G.R. No.

L-25532

February 28, 1969

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
WILLIAM J. SUTER and THE COURT OF TAX APPEALS, respondents.
Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Felicisimo R. Rosete and Special Attorneys
B. Gatdula, Jr. and T. Temprosa Jr. for petitioner.
A. S. Monzon, Gutierrez, Farrales and Ong for respondents.
REYES, J.B.L., J.:
A limited partnership, named "William J. Suter 'Morcoin' Co., Ltd.," was formed on 30 September 1947 by herein
respondent William J. Suter as the general partner, and Julia Spirig and Gustav Carlson, as the limited partners. The
partners contributed, respectively, P20,000.00, P18,000.00 and P2,000.00 to the partnership. On 1 October 1947, the
limited partnership was registered with the Securities and Exchange Commission. The firm engaged, among other
activities, in the importation, marketing, distribution and operation of automatic phonographs, radios, television sets
and amusement machines, their parts and accessories. It had an office and held itself out as a limited partnership,
handling and carrying merchandise, using invoices, bills and letterheads bearing its trade-name, maintaining its own
books of accounts and bank accounts, and had a quota allocation with the Central Bank.
In 1948, however, general partner Suter and limited partner Spirig got married and, thereafter, on 18 December 1948,
limited partner Carlson sold his share in the partnership to Suter and his wife. The sale was duly recorded with the
Securities and Exchange Commission on 20 December 1948.
The limited partnership had been filing its income tax returns as a corporation, without objection by the herein
petitioner, Commissioner of Internal Revenue, until in 1959 when the latter, in an assessment, consolidated the income
of the firm and the individual incomes of the partners-spouses Suter and Spirig resulting in a determination of a
deficiency income tax against respondent Suter in the amount of P2,678.06 for 1954 and P4,567.00 for 1955.
Respondent Suter protested the assessment, and requested its cancellation and withdrawal, as not in accordance with
law, but his request was denied. Unable to secure a reconsideration, he appealed to the Court of Tax Appeals, which
court, after trial, rendered a decision, on 11 November 1965, reversing that of the Commissioner of Internal Revenue.
The present case is a petition for review, filed by the Commissioner of Internal Revenue, of the tax court's aforesaid
decision. It raises these issues:
(a) Whether or not the corporate personality of the William J. Suter "Morcoin" Co., Ltd. should be disregarded for
income tax purposes, considering that respondent William J. Suter and his wife, Julia Spirig Suter actually formed a
single taxable unit; and
(b) Whether or not the partnership was dissolved after the marriage of the partners, respondent William J. Suter and
Julia Spirig Suter and the subsequent sale to them by the remaining partner, Gustav Carlson, of his participation of
P2,000.00 in the partnership for a nominal amount of P1.00.
The theory of the petitioner, Commissioner of Internal Revenue, is that the marriage of Suter and Spirig and their
subsequent acquisition of the interests of remaining partner Carlson in the partnership dissolved the limited
partnership, and if they did not, the fiction of juridical personality of the partnership should be disregarded for income
tax purposes because the spouses have exclusive ownership and control of the business; consequently the income tax
return of respondent Suter for the years in question should have included his and his wife's individual incomes and
that of the limited partnership, in accordance with Section 45 (d) of the National Internal Revenue Code, which
provides as follows:
(d) Husband and wife. In the case of married persons, whether citizens, residents or non-residents, only one
consolidated return for the taxable year shall be filed by either spouse to cover the income of both spouses; ....
In refutation of the foregoing, respondent Suter maintains, as the Court of Tax Appeals held, that his marriage with
limited partner Spirig and their acquisition of Carlson's interests in the partnership in 1948 is not a ground for
dissolution of the partnership, either in the Code of Commerce or in the New Civil Code, and that since its juridical
personality had not been affected and since, as a limited partnership, as contra distinguished from a duly registered
general partnership, it is taxable on its income similarly with corporations, Suter was not bound to include in his
individual return the income of the limited partnership.

We find the Commissioner's appeal unmeritorious.

The thesis that the limited partnership, William J. Suter "Morcoin" Co., Ltd., has been dissolved by operation of law
because of the marriage of the only general partner, William J. Suter to the originally limited partner, Julia Spirig one
year after the partnership was organized is rested by the appellant upon the opinion of now Senator Tolentino in
Commentaries and Jurisprudence on Commercial Laws of the Philippines, Vol. 1, 4th Ed., page 58, that reads as
follows:
A husband and a wife may not enter into a contract of general copartnership, because under the Civil Code,
which applies in the absence of express provision in the Code of Commerce, persons prohibited from making
donations to each other are prohibited from entering into universal partnerships. (2 Echaverri 196) It follows
that the marriage of partners necessarily brings about the dissolution of a pre-existing partnership. (1 Guy de
Montella 58)
The petitioner-appellant has evidently failed to observe the fact that William J. Suter "Morcoin" Co., Ltd. was not a
universal partnership, but a particular one. As appears from Articles 1674 and 1675 of the Spanish Civil Code, of 1889
(which was the law in force when the subject firm was organized in 1947), a universal partnership requires either that
the object of the association be all the present property of the partners, as contributed by them to the common fund,
or else "all that the partners may acquire by their industry or work during the existence of the partnership". William J.
Suter "Morcoin" Co., Ltd. was not such a universal partnership, since the contributions of the partners were fixed sums
of money, P20,000.00 by William Suter and P18,000.00 by Julia Spirig and neither one of them was an industrial
partner. It follows that William J. Suter "Morcoin" Co., Ltd. was not a partnership that spouses were forbidden to enter
by Article 1677 of the Civil Code of 1889.
The former Chief Justice of the Spanish Supreme Court, D. Jose Casan, in his Derecho Civil, 7th Edition, 1952, Volume
4, page 546, footnote 1, says with regard to the prohibition contained in the aforesaid Article 1677:
Los conyuges, segun esto, no pueden celebrar entre si el contrato de sociedad universal, pero o podran
constituir sociedad particular? Aunque el punto ha sido muy debatido, nos inclinamos a la tesis permisiva de
los contratos de sociedad particular entre esposos, ya que ningun precepto de nuestro Codigo los prohibe, y
hay que estar a la norma general segun la que toda persona es capaz para contratar mientras no sea
declarado incapaz por la ley. La jurisprudencia de la Direccion de los Registros fue favorable a esta misma tesis
en su resolution de 3 de febrero de 1936, mas parece cambiar de rumbo en la de 9 de marzo de 1943.
Nor could the subsequent marriage of the partners operate to dissolve it, such marriage not being one of the causes
provided for that purpose either by the Spanish Civil Code or the Code of Commerce.
The appellant's view, that by the marriage of both partners the company became a single proprietorship, is equally
erroneous. The capital contributions of partners William J. Suter and Julia Spirig were separately owned and contributed
by them before their marriage; and after they were joined in wedlock, such contributions remained their respective
separate property under the Spanish Civil Code (Article 1396):
The following shall be the exclusive property of each spouse:
(a) That which is brought to the marriage as his or her own; ....
Thus, the individual interest of each consort in William J. Suter "Morcoin" Co., Ltd. did not become common property of
both after their marriage in 1948.
It being a basic tenet of the Spanish and Philippine law that the partnership has a juridical personality of its own,
distinct and separate from that of its partners (unlike American and English law that does not recognize such separate
juridical personality), the bypassing of the existence of the limited partnership as a taxpayer can only be done by
ignoring or disregarding clear statutory mandates and basic principles of our law. The limited partnership's separate
individuality makes it impossible to equate its income with that of the component members. True, section 24 of the
Internal Revenue Code merges registered general co-partnerships (compaias colectivas) with the personality of the
individual partners for income tax purposes. But this rule is exceptional in its disregard of a cardinal tenet of our
partnership laws, and can not be extended by mere implication to limited partnerships.
The rulings cited by the petitioner (Collector of Internal Revenue vs. University of the Visayas, L-13554, Resolution of
30 October 1964, and Koppel [Phil.], Inc. vs. Yatco, 77 Phil. 504) as authority for disregarding the fiction of legal
personality of the corporations involved therein are not applicable to the present case. In the cited cases, the
corporations were already subject to tax when the fiction of their corporate personality was pierced; in the present
case, to do so would exempt the limited partnership from income taxation but would throw the tax burden upon the
partners-spouses in their individual capacities. The corporations, in the cases cited, merely served as business

conduits or alter egos of the stockholders, a factor that justified a disregard of their corporate personalities for tax
purposes. This is not true in the present case. Here, the limited partnership is not a mere business conduit of the
partner-spouses; it was organized for legitimate business purposes; it conducted its own dealings with its customers
prior to appellee's marriage, and had been filing its own income tax returns as such independent entity. The change in
its membership, brought about by the marriage of the partners and their subsequent acquisition of all interest therein,
is no ground for withdrawing the partnership from the coverage of Section 24 of the tax code, requiring it to pay
income tax. As far as the records show, the partners did not enter into matrimony and thereafter buy the interests of
the remaining partner with the premeditated scheme or design to use the partnership as a business conduit to dodge
the tax laws. Regularity, not otherwise, is presumed.
As the limited partnership under consideration is taxable on its income, to require that income to be included in the
individual tax return of respondent Suter is to overstretch the letter and intent of the law. In fact, it would even conflict
with what it specifically provides in its Section 24: for the appellant Commissioner's stand results in equal treatment,
tax wise, of a general copartnership (compaia colectiva) and a limited partnership, when the code plainly
differentiates the two. Thus, the code taxes the latter on its income, but not the former, because it is in the case of
compaias colectivas that the members, and not the firm, are taxable in their individual capacities for any dividend or
share of the profit derived from the duly registered general partnership (Section 26, N.I.R.C.; Araas, Anno. & Juris. on
the N.I.R.C., As Amended, Vol. 1, pp. 88-89).lawphi1.nt
But it is argued that the income of the limited partnership is actually or constructively the income of the spouses and
forms part of the conjugal partnership of gains. This is not wholly correct. As pointed out in Agapito vs. Molo 50 Phil.
779, and People's Bank vs. Register of Deeds of Manila, 60 Phil. 167, the fruits of the wife's parapherna become
conjugal only when no longer needed to defray the expenses for the administration and preservation of the
paraphernal capital of the wife. Then again, the appellant's argument erroneously confines itself to the question of the
legal personality of the limited partnership, which is not essential to the income taxability of the partnership since the
law taxes the income of even joint accounts that have no personality of their own. 1 Appellant is, likewise, mistaken in
that it assumes that the conjugal partnership of gains is a taxable unit, which it is not. What is taxable is the "income
of both spouses" (Section 45 [d] in their individual capacities. Though the amount of income (income of the conjugal
partnership vis-a-vis the joint income of husband and wife) may be the same for a given taxable year, their
consequences would be different, as their contributions in the business partnership are not the same.
The difference in tax rates between the income of the limited partnership being consolidated with, and when split from
the income of the spouses, is not a justification for requiring consolidation; the revenue code, as it presently stands,
does not authorize it, and even bars it by requiring the limited partnership to pay tax on its own income.
FOR THE FOREGOING REASONS, the decision under review is hereby affirmed. No costs.
Concepcion, C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Fernando, Capistrano and Teehankee, JJ., concur.
Barredo, J., took no part.

