7. TUASON VS.

BOLANOS
GR. No. L-4935 May 28, 1954 95 Phil. 106
Facts:
Plaintiffs complaint against defendant was to recover possession of a registered land. In the
complaint, the plaintiff is represented by its Managing Partner, Gregorio Araneta, Inc.,another
corporation. Defendant, in his answer, sets up prescription and title in himself thru"open, continuous,
exclusive and public and notorious possession under claim of ownership,adverse to the entire world
by defendant and his predecessors in interest" from "timeimmemorial". After trial, the lower court
rendered judgment for plaintiff, declaring defendant tobe without any right to the land in question and
ordering him to restore possession thereof toplaintiff and to pay the latter a monthly rent. Defendant
appealed directly to the Supreme Courtand contended, among others, that Gregorio Araneta, Inc. can
not act as managing partner for plaintiff on the theory that it is illegal for two corporations to enter
into a partnership
Issue:
Whether or not a corporation may enter into a joint venture with another corporation.
Ruling:
It is true that the complaint states that the plaintiff is "represented herein by its ManagingPartner
Gregorio Araneta, Inc.", another corporation, but there is nothing against onecorporation being
represented by another person, natural or juridical, in a suit in court. Thecontention that Gregorio
Araneta, Inc. cannot act as managing partner for plaintiff on the theorythat it is illegal for two
corporations to enter into a partnership is without merit, for the true rule isthat "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 businessauthorized by its charter." (WyomingIndiana Oil Gas Co. vs. Weston, 80 A. L. R., 1043, citing 2.Fletcher Cyc. of Corp., 1082.). There is
nothing in the record to indicate that the venture inwhich plaintiff is represented by Gregorio Araneta,
Inc. as "its managing partner" is not in linewith the corporate business of either of them.
17. Ang Pue Co v Sec of Commerce and Industry
Facts:
It appears that on May 1, 1953, Ang Pue and Tan Siong, both Chinese citizens, organized the
partnership Ang Pue & Company for a term of five years from May 1, 1953, extendible by their mutual
consent. The purpose of the partnership was "to maintain the business of general merchandising,
buying and selling at wholesale and retail, particularly of lumber, hardware and other construction
materials for commerce, either native or foreign." The corresponding articles of partnership (Exhibit B)
were registered in the Office of the Securities & Exchange Commission on June 16, 1953.On June 19,
1954 Republic Act No. 1180 was enacted to regulate the retail business. It provided, among other
things, that, after its enactment, a partnership not wholly formed by Filipinos could continue to
engage in the retail business until the expiration of its term. SEC refused to give it an extension of its
partnership because it is against RA 1180. RTC dismissed the action.
Issue: May the partnership be renewed?
Held: no. To organize a corporation or a partnership that could claim a juridical personality of its own
and transact business as such, is not a matter of absolute right but a privilege which may be enjoyed
only under such terms as the State may deem necessary to impose.The agreement contain therein
must be deemed subject to the law existing at the time when the partners came to agree regarding

the extension. In the present case, as already stated, when the partners amended the articles of
partnership, the provisions of Republic Act 1180 were already in force, and there can be not the
slightest doubt that the right claimed by appellants to extend the original term of their partnership to
another five years would be in violation of the clear intent and purpose of the law aforesaid.
19. PASCUAL v. Commissioner of Internal Revenue G.R. No. 78133 October 18, 1988
FACTS:
On June 22, 1965, petitioners bought two (2)parcels of land from Santiago Bernardino, et al. and on
May 28, 1966, they bought another three (3) parcels of land from Juan Roque. The first two parcels of
land were sold by petitioners in 1968 to Marenir Development Corporation, while the three parcels of
land were sold by petitioners to Erlinda Reyes and Maria Samsonon March 19,1970. Petitioner realized
a net profit in the sale made in 1968 in the amount of P165, 224.70, while they realized a net profit
of P60,000 in the sale made in 1970. The corresponding capital gains taxes were paid by petitioners in
1973 and 1974 .Respondent Commissioner 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 under Section 20(b)and its income was subject to the taxes
prescribed under Section 24, both of the National Internal Revenue Code; 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.
ISSUE:
Whether petitioners formed an unregistered partnership subject to corporate income tax(partnership
vs. co-ownership)
RULING:
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; The sharing of returns does not in
itself establish a partnership whether or not the persons sharing therein have a joint or common right
or interest in the property. There must be a clear intent to form a partnership, the existence of a
juridical personality different from the individual partners, and the freedom of each party to transfer
or assign the whole property. In the present case, there is clear evidence of co-ownership between the
petitioners. 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. And even assuming for the sake of argument that such unregistered partnership appears to
have been formed, since there is no such existing unregistered partnership with a distinct personality
nor with assets that can be held liable for said deficiency corporate income tax, then petitioners can
be held individually liable as partners for this unpaid obligation of the partnership

