (he .ivil .ode provides that an action
to enforce an oral contract prescribes in si# ;" 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.
.onsidering that the death of a partner results in the dissolution of the partnership, in
this case, it was after >acinto!s death that .hua as the surviving partner had the right
to an account of his interest as against :ilibeth. It bears stressing that while >acinto!s
death dissolved the partnership, the dissolution did not immediately terminate the
partnership. (he .ivil .ode e#pressly 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.