G.R. No. L-4935

May 28, 1954
J. M. TUASON & CO., INC., represented by it Managing PARTNER, GREGORIA ARANETA, INC., plaintiffappellee,
vs.
QUIRINO BOLAOS, defendant-appellant.
Araneta and Araneta for appellee.
Jose A. Buendia for appellant.
REYES, J.:
This is an action originally brought in the Court of First Instance of Rizal, Quezon City Branch, to recover possesion of
registered land situated in barrio Tatalon, Quezon City.
Plaintiff's complaint was amended three times with respect to the extent and description of the land sought to be
recovered. The original complaint described the land as a portion of a lot registered in plaintiff's name under Transfer
Certificate of Title No. 37686 of the land record of Rizal Province and as containing an area of 13 hectares more or less.
But the complaint was amended by reducing the area of 6 hectares, more or less, after the defendant had indicated
the plaintiff's surveyors the portion of land claimed and occupied by him. The second amendment became necessary
and was allowed following the testimony of plaintiff's surveyors that a portion of the area was embraced in another
certificate of title, which was plaintiff's Transfer Certificate of Title No. 37677. And still later, in the course of trial, after
defendant's surveyor and witness, Quirino Feria, had testified that the area occupied and claimed by defendant was
about 13 hectares, as shown in his Exhibit 1, plaintiff again, with the leave of court, amended its complaint to make its
allegations conform to the evidence.
Defendant, in his answer, sets up prescription and title in himself thru "open, continuous, exclusive and public and
notorious possession (of land in dispute) under claim of ownership, adverse to the entire world by defendant and his
predecessor in interest" from "time in-memorial". The answer further alleges that registration of the land in dispute
was obtained by plaintiff or its predecessors in interest thru "fraud or error and without knowledge (of) or interest
either personal or thru publication to defendant and/or predecessors in interest." The answer therefore prays that the
complaint be dismissed with costs and plaintiff required to reconvey the land to defendant or pay its value.
After trial, the lower court rendered judgment for plaintiff, declaring defendant to be without any right to the land in
question and ordering him to restore possession thereof to plaintiff and to pay the latter a monthly rent of P132.62
from January, 1940, until he vacates the land, and also to pay the costs.
Appealing directly to this court because of the value of the property involved, defendant makes the following
assignment or errors:
I. The trial court erred in not dismissing the case on the ground that the case was not brought by the real property in
interest.
II. The trial court erred in admitting the third amended complaint.
III. The trial court erred in denying defendant's motion to strike.
IV. The trial court erred in including in its decision land not involved in the litigation.
V. The trial court erred in holding that the land in dispute is covered by transfer certificates of Title Nos. 37686 and
37677.
Vl. The trial court erred in not finding that the defendant is the true and lawful owner of the land.
VII. The trial court erred in finding that the defendant is liable to pay the plaintiff the amount of P132.62 monthly from
January, 1940, until he vacates the premises.
VIII. The trial court erred in not ordering the plaintiff to reconvey the land in litigation to the defendant.
As to the first assigned error, there is nothing to the contention that the present action is not brought by the real party
in interest, that is, by J. M. Tuason and Co., Inc. What the Rules of Court require is that an action be broughtin the name
of, but not necessarily by, the real party in interest. (Section 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. That practice appears to have been followed

in this case, since the complaint is signed by the law firm of Araneta and Araneta, "counsel for plaintiff" and
commences with the statement "comes now plaintiff, through its undersigned counsel." 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. The contention 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 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. 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 in which plaintiff is represented by Gregorio Araneta, Inc. as "its managing partner" is not in line with the
corporate business of either of them.
Errors II, III, and IV, referring to the admission of the third amended complaint, may be answered by mere reference to
section 4 of Rule 17, Rules of Court, which sanctions such amendment. It reads:
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 my 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.
Under this provision amendment is not even necessary for the purpose of rendering judgment on issues proved though
not alleged. Thus, commenting on the provision, Chief Justice Moran says in this Rules of Court:
Under this section, American courts have, under the New Federal Rules of Civil Procedure, ruled that where the facts
shown entitled plaintiff to relief other than that asked for, no amendment to the complaint is necessary, especially
where defendant has himself raised the point on which recovery is based, and that the appellate court treat the
pleadings as amended to conform to the evidence, although the pleadings were not actually amended. (I Moran, Rules
of Court, 1952 ed., 389-390.)
Our conclusion therefore is that specification of error II, III, and IV are without merit..
Let us now pass on the errors V and VI. Admitting, though his attorney, at the early stage of the trial, that the land in
dispute "is that described or represented in Exhibit A and in Exhibit B enclosed in red pencil with the name Quirino
Bolaos," defendant later changed his lawyer and also his theory and tried to prove that the land in dispute was not
covered by plaintiff's certificate of title. The evidence, however, is against defendant, for it clearly establishes that
plaintiff is the registered owner of lot No. 4-B-3-C, situate in barrio Tatalon, Quezon City, with an area of 5,297,429.3
square meters, more or less, covered by transfer certificate of title No. 37686 of the land records of Rizal province, and
of lot No. 4-B-4, situated in the same barrio, having an area of 74,789 square meters, more or less, covered by transfer
certificate of title No. 37677 of the land records of the same province, both lots having been originally registered on
July 8, 1914 under original certificate of title No. 735. The identity of the lots was established by the testimony of
Antonio Manahan and Magno Faustino, witnesses for plaintiff, and the identity of the portion thereof claimed by
defendant was established by the testimony of his own witness, Quirico Feria. The combined testimony of these three
witnesses clearly shows that the portion claimed by defendant is made up of a part of lot 4-B-3-C and major on portion
of lot 4-B-4, and is well within the area covered by the two transfer certificates of title already mentioned. This fact also
appears admitted in defendant's answer to the third amended complaint.
As the land in dispute is covered by plaintiff's Torrens certificate of title and was registered in 1914, the decree of
registration 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. Neither court the decree be collaterally attacked
by any person claiming title to, or interest in, the land prior to the registration proceedings. (Sorogon vs.
Makalintal,1 45 Off. Gaz., 3819.) Nor could title to that land in derogation of that of plaintiff, the registered owner, be
acquired by prescription or adverse possession. (Section 46, Act No. 496.) Adverse, notorious and continuous
possession under claim of ownership for the period fixed by law is ineffective against a Torrens title. (Valiente vs. Judge
of CFI of Tarlac,2 etc., 45 Off. Gaz., Supp. 9, p. 43.) And it is likewise settled that the right to secure possession under a
decree of registration does not prescribed. (Francisco vs. Cruz, 43 Off. Gaz., 5105, 5109-5110.) A recent decision of this
Court on this point is that rendered in the case of Jose Alcantara et al., vs. Mariano et al., 92 Phil., 796. This disposes of
the alleged errors V and VI.
As to error VII, it is claimed that `there was no evidence to sustain the finding that defendant should be sentenced to
pay plaintiff P132.62 monthly from January, 1940, until he vacates the premises.' But it appears from the record that
that reasonable compensation for the use and occupation of the premises, as stipulated at the hearing was P10 a
month for each hectare and that the area occupied by defendant was 13.2619 hectares. The total rent to be paid for
the area occupied should therefore be P132.62 a month. It is appears from the testimony of J. A. Araneta and witness
Emigdio Tanjuatco that as early as 1939 an action of ejectment had already been filed against defendant. And it

cannot be supposed that defendant has been paying rents, for he has been asserting all along that the premises in
question 'have always been since time immemorial in open, continuous, exclusive and public and notorious possession
and under claim of ownership adverse to the entire world by defendant and his predecessors in interest.' This
assignment of error is thus clearly without merit.
Error No. VIII is but a consequence of the other errors alleged and needs for further consideration.
During the pendency of this case in this Court appellant, thru other counsel, has filed a motion to dismiss alleging that
there is pending before the Court of First Instance of Rizal another action between the same parties and for the same
cause and seeking to sustain that allegation with a copy of the complaint filed in said action. But an examination of
that complaint reveals that appellant's allegation is not correct, for the pretended identity of parties and cause of
action in the two suits does not appear. That other case is one for recovery of ownership, while the present one is for
recovery of possession. And while appellant claims that he is also involved in that order action because it is a class
suit, the complaint does not show that such is really the case. On the contrary, it appears that the action seeks relief
for each individual plaintiff and not relief for and on behalf of others. The motion for dismissal is clearly without merit.
Wherefore, the judgment appealed from is affirmed, with costs against the plaintiff.
Paras, C.J., Pablo, Bengzon, Montemayor, Jugo, Bautista Angelo, Labrador, and Concepcion, JJ., concur.

G.R. No. L-31684 June 28, 1973

EVANGELISTA & CO., DOMINGO C. EVANGELISTA, JR., CONCHITA B. NAVARRO and LEONARDA ATIENZA
ABAD SABTOS, petitioners,
vs.
ESTRELLA ABAD SANTOS, respondent.
Leonardo Abola for petitioners.
Baisas, Alberto & Associates for respondent.

MAKALINTAL, J.:
On October 9, 1954 a co-partnership was formed under the name of "Evangelista & Co." On June 7, 1955 the Articles of
Co-partnership was amended as to include herein respondent, Estrella Abad Santos, as industrial partner, with herein
petitioners Domingo C. Evangelista, Jr., Leonardo Atienza Abad Santos and Conchita P. Navarro, the original capitalist
partners, remaining in that capacity, with a contribution of P17,500 each. The amended Articles provided, inter alia,
that "the contribution of Estrella Abad Santos consists of her industry being an industrial partner", and that the profits
and losses "shall be divided and distributed among the partners ... in the proportion of 70% for the first three partners,
Domingo C. Evangelista, Jr., Conchita P. Navarro and Leonardo Atienza Abad Santos to be divided among them equally;
and 30% for the fourth partner Estrella Abad Santos."
On December 17, 1963 herein respondent filed suit against the three other partners in the Court of First Instance of
Manila, alleging that the partnership, which was also made a party-defendant, had been paying dividends to the
partners except to her; and that notwithstanding her demands the defendants had refused and continued to refuse
and let her examine the partnership books or to give her information regarding the partnership affairs to pay her any
share in the dividends declared by the partnership. She therefore prayed that the defendants be ordered to render
accounting to her of the partnership business and to pay her corresponding share in the partnership profits after such
accounting, plus attorney's fees and costs.

