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01

FEDERICO
JARANTILLA,
JR.
vs.
ANTONIETA
JARANTILLA,
BUENAVENTURA REMOTIGUE, SUBSTITUTED BY CYNTHIA REMOTIGUE,
DOROTEO JARANTILLA and TOMAS JARANTILLA (2010)
Under Article 1767 of the Civil Code, there are two essential elements in a
contract of partnership: (a) an agreement to contribute money, property or
industry to a common fund; and (b) intent to divide the profits among the
contracting parties. The first element is undoubtedly present in the case at
bar, for, admittedly, all the parties in this case have agreed to, and did,
contribute money and property to a common fund. Hence, the issue narrows
down to their intent in acting as they did. And in the present case, there was
no intent to form a partnership.
Facts:
1. In 1948, the eight (8) Jarantilla heirs extrajudicially partitioned the real
properties of their deceased parents, Andres and Felisa. (Some
produce went to fund the studies of Rafael and Antonieta Jarantilla).
2. In the same year, the spouses Rosita Jarantilla and Vivencio
Deocampo entered into a Joint Business Relationship agreement with
the spouses Conchita Jarantilla and Buenaventura Remotigue.
3. This business relationship became successful and spawned other
businesses, including acquiring buildings and other real properties
subject of this case.
4. In 1973, the partners agreed to dissolve their "joint business
relationship/arrangement."
5. Before this, on 1957, the spouses Remotigue executed a document
wherein they acknowledged that while registered only in
Buenaventura Remotigue's name, they were not the only owners of
the capital of the businesses Manila Athletic Supply (712 Raon Street,
Manila), Remotigue Trading (Calle Real, Iloilo City) and Remotigue
Trading (Cotabato City).
6. In this same "Acknowledgement of Participating Capital," they
stated the participating capital of their co-owners as of the year 1952,
with Antonieta Jarantilla's stated as eight thousand pesos (P8,000.00)
and Federico Jarantilla, Jr.'s as five thousand pesos (P5,000.00).
7. In 1987, Antonieta (aunt of the petitioner) filed a case against
Buenaventura Remotigue, Cynthia Remotigue, Federico Jarantilla, Jr.
(grandchild of the Andres and who later joined his aunt as petitioner),
Doroteo Jarantilla and Tomas Jarantilla (brothers of Federico, Jr.), for
the accounting of the assets and income of the co-ownership, for its
partition and the delivery of her share corresponding to eight
percent (8%), and for damages.
8. Antonieta claimed that the initial contribution of property and money
came from the heirs' inheritance. She also claimed co-ownership of
certain properties (QC, Rizal and Cotabato), since the only way the
defendants could have purchased these properties were through the
partnership as they had no other source of income.
9. DEFENSE: No partnership. In 1946, Antonieta was still in school and
the proceeds of a certain land was used to pay for her schooling. If
she helped Conchita in the business, she was paid a salary. The 8%

share was limited to the businesses enumerated in the


Acknowledgement of Participating Capital, not to all their
businesses.
10. Federico entered into a Compromise Agreement with Antonieta and
also demanded 6% of the share in the companies and real estate.
RTC: ifo Antonieta. There was partnership. To deliver 8% of assets,
income and worth of real properties of the partnership based on present
market value to Antonieta, plus P50k moral and P50k attys fees.
Jarantillas appeal, aside from Federico who also appealed for his share of
6% which was not included in the judgement.
CA: ifo of Remotigue et al. RTC decision set aside. There was no
partnership. Antonieta to be paid 8% and Federico 6% for their share in
the following businesses only: Manila Athletic Supply, Remotigue Trading
in Iloilo City and Remotigue Trading in Cotabato City. Motion for Partial
Reconsideration denied by CA.
Antonieta files petition for review at the SC late, so it was denied. The
present petition for certiorari is filed only by Federico.
Issue/s:

WON there is a partnership agreement between Federico and the


Remotigue spouses, et al., as shown by the Acknowledgement of
Participating Capital? NO.

WON Federico is part owner of the subject properties in QC, Rizal and
Cotabato? NO. Only those mentioned in the said 1957 document.
Held/Ratio: CA decision affirmed.
1. There is a co-ownership when an undivided thing or right belongs to
different persons. It is a 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.
2. Art. 1797. The losses and profits shall be distributed in
conformity with the agreement. If only the share of each partner
in the profits has been agreed upon, the share of each in the losses
shall be in the same proportion.
In the absence of stipulation, the share of each partner in the
profits and losses shall be in proportion to what he may have
contributed, but the industrial partner shall not be liable for the
losses. As for the profits, the industrial partner shall receive such
share as may be just and equitable under the circumstances. If
besides his services he has contributed capital, he shall also receive a
share in the profits in proportion to his capital. (Emphases supplied.)
3. Federico is not a partner. He is a co-owner but only to those properties
enumerated in the Acknowledgement of Participating Capital. Since
there was a clear agreement that the capital the partners contributed
went to the three businesses, then there is no reason to deviate from
such agreement and go beyond the stipulations in the document.
4. Petitioner has not presented evidence, other than unsubstantiated
testimonies, to prove that the respondents did not have the means to
fund their other businesses and real properties without the

partnership's income. On the other hand, the respondents presented


preponderant proof on how they acquired and funded such properties
in addition to tax receipts and tax declarations.
NOT QUITE RELEVANT:
5. The petitioner has failed to prove that there exists a trust over the
subject real properties. Aside from his bare allegations, he has failed
to show that the respondents used the partnership's money to
purchase the said properties. Even assuming arguendo that some
partnership income was used to acquire these properties, the
petitioner should have successfully shown that these funds came from
his share in the partnership profits. After all, by his own admission,
and as stated in the Acknowledgement of Participating Capital, he
owned a mere 6% equity in the partnership.
6. Moreover, this action never really was for partition of a co-ownership,
and to permit petitioner's claim on these properties is to allow a
collateral, indirect attack on respondents' admitted titles, which is
prohibited under Section 48 of Presidential Decree No. 1529, the
Property Registration Decree.
Petition for certiorari is denied.

and (c) whatever is left of the assets becomes available for the payment of
the partners' shares.
Facts:

Digest by: Arnel Abeleda

02
G.R. No. 144214

July 14, 2003

LUZVIMINDA J. VILLAREAL, DIOGENES VILLAREAL and CARMELITO JOSE,


petitioners, vs. DONALDO EFREN C. RAMIREZ and Spouses CESAR G. RAMIREZ
JR. and CARMELITA C. RAMIREZ, respondents.

PANGANIBAN, J.:
cvflores
Short Version:
Facts: Managers of the partnership closed the business. When one partner
asked for the return of his capital, the managers refused to pay. The
managers based their refusal due to business losses and that they have
delivered furniture and equipment to the partner as settlement for his capital.
The partner filed a case against the managers.
Held: It is the partnership not the managers that must refund the equity of the
retiring partners. The exact amount of refund for the capital contribution
cannot determined until (a) all the partnership assets have been liquidated in
other words, sold and converted to cash (b) all the creditors have been paid;

Luzviminda Villareal, Carmelito Jose and Jesus Jose formed a partnership


with a capital of P750,000 to operate a restaurant business under the
name "Aquarius Food House and Catering Services."
Villareal was appointed general manager and Carmelito Jose, operations
manager.
Donaldo Ramirez joined as partner with P250,000 capital contribution
which was paid by his parents, Cesar and Carmelita Ramirez.
Jesus Jose withdrew from the partnership and was refunded P250,000 for
his capital contribution
Villareal and Carmelito closed down the restaurant without prior
knowledge of Ramirez, allegedly because of increased rental.
The restaurant furniture and equipment were deposited in the house of
Ramirez for storage.
The parents of Ramirez wrote petitioners, saying that they were no longer
interested in continuing their partnership and they were accepting the
offer to return their capital contribution.
Due to the petitioners failure to return the capital contribution, Ramirez
filed a complaint before the RTC for the collection of a sum of money
Petitioners contended that:
o Ramirez had been paid, upon the turnover of furniture and
equipment worth over P400k
o The partnerships capital, including Ramirezshare had been spent
as a result of irreversible business losses.
Ramirez alleged that
o they expected the equipment and the furniture stored in their house
to be removed by petitioners as soon as the latter found a better
location for the restaurant.
o they did not know of any loan encumbrance and if there was, the
loans incurred by petitioners should be regarded as purely personal
and not chargeable to the partnership.
o they had not received any regular report or accounting from the
petitioners
Ramirez filed an Urgent Motion for Leave to Sell or Otherwise Dispose of
Restaurant Furniture and Equipment. The furniture and the equipment
stored in their house were appraised at P29,000.
The display freezer was sold for P5,000 and the proceeds were paid to
them.
RTC ruled in favour of Ramirez and held that petitioners intended to
dissolve the partnership when they stopped operating the restaurant.
RTC ordered petitioners to pay P250,000 as actual damages, P30,000 as
attys fees, and costs of suit
The CA ruled that although Ramirez had no right to demand the return of
their capital, the partnership was nonetheless dissolved when they lost
interest in continuing the restaurant business.

Since the petitioners never gave a proper accounting of the partnership


accounts, the CA computed the liability amounting to P253,114, as
follows:
o (P1,000,000- P240,658)/3 = P253,114
o Where 1M =remaining capitalization; P240,658 = outstanding
obligation of the partnership; and 3 = number of partners
(Ramirez, Villareal and Carmelito Jose)
Issue:

The delivery of the store furniture and equipment to Ramirez was for the
purpose of storage and not for the settlement of their capital contribution.
(3) SC made no pronouncement as to costs. Although, as a rule, costs are
adjudged against the losing party, courts have discretion, "for special
reasons," to decree otherwise. When a lower court is reversed, the higher
court normally does not award costs, because the losing party relied on
the lower court's judgment which is presumed to have been issued in
good faith, even if found later on to be erroneous.