Oa vs CIR GR No. L -19342 | May 25, 1972

Facts:
Julia Buales died leaving as heirs her surviving spouse, Lorenzo Oa and her five children. A civil
case was instituted for the settlement of her state, in which Oa was appointed administrator and
later on the guardian of the three heirs who were still minors when the project for partition was
approved. This shows that the heirs have undivided interest in 10 parcels of land, 6 houses and
money from the War Damage Commission.
Although the project of partition was approved by the Court, no attempt was made to divide the
properties and they remained under the management of Oa who used said properties in business by
leasing or selling them and investing the income derived therefrom and the proceeds from the sales
thereof in real properties and securities. As a result, petitioners properties and investments gradually
increased. Petitioners returned for income tax purposes their shares in the net income but they did
not actually receive their shares because this left with Oa who invested them.
Based on these facts, CIR decided that petitioners formed an unregistered partnership and therefore,
subject to the corporate income tax, particularly for years 1955 and 1956. Petitioners asked for
reconsideration, which was denied hence this petition for review from CTAs decision.
Issue: W/N there was a co-ownership or an unregistered partnership; W/N the petitioners are liable
for the deficiency corporate income tax
Held: Unregistered partnership. The Tax Court found that instead of actually distributing the
estate of the deceased among themselves pursuant to the project of partition, the heirs allowed their
properties to remain under the management of Oa and let him use their shares as part of the
common fund for their ventures, even as they paid corresponding income taxes on their respective
shares.
Yes. For tax purposes, the co-ownership of inherited properties is automatically converted into an
unregistered partnership the moment the said common properties and/or the incomes derived
therefrom are used as a common fund with intent to produce profits for the heirs in proportion to their
respective shares in the inheritance as determined in a project partition either duly executed in an
extrajudicial settlement or approved by the court in the corresponding testate or intestate
proceeding. The reason is simple. From the moment of such partition, the heirs are entitled already to
their respective definite shares of the estate and the incomes thereof, for each of them to manage
and dispose of as exclusively his own without the intervention of the other heirs, and, accordingly, he

becomes liable individually for all taxes in connection therewith. If after such partition, he allows his
share to be held in common with his co-heirs under a single management to be used with the intent
of making profit thereby in proportion to his share, there can be no doubt that, even if no document or
instrument were executed, for the purpose, for tax purposes, at least, an unregistered partnership is
formed.
For purposes of the tax on corporations, our National Internal Revenue Code includes these
partnerships
The term partnership includes a syndicate, group, pool, joint venture or other unincorporated
organization, through or by means of which any business, financial operation, or venture is carried
on (8 Mertens Law of Federal Income Taxation, p. 562 Note 63; emphasis ours.)
with the exception only of duly registered general copartnerships within the purview of the term
corporation. It is, therefore, clear to our mind that petitioners herein constitute a partnership,
insofar as said Code is concerned, and are subject to the income tax for corporations. Judgment
affirmed.
21. 21. GATCHALIAN VS CIR
Facts: Plaintiffs purchased, in the ordinary course of business, from one of the duly authorized agents
of the National Charity Sweepstakes Office one ticket for the sum of two pesos (P2), said ticket was
registered in the name of Jose Gatchalian and Company. The ticket won one of the third-prizes in the
amount of P50,000. Jose Gatchalian was required to file the corresponding income tax return covering
the prize won. Defendant-Collector made an assessment against Jose Gatchalian and Co.
requesting the payment of the sum of P1,499.94 to the deputy provincial treasurer of Pulilan,
Bulacan. Plaintiffs, however through counsel made a request for exemption. It was denied.
Plaintiffs failed to pay the amount due, hence a warrant of distraint and levy was
issued. Plaintiffs paid under protest a part of the tax and penalties to avoid the effects of the warrant.
A request that the balance be paid by plaintiffs in installments was made. This was granted on the
condition that a bond be filed.
Plaintiffs failed in their installment payments. Hence a request for execution of the warrant of distraint
and levy was made. Plaintiffs paid under protest to avoid the execution.
A claim for refund was made by the plaintiffs, which was dismissed, hence the appeal.
Issue: Whether the plaintiffs formed a partnership hence liable for income tax.
Held: Yes. According to the stipulation facts the plaintiffs organized a partnership of a civil nature
because each of them put up money to buy a sweepstakes ticket for the sole purpose of dividing
equally the prize which they may win, as they did in fact in the amount of P50,000. The partnership
was not only formed, but upon the organization thereof and the winning of the prize, Jose Gatchalian
personally appeared in the office of the Philippines Charity Sweepstakes, in his capacity as co-partner,
as such collection the prize, the office issued the check for P50,000 in favor of Jose Gatchalian and
company, and the said partner, in the same capacity, collected the said check. All these
circumstances repel the idea that the plaintiffs organized and formed a community of property only