The defendants, in their answer, denied ever having declared dividends or distributed profits of the partnership;
denied likewise that the plaintiff ever demanded that she be allowed to examine the partnership books; and byway of
affirmative defense alleged that the amended Articles of Co-partnership did not express the true agreement of the
parties, which was that the plaintiff was not an industrial partner; that she did not in fact contribute industry to the
partnership; and that her share of 30% was to be based on the profits which might be realized by the partnership only
until full payment of the loan which it had obtained in December, 1955 from the Rehabilitation Finance Corporation in
the sum of P30,000, for which the plaintiff had signed a promisory note as co-maker and mortgaged her property as
security.
The parties are in agreement that the main issue in this case is "whether the plaintiff-appellee (respondent here) is an
industrial partner as claimed by her or merely a profit sharer entitled to 30% of the net profits that may be realized by
the partnership from June 7, 1955 until the mortgage loan from the Rehabilitation Finance Corporation shall be fully
paid, as claimed by appellants (herein petitioners)." On that issue the Court of First Instance found for the plaintiff and
rendered judgement "declaring her an industrial partner of Evangelista & Co.; ordering the defendants to render an
accounting of the business operations of the (said) partnership ... from June 7, 1955; to pay the plaintiff such amounts
as may be due as her share in the partnership profits and/or dividends after such an accounting has been properly
made; to pay plaintiff attorney's fees in the sum of P2,000.00 and the costs of this suit."
The defendants appealed to the Court of Appeals, which thereafter affirmed judgments of the court a quo.
In the petition before Us the petitioners have assigned the following errors:
I. The Court of Appeals erred in the finding that the respondent is an industrial partner of Evangelista &
Co., notwithstanding the admitted fact that since 1954 and until after promulgation of the decision of
the appellate court the said respondent was one of the judges of the City Court of Manila, and despite
its findings that respondent had been paid for services allegedly contributed by her to the partnership.
In this connection the Court of Appeals erred:
(A) In finding that the "amended Articles of Co-partnership," Exhibit "A" is conclusive
evidence that respondent was in fact made an industrial partner of Evangelista & Co.
(B) In not finding that a portion of respondent's testimony quoted in the decision
proves that said respondent did not bind herself to contribute her industry, and she
could not, and in fact did not, because she was one of the judges of the City Court of
Manila since 1954.
(C) In finding that respondent did not in fact contribute her industry, despite the
appellate court's own finding that she has been paid for the services allegedly
rendered by her, as well as for the loans of money made by her to the partnership.
II. The lower court erred in not finding that in any event the respondent was lawfully excluded from,
and deprived of, her alleged share, interests and participation, as an alleged industrial partner, in the
partnership Evangelista & Co., and its profits or net income.
III. The Court of Appeals erred in affirming in toto the decision of the trial court whereby respondent
was declared an industrial partner of the petitioner, and petitioners were ordered to render an
accounting of the business operation of the partnership from June 7, 1955, and to pay the respondent
her alleged share in the net profits of the partnership plus the sum of P2,000.00 as attorney's fees and
the costs of the suit, instead of dismissing respondent's complaint, with costs, against the respondent.
It is quite obvious that the questions raised in the first assigned errors refer to the facts as found by the Court of
Appeals. The evidence presented by the parties as the trial in support of their respective positions on the issue of
whether or not the respondent was an industrial partner was thoroughly analyzed by the Court of Appeals on its
decision, to the extent of reproducing verbatim therein the lengthy testimony of the witnesses.
It is not the function of the Supreme Court to analyze or weigh such evidence all over again, its jurisdiction being
limited to reviewing errors of law that might have been commited by the lower court. It should be observed, in this
regard, that the Court of Appeals did not hold that the Articles of Co-partnership, identified in the record as Exhibit "A",
was conclusive evidence that the respondent was an industrial partner of the said company, but considered it together
with other factors, consisting of both testimonial and documentary evidences, in arriving at the factual conclusion
expressed in the decision.

The findings of the Court of Appeals on the various points raised in the first assignment of error are hereunder
reproduced if only to demonstrate that the same were made after a through analysis of then evidence, and hence are
beyond this Court's power of review.
The aforequoted findings of the lower Court are assailed under Appellants' first assigned error, wherein
it is pointed out that "Appellee's documentary evidence does not conclusively prove that appellee was
in fact admitted by appellants as industrial partner of Evangelista & Co." and that "The grounds relied
upon by the lower Court are untenable" (Pages 21 and 26, Appellant's Brief).
The first point refers to Exhibit A, B, C, K, K-1, J, N and S, appellants' complaint being that "In finding
that the appellee is an industrial partner of appellant Evangelista & Co., herein referred to as the
partnership the lower court relied mainly on the appellee's documentary evidence, entirely
disregarding facts and circumstances established by appellants" evidence which contradict the said
finding' (Page 21, Appellants' Brief). The lower court could not have done otherwise but rely on the
exhibits just mentioned, first, because appellants have admitted their genuineness and due execution,
hence they were admitted without objection by the lower court when appellee rested her case and,
secondly the said exhibits indubitably show the appellee is an industrial partner of appellant company.
Appellants are virtually estopped from attempting to detract from the probative force of the said
exhibits because they all bear the imprint of their knowledge and consent, and there is no credible
showing that they ever protested against or opposed their contents prior of the filing of their answer to
appellee's complaint. As a matter of fact, all the appellant Evangelista, Jr., would have us believe as
against the cumulative force of appellee's aforesaid documentary evidence is the appellee's Exhibit
"A", as confirmed and corroborated by the other exhibits already mentioned, does not express the true
intent and agreement of the parties thereto, the real understanding between them being the appellee
would be merely a profit sharer entitled to 30% of the net profits that may be realized between the
partners from June 7, 1955, until the mortgage loan of P30,000.00 to be obtained from the RFC shall
have been fully paid. This version, however, is discredited not only by the aforesaid documentary
evidence brought forward by the appellee, but also by the fact that from June 7, 1955 up to the filing of
their answer to the complaint on February 8, 1964 or a period of over eight (8) years appellants
did nothing to correct the alleged false agreement of the parties contained in Exhibit "A". It is thus
reasonable to suppose that, had appellee not filed the present action, appellants would not have
advanced this obvious afterthought that Exhibit "A" does not express the true intent and agreement of
the parties thereto.
At pages 32-33 of appellants' brief, they also make much of the argument that 'there is an overriding
fact which proves that the parties to the Amended Articles of Partnership, Exhibit "A", did not
contemplate to make the appellee Estrella Abad Santos, an industrial partner of Evangelista & Co. It is
an admitted fact that since before the execution of the amended articles of partnership, Exhibit "A",
the appellee Estrella Abad Santos has been, and up to the present time still is, one of the judges of the
City Court of Manila, devoting all her time to the performance of the duties of her public office. This
fact proves beyond peradventure that it was never contemplated between the parties, for she could
not lawfully contribute her full time and industry which is the obligation of an industrial partner
pursuant to Art. 1789 of the Civil Code.
The Court of Appeals then proceeded to consider appellee's testimony on this point, quoting it in the decision, and
then concluded as follows:
One cannot read appellee's testimony just quoted without gaining the very definite impression that,
even as she was and still is a Judge of the City Court of Manila, she has rendered services for
appellants without which they would not have had the wherewithal to operate the business for which
appellant company was organized. Article 1767 of the New Civil Code which provides that "By 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, 'does not specify the kind
of industry that a partner may thus contribute, hence the said services may legitimately be considered
as appellee's contribution to the common fund. Another article of the same Code relied upon
appellants reads:
'ART. 1789. An industrial partner cannot engage in business for himself, unless the
partnership expressly permits him to do so; and if he should do so, the capitalist
partners may either exclude him from the firm or avail themselves of the benefits
which he may have obtained in violation of this provision, with a right to damages in
either case.'
It is not disputed that the provision against the industrial partner engaging in business for himself
seeks to prevent any conflict of interest between the industrial partner and the partnership, and to
insure faithful compliance by said partner with this prestation. There is no pretense, however, even on

the part of the appellee is engaged in any business antagonistic to that of appellant company, since
being a Judge of one of the branches of the City Court of Manila can hardly be characterized as a
business. That appellee has faithfully complied with her prestation with respect to appellants is clearly
shown by the fact that it was only after filing of the complaint in this case and the answer thereto
appellants exercised their right of exclusion under the codal art just mentioned by alleging in their
Supplemental Answer dated June 29, 1964 or after around nine (9) years from June 7, 1955
subsequent to the filing of defendants' answer to the complaint, defendants reached an agreement
whereby the herein plaintiff been excluded from, and deprived of, her alleged share, interests or
participation, as an alleged industrial partner, in the defendant partnership and/or in its net profits or
income, on the ground plaintiff has never contributed her industry to the partnership, instead she has
been and still is a judge of the City Court (formerly Municipal Court) of the City of Manila, devoting her
time to performance of her duties as such judge and enjoying the privilege and emoluments
appertaining to the said office, aside from teaching in law school in Manila, without the express
consent of the herein defendants' (Record On Appeal, pp. 24-25). Having always knows as a appellee
as a City judge even before she joined appellant company on June 7, 1955 as an industrial partner,
why did it take appellants many yearn before excluding her from said company as aforequoted
allegations? And how can they reconcile such exclusive with their main theory that appellee has never
been such a partner because "The real agreement evidenced by Exhibit "A" was to grant the appellee
a share of 30% of the net profits which the appellant partnership may realize from June 7, 1955, until
the mortgage of P30,000.00 obtained from the Rehabilitation Finance Corporal shall have been fully
paid." (Appellants Brief, p. 38).
What has gone before persuades us to hold with the lower Court that appellee is an industrial partner
of appellant company, with the right to demand for a formal accounting and to receive her share in the
net profit that may result from such an accounting, which right appellants take exception under their
second assigned error. Our said holding is based on the following article of the New Civil Code:
'ART. 1899. Any partner shall have the right to a formal account as to partnership
affairs:
(1) If he is wrongfully excluded from the partnership business or possession of its property by his copartners;
(2) If the right exists under the terms of any agreement;
(3) As provided by article 1807;
(4) Whenever other circumstance render it just and reasonable.
We find no reason in this case to depart from the rule which limits this Court's appellate jurisdiction to reviewing only
errors of law, accepting as conclusive the factual findings of the lower court upon its own assessment of the evidence.
The judgment appealed from is affirmed, with costs.
Zaldivar, Castro, Fernando, Teehankee, Barredo, Makasiar, Antonio and Esguerra, JJ., concur.

G.R. L-No. 3666

August 17, 1909

THE CITY OF MANILA, plaintiff-appellant,

vs.
FRANCISCO GAMBE, ET AL., defendants-appellees.

Modesto Reyes for appellant.