(1) whether petitioners are liable to respondents for the latter's share in the
partnership;
(2) whether the CA's computation of P253,114 as respondents' share is
correct; and
(3) whether the CA was likewise correct in not assessing costs.

SC granted the petition but without prejudice to proper proceedings for the
accounting, the liquidation and the distribution of the remaining partnership
assets, if any.

Ruling:

03

(1) Villareal and Jose are not liable. It is the partnership not the managers
that must refund the equity of the retiring partners. The partnership has
a juridical personality separate and distinct from that of each of the
partners. Except as managers of the partnership, petitioners did not
personally hold its equity or assets. The dissolution took place when
Ramirez informed petitioners of the intention to discontinue because of
dissatisfaction with, and loss of trust in, the management of the
partnership affairs.
(2) The exact amount of refund for the capital contribution cannot
determined until
a. all the partnership assets have been liquidated in other words,
sold and converted to cash
b. all the creditors have been paid
c. whatever is left of the assets becomes available for the payment
of the partners' shares
The CA computation was erroneous.

ELIGIO ESTANISLAO, JR. vs. CA, REMEDIOS ESTANISLAO, EMILIO and LEOCADIO
SANTIAGO
GANCAYCO, J.: G.R. No. L-49982 April 27, 1988
cvflores

Total capital contribution is not equivalent to the gross assets to


be distributed to the partners at the time of the dissolution of the
partnership. Capital is either increased by profits earned or
decreased by losses sustained.
In the present case, there should be a decrease in capital. The
financial statements showed that the business had made meager
profits. Said profits should be decreased for the depreciation of
the furniture and equipment and amortization of goodwill which
were not reflected in the financial statements.
The outstanding obligation in the amount of P240,658 was not
supported by evidence. The balance sheet does not reveal the
total loan.
CA failed to consider Joses withdrawal of his capital amounting to
P250,000

Short Version:
Facts: Estanislao siblings were the owners of certain lots in QC leased to Shell.
The siblings wanted to open a gas station so they negotiated with Shell. In a
joint affidavit, the siblings, as co-owners, asked Shell for advance rentals up to
P15k. However said joint affidavit was cancelled in a subsequent document
where the siblings waived in favour of their brother, Eligio the rentals due to
them from Shell. Eligio then assigned the rentals to Shell which was supposed
to be applied by Shell as Eligios additional security. At first, Eligio submitted
financial statements to his other siblings but therafter failed to render
subsequent accounting. The other siblings then filed a suit. Eligio contended
that there was no partnership.
Held: There was a partnership. Eligio was named sole dealer only because of
Shells policy of appointing only 1 dealer. Eligio submitted periodic
accounting of the business. He gave a written authority to his sister, to
examine and audit the books of their "common business. His sister also
assisted in the running of the business.
Facts:

The parties to this case are brothers and sisters. They are co-owners of
certain lots at the corner of Annapolis and Aurora Blvd., Quezon City.
The lots were leased to Shell Company of the Philippines Limited (Shell).

They agreed to open and operate a gas station to be known as Estanislao


Shell Service Station. To help their brother, Eligio, the other siblings
allowed him to manage the gasoline service station.
They negotiated with Shell. For practical purposes and in order not to run
counter to the Shell's policy of appointing only one dealer, it was agreed
that only Eligio would apply for the dealership.
In April 11, 1966, the siblings executed a joint affidavit in favour of shell.
It provides that:
o They have requested from Shell, advance rentals in the amount of
P15,000 to augment their capital investment.
o Shell, out of its benevolence, agreed to give P15,000.
o The advance rentals shall be applied to the monthly rentals starting
on May 25, 1966 until such time that the said of P 15,000.00 be
applicable.
In May 20, 1966, the parties, as co-owners, entered into an Additional
Cash Pledge Agreement with Shell. The agreement provided that:
o Eligio, the dealer, shall deposit with Shell additional P10,000 to secure
his purchases.
o Eligios siblings waive in his favour the monthly rentals due to them to
increase his existing cash deposit to Shell, from P10,000 to P25,000.
For this purpose the co-owners with the dealer assigned to Shell the
monthly rental of P3,382.29 starting May 24, 1966 until such time that
the monthly rentals accumulated, shall be equal to P15,000.
o Shell shall treat the accumulated monthly rentals as additional cash
deposit by Eligio as dealer, thereby increasing his credit limit from P
10,000 to P 25,000.
o This Additional Cash Pledge Agreement cancels and supersedes the
Joint Affidavit dated 11 April 1966 executed by the co-owners.
From 1966 to 1967, one of the siblings, Remedios Estanislao, also helped
in managing the business.
For sometime, Eligio submitted financial statements to his other siblings,
but therafter he failed to render subsequent accounting.
Hence, the other sibilings demanded Eligio to render an accounting of the
profits.
The financial report showed that the business realized profits of
P87,293.79 and P150,000 for the years 1968 and 1969, respectively.
Thus a complaint was filed against Eligio praying among others that Eligio
be ordered to:
o Execute a public document embodying the provisions of the
partnership agreement as provided in Art. 1771 of the Civil Code.
o Render a formal accounting of the business for 1966 up to the time
the order is issued.
o Pay the plaintiffs their lawful shares and participation in the net profits
in the amount of no less than P150,000 with interest.
o Pay P10,000 as attys fees and cost of suit.
After trial on the merits, Judge Anover, who was then the temporary
presiding judge dismissed the complaint.
However upon MR, Judge Tensuan, the newly appointed presiding judge of
the branch, rendered a judgment against Eligio. Judge Tensuan ordered

Eligio to execeute a public document, render an accounting, pay the


plaintiffs their just share and to cost of the suit.
CA affirmed RTCs ruling.
Eligio filed a petition for certiorari with SC. He contended that there is no
partnership. He argued that the Additional Cash Pledge Agreement of
1966 cancels and supersedes the previous joint affidavit. That whatever
partnership agreement there was in said previous agreement had thereby
been abrogated.

Issue: Whether there is an existing partnership between Eligio and his


siblings. Yes.
Dispositive: Judgment affirmed.
Ruling:
In the Joint Affidavit it was clearly stipulated that the P15,000 advance rental
due to the co owners shall augment their "capital investment." In the
subsequent Additional Cash Pledge Agreement, it was provided that such
agreement cancels and supersedes the Joint Affidavit.
However, said cancellation was necessary since both agreements refer to
advance rentals of the same amount and for the same period which starts at
May 1966. There is, therefore, a duplication of reference. Hence the need to
provide in the subsequent document that it "cancels and supersedes" the
previous one.
Further although the subsequent document refers to Eligio as the sole dealer,
it was only because Shell was also a signatory thereto and that Shell has a
policy of appointing only one dealer. It would be against Shells policy if it is
stated there that the business is a partnership and not a sole proprietorship.
Moreover there are other pieces of evidence in the record that show that
there was in fact a partnership agreement between the parties. The following
were the evidence in record:

Eligio submitted periodic accounting of the business.


Eligio gave a written authority to Remedios , to examine and audit the
books of their "common business (aming negosyo).
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 to a common fund with the intention
of dividing the profits among themselves.

The sole dealership by Eligio and the issuance of all government permits and
licenses in his name was in compliance with the aforestated policy of Shell
and the understanding of the parties of having only one dealer of the Shell
products.
04. LITONJUA vs LITONJUA
AURELIO K. LITONJUA, JR., Petitioner, vs. EDUARDO K. LITONJUA, SR.,
ROBERT T. YANG, ANGLO PHILS. MARITIME, INC., CINEPLEX, INC., DDM
GARMENTS, INC., EDDIE K. LITONJUA SHIPPING AGENCY, INC., EDDIE
K. LITONJUA SHIPPING CO., INC., LITONJUA SECURITIES, INC.
(formerly E. K. Litonjua Sec), LUNETA THEATER, INC., E & L REALTY,
(formerly E & L INTL SHIPPING CORP.), FNP CO., INC., HOME
ENTERPRISES, INC., BEAUMONT DEV. REALTY CO., INC., GLOED LAND
CORP., EQUITY TRADING CO., INC., 3D CORP., L DEV. CORP, LCM
THEATRICAL ENTERPRISES, INC., LITONJUA SHIPPING CO. INC.,
MACOIL INC., ODEON REALTY CORP., SARATOGA REALTY, INC., ACT
THEATER INC. (formerly General Theatrical & Film Exchange, INC.),
AVENUE REALTY, INC., AVENUE THEATER, INC. and LVF PHILIPPINES,
INC., (Formerly VF PHILIPPINES), Respondents.
December 13, 2005
GARCIA, J.
Petition for Review of a Decision of the CA
FACTS: Aurelio and Eduardo are brothers. Yang and the other corporations just
got involved because they are allegedly holdings and/or members of the
partnership.
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 (Annex
A) that the latter is allowing Aurelio to manage their family business (if
Eduardos away) and in exchange thereof he will be giving Aurelio P1 million
or 10% equity, whichever is higher. A memorandum was subsequently made
for the said partnership agreement. The memorandum this time stated that in
exchange of Aurelio, who just got married, retaining his share in the family
business (movie theatres, shipping and land development) and some other
immovable properties, he will be given P1 Million or 10% equity in all these
businesses and those to be subsequently acquired by them whichever is
greater.
In 1992 however, the relationship between the brothers went sour. And so
Aurelio demanded an accounting and the liquidation of his share in the
partnership. Eduardo did not heed and so Aurelio sued Eduardo to render an
accounting and annotate on the titles of these real properties a notice of lis
pendens . Aurelio alleges that Eduardo and the other partners are transferring
various real properties of the corporations belonging to the joint
venture/partnership to other parties in fraud of Aurelio.
Eduardo filed an answer with affirmative defenses. He denies ever having
gone into a partnership with Aurelio and argues that there is no cause of
action since one cannot be derived from the actionable document. (Referring
to Annex A, in that it does not show the existence of a partnership.) He argues
that the contents are void under the terms of Article 1767 in relation to Article