22. FLORENCIO REYES and ANGEL REYES, vs.COMMISSIONER OF INTERNAL REVENUE and
HON. COURT OF TAX APPEALS
On October 31, 1950, petitioners, father and son, purchased a lot and building, known as the Gibbs
Building, situated at 671 Dasmarias Street, Manila, for P835,000.00, of which they paid the sum of
P375,000.00, leaving a balance of P460,000.00, representing the mortgage obligation of the vendors
with the China Banking Corporation, which mortgage obligations were assumed by the vendees. The
initial payment of P375,000.00 was shared equally by petitioners. At the time of the purchase, the
building was leased to various tenants, whose rights under the lease contracts with the original
owners, the purchasers, petitioners herein, agreed to respect. The administration of the building was
entrusted to an administrator who collected the rents; kept its books and records and rendered
statements of accounts to the owners; negotiated leases; made necessary repairs and disbursed
payments, whenever necessary, after approval by the owners; and performed such other functions
necessary for the conservation and preservation of the building. Petitioners divided equally the
income of operation and maintenance. The tax liability for the years 1951 to 1954 was reduced to
P37,128.00 (from 46k) and for the years 1955 and 1956, to P20,619 (from 25k) as income tax due
"from the partnership formed" by petitioners.2 The reduction was due to the elimination of surcharge,
the failure to file the income tax return being accepted as due to petitioners honest belief that no
such liability was incurred as well as the compromise penalties for such failure to file.
From the above facts, the respondent Court of Tax Appeals applying the appropriate provisions of the
National Internal Revenue Code, the first of which imposes an income tax on corporations "organized
in, or existing under the laws of the Philippines, no matter how created or organized but not including
duly registered general co-partnerships (companias colectivas), ...," 6 a term, which according to the
second provision cited, includes partnerships "no matter how created or organized, ...," 7 and applying
the leading case of Evangelista v. Collector of Internal Revenue,8 sustained the action of respondent
Commissioner of Internal Revenue, but reduced the tax liability of petitioners, as previously noted.
Petitioners maintain the view that the Evangelista ruling does not apply; for them, the situation is
dissimilar. Consequently they allege that the reliance by respondent Court of Tax Appeals was
unwarranted and the decision should be set aside.
The issue was whether petitioners are subject to the tax on corporations provided for in section 24 of
Commonwealth Act No. 466, otherwise known as the National Internal Revenue Code, ..." 9 After
referring to another section of the National Internal Revenue Code, which explicitly provides that the
term corporation "includes partnerships" and then to Article 1767 of the Civil Code of the Philippines,
defining what a contract of partnership is, the opinion goes on to state that "the essential elements of
a partnership are two, namely: (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, petitioners 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. Upon consideration of all the facts and circumstances surrounding the case, we are fully
satisfied that their purpose was to engage in real estate transactions for monetary gain and then
divide the same among themselves
RULING:

YES!

In support of the above conclusion, reference was made to the following circumstances, namely, the
common fund being created purposely not something already found in existence, the investment of
the same not merely in one transaction but in a series of transactions; the lots thus acquired not
being devoted to residential purposes or to other personal uses of petitioners in that case; such
properties having 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 endorse notes and checks; the
above conditions having existed for more than 10 years since the acquisition of the above properties;
and no testimony having been introduced as to the purpose "in creating the set up already adverted
to, or on the causes for its continued existence."
It may be said that there could be a differentiation made between the circumstances above detailed
and those existing in the present case. It does not suffice though to preclude the applicability of the
Evangelista decision. Petitioners could harp on these being only one transaction. They could stress
that an affidavit of one of them found in the Bureau of Internal Revenue records would indicate that
their intention was to house in the building acquired by them the respective enterprises, coupled with
a plan of effecting a division in 10 years. It is a little surprising then that while the purchase was made
on October 31, 1950 and their brief as petitioners filed on October 20, 1965, almost 15 years later,
there was no allegation that such division as between them was in fact made. Moreover, the facts as
found and as submitted in the brief made clear that the building in question continued to be leased by
other parties with petitioners dividing "equally the income ... after deducting the expenses of
operation and maintenance ..."
It is obvious that petitioners' effort to avoid the controlling force of the Evangelista ruling cannot be
deemed successful. Respondent Court of Tax Appeals acted correctly. It yielded to the command of an
authoritative decision; it recognized its binding character. There is clearly no merit to the second error
assigned by petitioners, who would deny its applicability to their situation.
The first alleged error committed by respondent Court of Tax Appeals in holding that petitioners, in
acquiring the Gibbs Building, established a partnership subject to income tax as a corporation under
the National Internal Revenue Code is likewise untenable. In their discussion in their brief of this
alleged error, stress is laid on their being co-owners and not partners. Such an allegation was likewise
made in the Evangelista case.
This is the way it was disposed of in the opinion of the present Chief Justice: "This pretense was
correctly rejected by the Court of Tax Appeals." 14 Then came the explanation why: "To begin with, the
tax in question is one imposed upon "corporations", which, strictly speaking, are distinct and different
from "partnerships". When our Internal Revenue Code includes "partnerships" among the entities
subject to the tax on "corporations", said Code must allude, therefore, to organizations which are not
necessarily "partnerships", in the technical sense of the term. Thus, for instance, section 24 of said
Code exempts from the aforementioned tax "duly registered general partnerships", which constitute
precisely one of the most typical forms of partnerships in this jurisdiction. Likewise, as defined in
section 84(b) of said Code, "the term corporation includes partnerships, no matter how created or
organized." This qualifying expression clearly indicates that a joint venture need not be undertaken in
any of the standard forms, or in conformity with the usual requirements of the law on partnerships, in
order that one could be deemed constituted for purposes of the tax on corporations. Again, pursuant
to said section 84(b), the term "corporation" includes, among others, "joint accounts, (cuentas en
participacion)" and "associations", none of which has a legal personality of its own, independent of