Del-Pan, Ortigas and Fisher for appellees.
JOHNSON, J.:
From the record the following facts appear:
First. That upon the 31st day of August, 1903, the plaintiff commenced an action in the Court of First Instance of the
city of Manila against the defendants, Francisco Gambe, Manuel Perez, Antonio Herranz, and Florencio Garriz, who
constitute the commercial firm of Herranz & Garriz, for the purpose of recovering the sum of five thousand dollars
($5,000), United States currency, for certain damages occasioned by the steamship Alfred to the "Spanish Bridge" in
the city of Manila.
Second. After a consideration of the facts adduced during the trial, the Honorable Judge Rohde, then one of the judges
of the Court of First Instance of the city of Manila, rendered a judgment against the said Francisco Gambe, for the sum
of $1,300, United States currency, and for the costs.
Third. Francisco Gambe was a pilot and member of the Pilot's Association of Manila and was at the time of the alleged
accident and injury in charge of said steamship Alfred. Judge Rohde dismissed the cause as to the other defendants.
Fourth. From this judgment of the lower court the defendant Gambe appealed to the Supreme Court.
Fifth. After a consideration of the facts, the Supreme Court on the 31st day of March, 1906, affirmed with costs the
judgment of the lower court. (See City of Manila vs. Gambe, 6 Phil. Rep., 49.)
Sixth. The judgment thus affirmed was returned to the lower court for an execution of the same.
Seventh. On the 26th day of May, 1906, an execution was issued upon the said judgment against the said defendant,
Francisco Gambe, and was returned upon the 23d day of June, 1906, unsatisfied.
Eighth. Later, upon the 11th day of July, 1906, another execution was issued out of the Court of First Instance against
the defendant, Francisco Gambe, which was returned upon the 17th day of August, 1906, unsatisfied.
Ninth. On the same day, or the 11th day of July, 1906, in accordance with the provisions of section 431 of the Code of
Procedure in Civil Actions, the plaintiff attempted to attach whatever money or effects which the defendant had in the
said Pilots' Association of Manila. These attachments were directed to the Hongkong and Shanghai Banking
Corporation, the Hon. W. Morgan Shuster, Collector of Customs, as well as Francisco Aguado, who was the chief of the
said Pilot's Association.
Tenth. On the 22d day of August, 1906, the attorney for the plaintiff presented in the lower court the following
affidavit:
Edmond Block, being duly sworn, says:
That he is the attorney for the plaintiff in the above-entitled action.
That a judgment was duly entered and docketed in the said action in the said court on the 20th day of April,
1906, for the sum of thirteen hundred dollars ($1,300), United States currency, and costs, against the abovenamed defendant, in favor of the plaintiff.
That an execution upon said judgment was duly issued against the property of said judgment debtor.
That the said judgment debtor now resides in the said city of Manila.
That the sheriff of the city of Manila has returned said execution wholly unsatisfied, and that the said judgment
still remains wholly unpaid.
That affiant is informed and believes that an organization or association known as the "Manila Pilots'
Association," of which Francisco Aguado is the chief pilot, Manuel Goitia is the treasurer and custodian of its
funds, and of which W. Morgan Shuster, Francisco Gambe, and other pilots of the port of Manila are members,
has property in its possession dedicated to and for the purpose of payment of damages caused through
negligence of the pilots of said association, or any of them, to third persons.

That the said association has in its possession and under its control, property of the said judgment debtor,
exceeding eight hundred pesos (P800), Philippine currency, and is indebted to the said judgment debtor in an
amount exceeding eight hundred pesos (P800), Philippine currency.
That the said indebtedness to said judgment debtor arose through this, that the said judgment debtor has
deposited with the said association the amount exceeding eight hundred pesos (P800), Philippine currency,
and that the said association now holds the said amount subject to the order of said judgment debtor, and that
the said amount should be applied, affiant believes, to the payment or satisfaction of the judgment debtor.
That on the 23d day of June and 11th of July, 1906, the said Pilots' Association, through the chief pilot, the
treasurer of said association, W. Morgan Shuster, and Francisco Gambe, was duly notified and each of the
above-mentioned persons were so duly notified by the sheriff of the city of Manila, that attachment was levied
against all the goods, effects, interests, credits or money belonging to the defendant, in the possession of said
association and persons, to cover the amount of two thousand six hundred and seventy pesos (P2,670),
Philippine currency, and to make immediate payment of said goods, effects, interests, credits, or money and
forward same to the sheriff.
That all of the above-mentioned persons denied having in their possession, and refused to deliver any such
said goods, effects, interests, credits, or money belonging to said defendant.
Wherefore deponent prays an order of this court that the said Francisco Aguado, Francisco Gambe, Manuel
Goitia, and W. Morgan Shuster, be and appear and answer as to the indebtedness of the said Pilots' Association
to said judgment debtor, at a time and place by said court to be specified.
(Signed) EDMOND BLOCK.
Subscribed and sworn to before me this 22d day of August, 1906, exhibiting in the act cedula No. 175565,
dated Manila, June 6, 1906.
(Signed)
Notary Public.

MODESTO

REYES,

Commission expires December 31, 1906.

Upon this affidavit, the Hon. A. S. Crossfield, one of the judges of the Court of First Instance of the city of Manila, made
the following order:
On reading the foregoing affidavit, it is satisfactorily appearing to me therefrom that the Manila Pilots'
Association has property of Francisco Gambe, the defendant in the above-entitled action, which property ought
to be applied toward the satisfaction of the judgment in said action, and that Francisco Aguado is the chief
pilot, Manuel Goitia the treasurer, and Francisco Gambe and W. Morgan Shuster are members of said
association, and that it is proper cause for this order, I, the undersigned, judge of the Court of First Instance of
the city of Manila, Philippine Islands, do hereby order the said Francisco Aguado, Francisco Gambe, Manuel
Goitia, and W. Morgan Shuster personally to appear before me in the said city of Manila, on the 10th day of
September, at 10 o'clock in the morning of that day, to answer concerning the said property.
Eleventh. In accordance with the above order, the said parties appeared before the said court and testified relating to
the money, property, credits or effects which the said Pilots' Association had in its possession belonging to the said
defendants.
After hearing the evidence of these parties, the said Hon. A. S. Crossfield rendered the following judgment:
This case is now before the court for hearing the order directing Francisco Aguado as chief pilot, Manuel Goitia
as treasurer, and Francisco Gambe and W. Morgan Shuster as members of the Pilots' Association to answer as
to any property they may have in their possession or under their control, belonging to the defendant, Francisco
Gambe. Execution having been issued in the above-named respondents having been attached, as in garnishee
proceedings, all of the above-named respondents appeared and the two first-named made declarations as to
the property in their hands.
From the declaration made it appears:

That each member of the Pilots' Association before becoming such, must deposit with the association the sum
of P800, to be retained by the association for the purpose of satisfying damages which may be incurred by
others by reason of negligence or fault on the part of the association in the transaction of its business.
It further appears from the declarations that persons thus depositing the money could not withdraw it; that it is
property of the association and may not be withdrawn, even in case of the death of a member, and that said
Francisco Gambe is a member.
I therefore find that the above-named respondents, either as officers of the association or members thereof,
have not in their control, nor do they possess any property, money, or effects which would be the subject of a
levy under execution against said Gambe, and the order to appear is discharged.
From this decision of the lower court the plaintiff appealed and made the following assignments of error in this court:
1. The court below erred in deciding that the sum of P800, Philippine currency, deposited by the defendant,
Gambe, with the Pilots' Association could not be withdrawn by him: "that it has become the property of the
association, and that the same can not be withdrawn even in the event of the death of a member", and that
the said Francisco Gambe is such a member.
2. The court below erred in deciding that the respondents called upon to appear in this incident "either as
officers of the association or as members thereof, have not under their control nor in their possession any
property, money, or goods subject to attachment by reason of an execution against the said Gambe."
3. The court below erred in not ordering the respondents, as officers or members of the Pilots' Association, to
deliver to the plaintiff, the city of Manila, the P800, Philippine currency, which the said defendant Gambe,
against whom the plaintiff has an execution pending for the sum of P2,670, Philippine currency, has in the
treasury of the association.
The only question presented in this court is whether or not the said Pilots' Association had debts, credits, or personal
property, not capable of manual delivery, in its possession or under its control, belonging to the defendant. In other
words, did said Pilots' Association owe to the defendant, a debt or have in its possession and under its control credits
and other personal property, belonging to the defendant, subject to be attached in accordance with the provisions of
said section 431? Section 431 of the Code of Procedure in Civil Actions provides:
Debts and credits, and other personal property not capable of manual delivery, shall be attached by leaving
with the person owing such debts or having in his possession or under his control such credits and other
personal property, a copy of the order of attachment, and a notice that the debts owing by him to the
defendant, or the credits and other personal property in his possession or under his control, belonging to the
defendant, are attached in pursuance of such order.
The test whether or not the interests of the defendant, if he has any, in said association may be attached by virtue of
said section is whether said Gambe could maintain an action against the said association for the recovery of the
specific debt, credit, or personal property. It would seem clear and conclusive that if Gambe himself could not maintain
an action against the said association for the recovery of the specific debt, credit, or personal property which the
plaintiff here is attempting to get possession of by virtue of the action, that said plaintiff could not recover the same
under the form of action adopted by it. If Gambe could successfully maintain an action against the said Pilots'
Association for the recovery of a specific sum of money or specific personal property, then, in our opinion, his
judgment creditors, or the plaintiff in this case, might also by the procedure provided for under said section 431
maintain the present action, but not otherwise. (Hassie vs. God Is With Us Cong., 35 Cal., 378, 386.)
We do not believe that a mere equitable or contingent debt, credit, or personal property can be reached by the
procedure provided for in said section (431). (Redondo Beach Co. vs. Brewer, 101 Cal., 322.) A "debt," as used in said
section, means some definite amount of money, ascertained or capable of being ascertained, which may be paid over
to the sheriff or the court under an order, while "credits " and "personal property" are something belonging to the
defendant, but in possession and under the control of the person attached. (Gow vs. Marshall, 90 Cal., 565; Dunsmoor
vs. Furstenfeldt, 88 Cal., 522.)
In our opinion it is also essential that the debt, credit, or the personal property which is attempted to be subjected to
the payment of the obligation of the defendant, and which is alleged to be in the possession of the person attached,
must exist in some definite and ascertainable form at the time of the attachment. (Norris vs. Burgoyne, 4 Cal., 409.)
The said Pilots' Association is purely a voluntary association of the pilots of the city of Manila. The association is
expressly recognized under the law. No one can become a member of said association who has not shown special
qualifications as a pilot, and no one can act as a pilot who has not been expressly recommended and approved by the

collector of the port of Manila, and no one can become a member of said association without having paid a certain sum
of money into the treasury of said association. This funds becomes the property of the association for the purpose of
protecting its members against losses occasioned by its members to ships while said ships are under the control of a
member or members of said association. The money paid in by one member of said association becomes a part of a
general fund of said association, subject to be paid out for damages done to ships by any member of the association.
The fund created by the contributions of the members no longer belongs to the members of the association; it belongs
to the association. The association has a distinct and separate entity from the individual members who make it up. The
fund is created for a specific purpose. (See articles 35, 36, 38, and 39 of the regulations of said association.) Under the
regulations of said association it has assumed a certain responsibility for its members. Whether the damage caused by
the defendant in this case is of such a character for which the said association assumed the responsibility is a question
which the person injured has a right to test in a special action against said association.
From the evidence that was adduced before the lower court we are of the opinion, and so hold, that the said
association had no debts, credits, or personal property, not capable of manual delivery, in its possession, belonging to
the defendant (Gambe), which are subject to be attached in accordance with the provisions of section 431. It is,
therefore, hereby ordered that the plaintiff take nothing in this action and that the plaintiff be charged with the costs of
both instances.
Arellano,
C.
J.,
Carson, J., concurs in the result.