1773 of the Civil Code further alleges that whatever undertaking Eduardo
agreed to do under Annex A are unenforceable under the provisions of the
Statute of Frauds.
In an Omnibus Order, the trial court denied the affirmative defenses and later
denied the MR as well. Yang filed an MTD which was dismissed. Yang filed an
answer reserving his right to file for reconsideration on the dismissal of his
MTD. Eduardo filed a petition for certiorari with the CA assailing the omnibus
order on the contention that grave abuse of discretion and injudicious haste
attended the issuance of the trial courts aforementioned Omnibus Orders.
Yang also filed a petition for certiorari on the dismissal of his MTD. The CA
consolidated both petitions and reversed the trial court, dismissing the
complaint of Aurelio.
ISSUE: Whether or not there exists a partnership. (NO)
RATIO: A partnership exists when two or more persons agree to place their
money, effects, labor, and skill in lawful commerce or business, with the
understanding that there shall be a proportionate sharing of the profits and
losses between them. A contract of partnership is defined by the Civil Code as
one where two or more persons bound themselves to contribute money,
property, or industry to a common fund with the intention of dividing the
profits among themselves. A joint venture, on the other hand, is hardly
distinguishable from, and may be likened to, a partnership since their
elements are similar, i.e., community of interests in the business and sharing
of profits and losses. Being a form of partnership, a joint venture is generally
governed by the law on partnership.
Given the foregoing perspective, what the CA said about the probative value
and legal effect of Annex A commends itself for concurrence:
Considering that the allegations in the complaint showed that Aurelio
contributed immovable properties to the alleged partnership, the
Memorandum (Annex A) which purports to establish the said
partnership/joint venture is NOT a public instrument and there was NO
inventory of the immovable property duly signed by the parties. As such, said
Memorandum is null and void for purposes of establishing the existence of a
valid contract of partnership. Indeed, because of the failure to comply with
the essential formalities of a valid contract, the purported partnership/joint
venture is legally inexistent and it produces no effect whatsoever.
Necessarily, a void or legally inexistent contract cannot be the source of any
contractual or legal right. Accordingly, the allegations in the complaint,
including the actionable document attached thereto, clearly demonstrates
that Aurelio has NO valid contractual or legal right which could be violated by
Eduardo or Yang. As a consequence, Aurelios complaint does NOT state a
valid cause of action because NOT all the essential elements of a cause of
action are present.
The documentary evidence presented by Aurelio, i.e. the letter from Eduardo
and the Memorandum, did not prove partnership.
The 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 quibbling that said letter does not meet the public
instrumentation requirements exacted under Article 1771 (how partnership is
constituted) of the Civil Code. Moreover, being unsigned and doubtless
referring to a partnership involving more than P3,000.00 in money or
property, said letter cannot be presented for notarization, let alone registered
with the Securities and Exchange Commission (SEC), as called for under the
Article 1772 (capitalization of a partnership) of the Code. And inasmuch as the
inventory requirement under the succeeding Article 1773 goes into the matter
of validity when immovable property is contributed to the partnership, the
next logical point of inquiry turns on the nature of Aurelios contribution, if
any, to the supposed partnership.
It is at once apparent that what Eduardo imposed upon himself under the
above passage, if he indeed wrote Annex A, is a promise which is not to be
performed within one year from contract execution on June 22, 1973.
Accordingly, the agreement covered by the Statute of Frauds and ergo
unenforceable for non-compliance therewith. By force of the statute of frauds,
an agreement that by its terms is not to be performed within a year from the
making thereof shall be unenforceable by action, unless the same, or some
note or memorandum thereof, be in writing and subscribed by the party
charged. Corollarily, no action can be proved unless the requirement exacted
by the statute of frauds is complied with.
The Memorandum 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 Memorandum. Article 1773 of
the Civil Code requires that if immovable property is contributed to the
partnership an inventory shall be had and attached to the contract.
Per the Courts own count, Aurelio used in his complaint the mixed words
joint venture/partnership nineteen (19) times and the term partner four
(4) times. He made reference to the law of joint venture/partnership [being
applicable] to the business relationship between [him], Eduardo and Bobby
[Yang] and to his rights in all specific properties of their joint
venture/partnership. Given this consideration, Aurelios right of action
against Eduardo and Yang doubtless pivots on the existence of the
partnership between the three of them, as purportedly evidenced by the
undated and unsigned Annex A. A void Annex A, as an actionable document of
partnership, would strip petitioner of a cause of action under the premises. A
complaint for delivery and accounting of partnership property based on such
void or legally non-existent actionable document is dismissible for failure to
state of action. So, in gist, said the Court of Appeals. The Court agrees.
DISPOSITIVE: Petition is DENIED; Decision of the CA is AFFIRMED.
-Mike

05

Pascual v. CIR (G.R. No. 78133, 18 October 1988)


Full Title: Mariano P. Pascual and Renato P. Dragon vs. The Commissioner of
Internal Revenue and Court of Tax Appeals.
Topic: Partnership distinguished from other contractual relationships/juridical
entities; Co-Ownership.
Ponente: Gancayco, J.
Nature: BIR - Assessment; CTA Petition for Review; SC Petition for Review
Doctrine: In order to constitute a partnership inter sese there must be: (a)
An intent to form the same; (b) generally participating in both profits and
losses; (c) and such a community of interest, as far as third persons are
concerned as enables each party to make contract, manage the business, and
dispose of the whole property.
An isolated transaction whereby two or more persons contribute funds to buy
certain real estate for profit in the absence of other circumstances showing a
contrary intention cannot be considered a partnership.
The fact that those who agree to form a co- ownership share or do not share
any profits made by the use of the property held in common does not convert
their venture into a partnership. Or the sharing of the gross returns does not
of itself establish a partnership whether or not the persons sharing therein
have a joint or common right or interest in the property. This only means that,
aside from the circumstance of profit, the presence of other elements
constituting partnership is necessary, such as the clear intent to form a
partnership, the existence of a juridical personality different from that of the
individual partners, and the freedom to transfer or assign any interest in the
property by one with the consent of the others.
Facts: On June 22, 1965, petitioners bought two (2) parcels of land. on May
28, 1966, they bought another three (3) parcels of land. The first two parcels
of land were sold by petitioners in 1968 at a profit of P165,224.70, while the
three parcels of land were sold in 1970 at a profit of P60,000.00. Petitioners
paid the corresponding capital gains taxes in 1973 and 1974 by availing of the
tax amnesties.
However, in 1979 then Acting BIR Commissioner Efren I. Plana assessed and
required petitioners to pay a total amount of P107,101.70 as deficiency
corporate income taxes. Petitioners protested, asserting that they had availed
of tax amnesties. The Commissioner replied and informed petitioners that in
the years 1968 and 1970, petitioners as co-owners in the real estate
transactions formed an unregistered partnership or joint venture

taxable as a corporation; that the unregistered partnership was subject to


corporate income tax as distinguished from profits derived from the
partnership by them which is subject to individual income tax; and that the
availment of tax amnesty relieved petitioners of their individual income tax
liabilities but not from the tax liability of the unregistered partnership.
Petitioners filed a petition for review with CTA, which affirmed the decision
and action by the CIR.
Issue: W/N petitioners formed a partnership, which would make them liable
for corporate income tax.
Held: NO
Ratio: In the present case, there is no evidence that petitioners entered into
an agreement to contribute money, property or industry to a common fund,
and that they intended to divide the profits among themselves. Respondent
commissioner and/ or his representative just assumed these conditions to be
present on the basis of the fact that petitioners purchased certain parcels of
land and became co-owners thereof.
There is clear evidence of co-ownership between the petitioners. There is no
adequate basis to support the proposition that they thereby formed an
unregistered partnership. The two isolated transactions whereby they
purchased properties and sold the same a few years thereafter did not
thereby make them partners. They shared in the gross profits as co-owners
and paid their capital gains taxes on their net profits and availed of the tax
amnesty thereby. Under the circumstances, they cannot be considered to
have formed an unregistered partnership which is thereby liable for corporate
income tax, as the respondent commissioner proposes.
In order to constitute a partnership inter sese there must be: (a) An intent to
form the same; (b) generally participating in both profits and losses; (c) and
such a community of interest, as far as third persons are concerned as
enables each party to make contract, manage the business, and dispose of
the whole property.
Article 1769 of the new Civil Code lays down the rule for determining when a
transaction should be deemed a partnership or a co-ownership. Said article
paragraphs 2 and 3, provides:
(2)
Co-ownership or co-possession does not itself establish a partnership,
whether such co-owners or co-possessors do or do not share any profits made
by the use of the property;