that of its members. Accordingly, the lawmaker could not have regarded that personality as a
condition essential to the existence of the partnerships therein referred to. In fact, as above stated,
"duly registered general copartnerships" which are possessed of the aforementioned personality have been expressly excluded by law (sections 24 and 84[b]) from the connotation of the term
"corporation"."15 The opinion went on to summarize the matter aptly: "For purposes of the tax on
corporations, our National Internal Revenue Code, include these partnerships with the exception
only of duly registered general co-partnerships within the purview of the term "corporation." It is,
therefore, clear to our mind that petitioners herein constitute a partnership, insofar as said Code is
concerned, and are subject to the income tax for corporations." 16
25. G.R. Nos. L-11483-84 February 14, 1958
BERNARDA CAMPOREDONDO vs. ADOLFO CRUZ AZNAR, as Executor of the Deceased EDWARD E.
CHRISTENSEN,
Edward E. Christensen, an American citizen, was already residing in Davao and on the following year
became the manager of Mindanao Estates located in the municipality of Padada of the same province.
A group of laborers recruited from Argao, Cebu, arrived to work in the said plantation. Among the
group was a young girl, Bernarda Camporendondo, who became an assistant to the cook. Thereafter,
the girl and Edward E. Christensen, who was also unmarried starting living together as husband and
wife and although the records failed to establish the exact date when such relationship commenced, it
has been continuous for over 30 years until the death of Christensen occurred on April 30, 1953. Out
of said relations, 2 children, Lucy and Helen Christensen, were allegedly born. Upon the demise of the
American, who had left a considerable amount of properties his will naming Adolfo Cruz Aznar as
executor was duly presented for probate in court and became the subject of Special Proceedings No.
622 of the Court of First Instance of Davao
Oppositions to the probate of this will were separately filed by Maria Helen Christensen Garcia
and Bernarda Camporendondo, the first contending that the will lacked the formalities required by
law; that granting that he had, the dispositions made therein were illegal because although she and
Lucy Christensen were both children had by the deceased with Bernarda Camporendondo, yet she
was given only a meager sum of P3,600 out of an estate valued at $485,000 while Lucy would get the
rest of the properties;and that the petitioner Adolfo Cruz Aznar was not qualified to be appointed as
administrator of the estate because he had an interest adverse to thatof the estate. It was therefore
prayed by his oppositor that the application for probate be denied and the will disallowed; that the
proceeding be declared intestate and that another disinterested person be appointed as
administrator. Hoowever the claims of the mother was denied because she is only a common law wife
and not a co-owner of properties.
Coming now to Civil Case No. 1076 of the Court of First Instance of Davao, Bernarda Camporendondo
claimed in her complaint 1/2 of the properties of the deceased as co-owner thereof in virtue of her
relations with the deceased. She alleged as basis for action that she and the deceased Edward E.
Christensen had lived and cohabitated as husband and wife, continuously and openly for a period for
more than 30 years; that within said period, plaintiff and the deceased acquired real and personal
properties through their common effort and industry; and that in virtue of such relationship, she was a
co-owner of said properties. As the executor refused to account for and deliver the share allegedly
belonging to her despite her repeated demands, she prayed the court that said executor be ordered
to submit an inventory and render an accounting of the entire estate of the deceased;to divide the
same into 2 equal parts and declare that one of them lawfully belonged to plaintiff; and for such other
reliefs as may be deemed just and equitable in the premises. In his answer, the executor denied the
averments of the complaint, contending that the decedent was the sole owner of the properties left

by him as they were acquired through his own efforts; that plaintiff had never been a co-owner of any
property acquired or possessed by the late Edward Christensen during his lifetime; that the personal
relationship between plaintiff and the deceased was purely clandestine because the former habitually
lived in her plantation at Paligue, Davao, from the time she acquired the same in 1928; that she also
maintained relations with 2 other men; and that the claim of plaintiff would violate the provisions of
Article 2253 of the Civil Code as the vested rights of the compulsory heirs of the deceased would be
impaired. Defendant thus prayed for the dismissal of the complaint and as counterclaim demanded
the sum of P70.000.00 representing actual, moral and exemplary damages.
Due hearing was conducted thereon and after the parties had submitted their respective
memoranda, the lower Court on August 25, 1954, rendered judgment finding that the deceased
Edward Christensen and Bernarda Camporendondo,not otherwise suffering from any impediment to
contract marriage, lived together as husband and wife without marital ties continously for over 30
years until the former's death in 1953; that out of such relations 2 children were born; and that the
properties in controversy were acquired by either or both of them through their work or industry.
Relying on Section 144 of theCivil Code which said court considered to have created another mode of
acquiring ownership, plaintiff was held to be entitled to one-half of said properties as co-owner thereof
in view of her relationship with the deceased and ordered the executor to account for and deliver the
same by her. From this decision, defendant Aznar, as Executor of the will, perfected an appeal to the
Court of Appeals, but as the property involved in the litigation exceeds P50,000.00 said tribunal
elevated the case to Us for consideration.
It is not controverted that at the time of his death, Edward Christensen was the owner of
certain properties, including shares of stock in the plantation bearing his name and a general
merchandising store in Davao City. It is also undeniable that the deceased and appellee, both
capacitated to enter into the married state, maintained relations as husband and wife, continuously
and publicly for a considerable number of years which the lower Court declared to be until the death
of Christensen in 1953. While as a general rule appellate courts do not usually disturb the lower
court's findings of fact, unless said finding is not supported by or totally devoid of or inconsistent with
the evidence on record, such finding must of necessity be modified to conform with the evidence if
the reviewing tribunal were to arrive at the proper and just solution of the controversy. In the instant
case, the court a quo overlooked or failed to consider the testimonies of both Lucy and Helen
Christensen to the effect that the deceased and their mother Bernarda Camporendondo had some
sort of quarrel or misunderstanding and parted ways as of March, 1950, a fact which appellee was not
able to overcome. Taking into account the circumstances of this caseas found by the trial court, with
the modification that the cohabitation should appear as continuous from the early 20's until March,
1950, the question left for our determination is whether Bernarda Camporedondo, by reason of such
relationship, may be considered as a co-owner of the properties acquired by the deceased during said
period and thus entitled to one-half thereof after the latter's death.
Presumably taking judicial notice of the existence in our society of a certain kind of relationship
brought about by couples living together as husbands and wives without the benefit of marriage,
acquiring and bringingproperties unto said union, and probably realizing that while same may not
beacceptable from the moral point of view they are as much entitled to theprotection of the laws as
any other property owners, the lawmakersincorporated Article 144 in Republic Act No. 386 (Civil Code
of the Philippines) to govern their property relations. Said article read as follows:

ART. 114. When a man and a woman live together as husband and wife, but they are not married, or
their marriage is void from the beginning, the property acquired by either or both of them through
their work or industry or their wages and salaries shall be governed by the rules of co-ownership.
It must be noted that such form of co-ownership requires that the man and the woman thus
living together must not in any way be incapacitated to contract marriage and that the properties
realized during their cohabitation be acquired through the work, industry, employment or occupation
of both or either of them. And the same thing may be said of whose marriages are by provision of law
declared void ab initio. While it is true that these requisites are fully met and satisfied in the case at
bar, We must remember that the deceased and herein appellee were already estranged as of March,
1950. There being no provision of law governing the cessation of such informal civil partnership, if
ever existed, same may be considered terminated upon their separation or desistance to continue
said relations. The Spanish Civil Code which was then enforce contains to counterpart of Article 144
and as the records in the instant case failed to show show thata subsequent reconciliation ever took
place and considering that Republic ActNo. 386 which recognizeed such form of co-ownership went
into operation only on August 30, 1950, evidently, this later enactment cannot be invoked as basis for
appellee's claim.
In determining the question poised by this action We may look upon the jurisprudence then
obtaining on the matter. As early as 1925, this Court already declared that where a man and a
woman, not suffering from any impediment to contract marriage, live together as husband and wife,
an informal civil partnership exists and made the pronouncement that each of them has an interest in
the properties acquired during said union and is entitled to participate therein if said properties were
the product of their JOINT efforts.
Appellee, claiming that the properties in controversy were the product of their joint industry
apparently in her desire to tread on the doctrine laid down in the aforementioned cases, would lead
Us to believe that her help was solicited or she took a hand in the management of and/or acquisition
of thesame. But such assertion appears incredible if We consider that she was observed by the trial
Court as an illiterate woman who cannot even remember simple things as the date when she arrived
at the Mindanao Estate, when she commenced relationship with the deceased, not even her
approximate age or that of her children. And considering that aside from her own declaration, which
We find to be highly improbable, there appears no evidence to prove her alleged contribution or
participation in the acquisition of the properties involved therein, and that in view of the holding of
this Court that for a claim to one-half of such property to be allowed it must be proved that the same
was acquired through their joint efforts and labor (Flores vs.Rehabilitation Finance Corporation, 50 Off.
Gaz. 1029[[*]]), We have no recourse but reverse the holding of the lower Court and deny the claim of
Bernarda Campredondo. We may further state that even granting, for the sake of argument, that this
case falls under the provisions of Article 144 of theCivil Code, same would be applicable only as far as
properties acquired after the effectivity of Republic Act 386 are concerned and to no other, forsuch
law cannot be given retroactive effect to govern those already possessed before August 30, 1950. It
may be argued, however, that being a newly created right, the provisions of Section 144 should be
made to retroact if only to enforce such right.
As it cannot be denied that the rights and legitimes of the compulsory heirs of the deceased
Edward Christensen would be impaired or diminished if the claim of herein appellee would succeed,
the answer to such argument would be simply obvious.