Torres,

and

Moreland,

JJ.,

concur.

G.R. No. L-49982 April 27, 1988

ELIGIO ESTANISLAO, JR., petitioner,
vs.
THE HONORABLE COURT OF APPEALS, REMEDIOS ESTANISLAO, EMILIO and LEOCADIO SANTIAGO,
respondents.
Agustin O. Benitez for petitioner.
Benjamin C. Yatco for private respondents.

GANCAYCO, J.:
By this petition for certiorari the Court is asked to determine if a partnership exists between members of the same
family arising from their joint ownership of certain properties.
Petitioner and private respondents are brothers and sisters who are co-owners of certain lots at the corner of Annapolis
and Aurora Blvd., QuezonCity which were then being leased to the Shell Company of the Philippines Limited (SHELL).
They agreed to open and operate a gas station thereat to be known as Estanislao Shell Service Station with an initial
investment of P 15,000.00 to be taken from the advance rentals due to them from SHELL for the occupancy of the said
lots owned in common by them. A joint affidavit was executed by them on April 11, 1966 which was prepared byAtty.
Democrito Angeles 1 They agreed to help their brother, petitioner herein, by allowing him to operate and manage the
gasoline service station of the family. They negotiated with SHELL. For practical purposes and in order not to run
counter to the company's policy of appointing only one dealer, it was agreed that petitioner would apply for the
dealership. Respondent Remedios helped in managing the bussiness with petitioner from May 3, 1966 up to February
16, 1967.
On May 26, 1966, the parties herein entered into an Additional Cash Pledge Agreement with SHELL wherein it was
reiterated that the P 15,000.00 advance rental shall be deposited with SHELL to cover advances of fuel to petitioner as
dealer with a proviso that said agreement "cancels and supersedes the Joint Affidavit dated 11 April 1966 executed by
the co-owners." 2
For sometime, the petitioner submitted financial statements regarding the operation of the business to private
respondents, but therafter petitioner failed to render subsequent accounting. Hence through Atty. Angeles, a demand
was made on petitioner to render an accounting of the profits.
The financial report of December 31, 1968 shows that the business was able to make a profit of P 87,293.79 and that
by the year ending 1969, a profit of P 150,000.00 was realized. 3
Thus, on August 25, 1970 private respondents filed a complaint in the Court of First Instance of Rizal against petitioner
praying among others that the latter be ordered:
1. to execute a public document embodying all the provisions of the partnership agreement entered
into between plaintiffs and defendant as provided in Article 1771 of the New Civil Code;

2. to render a formal accounting of the business operation covering the period from May 6, 1966 up to
December 21, 1968 and from January 1, 1969 up to the time the order is issued and that the same be
subject to proper audit;
3. to pay the plaintiffs their lawful shares and participation in the net profits of the business in an
amount of no less than P l50,000.00 with interest at the rate of 1% per month from date of demand
until full payment thereof for the entire duration of the business; and
4. to pay the plaintiffs the amount of P 10,000.00 as attorney's fees and costs of the suit (pp. 13-14
Record on Appeal.)
After trial on the merits, on October 15, 1975, Hon. Lino Anover who was then the temporary presiding judge of Branch
IV of the trial court, rendered judgment dismissing the complaint and counterclaim and ordering private respondents to
pay petitioner P 3,000.00 attorney's fee and costs. Private respondent filed a motion for reconsideration of the
decision. On December 10, 1975, Hon. Ricardo Tensuan who was the newly appointed presiding judge of the same
branch, set aside the aforesaid derision and rendered another decision in favor of said respondents.
The dispositive part thereof reads as follows:
WHEREFORE, the Decision of this Court dated October 14, 1975 is hereby reconsidered and a new
judgment is hereby rendered in favor of the plaintiffs and as against the defendant:
(1) Ordering the defendant to execute a public instrument embodying all the provisions of the
partnership agreement entered into between plaintiffs and defendant as provided for in Article 1771,
Civil Code of the Philippines;
(2) Ordering the defendant to render a formal accounting of the business operation from April 1969 up
to the time this order is issued, the same to be subject to examination and audit by the plaintiff,
(3) Ordering the defendant to pay plaintiffs their lawful shares and participation in the net profits of the
business in the amount of P 150,000.00, with interest thereon at the rate of One (1%) Per Cent per
month from date of demand until full payment thereof;
(4) Ordering the defendant to pay the plaintiffs the sum of P 5,000.00 by way of attorney's fees of
plaintiffs' counsel; as well as the costs of suit. (pp. 161-162. Record on Appeal).
Petitioner then interposed an appeal to the Court of Appeals enumerating seven (7) errors allegedly committed by the
trial court. In due course, a decision was rendered by the Court of Appeals on November 28,1978 affirming in toto the
decision of the lower court with costs against petitioner. *
A motion for reconsideration of said decision filed by petitioner was denied on January 30, 1979. Not satisfied
therewith, the petitioner now comes to this court by way of this petition for certiorari alleging that the respondent
court erred:
1. In interpreting the legal import of the Joint Affidavit (Exh. 'A') vis-a-vis the Additional Cash Pledge
Agreement (Exhs. "B-2","6", and "L"); and
2. In declaring that a partnership was established by and among the petitioner and the private
respondents as regards the ownership and or operation of the gasoline service station business.
Petitioner relies heavily on the provisions of the Joint Affidavit of April 11, 1966 (Exhibit A) and the Additional Cash
Pledge Agreement of May 20, 1966 (Exhibit 6) which are herein reproduced(a) The joint Affidavit of April 11, 1966, Exhibit A reads:
(1) That we are the Lessors of two parcels of land fully describe in Transfer Certificates of Title Nos.
45071 and 71244 of the Register of Deeds of Quezon City, in favor of the LESSEE - SHELL COMPANY OF
THE PHILIPPINES LIMITED a corporation duly licensed to do business in the Philippines;
(2) That we have requested the said SHELL COMPANY OF THE PHILIPPINE LIMITED advanced rentals in
the total amount of FIFTEEN THOUSAND PESOS (P l5,000.00) Philippine Currency, so that we can use
the said amount to augment our capital investment in the operation of that gasoline station

constructed ,by the said company on our two lots aforesaid by virtue of an outstanding Lease
Agreement we have entered into with the said company;
(3) That the and SHELL COMPANY OF THE PHILIPPINE LIMITED out of its benevolence and desire to help
us in aumenting our capital investment in the operation of the said gasoline station, has agreed to give
us the said amount of P 15,000.00, which amount will partake the nature of ADVANCED RENTALS;
(4) That we have freely and voluntarily agreed that upon receipt of the said amount of FIFTEEN
THOUSAND PESOS (P l6,000.00) from he SHELL COMPANY OF THE PHILIPPINES LIMITED, the said sum
as ADVANCED RENTALS to us be applied as monthly rentals for the sai two lots under our Lease
Agreement starting on the 25th of May, 1966 until such time that the said of P 15,000.00 be
applicable, which time to our estimate and one-half months from May 25, 1966 or until the 10th of
October, 1966 more or less;
(5) That we have likewise agreed among ourselves that the SHELL COMPANY OF THE PHILIPPINES
LIMITED execute an instrument for us to sign embodying our conformity that the said amount that it
will generously grant us as requested be applied as ADVANCED RENTALS; and
(6) FURTHER AFFIANTS SAYETH NOT.,
(b) The Additional Cash Pledge Agreement of May 20,1966, Exhibit 6, is as follows:
WHEREAS, under the lease Agreement dated 13th November, 1963 (identified as doc. Nos. 491 &
1407, Page Nos. 99 & 66, Book Nos. V & III, Series of 1963 in the Notarial Registers of Notaries Public
Rosauro Marquez, and R.D. Liwanag, respectively) executed in favour of SHELL by the herein COOWNERS and another Lease Agreement dated 19th March 1964 . . . also executed in favour of SHELL
by CO-OWNERS Remedios and MARIA ESTANISLAO for the lease of adjoining portions of two parcels of
land at Aurora Blvd./ Annapolis, Quezon City, the CO OWNERS RECEIVE a total monthly rental of PESOS
THREE THOUSAND THREE HUNDRED EIGHTY TWO AND 29/100 (P 3,382.29), Philippine Currency;
WHEREAS, CO-OWNER Eligio Estanislao Jr. is the Dealer of the Shell Station constructed on the leased
land, and as Dealer under the Cash Pledge Agreement dated llth May 1966, he deposited to SHELL in
cash the amount of PESOS TEN THOUSAND (P 10,000), Philippine Currency, to secure his purchase on
credit of Shell petroleum products; . . .
WHEREAS, said DEALER, in his desire, to be granted an increased the limit up to P 25,000, has secured
the conformity of his CO-OWNERS to waive and assign to SHELL the total monthly rentals due to all of
them to accumulate the equivalent amount of P 15,000, commencing 24th May 1966, this P 15,000
shall be treated as additional cash deposit to SHELL under the same terms and conditions of the
aforementioned Cash Pledge Agreement dated llth May 1966.
NOW, THEREFORE, for and in consideration of the foregoing premises,and the mutual covenants
among the CO-OWNERS herein and SHELL, said parties have agreed and hereby agree as follows:
l. The CO-OWNERS dohere by waive in favor of DEALER the monthly rentals due to all CO-OWNERS,
collectively, under the above describe two Lease Agreements, one dated 13th November 1963 and the
other dated 19th March 1964 to enable DEALER to increase his existing cash deposit to SHELL, from P
10,000 to P 25,000, for such purpose, the SHELL CO-OWNERS and DEALER hereby irrevocably assign
to SHELL the monthly rental of P 3,382.29 payable to them respectively as they fall due, monthly,
commencing 24th May 1966, until such time that the monthly rentals accumulated, shall be equal to P
l5,000.
2. The above stated monthly rentals accumulated shall be treated as additional cash deposit by
DEALER to SHELL, thereby in increasing his credit limit from P 10,000 to P 25,000. This agreement,
therefore, cancels and supersedes the Joint affidavit dated 11 April 1966 executed by the COOWNERS.
3. Effective upon the signing of this agreement, SHELL agrees to allow DEALER to purchase from SHELL
petroleum products, on credit, up to the amount of P 25,000.
4. This increase in the credit shall also be subject to the same terms and conditions of the abovementioned Cash Pledge Agreement dated llth May 1966. (Exhs. "B-2," "L," and "6"; emphasis supplied)