(3)
The sharing of gross returns does not of itself establish a partnership,
whether or not the persons sharing them have a joint or common right or
interest in any property from which the returns are derived
From the above it appears that the fact that those who agree to form a coownership share or do not share any profits made by the use of the property
held in common does not convert their venture into a partnership. Or the
sharing of the gross returns does not of itself establish a partnership whether
or not the persons sharing therein have a joint or common right or interest in
the property. This only means that, aside from the circumstance of profit, the
presence of other elements constituting partnership is necessary, such as the
clear intent to form a partnership, the existence of a juridical personality
different from that of the individual partners, and the freedom to transfer or
assign any interest in the property by one with the consent of the others.
An isolated transaction whereby two or more persons contribute funds to buy
certain real estate for profit in the absence of other circumstances showing a
contrary intention cannot be considered a partnership.
[The SC relied heavily on Evangelista v. Collector (G.R. No. 9996, Oct.
15,1957,102 Phil. 140), by comparing it with the instant case. In Evangelista,
Petitioners contributed to a common fund to buy real properties rented or
leased to various tenants for several years, with the intention to earn profits.
The SC found them to have formed a partnership liable for corporate income
tax because: (1) said common fund was not something they found already in
existence; (2) they invested the same, not merely in one transaction, but in a
series of transactions; (3) The lots were not devoted to residential purposes or
to other personal uses of petitioners but were leased separately to several
persons; (4) the properties have been under the management of one person,
with 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, and
thus, the affairs relative to said properties have been handled as if the same
belonged to a corporation or business enterprise operated for profit; (5) there
was a series of transactions where petitioners purchased twenty-four (24) lots
showing that the purpose was not limited to the conservation or preservation
of the common fund or even the properties acquired by them, the character of
habituality peculiar to business transactions engaged in for the purpose of
gain was present.]
SC Petition granted, CTA Decision reversed and set aside, relieved Petitioner
of corporate income tax liability.
06

CASE: Arsenio T. Mendiola v Court of Appeals, National Labor Relations


Commission, Pacific Forest Resources, Phils., Inc and/or Cellmark AB
DATE: July 31, 2006
PONENTE: Puno, J.

Topic in syllabus: Partnership distinguished from other contractual


relationships/juridical entities
FACTS:

Pacific Forest Resources, Phils., Inc. (Pacfor) is a corporation organized


and existing under the laws of California, USA. It is a subsidiary of
Cellulose Marketing International, a corporation duly organized under
the law of Sweden, with principal office in Gothenburg, Sweden.

Pacfor entered into a Side Agreement on Representative Office


known as Pacific Resources (Phils.) Inc. with petitioner Arsenio T.
Mendiola effective May 1, 1995, assuming that Pacor-Phils. is already
approved by the SEC on the said ate. The Side Agreement outlined
the business relationship of the parties with regard to the Philippine
operations of Pacfor.
Pacfor will establish a representative office in the Philippines,
to be known as Pacfor Phils., and Mendiola will be its
President. His base salary and overhead expenditures of the
company shall be borne by Pacfor Phils. and funded by
Pacfor/Mendiola since Pacfor Phils. is equally owned on a 5050 basis by Mendiola and Pacfor USA.

July 14, 1995: SEC granted the application of Pacfor for a license to
transact business in the Philippines under the name of Pacfor or
Pacfor Phils. Pacfor designated Mendiola as its resident agent in the
Philippines, authorized to accept summons and processes in all legal
proceedings, and all notices affecting the corporation.

March 1997: The Side Agreement was amended through a Revised


Operating and Profit Sharing Agreement for the Representative Office
Known as Pacific Forest Resources (Philippines), where the salary of
petitioner was increased to $78,000 per annum. Both agreements
show that the operational expenses will be borne by the
representative office and funded by all parties as equal partners,
while the profits and commissions will be shared among them.

July 2000: Mendiola wrote Kevin Daley, VP for Asia of Pacfor, seeking
confirmation of his 50% equity of Pacfor Phils. Private respondent
Pacfor, through William Gleason, its President, replied that petitioner
is not a part-owner of Pacfor Phils. because the latter is merely Pacfor
USAs representative office and not an entity separate and distinct
from Pacfor USA.
Its simply a theoretical company with the purpose of
dividing the income 50-50.
Mendiola presumably knew of this arrangement from the
start, having been the one to propose to Pacfor the setting up
of a representative office and not a branch office to save on
taxes.

Mendiola claimed he was all along made to believe that he was in a


joint venture with them and alleged that he would have been better
off remaining as an independent agent or representative of Pacfor
USA as ATM Marketing Corp. Had he known that no joint venture
existed, he would not have allowed Pacfor to take the profitable
business of his own company.
He also raised other issues, such as rentals of office furniture,
salary of the employees, company car, as well as commissions
allegedly due him.
The issues were not resolved and so on October 2000, Mendiola wrote
to Pacfor USA demanding payment of unpaid commissions and office
furniture and equipment rentals, amounting to more than one million
dollars.
November 27, 2000: Pacfor, through counsel, ordered Mendiola to
turn over to it all papers, documents, files, records, and other
materials in his or ATM Marketings possession that belonged to Pacfor
or Pacfor Phils.
December 18, 2000: Pacfor also required Mendiola to remit more than
P300,000 Christmas giveaway fund for clients of Pacfor Phils. Pacfor
also withdrew all its offers of settlement and ordered petitioner to
transfer title and turn over to its possession of the service car.
Pacfor also sent letters to its clients in the Philippines, advising them
not to deal with Pacfor Phils.
To International Paper Industries Inc.
To Pacific Forest Resources Philippines, telling said client to
please communicate directly with us on any further questions
associated with these payments or any future business. Do
not communicate with [Pacfor] and/or [ATM].
Mendiola took these directives as severance of the unregistered
partnership between him and Pacfor and the termination of his
employment as resident manager of Pacfor Phils.
On the basis of the Side Agreement, Mendiola insisted that he and
Pacfor equally own Pacfor Phils. Thus, it follows that he and Pacfor
likewise own, on a 50/50 basis, Pacfor Phils. office furniture and
equipment and service car. He also reiterated his demand for unpaid
commissions and proposed to offset these with the remaining
Christmas giveaway fund in his possession. He also did not renew the
lease contract with the lessor of the office premises of Pacfor Phils.
February 2, 2001: Pacfor placed Mendiola on preventive suspension
and ordered him to show cause why no disciplinary action should be
taken against him. It charged Mendiola with willful disobedience and
serious misconduct, as well as alleged loss of confidence and gross
neglect of duty.
Mendiola denied the charges and reiterated that he considered the
import of Pacfor President Gleasons letter as a cessation of his
position and the existence of Pacfor Phils.
Pacfor lodged fresh charges against the petitioner.
LA: ruled in favor of petitioner, finding that there was constructive
dismissal.

Pacfor appealed to the NLRC which ruled in its favor.


NLRC denied MR.
Petitioners appeal to the CA was unsuccessful. Ruling of the NLRC
upheld.
ISSUE/ISSUES:

Was there an employer-employee relationship between the parties?


RATIO:

YES, there was.


The court held that Mendiola was an employee of Pacfor and
there was no partnership or co-ownership that existed
between the parties.
n a partnership, the members become co-owners of what is
contributed to the firm capital and of all property that may be
acquired thereby and through the efforts of the members. The
property or stock of the partnership forms a community of
goods, a common fund, in which each party has a proprietary
interest. In fact, the New Civil Code regards a partner as a coowner of specific partnership property. Each partner
possesses a joint interest in the whole of partnership property.
If the relation does not have this feature, it is not one of
partnership. This essential element, the community of
interest, or co-ownership of, or joint interest in partnership
property is absent in the relations between petitioner and
private respondent Pacfor.
Mendiola is not a part-owner of Pacfor Phils. William Gleason,
private respondent Pacfor's President established this fact
when he said that Pacfor Phils. is simply a "theoretical
company" for the purpose of dividing the income 50-50. He
stressed that petitioner knew of this arrangement from the
very start, having been the one to propose to private
respondent Pacfor the setting up of a representative office,
and "not a branch office" in the Philippines to save on taxes.
Thus, the parties in this case, merely shared profits. This
alone does not make a partnership.
Besides, a corporation cannot become a member of a
partnership in the absence of express authorization by statute
or charter. This doctrine is based on the following
considerations: (1) that the mutual agency between the
partners, whereby the corporation would be bound by the acts
of persons who are not its duly appointed and authorized
agents and officers, would be inconsistent with the policy of
the law that the corporation shall manage its own affairs
separately and exclusively; and, (2) that such an arrangement
would improperly allow corporate property to become subject
to risks not contemplated by the stockholders when they
originally invested in the corporation. No such authorization
has been proved in the case at bar.
An employer-employee relationship is present in the case at
bar. The elements to determine the existence of an
employment relationship are: (a) the selection and

engagement of the employee; (b) the payment of wages; (c)


the power of dismissal; and (d) the employer's power to
control the employee's conduct. The most important element
is the employer's control of the employee's conduct, not only
as to the result of the work to be done, but also as to the
means and methods to accomplish it.
o In the instant case, all the foregoing elements are
present. First, it was private respondent Pacfor which
selected and engaged the services of petitioner as its
resident agent in the Philippines. Second, as
stipulated in their Side Agreement, private respondent
Pacfor pays petitioner his salary amounting to
$65,000 per annum which was later increased to
$78,000. Third, private respondent Pacfor holds the
power of dismissal, as may be gleaned through the
various memoranda it issued against petitioner,
placing the latter on preventive suspension while
charging him with various offenses, including willful
disobedience, serious misconduct, and gross neglect
of duty, and ordering him to show cause why no
disciplinary action should be taken against him. Lastly
and most important, private respondent Pacfor has
the power of control over the means and method of
petitioner in accomplishing his work.
HELD:

IN VIEW WHEREOF, the petition is GRANTED. The Court of Appeals'


January 30, 2003 Decision in CA-G.R. SP No. 71028 and July 30, 2003
Resolution, affirming the December 20, 2001 Decision of the National
Labor Relations Commission, are ANNULED and SET ASIDE. The July
30, 2001 Decision of the Labor Arbiter isREINSTATED with
the MODIFICATION that the amount of P250,000.00 representing an
alleged increase in petitioner's salary shall be deducted from the
grant of separation pay for lack of evidence.
kitty
07
J.M. Tuason& Co., Inc., represented by its Managing Partner, Gregorio
Araneta, Inc., plaintiff-appellee vs. QuirinoBolanos, defendantappelant
Reyes, J. May 28, 1954
SV: A petition for recovery of possession was filed before the CFI Rizal, QC
Branch. The case was brought in the name of JM Tuason& Co, represented by
its Managing Partner, Gregorio Araneta, Inc. The defendant therein, Bolanos,
objected on the ground that a partnership cannot be formed between two
corporations. The Supreme Court held that the suit can still be brought
because two corporations can enter into a joint venture with one another.