On the strength of the foregoing considerations, We affirm the decision of the lower Court in
case G.R. No. L-11484, with the modification that MariaLucy Christensen Daney need not be
compelled to acknowledge her sister Maria Helen Christensen Garcia as a natural child of her father
Edward E. Christensen, the declaration of the Court in this respect being sufficient to enable her to all
the rights inherent to such status.
27. FORTIS V. GUTIERREZ HERMANOS
FACTS:
Fortis, an employee of Gutierrez Hermanos, brought the action to recover the balance of his salary for
the year 1902, which is 5% of the net profits of Hermanos business, and the amount he expended for
the year 1903 amounting to P600. The salary was in accordance with the contract made by Miguel
Alonzo Gutierrez, who was made as one of the managers of the company, with full power to transact
all of the business and to make a contract of employment. In 1903, Fortis went to Hongkong to look
after the business of Gutierrez Hermanos in the matter of the repair of a certain steamship, for which
he expended P600. Gutierrez Hermanos contended that Fortis is not entitled to compensation for the
services rendered, because according to Art. 1711 of the Civil Code, the contract of agency is
supposed to be gratuitous in the absence of an agreement to the contrary. Lower court ruled in favor
of Fortis.
ISSUE:
W/N Fortis, as an agent of Gutierrez Hermanos in Hongkong, is entitled to reimbursement of the P600
expense he incurred
HELD:
YES. Art. 1711 is INAPPLICABLE in this case because the amount of P600 is not claimed as
compensation for services but as a reimbursement for money expended by him in the business of
Hermanos. Thus, it is Art. 1728 (now Art. 1912 of the NCC) that is applicable Article 1912. The
principal must advance to the agent, should the latter so request, the sums necessary for the
execution of the agency. Should the agent have advanced them, the principal must reimburse him
therefore, even if the business or undertaking was not successful, provided the agent is free from all
fault. The reimbursement shall include interest on the sums advanced, from the day on which the
advance was made. (1728)
29. 29. Bastida v Menzi and Co
Facts:
the defendant Menzi & Co., Inc. through its president and general manager, J.M. Menzi, under the
authority of the board of directors, entered into a contract with the plaintiff to engage in the business
of exploiting prepared fertilizers.The plaintiffs intervention is limited to the supervision of the mixing
of the fertilizeers in the bodega of Menzi. The plaintiff was kept in ignorance of the defendants' acts
relating to the management of the partnership funds, and the keeping of accounts, until he was
informed and so believes and alleges, that the defendants had conspired to conceal from him the true
status of the business, and to his damage and prejudice made false entries in the books of account
and in the yearly balance sheets, the exact nature and amount of which it is impossible to ascertain,
even after the examination of the books of the business, due to the defendants' refusal to furnish all
the books and data required for the purpose, and the constant obstacles they have placed in the way
of the examination of the books of account and vouchers. PRior the termination of their agreement,

respondents notified petitioner that the agreement will no longer be renewed. Menzi proceeded with
the liquidation of the fertilizer business but petitioner refused. Bastida claimed that their contract is a
contract of general regular commercial partnership, that Menzi is the capitalist and Bastida is the
industrial partner.
ISSUE: WON it was a contract f partnership
HELD: NO. Neither the provisions of the contract nor the conduct of the parties prior or subsequent to
its execution justified the finding that it was a contract of copartnership. continuation of the verbal
agreement between the parties, whereby the plaintiff worked for the defendant corporation for onehalf of the net profits derived by the corporation from certain fertilizer contracts. but in the case at
bar there was no common fund, that is, a fund belonging to the parties as joint owners or partners.
The business belonged to Menzi & Co., Inc. The plaintiff was working for Menzi & Co., Inc. Instead of
receiving a fixed salary or a fixed salary and a small percentage of the net profits, he was to receive
35 per cent of the net profits as compensation for his services. It is nowhere stated in the contract
that the parties were establishing a partnership or intended to become partners. In the second place,
although the word "associated" may be related etymologically to the Spanish word "socio", meaning
partner, it does not in its common acceptation imply any partnership relation. The phrase en
sociedad con which is used as basis of the plaintiff to prove partnership merely means en reunion
con or in association with.
32. G.R. No. 5837, Gallemit v. Tabiliran, 20 Phil. 241
FACTS: Under a verbal contract, Gallemit and Tabiliran contributed P22.00 each for the purpose of
purchasing a parcel of land. It was agreed that upon its acquisition, the property would be divided
equally between them. Tabiliran kept the land for himself and refused divide. Gallemit brought an
action for partition.
Issue: Whether or not the parties enter into a contract of partnership?
Held: No. The transaction entered into between plaintiff and defendant was the acquisition jointly by
mutual agreement of the land in question, not for the purpose of undertaking any business, nor for its
cultivation in partnership, but solely to divide it equally between them. Since the land was undivided,
they were coowners of the said land, and the partition or division of such property must, therefore, be
allowed in accordance with their agreement
34. AFISCO INSURANCE CORPORATION ETAL. VS CA
The petitioners are 41 non-life insurance corporations, organized and existing under the laws of the
Philippines. Upon issuance by them of Erection, Machinery Breakdown, Boiler Explosion and
Contractors All Risk insurance policies, the petitioners on August 1, 1965 entered into a Quota Share
Reinsurance Treaty and a Surplus Reinsurance Treaty with the Munchener RuckversicherungsGesselschaft (hereafter called Munich), a non-resident foreign insurance corporation. The reinsurance
treaties required petitioners to form a [p]ool. Accordingly, a pool composed of the petitioners was
formed on the same day.
On April 14, 1976, the pool of machinery insurers submitted a financial statement and filed an
Information Return of Organization Exempt from Income Tax for the year ending in 1975, on the
basis of which it was assessed by the Commissioner of Internal Revenue deficiency corporate taxes in