In the aforesaid Joint Affidavit of April 11, 1966 (Exhibit A), it is clearly stipulated by the parties that the P 15,000.00
advance rental due to them from SHELL shall augment their "capital investment" in the operation of the gasoline
station, which advance rentals shall be credited as rentals from May 25, 1966 up to four and one-half months or until
10 October 1966, more or less covering said P 15,000.00.
In the subsequent document entitled "Additional Cash Pledge Agreement" above reproduced (Exhibit 6), the private
respondents and petitioners assigned to SHELL the monthly rentals due them commencing the 24th of May 1966 until
such time that the monthly rentals accumulated equal P 15,000.00 which private respondents agree to be a cash
deposit of petitioner in favor of SHELL to increase his credit limit as dealer. As above-stated it provided therein that
"This agreement, therefore, cancels and supersedes the Joint Affidavit dated 11 April 1966 executed by the COOWNERS."
Petitioner contends that because of the said stipulation cancelling and superseding that previous Joint Affidavit,
whatever partnership agreement there was in said previous agreement had thereby been abrogated. We find no merit
in this argument. Said cancelling provision was necessary for the Joint Affidavit speaks of P 15,000.00 advance rentals
starting May 25, 1966 while the latter agreement also refers to advance rentals of the same amount starting May 24,
1966. There is, therefore, a duplication of reference to the P 15,000.00 hence the need to provide in the subsequent
document that it "cancels and supersedes" the previous one. True it is that in the latter document, it is silent as to the
statement in the Joint Affidavit that the P 15,000.00 represents the "capital investment" of the parties in the gasoline
station business and it speaks of petitioner as the sole dealer, but this is as it should be for in the latter document
SHELL was a signatory and it would be against its policy if in the agreement it should be stated that the business is a
partnership with private respondents and not a sole proprietorship of petitioner.
Moreover other evidence in the record shows that there was in fact such partnership agreement between the parties.
This is attested by the testimonies of private respondent Remedies Estanislao and Atty. Angeles. Petitioner submitted
to private respondents periodic accounting of the business. 4 Petitioner gave a written authority to private respondent
Remedies Estanislao, his sister, to examine and audit the books of their "common business' aming negosyo). 5
Respondent 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. 6 The sole dealership by the petitioner and the issuance of all government permits and
licenses in the name of petitioner was in compliance with the afore-stated policy of SHELL and the understanding of
the parties of having only one dealer of the SHELL products.Further, the findings of facts of the respondent court are
conclusive in this proceeding, and its conclusion based on the said facts are in accordancewith the applicable law.
WHEREFORE, the judgment appealed from is AFFIRMED in toto with costs against petitioner. This decision is
immediately executory and no motion for extension of time to file a motion for reconsideration shag beentertained.
SO ORDERED.
Narvasa, Cruz and Grio-Aquino, JJ., concur.

[G.R. No. 413. February 2, 1903. ]

JOSE FERNANDEZ, Plaintiff-Appellant, v. FRANCISCO DE LA ROSA, Defendant-Appellee.
Vicente Miranda, for Appellant.
Simplicio del Rosario, for Appellee.
SYLLABUS
1. PARTNERSHIP; INTENTION TO DIVIDE PROFITS. Where the fact is established that parties have mutually
contributed to the purchase of a common stock, under circumstances which afford no different explanation of their
object, it must be deduced that they intended a joint interest in the profits therefrom.
2. ID.; WRITTEN ARTICLES. Since the general provisions of article 1280 of the Civil Code are controlled by the special
provisions of article 1667 idem, written articles of copartnership are only necessary in the cases mentioned in the
latter.
3. ID.; DISSOLUTION. Where the parties fail to agree upon articles of copartnership and some of the contributions of
one partner, less than all, are returned to him and accepted with an express reservation of his rights as partner, the
partnership is not dissolved nor does he waive his right to an accounting of the profits.

DECISION

LADD, J. :

The object of this action is to obtain from the court a declaration that a partnership exists between the parties, that the
plaintiff has a consequent interest in certain cascoes which are alleged to be partnership property, and that the
defendant is bound to render an account of his administration of the cascoes and the business carried on with them.
Judgment

was

rendered

for

the

defendant

in

the

court

below

and

the

plaintiff

appealed.

The respective claims of the parties as to the facts, so far as it is necessary to state them in order to indicate the point
in dispute, may be briefly summarized. The plaintiff alleges that in January, 1900, he entered into a verbal agreement
with the defendant to form a partnership for the purchase of cascoes and the carrying on of the business of letting the
same for hire in Manila, the defendant to buy the cascoes and each partner to furnish for that purpose such amount of
money as he could, the profits to be divided proportionately; that in the same January the plaintiff furnished the
defendant 300 pesos to purchase a casco designated as No. 1515, which the defendant did purchase for 500 pesos of
Doa Isabel Vales, taking the title in his own name; that the plaintiff furnished further sums aggregating about 300
pesos for repairs on this casco; that on the fifth of the following March he furnished the defendant 825 pesos to
purchase another casco designated as No. 2089, which the defendant did purchase for 1,000 pesos of Luis R. Yangco,
taking the title to this casco also in his own name; that in April the parties undertook to draw up articles of partnership
for the purpose of embodying the same in an authentic document, but that the defendant having proposed a draft of
such articles which differed materially from the terms of the earlier verbal agreement, and being unwilling to include
casco No. 2089 in the partnership, they were unable to come to any understanding and no written agreement was
executed; that the defendant having in the meantime had the control and management of the two cascoes, the
plaintiff made a demand for an accounting upon him, which the defendant refused to render, denying the existence of
the
partnership
altogether.
The defendant admits that the project of forming a partnership in the casco business in which he was already engaged
to some extent individually was discussed between himself and the plaintiff in January, 1900, and earlier, one Marcos
Angulo, who was a partner of the plaintiff in a bakery business, being also a party to the negotiations, but he denies
that any agreement was ever consummated. He denies that the plaintiff furnished any money in January, 1900, for the
purchase of casco No. 1515, or for repairs on the same, but claims that he borrowed 300 pesos on his individual
account in January from the bakery firm, consisting of the plaintiff, Marcos Angulo, and Antonio Angulo. The 825 pesos,
which he admits he received from the plaintiff March 5, he claims was for the purchase of casco No. 1515, which he
alleged was bought March 12, and he alleges that he never received anything from the defendant toward the purchase
of casco No. 2089. He claims to have paid, exclusive of repairs, 1,200 pesos for the first casco and 2,000 pesos for the
second
one.
The case comes to this court under the old procedure, and it is therefore necessary for us the review the evidence and
pass upon the facts. Our general conclusions may be stated as follows:chanrob1es virtual 1aw library
(1) Doa Isabel Vales, from whom the defendant bought casco No. 1515, testifies that the sale was made and the
casco delivered in January, although the public document of sale was not executed till some time afterwards. This
witness is apparently disinterested, and we think it is safe to rely upon the truth of her testimony, especially as the
defendant, while asserting that the sale was in March, admits that he had the casco taken to the ways of repairs in
January.
It is true that the public document of sale was executed March 10, and that the vendor declares therein that she is the
owner of the casco, but such declaration does not exclude proof as to the actual date of the sale, at least as against
the plaintiff, who was not a party to the instrument. (Civil Code, sec. 1218.) It often happens, of course, in such cases,
that the actual sale precedes by a considerable time the execution of the formal instrument of transfer, and this is
what
we
think
occurred
here.
(2) The plaintiff presented in evidence the following receipt: "I have this day received from D. Jose Fernandez eight
hundred and twenty-five pesos for the cost of a casco which we are to purchase in company. Manila, March 5, 1900.
Francisco de la Rosa." The authenticity of this receipt is admitted by the defendant. If casco No. 1515 was bought, as
we think it was, in January, the casco referred to in the receipt which the parties "are to purchase in company" must be
casco No. 2089, which was bought March 22. We find this to be the fact, and that the plaintiff furnished and the
defendant received 825 pesos toward the purchase of this casco, with the understanding that it was to be purchased
on
joint
account.
(3) Antonio Fernandez testifies that in the early part of January, 1900, he saw Antonio Angulo give the defendant, in
the name of the plaintiff, a sum of money, the amount of which he is unable to state, for the purchase of a casco to be
used in the plaintiffs and defendants business. Antonio Angulo also testified, but the defendant claims that the fact
that Angulo was a partner of the plaintiff rendered him incompetent as a witness under the provisions of article 643 of
the then Code of Civil Procedure, and without deciding whether this point is well taken, we have discarded his
testimony altogether in considering the case. The defendant admits the receipt of 300 pesos from Antonio Angulo in
January, claiming, as has been stated, that it was a loan from the firm. Yet he sets up the claim that the 825 pesos
which he received from the plaintiff in March were furnished toward the purchase of casco No. 1515, thereby virtually

admitting that casco was purchased in company with the plaintiff. We discover nothing in the evidence to support the
claim that the 300 pesos received in January was a loan, unless it may be the fact that the defendant had on previous
occasions borrowed money from the bakery firm. We think all the probabilities of the case point to the truth of the
evidence of Antonio Fernandez as to this transaction, and we find the fact to be that the sum in question was furnished
by the plaintiff toward the purchase for joint ownership of casco No. 1515, and that the defendant received it with the
understanding that it was to be used for this purpose. We also find that the plaintiff furnished some further sums of
money
for
the
repair
of
this
casco.
(4) The balance of the purchase price of each of the two cascoes over and above the amount contributed by the
plaintiff
was
furnished
by
the
defendant.
(5) We are unable to find upon the evidence before us that there was any specific verbal agreement of partnership,
except
such
as
may
be
implied
from
the
facts
as
to
the
purchase
of
the
casco.
(6) Although the evidence is somewhat unsatisfactory upon this point, we think it more probable than otherwise that
no attempt was made to agree upon articles of partnership till about the middle of the April following the purchase of
the
cascoes.
(7) At some time subsequently to the failure of the attempt to agree upon partnership articles and after the defendant
had been operating the cascoes for some time, the defendant returned to the plaintiff, 1,125 pesos, in two different
sums, one of 300 and one of 825 pesos. The only evidence in the record as to the circumstances under which the
plaintiff received these sums is contained in his answers to the interrogatories proposed to him by the defendant, and
the whole of his statement on this point may properly be considered in determining the facts as being in the nature of
an indivisible admission. He states that both sums were received with an express reservation on his part of all his
rights
as
a
partner.
We
find
this
to
be
the
fact.
Two