FACTS:
- This was originally an action brought in the CFI Rizal, QC Branch, to recover
possession of registered land situated in barrio Tatalon, Quezon City.
- The complaint by plaintiffs JM Tuason, represented by Gregorio Araneta, Inc.
was amended three times with respect to the description of the land sought to
be recovered throughout the trial.
- Defendant set up prescriptive acquisition through open, continuous,
exclusive, public and notorious possession by him and his predecessor in
interest from time in-memorial.

Petitioner argues that Gregorio Araneta, Inc., cannot act as managing partner
for plaintiff on the theory that it is illegal for two corporations to enter into a
partnership. This is without merit, for the true rule is that: though a
corporation has no power to enter into a partnership, it may nevertheless
enter into a joint venture with another where the nature of that venture is in
line with the business authorized by its charter. (Wyoming-Indiana Oil Gas
Co. v. Weston).
2) Amendment is not even necessary for the purpose of rendering judgment
on an issue proved but not alleged according to (then) Sec. 4 Rule 17 ROC:
Sec. 4.Amendment to conform to evidence. When issues not raised
by the pleadings are tried by express or implied consent of the
parties, they shall be treated in all respects, as if they had been raised
in the pleadings. Such amendment of the pleadings as may be
necessary to cause them to conform to the evidence and to raise
these issues may be made upon motion of any party at any time,
even of the trial of these issues. If evidence is objected to at the trial
on the ground that it is not within the issues made by the pleadings,
the court may allow the pleadings to be amended and shall be so
freely when the presentation of the merits of the action will be
subserved thereby and the objecting party fails to satisfy the court
that the admission of such evidence would prejudice him in
maintaining his action or defense upon the merits. The court may
grant a continuance to enable the objecting party to meet such
evidence.

- Trial court rendered judgment in favor of plaintiff, declaring defendant to be


without any right to the land in question. CFI Rizal also ordered Bolanos to pay
rentals. Bolanos appealed directly to SC.
ISSUES:
1) WON the trial court erred in not dismissing the case on the ground that the
case was not brought by the real party in interest. NO, it did not err.
2) WON the trial court erred in admitting the third amended complaint. NO, it
did not.
3) WON the trial court erred in not finding that the defendant is the true and
lawful owner of the land. NO, it did not.
REASONING:
1) There is nothing to the contention that the present action is not brought by
the real party in interest: that is, by JM Tuason and Co., Inc.
The ROC merely requires that the action be brought in the name of, but not
necessarily by, the real party in interest (then Sec. 2, Rule 2). In fact the
practice is for an attorney-at-law to bring the action, that is, to file the
complaint, in the name of the plaintiff.

3) The land in question was proven to be covered by plaintiffs certificate of


title. The land in dispute is covered by plaintiffs Torrens certificate of title
which was registered in 1914 and which can no longer be impugned on the
ground of fraud, error, or lack of notice to defendant, as more than one year
has already elapsed from the issuance and entry of the decree.
Adverse, notorious and continuous possession unde claim of ownership for the
period fixed by law is ineffective against a Torrens title (Valiente v. Judge of
CFI Tarlac).

Here, that practice is followed, since the complaint is signed by the law firm of
Araneta and Araneta and commences with the statement comes now
plaintiff, through its undersigned counsel.

4) The reasonable compensation was stipulated at the hearing and there is no


reason to suppose that defendant has been paying rents, for he has been
asserting all along that the premises in question are theirs.

It is true that the complaint also states that the plaintiff is represented herein
by its Managing Partner, Gregorio Araneta, Inc., another corporation, but
there is nothing against one corporation being represented by another person,
natural or juridical, in a suit in court.

Judgement appealed from AFFIRMED, costs against plaintiff.


@ajmlegs
08

Primelink Properties and Development Corporation and Rafaelito W.


Lopez, petitioners, v. Ma. Clarita Lazatin-Magat, Jose Serafin T.
Lazatin, Jaime Teodoro T. Lazatin, and Jose Marcos T. Lazatin
Date: June 27, 2006
Ponente: Callejo, Sr.
Digested by: Mandee
The case in a nutshell: In 1994, petitioner Primelink Properties and
Development Corporation, represented by its President, Lopez, entered into a
Joint Venture Agreement with the respondents, the Lazatin siblings, for the
development of 2 adjoining parcels of land in Tagaytay, owned by the
Lazatins, into a residential subdivision. One of the stipulations in the JVA was
that both parties would share in the profits from the joint venture (net
revenue/income after deducting land development and marketing expenses),
60% for Primelink and 40% for the Lazatins. In 1997, the Lazatins informed
Primelink (via letter) that they were rescinding the JVA. The Lazatins filed a
complaint for rescission, accounting and damages, with prayer for TRO and/or
preliminary injunction, against Primelink and Lopez before the Tagaytay RTC.
RTC ruled in favor of the Lazatins and ordered Primelink to return possession,
including all improvements therein, of the Lazatins property. CA and SC
affirmed. The Lazatins are entitled to the possession of the parcels of land
covered by the JVA and the improvements thereon introduced by Primelink as
their contribution to the JVA. These formed part of the assets of the joint
venture. The Lazatins were entitled to the possession not only of the parcels
of land, but also of the improvements thereon, as a consequence of the RTCs
finding that Primelink breached their agreement and defrauded the Lazatins
of their share of the net income under the JVA. The parties entered into a joint
venture as evidenced by their JVA which, under the Aurbach ruling, is a form
of partnership, and as such is to be governed by the laws on partnership.
However, it was premature for Primelink to demand that it be indemnified for
the value of the improvements on the parcels of land owned by the joint
venture/partnership. Until the partnership accounts are determined, it cannot
be ascertained how much any of the parties is entitled to, if at all.
Facts:

Primelink Properties and Development Corporation is a domestic


corporation engaged in real estate development. Rafaelito W. Lopez is
its President and CEO.

Respondents Ma. Clara T. Lazatin-Magat and her brothers, Jose Serafin


T. Lazatin, Jaime T. Lazatin, and Jose Marcos T. Lazatin are co-owners
of 2 adjoining parcels of land (combined area = 30,000 square
meters) in Tagaytay City, covered by TCTs in the Register of Deeds of
Tagaytay City.

On March 10, 1994, the Lazatins and Primelink, represented by Lopez


in his capacity as President, entered into a Joint Venture Agreement for
the development of the aforementioned property into a residential
subdivision to be known as Tagaytay Garden Villas. Under the JVA
o

The Lazatins obliged themselves to contribute the 2 parcels of


land as their share in the joint venture.

Both parties were entitled to draw advances/allowances from


the net revenue/income. For the first 2 years, max of 20%
(60% for Primelink, 40% for the Lazatins) for the first 2 years,
then after 2 years, up to the total net revenue/income.
o They would share in the profits from the joint venture (net
revenue/income after deducting land development and
marketing expenses), 60% for Primelink and 40% for the
Lazatins.
o Primelink submitted its Projection of the Sales-Income-Cost of
the project.
o Any conflicts regarding the interpretation, enforcement, and
implementation of any provision of the JVA would be referred
to Voluntary Arbitration in accordance with the Arbitration
Law.
o The Lazatins agreed to subject the title over the property to
an Escrow Agreement, and accordingly deposited the owners
duplicate of the title with Chinabank.
Primelink failed to immediately secure a Development Permit from
Tagaytay City, and applied for the permit only on August 30, 1995.
On October 12, 1995, the City issued a Development Permit to
Primelink.
In a letter dated April 10, 1997, the Lazatins, through counsel,
demanded that Primelink comply with its obligations under the JVA,
otherwise the appropriate action would be filed against the company.
Primelinks officers met with the Lazatins, who reviewed the
companys business records/papers.
In another letter dated October 22, 1997, the Lazatins informed
Primelink that they had decided to rescind the JVA. They demanded
that Primelink cease and desist from further developing the property.
On January 19, 1998, the Lazatins filed with the Tagaytay City RTC a
complaint for rescission, accounting and damages, with prayer for
TRO and/or preliminary injunction, against Primelink and Lopez.
o Despite the lapse of almost 4 years from the execution of the
JVA and the delivery of the title and possession of the land to
defendants, the land development aspect of the project had
not yet been completed, and no progress had been made on
the construction of the housing units.

Phase I: out of the 50 housing units programmed for


the phase, only a total of 10 had been built (some
complete, some unfinished).

Phase II: all that Primelink had done was to grade the
area

The units so far constructed had been the object of


numerous complaints by their owners/purchasers for
o

Primelink undertook to contribute money, labor, personnel,


machineries, equipment, contractors pool, marketing
activities, managerial expertise and other needed resources
to develop the property and construct therein the units for
sale to the public.

poor workmanship and the use of sub-standard


materials in their construction, undermining the
projects marketability.

Primelink had, without justifiable reason, completely


disregarded previously agreed-upon accounting and
auditing procedures, checks and balances system
installed for the mutual protection of both parties, and
the scheduled regular meetings were seldom held.