the amount of P1,843,273.60, and withholding taxes in the amount of P1,768,799.39 and P89,438.68
on dividends paid to Munich and to the petitioners, respectively. These assessments were protested
by the petitioners through its auditors Sycip, Gorres, Velayo and Co.
On January 27, 1986, the Commissioner of Internal Revenue denied the protest and ordered the
petitioners, assessed as Pool of Machinery Insurers, to pay deficiency income tax, interest, and
with[h]olding tax,
The CA ruled in the main that the pool of machinery insurers was a partnership taxable as a
corporation, and that the latters collection of premiums on behalf of its members, the ceding
companies, was taxable income. It added that prescription did not bar the Bureau of Internal
Revenue (BIR) from collecting the taxes due, because the taxpayer cannot be located at the address
given in the information return filed. Hence, this Petition for Review before us
ISSUE: WON THE POOL THEY CREATED WAS TAXABLE AS A CORPORATION
YES!
Petitioners contend that the Court of Appeals erred in finding that the pool or clearing house was
an informal partnership, which was taxable as a corporation under the NIRC. They point out that the
reinsurance policies were written by them individually and separately, and that their liability was
limited to the extent of their allocated share in the original risks thus reinsured. [11] Hence, the pool did
not act or earn income as a reinsurer. [12] Its role was limited to its principal function of allocating and
distributing the risk(s) arising from the original insurance among the signatories to the treaty or the
members of the pool based on their ability to absorb the risk(s) ceded[;] as well as the performance of
incidental functions, such as records, maintenance, collection and custody of funds, etc. [13]
Petitioners belie the existence of a partnership in this case, because (1) they, the reinsurers, did
not share the same risk or solidary liability;[14] (2) there was no common fund;[15] (3) the executive
board of the pool did not exercise control and management of its funds, unlike the board of directors
of a corporation;[16] and (4) the pool or clearing house was not and could not possibly have engaged
in the business of reinsurance from which it could have derived income for itself. [17]
The Court is not persuaded. The opinion or ruling of the Commission of Internal Revenue, the
agency tasked with the enforcement of tax laws, is accorded much weight and even finality, when
there is no showing that it is patently wrong, [18] particularly in this case where the findings and
conclusions of the internal revenue commissioner were subsequently affirmed by the CTA, a
specialized body created for the exclusive purpose of reviewing tax cases, and the Court of Appeals.
[19]
Indeed,
[I]t has been the long standing policy and practice of this Court to respect the conclusions of quasijudicial agencies, such as the Court of Tax Appeals which, by the nature of its functions, is dedicated
exclusively to the study and consideration of tax problems and has necessarily developed an
expertise on the subject, unless there has been an abuse or improvident exercise of its authority. [20]

This Court rules that the Court of Appeals, in affirming the CTA which had previously sustained the
internal revenue commissioner, committed no reversible error. Section 24 of the NIRC, as worded in
the year ending 1975, provides:
SEC. 24. Rate of tax on corporations. -- (a) Tax on domestic corporations. -- A tax is hereby
imposed upon the taxable net income received during each taxable year from all sources by every
corporation organized in, or existing under the laws of the Philippines, no matter how created or
organized, but not including duly registered general co-partnership (compaias colectivas),
general professional partnerships, private educational institutions, and building and loan associations
xxx.
Ineludibly, the Philippine legislature included in the concept of corporations those entities that
resembled them such as unregistered partnerships and associations. Parenthetically, the NLRCs
inclusion of such entities in the tax on corporations was made even clearer by the Tax Reform Act of
1997,[21] which amended the Tax Code. Pertinent provisions of the new law read as follows:
SEC. 27. Rates of Income Tax on Domestic Corporations. -(A) In General. -- Except as otherwise provided in this Code, an income tax of thirty-five percent
(35%) is hereby imposed upon the taxable income derived during each taxable year from all sources
within and without the Philippines by every corporation, as defined in Section 22 (B) of this Code, and
taxable under this Title as a corporation xxx.
SEC. 22. -- Definition. -- When used in this Title:
xxx xxx

xxx

(B) The term corporation shall include partnerships, no matter how created or organized, jointstock companies, joint accounts (cuentas en participacion), associations, or insurance companies, but
does not include general professional partnerships [or] a joint venture or consortium formed for the
purpose of undertaking construction projects or engaging in petroleum, coal, geothermal and other
energy operations pursuant to an operating or consortium agreement under a service contract
without the Government. General professional partnerships are partnerships formed by persons
for the sole purpose of exercising their common profession, no part of the income of which is derived
from engaging in any trade or business.
xxx xxx

xxx."