questions

of

law

are

raised

by

the

foregoing

facts:chanrob1es

virtual

1aw

library

(1) Did a partnership exist between the parties? (2) If such partnership existed, was it terminated as a result of the act
of
the
defendant
in
receiving
back
the
1,125
pesos?
(1) "Partnership is a contract by which two or more persons bind themselves to contribute money, property, or industry
to a common fund, with the intention of dividing the profits among themselves." (Civil Code, art. 1665.)
The essential points upon which the minds of the parties must meet in a contract of partnership are, therefore, (1)
mutual contribution to a common stock, and (2) a joint interest in the profits. If the contract contains these two
elements the partnership relation results, and the law itself fixes the incidents of this relation if the parties fail to do so.
(Civil
Code,
secs.
1689,
1695.)
We have found as a fact that money was furnished by the plaintiff and received by the defendant with the
understanding that it was to be used for the purchase of the cascoes in question. This establishes the first element of
the contract, namely, mutual contribution to a common stock. The second element, namely, the intention to share
profits, appears to be an unavoidable deduction from the fact of the purchase of the cascoes in common, in the
absence of any other explanation of the object of the parties in making the purchase in that form, and, it may be
added, in view of the admitted fact that prior to the purchase of the first casco the formation of a partnership had been
a
subject
of
negotiation
between
them.
Under other circumstances the relation of joint ownership, a relation distinct though perhaps not essentially different in
its practical consequence from that of partnership, might have been the result of the joint purchase. If, for instance, it
were shown that the object of the parties in purchasing in company had been to make a more favorable bargain for the
two cascoes than they could have done by purchasing them separately, and that they had no ulterior object except to
effect a division of the common property when once they had acquired it, the affectio societatis would be lacking and
the parties would have become joint tenants only; but, as nothing of this sort appears in the case, we must assume
that the object of the purchase was active use and profit and not mere passive ownership in common.
It is thus apparent that a complete and perfect contract of partnership was entered into by the parties. This contract, it
is true, might have been subject to a suspensive condition, postponing its operation until an agreement was reached
as to the respective participation of the partners in the profits, the character of the partnership as collective or en
comandita, and other details, but although it is asserted by counsel for the defendant that such was the case, there is
little or nothing in the record to support this claim, and the fact that the defendant did actually go on and purchase the
boats, as it would seem, before any attempt had been made to formulate partnership articles, strongly
discountenances
the
theory.
The execution of a written agreement was not necessary in order to give efficacy to the verbal contract of partnership
as a civil contract, the contributions of the partners not having been in the form of immovables or rights in
immovables. (Civil Code, art. 1667.) The special provision cited, requiring the execution of a public writing in the single
case mentioned and dispensing with all formal requirements in other cases, renders inapplicable to this species of
contract
the
general
provisions
of
article
1280
of
the
Civil
Code.

(2) The remaining question is as to the legal effect of the acceptance by the plaintiff of the money returned to him by
the defendant after the definitive failure of the attempt to agree upon partnership articles. The amount returned fell
short, in our view of the facts, of that which the plaintiff had contributed to the capital of the partnership, since it did
not include the sum which he had furnished for the repairs of casco No. 1515. Moreover, it is quite possible, as claimed
by the plaintiff, that a profit may have been realized from the business during the period in which the defendant had
been administering it prior to the return of the money, and if so he still retained that sum in his hands. For these
reasons the acceptance of the money by the plaintiff did not have the effect of terminating the legal existence of the
partnership by converting it into a societas leonina, as claimed by counsel for the defendant.
Did the defendant waive his right to such interest as remained to him in the partnership property by receiving the
money? Did he by so doing waive his right to an accounting of the profits already realized, if any, and a participation in
them in proportion to the amount he had originally contributed to the common fund? Was the partnership dissolved by
the "will or withdrawal of one of the partners" under article 1705 of the Civil Code? We think these questions must be
answered
in
the
negative.
There was no intention on the part of the plaintiff in accepting the money to relinguish his rights as a partner, nor is
there any evidence that by anything that he said or by anything that he omitted to say he gave the defendant any
ground whatever to believe that he intended to relinquish them. On the contrary he notified the defendant that he
waived none of his rights in the partnership. Nor was the acceptance of the money an act which was in itself
inconsistent with the continuance of the partnership relation, as would have been the case had the plaintiff withdrawn
his entire interest in the partnership. There is, therefore, nothing upon which a waiver, either express or implied, can
be predicated. The defendant might have himself terminated the partnership relation at any time, if he had chosen to
do so, by recognizing the plaintiffs right in the partnership property and in the profits. Having failed to do this he can
not be permitted to force a dissolution upon his copartner upon terms which the latter is unwilling to accept. We see
nothing in the case which can give the transaction in question any other aspect than that of the withdrawal by one
partner
with
the
consent
of
the
other
of
a
portion
of
the
common
capital.
The result is that we hold and declare that a partnership was formed between the parties in January, 1900, the
existence of which the defendant is bound to recognize; that cascoes Nos. 1515 and 2089 constitute partnership
property, and that the plaintiff is entitled to an accounting of the defendants administration of such property, and of
the profits derived therefrom. This declaration does not involve an adjudication as to any disputed items of the
partnership
account.
The judgment of the court below will be reversed without costs, and the record returned for the execution of the
judgment
now
rendered.
So
ordered.
Arellano,

C.J.,

Willard,
ON

Torres,

Cooper,

and

Mapa,

J.,
MOTION

JJ.,

concur.

dissenting.
FOR

REHEARING.

MAPA, J. :

This case has been decided on appeal in favor of the plaintiff, and the defendant has moved for a rehearing upon the
following
grounds:chanrob1es
virtual
1aw
library
1. Because that part of the decision which refers to the existence of the partnership which is the object of the
complaint
is
not
based
upon
clear
and
decisive
legal
grounds;
and
2. Because, upon the supposition of the existence of the partnership, the decision does not clearly determine whether
the juridical relation between the partners suffered any modification in consequence of the withdrawal by the plaintiff
of the sum of 1,125 pesos from the funds of the partnership, or if it continued as before, the parties being thereby
deprived, he alleges, of one of the principal bases for determining with exactness the amount due to each.
With respect to the first point, the appellant cites the fifth conclusion of the decision, which is as follows: "We are
unable to find from the evidence before us that there was any specific verbal agreement of partnership, except such as
may be implied from the facts as to the purchase of the cascoes."cralaw virtua1aw library
Discussing this part of the decision, the defendant says that, in the judgment of the court, if on the one hand there is
no direct evidence of a contract, on the other its existence can only be inferred from certain facts, and the defendant
adds that the possibility of an inference is not sufficient ground upon which to consider as existing what may be
inferred to exist, and still less as sufficient ground for declaring its efficacy to produce legal effects.
This reasoning rests upon a false basis. We have not taken into consideration the mere possibility of an inference, as
the appellant gratuitously states, for the purpose of arriving at a conclusion that a contract of partnership was entered

into between him and the plaintiff, but have considered the proof which is derived from the facts connected with the
purchase of the cascoes. It is stated in the decision that with the exception of this evidence we find no other which
shows the making of the contract. But this does not mean (for it says exactly the contrary) that this fact is not
absolutely proven, as the defendant erroneously appears to think. From this data we infer a fact which to our mind is
certain and positive, and not a mere possibility; we infer not that it is possible that the contract may have existed, but
that it actually did exist. The proofs constituted by the facts referred to, although it is the only evidence, and in spite of
the fact that it is not direct, we consider, however, sufficient to produce such a conviction, which may certainly be
founded upon any of the various classes of evidence which the law admits. There is all the more reason for its being so
in this case, because a civil partnership may be constituted in any form, according to article 1667 of the Civil Code,
unless real property or real rights are contributed to it the only case of exception in which it is necessary that the
agreement
be
recorded
in
a
public
instrument.
It is of no importance that the parties have failed to reach an agreement with respect to the minor details of contract.
These details pertain to the accidental and not to the essential part of the contract. We have already stated in the
opinion what are the essential requisites of a contract of partnership, according to the definition of article 1665.
Considering as a whole the probatory facts which appears from the record, we have reached the conclusion that the
plaintiff and the defendant agreed to the essential parts of that contract, and did in fact constitute a partnerhip, with
the funds of which were purchased the cascoes with which this litigation deals, although it is true that they did not
take the precaution to recisely establish and determine from the beginning the conditions with respect to the
participation of each partner in the profits or losses of the partnership. The disagreements subsequently arising
between them, when endeavoring to fix these conditions, should not and can not produce the effect of destroying that
which has been done, to the prejudice of one of the partners, nor could it divest his rights under the partnership which
had accrued by the actual contribution of capital which followed the agreement to enter into a partnership, together
with the transactions effected with partnership funds. The law has foreseen the possibility of the constitution of a
partnership without an express stipulation by the partners upon those conditions, and has established rules which may
serve as a basis for the distribution of profits and losses among the partners. (Art. 1689 of the Civil Code.) We consider
that the partnership entered into by the plaintiff and the defendant falls within the provisions of this article.
With respect to the second point, it is obvious that upon declaring the existence of a partnership and the right of the
plaintiff to demand from the defendant an itemized accounting of his management thereof, it was impossible at the
same time to determine the effects which might have been produced with respect to the interest of the partnership by
the withdrawal by the plaintiff of the sum of 1,125 pesos. This could only be determined after a liquidation of the
partnership. Then, and only then, can it be known if this sum is to be charged to the capital contributed by the plaintiff,
or to his share of the profits, or to both. It might well be that the partnership has earned profits, and that the plaintiffs
participation therein is equivalent to or exceeds the sum mentioned. In this case it is evident that, notwithstanding
that payment, his interest in the partnership would still continue. This is one case. It would be easy to imagine many
others, as the possible results of a liquidation are innumerable. The liquidation will finally determine the condition of
the legal relations of the partners inter se at the time of the withdrawal of the sum mentioned. It was not, nor is it
possible to determine this status a priori without prejudging the result, as yet unknown, of the litigation. Therefore it is
that in the decision no direct statement has been made upon this point. It is for the same reason that it was expressly
stated in the decision that it "does not involve an adjudication as to any disputed item of the partnership
account."cralaw
virtua1aw
library
The contentions advanced by the moving party are so evidently unfounded that we can not see the necessity or
convenience
of
granting
the
rehearing
prayed
for,
and
the
motion
is
therefore
denied.
Arellano,

C.J.,

Torres,

Cooper

Willard and McDonough, JJ., did not sit in this case.

and

Ladd,

JJ.,

concur.

G.R. No. L-55397 February 29, 1988

TAI TONG CHUACHE & CO., petitioner,
vs.
THE INSURANCE COMMISSION and TRAVELLERS MULTI-INDEMNITY CORPORATION, respondents.