Primelink refused to heed the Lazatins letterdemands for compliance with the JVA, so the Lazatins
sent a final letter formally rescinding the JVA.
o Based on the Sales-Income-Cost projection, the Lazatins stood
to receive the amount of Php70,218,296.00 as their net share
in the joint venture project. But after almost 4 years and
despite the undertaking in the JVA that they would shall
initially get 20% of the agreed net revenue during the first 2
years (on the basis of the 60%-40% sharing) and their full
40% share thereafter, Primelink had yet to deliver these
shares to them.
The RTC ruled in favor of the Lazatins.
o Found that based on the evidence...

Primelink had committed patent violations of the JVAs


stipulations, not just against the Lazatins, but also
some of the unit buyers, who had also complained.

Primelink had a scheme to reduce and eventually blot


out the net revenue/income generated from sales of
housing units by Primelink. Its net revenue/income
was drastically reduced in subsequent financial
reports, and the income statements and balance
sheets it submitted indicated net loss. By declaring
net loss, Primelink was able to avoid giving the
Lazatins their share of the net revenue/income.
o Ordered the rescission of the JVA, and ordered Primelink to

Return possession, including all improvements


therein, of the Lazatins property

Turn over all documents, records, or papers that had


been executed, prepared, and retained in connection
with any contract to sell or deed of sale of all
lots/units sold during the effectivity of the JVA

Pay the Lazatins their share of the net income as of


September 30, 1995, as stipulated in the JVA, plus
attorneys fees and costs
On appeal, the CA affirmed the RTCs decision with modification.
o It ordered the release of the TCT held for safekeeping by
Chinabank pursuant to the Escrow Agreement for return to the
Lazatins, and the cancellation by the Register of Deeds of
Tagaytay City of whatever annotation was made on it by
virtue of the JVA.

Aurbach v. Sanitary Wares Manufacturing Corporation: under


Philippine law, a joint venture is a form of partnership and is
to be governed by the laws of partnership.
Primelink filed a petition for review on certiorari before the SC.
o

Issues:
1. WON the Lazatins are entitled to the possession of the parcels of land
covered by the JVA and the improvements thereon introduced by
Primelink and Lopez as their contribution to the JVA
2. WON Primelink and Lopez entitled to reimbursement for the value of
the improvements on the parcels of land.
Held: Petition DENIED. CA Decision and Resolution AFFIRMED.
Ratio:
(NOTE: In the interest of brevity, the many Civil Cases cited in the case are
not quoted in full.)
1. The Lazatins are entitled to the possession of the parcels of land covered
by the JVA and the improvements thereon introduced by Primelink and
Lopez as their contribution to the JVA.
a. Although the Lazatins did not specifically pray in their complaint
that possession of the improvements on the parcels of land which
they contributed to the JVA be transferred to them (they prayed
that upon the rescission of the JVA, they be placed in possession
of the parcels of land subject of the agreement, and for other
reliefs and such other remedies as are just and equitable in the
premises), the RTC was not precluded from awarding them
possession of the improvements.
i. Sec. 2(c), Rule 7, Rules of Court: A pleading shall specify
the relief sought but it may add as general prayer for
such further or other relief as may be deemed just and
equitable.
1. Eugenio v. Velez: Even without the prayer for a
specific remedy, proper relief may be granted by
the court if the facts alleged in the complaint and
the evidence introduced so warrant
2. Arroyo, Jr. v. Taduran: The prayer in the complaint
for other reliefs equitable and just in the premises
justifies the grant of a relief not otherwise
specifically prayed for.
b. The parcels of land, as well as the improvements made thereon,
were contributed by the parties to the joint venture under the JVA,
and thus formed part of the assets of the joint venture. The
Lazatins were entitled to the possession not only of the parcels of
land, but also of the improvements thereon, as a consequence of
the RTCs finding that Primelink and Lopez breached their
agreement and defrauded the Lazatins of their share of the net
income under the JVA.
2. Primelink and the Lazatins entered into a joint venture as evidenced by
their JVA which, under the Aurbach ruling, is a form of partnership, and as
such is to be governed by the laws on partnership.

a.

b.

c.

Aurbach v. Sanitary Wares Manufacturing Corporation on joint


ventures vis--vis partnerships:
i. Joint venture an organization formed for some
temporary purpose (Gates v. Megargel)
ii. Joint ventures and partnerships share similar elements:
community of interest in the business, sharing of profits
and losses, and a mutual right of control (Blackner v.
McDermott, etc.)
iii. Common law distinction between joint ventures and
partnerships: a partnership contemplates a general
business with some degree of continuity, while a joint
venture is formed for the execution of a single
transaction, and is thus of a temporary nature
1. Not really applicable in the Philippines a
partnership may be particular or universal, and a
particular partnership may have for its object a
specific undertaking (Art. 1783, Civil Code)
iv. Philippine SC distinction between joint ventures and
partnerships: although a corporation cannot enter into a
partnership contract, it may, however, engage in a joint
venture with others (Tuazon v. Bolanos)
Aurbach, again: under Philippine law, a joint venture is a form of
partnership and is to be governed by the laws of partnership.
i. When the RTC rescinded the JVA after finding that
Primelink was guilty of committing a breach thereof, the
court thereby dissolved/cancelled the partnership.
ii.

With the rescission of the JVA on account of petitioners


fraudulent acts, all authority of any partner to act for the
partnership is terminated except so far as may be
necessary to wind up the partnership affairs or to
complete transactions begun but not yet finished (Art.
1832 in relation to Art. 1834).

iii.

On dissolution, the partnership is not terminated but


continues until the winding up of partnership affairs
(administration of the partnerships assets for the purpose
of terminating the business and discharging the
obligations of the partnership) is completed (Art. 1829).

iv.

The transfer of the possession of the parcels of land and


the improvements thereon to the Lazatins was only for a
specific purpose: the winding up of partnership affairs,
and the partition and distribution of the net partnership
assets as provided by law. Unless otherwise agreed by the
parties in their JVA, the Lazatins have the right to wind up
the partnership affairs (Art. 1836).

It was premature for Primelink to demand that it be indemnified


for the value of the improvements on the parcels of land owned
by the joint venture/partnership. Until the partnership accounts

are determined, it cannot be ascertained how much any of the


parties is entitled to, if at all.
i. Although the Lazatins acquired possession of the parcels
of land and the improvements thereon, these remained
partnership property, subject to the rights and obligations
of the parties, inter se, of the creditors, and of third
parties (Art. 1837 and 1838), and subject to the outcome
of the settlement of the accounts between the parties
(Art. 1839), absent any agreement of the parties in their
JVA to the contrary. The JVA doesnt contain any provision
designating any party to wind up the partnership affairs.

09
Heirs of Tan EngKeev.CA and Benguet Lumber Company, represented
by its President Tan Eng Lay De Leon, Jr., J. 3 October 2000
SV: Tan EngKees Heirs allege that the deceased and his brother, Tan EngLay
entered into a partnership to sell lumber and hardware supplies. They filed
suit to cause the accounting, liquidation and winding up of such alleged
partnership. The RTC ruled that Kee and Lay entered into a joint venture which
was akin to a partnership. The CA reversed such ruling. The SC agreed with
the CA and declared that there was no partnership in this case.
FACTS:
The common-law spouse and children of TAN ENG KEE (the plaintiffs) filed suit
against the decedent's brother TAN ENG LAY for accounting, liquidation and
winding up of the alleged partnership formed after World War II between Tan
EngKee and Tan Eng Lay.
After the second World War,Tan Eng Keeand Tan Eng Lay allegedly entered
into a partnership engaged in the business of selling lumber and hardware
and construction supplies named "BenguetLumber" which they jointly
managed until Tan Eng Kee's death.
Petitioners claim 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.
They filed an amended complaint impleading Benguet Lumber Company.
RTC granted the petition for accounting and determined that Tan Eng Kee and
Tan Eng Lay had entered into a joint venture, which it said was akin to a
partnership.
The CA reversed such decision,hence the present petition (Rule 45 appeal.
ISSUE:
WON there a partnership between Tan Eng Kee and Tan Eng Lay. NO, there
was none.
REASONING:
1) The CA correctly noted that the trial court over extended the issue because
it went so far as to justify the existence of a joint adventure when all the
plaintiffs alleged was the existence of a partnership.

The legal concept of joint adventure is of common law origin, hardly


distinguishable from partnership. The Court distinguished partnership from
joint adventure thus:
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.(May be likened to a particular partnership).
(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. (In this jurisdiction, the main difference
is that corporations cannot enter into a partnership contract but it
may engage in a joint adventure.
2) The best evidence would have been the contract of partnership itself or the
articles of partnership but there were none. The Court thus made a
determination that they are being asked to determine the existence of a
partnership based purely on circumstantial evidence (outlined below).
Plaintiffs claim that because of the pooling of resources, the post-war Benguet
Lumber was eventually established. They further claim that the fact that the
father of the plaintiffs and Lay were partners is obvious from the fact that:
(a)they conducted the affairs of the business during Kee's lifetime,
jointly,
- BUTLay was the only registered owner of Benguet Lumber
and Hardware as evidenced by his application for registration.
Kee was merely an employee, on the basis of his SSS
coverage and the fact that he was on the payroll listing.
(b)they were the ones giving orders to the employees,
- BUT even a mere supervisor in a company, factory or store
gives orders and directions to his subordinates. So long,
therefore, that an employee's position is higher in rank, it is
not unusual that he orders around those lower in rank.
(c)they were the ones preparing orders from the suppliers,
- BUT even a messenger or other trusted employee,
overwhom confidence is reposed by the owner, can order
materials from suppliers for and in behalf of Benguet Lumber.
Furthermore, even a partner does not necessarily have to
perform this particular task. It is, thus, not an indication that
Tan Eng Kee was apartner.
(d)their families stayed together at the Benguet Lumber
compound,and
- BUT, although Tan Eng Kee, together with his family,lived in
the lumber compound and this privilege was not accorded to
other employees, the undisputed fact remains that Kee was
Lays brother. Whatever privileges Tan Eng Lay gave his
brother, and which were not given the other employees, only
proves the kindness and generosity of Tan Eng Lay towards a
blood relative.