Thus, the Court in Evangelista v. Collector of Internal Revenue [22] held that Section 24 covered
these unregistered partnerships and even associations or joint accounts, which had no legal
personalities apart from their individual members. [23] The Court of Appeals astutely
applied Evangelista:[24]
xxx Accordingly, a pool of individual real property owners dealing in real estate business was
considered a corporation for purposes of the tax in sec. 24 of the Tax Code in Evangelista v. Collector
of Internal Revenue, supra. The Supreme Court said:

The term partnership includes a syndicate, group, pool, joint venture or other unincorporated
organization, through or by means of which any business, financial operation, or venture is carried
on. * * * (8 Mertens Law of Federal Income Taxation, p. 562 Note 63)
Article 1767 of the Civil Code recognizes the creation of a contract of partnership when two or
more persons bind themselves to contribute money, property, or industry to a common fund, with the
intention of dividing the profits among themselves. [25] Its requisites are: (1) mutual contribution to
a common stock, and (2) a joint interest in the profits. [26] In other words, a partnership is formed
when persons contract to devote to a common purpose either money, property, or labor with the
intention of dividing the profits between themselves. [27] Meanwhile, an association implies associates
who enter into a joint enterprise x x x for the transaction of business. [28]
In the case before us, the ceding companies entered into a Pool Agreement [29] or an
association[30] that would handle all the insurance businesses covered under their quota-share
reinsurance treaty[31] and surplus reinsurance treaty[32]with Munich. The following unmistakably
indicates a partnership or an association covered by Section 24 of the NIRC:
(1) The pool has a common fund, consisting of money and other valuables that are deposited in the
name and credit of the pool. [33] This common fund pays for the administration and operation expenses
of the pool.[34]
(2) The pool functions through an executive board, which resembles the board of directors of a
corporation, composed of one representative for each of the ceding companies. [35]
(3) True, the pool itself is not a reinsurer and does not issue any insurance policy; however, its work is
indispensable, beneficial and economically useful to the business of the ceding companies and
Munich, because without it they would not have received their premiums. The ceding companies
share in the business ceded to the pool and in the expenses according to a Rules of Distribution
annexed to the Pool Agreement.[36] Profit motive or business is, therefore, the primordial reason for
the pools formation. As aptly found by the CTA:
xxx The fact that the pool does not retain any profit or income does not obliterate an antecedent
fact, that of the pool being used in the transaction of business for profit. It is apparent, and
petitioners admit, that their association or coaction was indispensable [to] the transaction of the
business. x x x If together they have conducted business, profit must have been the object as,
indeed, profit was earned. Though the profit was apportioned among the members, this is only a
matter of consequence, as it implies that profit actually resulted. [37]
The petitioners reliance on Pascual v. Commissioner[38] is misplaced, because the facts obtaining
therein are not on all fours with the present case. In Pascual, there was no unregistered partnership,
but merely a co-ownership which took up only two isolated transactions. [39] The Court of Appeals did
not err in applying Evangelista, which involved a partnership that engaged in a series of transactions
spanning more than ten years, as in the case before us.
41.Insular life v Ebrado
Facts:

Buenaventura Cristor Ebrado was issued by The Life Assurance Co., Ltd., Policy No. 009929 on a
whole-life for P5,882.00 with a, rider for Accidental Death for the same amount Buenaventura C.
Ebrado designated T. Ebrado as the revocable beneficiary in his policy. He to her as his wife.
On October 21, 1969, Buenaventura C. Ebrado died as a result of an t when he was hit by a failing
branch of a tree.Carponia T. Ebrado filed with the insurer a claim for the proceeds of the Policy as the
designated beneficiary therein, although she admits that she and the insured Buenaventura C. Ebrado
were merely living as husband and wife without the benefit of marriage. Pascuala Vda. de Ebrado also
filed her claim as the widow of the deceased insured. She asserts that she is the one entitled to the
insurance proceeds, not the common-law wife, Carponia T. Ebrado. the trial court rendered judgment
declaring among others, Carponia T. Ebrado disqualified from becoming beneficiary of the insured
Buenaventura Cristor Ebrado and directing the payment of the insurance proceeds to the estate of
the deceased insured because It is patent from the last paragraph of Art. 739 of the Civil Code that a
criminal conviction for adultery or concubinage is not essential in order to establish the
disqualification mentioned therein. Neither is it also necessary that a finding of such guilt or
commission of those acts be made in a separate independent action brought for the purpose.

Issue: WON the common law wife may be a beneficiary

Held: NO. And under Article 2012 of the same Code, "any person who is forbidden from receiving any
donation under Article 739 cannot be named beneficiary of a fife insurance policy by the person who
cannot make a donation to him. 4 Common-law spouses are, definitely, barred from receiving
donations from each other. In essence, a life insurance policy is no different from a civil donation
insofar as the beneficiary is concerned. Both are founded upon the same consideration: liberality. A
beneficiary is like a donee, because from the premiums of the policy which the insured pays out of
liberality, the beneficiary will receive the proceeds or profits of said insurance. As a consequence, the
proscription in Article 739 of the new Civil Code should equally operate in life insurance contracts. he
underscored clause neatly conveys that no criminal conviction for the offense is a condition
precedent. In fact, it cannot even be from the aforequoted provision that a prosecution is needed. On
the contrary, the law plainly states that the guilt of the party may be proved "in the same acting for
declaration of nullity of donation. And, it would be sufficient if evidence preponderates upon the guilt
of the consort for the offense indicated. The quantum of proof in criminal cases is not demanded.
44. LITONJUA, JR. VS LITONJUA
Aurelio and Eduardo are brothers. In 1973, Aurelio alleged that Eduardo entered into a contract of
partnership with him. Aurelio showed as evidence a letter sent to him by Eduardo that the latter is
allowing Aurelio to manage their family business (if 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.
ISSUE: Whether or not there exists a partnership.
HELD: No. The partnership is void and legally nonexistent. 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.
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.