However, these are not evidencessupporting the existence of a partnership.


There was no partnership whatsoever. These only support the establishment
of a proprietorship.
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.
3) In order to constitute a partnership, it must be established that:
a) 2 or more persons bound themselves to contribute money,
property, or industry to a common fund, and
b) they intend to divide the profits among themselves.
The agreement need not be formally reduced in writing, since oral
constitution of partnerships are allowed except when:
a) when immovable property or real rights are contributed and
b) when the partnership has a capital of P3,000 or more.
4) Art. 1769
CC.Indeterminingwhetherapartnershipexists,theserulesshallapply:
(1)Except as provided by Article1825,persons who are not partners as
to each other are not partners as to third persons;
(2)Co-ownership or co-possession does not of itself establish a
partnership, whether such co-owners or co-possessors do or do not
share any profits made by the use of theproperty;
(3)The sharing of gross returns does not of itself establish a
partnership, whether or not the persons sharing them have a joint or
common right or interest in any property which the returns are
derived;
(4)The receipt by a person of a share of the profits of a businesss is a
prima facie evidence that he is a partner in the business, but no
such inference shall be drawn if such profits were received in
payment:
(a)As a debt by installment or otherwise;
(b)As wages of an employee or rent to a landlord;
(c)As an annuity to a widow or representative of a deceased
partner;
(d)As interest on a loan ,though the amount of payment vary
with the profits of the business;
(e)As the consideration for the sale of a goodwill of a business
or other property by installments or otherwise.
PETITION DENIED, decision of CA AFFIRMED in toto.
@ajmlegs

10
JOSEFINA P. REALUBIT vs. PROSENCIO D. JASO and EDEN G. JASO
(2011)
"The transfer by a partner of his partnership interest does not make the
assignee of such interest a partner of the firm, nor entitle the assignee to

interfere in the management of the partnership business or to receive


anything except the assignee's profits. The assignment does not purport to
transfer an interest in the partnership, but only a future contingent right to a
portion of the ultimate residue as the assignor may become entitled to
receive by virtue of his proportionate interest in the capital." Since a
partner's interest in the partnership includes his share in the profits, the
Spouses Jaso are entitled to Biondo's share in the profits, despite
Juanita's lack of consent to the assignment of [Biondos] interest in the
joint venture.
Facts:
11. In 1994, petitioner Josefina Realubit (Josefina) entered into a Joint
Venture Agreement with Francis Eric Amaury Biondo (Biondo), a
French national, for the operation of an ice manufacturing
business.
12. Josefina is the industrial partner and Biondo is the capitalist partner.
They agreed that they would each receive 40% of the net profit, with
the remaining 20% to be used for the payment of the ice making
machine
13. In 1997, Biondo executed a Deed of Assignment transferring all his
rights and interests in the business in favor of respondent Eden Jaso
(Eden), the wife of respondent Prosencio Jaso for Php500k. Biondo
then left the country.
14. The Spouses Jaso informed Josefina and formally demanded an
accounting and inventory, as well as the remittance of their portion of
its profits.
15. Josefina ignored the demand, and was sued for specific performance,
accounting, examination, audit and inventory of assets and
properties, dissolution of the joint venture, appointment of a receiver
and damages in Paranaque RTC.
16. DEFENSE:
a. Spouses Realubit claimed that they have been engaged in the
tube ice trading business under a single proprietorship even
before their dealings with Biondo,
b. the Deed of Assignment which bears a signature markedly
different from that which he affixed on their Joint Venture
Agreement;
c. that they refused the Spouses Jaso's demand in view of the
dubious circumstances surrounding their acquisition of
Biondo's share in the business which was established at Don
Antonio Heights, Commonwealth Avenue, Quezon City;
d. that said business had already stopped operations on
January 1996 when its plant shut down after its power supply
was disconnected by MERALCO for non-payment of utility bills;
and
e. They now have their own tube ice trading business in Sanville
Subdivision, Project 6, Quezon City that the Spouses Jaso
mistook for the ice manufacturing business established in
partnership with Biondo.

RTC: ifo Sps Jaso. Sps. Jaso has been subrogated to the rights of Biondo.
There is partnership. Sps. Realubit to submit complete accounting and
inventory of the assets and liabilities of the joint venture from its inception
to the present, to allow plaintiffs access to the books and accounting
records of the joint venture, to deliver to plaintiffs their share in the
profits, if any, plus P20k for moral damages.
CA: ifo of Sps Jaso. RTC decision set aside. There was no partnership.
The business continued its operation in Sanville Subd.; Eden cannot be
considered as a partner in the business, pursuant to Article 1813 of
the Civil Code of the Philippines; while entitled to Biondo's share in the
profits of the business, Eden cannot, however, interfere with the
management of the partnership, require information or account of its
transactions and inspect its books; the partnership should first be
dissolved before Eden can seek an accounting of its transactions
and demand Biondo's share in the business; and no moral damages to be
awarded. MR denied.
Issue:

WON there is a partnership agreement between Josefina Realubit and


the Eden Jaso, the assignee of his former partner? NO.
Held/Ratio: CA decision affirmed.
7. Joint venture is likened to a particular partnership or one which "has
for its object determinate things, their use or fruits, or a specific
undertaking, or the exercise of a profession or vocation."
8. The rule is settled that joint ventures are governed by the law on
partnerships which are, in turn, based on mutual agency or delectus
personae.
9. Art. 1813.A conveyance by a partner of his whole interest in the
partnership does not itself dissolve the partnership, or, as
against the other partners in the absence of agreement, entitle the
assignee, during the continuance of the partnership, to interfere in
the management or administration of the partnership business or
affairs, or to require any information or account of partnership
transactions, or to inspect the partnership books; but it merely
entitles the assignee to receive in accordance with his contracts
the profits to which the assigning partners would otherwise be
entitled. However, in case of fraud in the management of the
partnership, the assignee may avail himself of the usual remedies.
In the case of a dissolution of the partnership, the assignee is entitled
to receive his assignor's interest and may require an account from the
date only of the last account agreed to by all the partners.(emphasis
mine)
10. A partner's interest in the partnership includes his share in the
profits, thus the Spouses Jaso are entitled to Biondo's share in the
profits.
11. Although Eden Jaso did not, become a partner as a consequence of
the assignment and/or acquire the right to require an accounting of
the partnership business, the CA correctly granted her prayer for
dissolution of the joint venture conformably with the right granted to

the purchaser of a partner's interest under Article 1831 of the Civil


Code.
NOT QUITE RELEVANT:
12. A party assailing the authenticity and due execution of a notarized
document is, consequently, required to present evidence that is clear,
convincing and more than merely preponderant. This, the Sps.
Realubit failed to do. (Note: Eden Jaso and the notary public testified)
13. Also, forgery is never presumed and must likewise be proved by clear
and convincing evidence by the party alleging the same. Said forgery
is debunked by Biondo's duly authenticated certification dated 17
November 1998, confirming the transfer of his interest in the business
in favor of Eden.
14. Both the RTC and the CA ruled out the dissolution of the joint venture
and concluded that the ice manufacturing business at the aforesaid
address was the same one established by Juanita and Biondo. As a
rule, findings of fact of the CA are binding and conclusive upon the
SC.
Petition for certiorari is denied.
Digest by: Arnel Abeleda

11
VICENTE SY, TRINIDAD PAULINO, 6BS TRUCKING CORP., AND SBT TRUCKING
CORP., PETITIONERS
V.
COURT OF APPEALS AND JAIME SAHOT.
GR No. 142293 February 27, 2003
Quisumbing, J.
SV: Sahot has been serving the trucking company as a truck helper and later
as a truck driver. At 59, he got sick and was not able to report back to work
despite the demand of the trucking corporation to return. Because of this, the
trucking corp dismissed him. He filed a complaint for illegal dismissal before
the LA. LA ruled that he was an industrial partner before 1994 and there was
no illegal dismissal, this was however reversed by the NLRC and such reversal
was affirmed by the CA
SC: SAhot is not an industrial partner, there was no written agreement; he did
not contribute to the common fund; no proof that he was receiving shares in
the profits; and no proof that he was participating in the management,
administration and adoption of policies of the business. There was no valid
dismissal although the labor code allows dismissal on the ground of disease
since the trucking corp did not comply with the requirements. Sahot was
illegally dismissed and entitled to separation pay.

1.

1958. Jaime Sahot started working as a truck helper for Vicente Sy


Trucking
2. 1965. He became a truck driver of the same family business, renamed
T. Paulino Trucking Service and later 6Bs Trucking Corporation in 1985
and renamed again and now known as SBT trucking Corp. throughout
the name changes, Sahot served the trucking business
3. April 1994, Sahot, 59 years old at the time had been incurring
absences due to various ailments (pain in left thigh which affected his
task as a driver).
4. He inquired with SSS about medical and retirement benefits but
discovered that his premium payments had not been remitted by his
employer
5. Sahot filed a week-long leave in May 1994 and before the end of the
month he was medically examined and treated for various illnesses.
SBT through its manager told him to file a formal extension of leave.
He applied for extension of his leave for the whole month of June
6. It was at this point when Petitioners allegedly threatened to terminate
his employment should he refuse to go back
7. He could not retire because his SSS premiums were not paid correctly
(hence, no pension) but he could neither go back to work because of
his thigh. But the trucking corp helped him with his dilemma when
they dismissed him from work (june 30, 1994)
8. He filed for illegal dismissal against Sy, 6Bs Trucking and SBT
Trucking et al.
a. Sy et al: Sahot was not illegally dismissed because he was an
industrial partner until 1994, the year Sahot became
adriver (SBT trucking corp was established that year and
Sahot became part of it as a driver/employee)
b. That from the expiration of the extended leave, Sahot never
came back to work and instead filed the case
9. LA ruled in favor of SY and held that there was no illegal dismissal
since Sahot failed to report to work. LA also ruled that Sahot was an
industrial partner before 1994
10. NRLC: Sahot was an employee since the start. He did not abandon his
job
11. CA affirmed NLRC decision
ISSUES:
1.

(Relevant ISSUE) Whether or not an employer-employee relationship


existed between Sy and Sahot. YES

The elements to determine the existence of an employment


relationship
i. Selection and engagement of the employee
ii. Payment of wages
iii. Power of dismissal
iv. Employers power to control the employees conduct
1. Most important. Control not only as to the
result of the work to be done but also as to
the means and methods to accomplish it

2.

Sy et al owned and operated a trucking business since the


1950s and they determined Sahots wages and rest day. Sahot
did not have the freedom to determine where he would go,
what he would do and how he would do it. He merely followed
instructions of petitioners and was content to do so, as long as
he was paid his wages. He worked as a truck helper and a
truck driver not for his own pleasure but under the control of
Sy et al.
Art. 1767: in a contract of partnership two or more persons
bind themselves to contribute money property or industry to a
common fund with the intention of dividing the profits among
themselves
i. (Not one is present in this case)
ii. No written agreement to prove the partnership
iii. Sahot did not contribute money, property or industry
for the purpose of engaging in the supposed business.
iv. No proof that he was receiving a share in the profits
as a matter of course during the period when the
trucking business was operating
v. No proof that he actively participated in the
management, administration and adoption of policies
of the business
If doubt exists between the evidence presented by the
employer and the employee, the sacles of justice must be
tilted in favor of the latter

Whether or not there was valid dismissal. NO

NLRC and CA: though SAhot didnt intend to come back to


work due to his illness, this was not abandonment. It should
fall under the just causes of terminating an employment. The
fact that they offered a different job did not change the
scenario

Art.294 of the labor code allows an employer to terminate


employment of an employee on the ground of disease but
there is a requirement under the omnibus implementing Rule
of the Labor code which requires the employer obtain a
certification by competent public health authority that the
disease of such nature or at such a stage that it cannot be
cured within a period of 6 months even with proper medical
treatment.

The trucking corp didnt comply with this. It is incumbent on


the trucking corp to prove that it complied with the requisites
for a valid dismissal.

Also the requirement of sending 2 notices (one to the


employee informing him of the acts or omissions for which his
dismissal is sought and second to the employee informing him
of his dismissal after giving him reasonable opportunity to
answer and to heard on his defense)

Clearly it was an invalid dismissal

3.

Whether or not Sahot is entitled to separation pay. YES

One month salary or to one-half month salary for every year


of service

P2080 x 36 years = P74, 880

Petition DENIED. CA decision AFFIRMED


Justin Benedict A. Moreto
12
CESAR C. LIRIO, doing business under the name and style of CELKOR AD
SONICMIX, vs. WILMER D. GENOVIA (G.R. No. 169757, November 23, 2011)
Topic: Partnership distinguished from Contract of Employment
Ponente: Peralta, J.
Nature: NLRC Illegal Dismissal; CA ; SC Petition for Certiorari
Doctrine:
Quick Facts:
Facts:
July 9, 2002: Respondent Genovia filed a complaint against Petitioner Lirio
and/or Celkor Ad Sonicmix Recording Studio for illegal dismissal, non-payment
of commission and award of moral and exemplary damages.
- In his Position Paper, respondent Genovia alleged, among others, that on
August 15, 2001, he was hired as studio manager by petitioner Lirio. He was
employed to manage and operate Celkor and to promote and sell the
recording studio's services to music enthusiasts and other prospective clients.
He received a monthly salary of P7k. They also agreed that he was entitled to
an additional commission of P100 per hour as recording technician whenever
a client uses the studio for recording, editing or any related work.
- Respondent stated that a few days after he started working as a studio
manager, petitioner approached him and told him about his project to
produce an album for his 15y.o. daughter, Celine Mei Lirio, a former talent of
ABS-CBN Star Records. Petitioner asked respondent to compose and arrange
songs for Celine and promised that he (Lirio) would draft a contract to assure
respondent of his compensation for such services. As agreed upon, the
additional services that respondent would render included composing and
arranging musical scores only, while the technical aspect in producing the
album, such as digital editing, mixing and sound engineering would be

performed by respondent in his capacity as studio manager for which he was


paid on a monthly basis. Respondent then started making the album.
- Genovia alleged that before the end of Sept 2001, he reminded petitioner
about his compensation as composer and arranger of the album. Petitioner
Lirio verbally assured him that he would be duly compensated. On Feb 26,
2002 (after the carrier single was already aired in over the radio on Feb 22),
respondent Genovia again reminded petitioner about the contract on his
compensation as composer and arranger of the album. Petitioner told
respondent that since he was practically a nobody and had proven nothing
yet in the music industry, respondent did not deserve a high compensation,
and he should be thankful that he was given a job to feed his family (kapal ng
mukha!). Petitioner Lirio informed respondent Genovia that he was entitled
only to 20% of the net profit, and not of the gross sales of the album, and that
the salaries he received and would continue to receive as studio manager of
Celkor would be deducted from the said 20% net profit share.
- Respondent Genovia objected and insisted that he be properly compensated.
On March 14, 2002, petitioner verbally terminated respondents services, and
he was instructed not to report for work.
- Respondent Genovia then filed a case for illegal dismissal before the NLRC,
which assigned his case to LA Hernandez. Respondent Genovia asserts that
he was illegally dismissed as he was terminated without any valid grounds,
and no hearing was conducted before he was terminated, in violation of his
constitutional right to due process. Having worked for more than six months,
he was already a regular employee. Although he was a so called studio
manager, he had no managerial powers, but was merely an ordinary
employee.
- Lirio stated in his Position Paper that respondent was not hired as studio
manager, composer, technician or as an employee in any other capacity of
Celkor. Respondent could not have been hired as a studio manager, since the
recording studio has no personnel except petitioner. He decided to produce an
album for his daughter and established a recording studio, which he named
Celkor Ad Sonicmix Recording Studio. He looked for a composer/arranger who
would compose the songs for the said album found Genovia. Respondent
verbally agreed with petitioner to co-produce the album based on the
following terms and conditions: (1) petitioner shall provide all the financing,
equipment and recording studio; (2) Celine Mei Lirio shall sing all the songs;
(3) respondent shall act as composer and arranger of all the lyrics and the
music of the five songs he already composed and the revival songs; (4)
petitioner shall have exclusive right to market the album; (5) petitioner was
entitled to 60% of the net profit, while respondent and Celine Mei Lirio were
each entitled to 20% of the net profit; and (6) respondent shall be entitled to

draw advances of P7,000.00 a month, which shall be deductible from his


share of the net profits and only until such time that the album has been
produced. Petitioner asserted that from the aforesaid terms and
conditions, his relationship with respondent is one of an informal
partnership under Article 1767 of NCC, since they agreed to
contribute money, property or industry to a common fund with the
intention of dividing the profits among themselves. Hence, petitioner
contended that no employer-employee relationship existed between him and
the respondent, and there was no illegal dismissal to speak of.
- Labor Arbiter: Genovia found employer-employee relationship and illegal
dismissal.
- NLRC: reversed. NLRC held that respondent failed to proved with substantial
evidence that he was selected and engaged by petitioner, that petitioner had
the power to dismiss him, and that they had the power to control him not only
as to the result of his work, but also as to the means and methods of
accomplishing his work
- CA: reversed and reinstated LA decision.
Issue: W/N the parties formed a partnership and not an employment contract
Held: No.
Ratio:
- Respondents evidence consisted of the Payroll dated July 31, 2001 to March
15, 2002, which was certified correct by petitioner, and Petty Cash Vouchers
evidencing receipt of payroll payments by respondent from Celkor. While
Respondent Lirio's so-called existence of a partnership agreement was not
substantiated and his assertion thereto, in the face of complainant's evidence,
constitute but a self-serving assertion, without probative value, a mere
invention to justify the illegal dismissal. Such claim was not supported by any
written agreement. The Court notes that in the payroll dated July 31, 2001 to
March 15, 2002, there were deductions from the wages of respondent for his
absence from work, which negates petitioners claim that the wages paid
were advances for respondents work in the partnership.
- Citing Nicario v. NLRC: It is a well-settled doctrine, that if doubts exist
between the evidence presented by the employer and the employee, the
scales of justice must be tilted in favor of the latter. It is a time-honored rule
that in controversies between a laborer and his master, doubts reasonably
arising from the evidence, or in the interpretation of agreements and writing
should be resolved in the formers favor. The policy is to extend the doctrine
to a greater number of employees who can avail of the benefits under the

law, which is in consonance with the avowed policy of the State to give
maximum aid and protection of labor. This rule should be applied in the case
at bar, especially since the evidence presented by the private respondent
company is not convincing.

SC Affirmed CA there was an employer-employee relationship terminated


illegally.