GANCAYCO, J.:
This petition for review on certiorari seeks the reversal of the decision of the Insurance Commission in IC Case #367 1
dismissing the complaint 2 for recovery of the alleged unpaid balance of the proceeds of the Fire Insurance Policies
issued by herein respondent insurance company in favor of petitioner-intervenor.
The facts of the case as found by respondent Insurance Commission are as follows:
Complainants acquired from a certain Rolando Gonzales a parcel of land and a building located at San
Rafael Village, Davao City. Complainants assumed the mortgage of the building in favor of S.S.S., which
building was insured with respondent S.S.S. Accredited Group of Insurers for P25,000.00.
On April 19, 1975, Azucena Palomo obtained a loan from Tai Tong Chuache Inc. in the amount of
P100,000.00. To secure the payment of the loan, a mortgage was executed over the land and the
building in favor of Tai Tong Chuache & Co. (Exhibit "1" and "1-A"). On April 25, 1975, Arsenio Chua,
representative of Thai Tong Chuache & Co. insured the latter's interest with Travellers Multi-Indemnity
Corporation for P100,000.00 (P70,000.00 for the building and P30,000.00 for the contents thereof)
(Exhibit "A-a," contents thereof) (Exhibit "A-a").
On June 11, 1975, Pedro Palomo secured a Fire Insurance Policy No. F- 02500 (Exhibit "A"), covering the
building for P50,000.00 with respondent Zenith Insurance Corporation. On July 16, 1975, another Fire
Insurance Policy No. 8459 (Exhibit "B") was procured from respondent Philippine British Assurance
Company, covering the same building for P50,000.00 and the contents thereof for P70,000.00.
On July 31, 1975, the building and the contents were totally razed by fire.
Adjustment Standard Corporation submitted a report as follow
xxx xxx xxx
... Thus the apportioned share of each company is as follows:

P
oli
cy
N
o..

Comp
any

Risk

Insur
es

Pays

MI
R
O

Zenit
h

Buildi
ng

P50,
000

P17,61
0.93

F02
50
0

Insur
ance

Corp.

F84
59
0

Phil.

House
hold

70,00
0

24,655
.31

Britis
h

Assco
. Co.

Inc.

FFF &
F5

50,00
0

39,186
.10

P
oli
cy
N
o.

Comp
any

Risk

Insur
es

Pays

FI
C15
38
1

SSSA
ccre

dited
Grou
p

of
Insur
ers

Buildi
ng

P25,
000

P8,805
.47

Totals

P195
,000

P90,25
7.81

We are showing hereunder another apportionment of the loss which includes the Travellers MultiIndemnity policy for reference purposes.

Po
lic
y
No
.

Com
pany

MI
R
O/

Zenit
h

F02
50
0

Insur
ance

Risk

Corp.

Injure
s

Buildi
ng

Pays

P50,
000

P11,87
7.14

Phil.

Britis
h

Assc
o.
Co.

F84
59
0

P
V
C15
18
1

IBuildi
ng

70,00
0

IIBuildi
ng

FFF &
PE

SSS

Accre
dited

16,628
.00

50,00
0

24,918
.79

Grou
p of

Insur
ers

Buildi
ng

25,00
0

5,938.
50

Insur
ers

I-Ref

30,00
0

14,467
.31

Multi

IIBuildi
ng

70,00
0

16,628
.00

Totals

P295
.000

P90,25
7.81

F59
9
D
V

Based on the computation of the loss, including the Travellers Multi- Indemnity, respondents, Zenith
Insurance, Phil. British Assurance and S.S.S. Accredited Group of Insurers, paid their corresponding
shares of the loss. Complainants were paid the following: P41,546.79 by Philippine British Assurance
Co., P11,877.14 by Zenith Insurance Corporation, and P5,936.57 by S.S.S. Group of Accredited Insurers
(Par. 6. Amended Complaint). Demand was made from respondent Travellers Multi-Indemnity for its
share in the loss but the same was refused. Hence, complainants demanded from the other three (3)
respondents the balance of each share in the loss based on the computation of the Adjustment
Standards Report excluding Travellers Multi-Indemnity in the amount of P30,894.31 (P5,732.79-Zenith
Insurance: P22,294.62, Phil. British: and P2,866.90, SSS Accredited) but the same was refused, hence,
this action.
In their answers, Philippine British Assurance and Zenith Insurance Corporation admitted the material
allegations in the complaint, but denied liability on the ground that the claim of the complainants had
already been waived, extinguished or paid. Both companies set up counterclaim in the total amount of
P 91,546.79.
Instead of filing an answer, SSS Accredited Group of Insurers informed the Commission in its letter of
July 22, 1977 that the herein claim of complainants for the balance had been paid in the amount of P
5,938.57 in full, based on the Adjustment Standards Corporation Report of September 22, 1975.
Travellers Insurance, on its part, admitted the issuance of the Policy No. 599 DV and alleged as its
special and affirmative defenses the following, to wit: that Fire Policy No. 599 DV, covering the
furniture and building of complainants was secured by a certain Arsenio Chua, mortgage creditor, for
the purpose of protecting his mortgage credit against the complainants; that the said policy was issued
in the name of Azucena Palomo, only to indicate that she owns the insured premises; that the policy
contains an endorsement in favor of Arsenio Chua as his mortgage interest may appear to indicate
that insured was Arsenio Chua and the complainants; that the premium due on said fire policy was
paid by Arsenio Chua; that respondent Travellers is not liable to pay complainants.
On May 31, 1977, Tai Tong Chuache & Co. filed a complaint in intervention claiming the proceeds of the
fire Insurance Policy No. F-559 DV, issued by respondent Travellers Multi-Indemnity.
Travellers Insurance, in answer to the complaint in intervention, alleged that the Intervenor is not
entitled to indemnity under its Fire Insurance Policy for lack of insurable interest before the loss of the

insured premises and that the complainants, spouses Pedro and Azucena Palomo, had already paid in
full their mortgage indebtedness to the intervenor. 3
As adverted to above respondent Insurance Commission dismissed spouses Palomos' complaint on the ground that the
insurance policy subject of the complaint was taken out by Tai Tong Chuache & Company, petitioner herein, for its own
interest only as mortgagee of the insured property and thus complainant as mortgagors of the insured property have
no right of action against herein respondent. It likewise dismissed petitioner's complaint in intervention in the following
words:
We move on the issue of liability of respondent Travellers Multi-Indemnity to the Intervenor-mortgagee.
The complainant testified that she was still indebted to Intervenor in the amount of P100,000.00. Such
allegation has not however, been sufficiently proven by documentary evidence. The certification
(Exhibit 'E-e') issued by the Court of First Instance of Davao, Branch 11, indicate that the complainant
was Antonio Lopez Chua and not Tai Tong Chuache & Company. 4
From the above decision, only intervenor Tai Tong Chuache filed a motion for reconsideration but it was likewise denied
hence, the present petition.
It is the contention of the petitioner that respondent Insurance Commission decided an issue not raised in the
pleadings of the parties in that it ruled that a certain Arsenio Lopez Chua is the one entitled to the insurance proceeds
and not Tai Tong Chuache & Company.
This Court cannot fault petitioner for the above erroneous interpretation of the decision appealed from considering the
manner it was written. 5 As correctly pointed out by respondent insurance commission in their comment, the decision
did not pronounce that it was Arsenio Lopez Chua who has insurable interest over the insured property. Perusal of the
decision reveals however that it readily absolved respondent insurance company from liability on the basis of the
commissioner's conclusion that at the time of the occurrence of the peril insured against petitioner as mortgagee had
no more insurable interest over the insured property. It was based on the inference that the credit secured by the
mortgaged property was already paid by the Palomos before the said property was gutted down by fire. The foregoing
conclusion was arrived at on the basis of the certification issued by the then Court of First Instance of Davao, Branch II
that in a certain civil action against the Palomos, Antonio Lopez Chua stands as the complainant and not petitioner Tai
Tong Chuache & Company.
We find the petition to be impressed with merit. It is a well known postulate that the case of a party is constituted by
his own affirmative allegations. Under Section 1, Rule 131 6 each party must prove his own affirmative allegations by
the amount of evidence required by law which in civil cases as in the present case is preponderance of evidence. The
party, whether plaintiff or defendant, who asserts the affirmative of the issue has the burden of presenting at the trial
such amount of evidence as required by law to obtain favorable judgment. 7 Thus, petitioner who is claiming a right
over the insurance must prove its case. Likewise, respondent insurance company to avoid liability under the policy by
setting up an affirmative defense of lack of insurable interest on the part of the petitioner must prove its own
affirmative allegations.
It will be recalled that respondent insurance company did not assail the validity of the insurance policy taken out by
petitioner over the mortgaged property. Neither did it deny that the said property was totally razed by fire within the
period covered by the insurance. Respondent, as mentioned earlier advanced an affirmative defense of lack of
insurable interest on the part of the petitioner that before the occurrence of the peril insured against the Palomos had
already paid their credit due the petitioner. Respondent having admitted the material allegations in the complaint, has
the burden of proof to show that petitioner has no insurable interest over the insured property at the time the
contingency took place. Upon that point, there is a failure of proof. Respondent, it will be noted, exerted no effort to
present any evidence to substantiate its claim, while petitioner did. For said respondent's failure, the decision must be
adverse to it.
However, as adverted to earlier, respondent Insurance Commission absolved respondent insurance company from
liability on the basis of the certification issued by the then Court of First Instance of Davao, Branch II, that in a certain
civil action against the Palomos, Arsenio Lopez Chua stands as the complainant and not Tai Tong Chuache. From said
evidence respondent commission inferred that the credit extended by herein petitioner to the Palomos secured by the
insured property must have been paid. Such is a glaring error which this Court cannot sanction. Respondent
Commission's findings are based upon a mere inference.
The record of the case shows that the petitioner to support its claim for the insurance proceeds offered as evidence
the contract of mortgage (Exh. 1) which has not been cancelled nor released. It has been held in a long line of cases
that when the creditor is in possession of the document of credit, he need not prove non-payment for it is presumed. 8
The validity of the insurance policy taken b petitioner was not assailed by private respondent. Moreover, petitioner's
claim that the loan extended to the Palomos has not yet been paid was corroborated by Azucena Palomo who testified
that they are still indebted to herein petitioner. 9

Public respondent argues however, that if the civil case really stemmed from the loan granted to Azucena Palomo by
petitioner the same should have been brought by Tai Tong Chuache or by its representative in its own behalf. From the
above premise respondent concluded that the obligation secured by the insured property must have been paid.
The premise is correct but the conclusion is wrong. Citing Rule 3, Sec. 2 10 respondent pointed out that the action must
be brought in the name of the real party in interest. We agree. However, it should be borne in mind that petitioner
being a partnership may sue and be sued in its name or by its duly authorized representative. The fact that Arsenio
Lopez Chua is the representative of petitioner is not questioned. Petitioner's declaration that Arsenio Lopez Chua acts
as the managing partner of the partnership was corroborated by respondent insurance company. 11 Thus Chua as the
managing partner of the partnership may execute all acts of administration 12 including the right to sue debtors of the
partnership in case of their failure to pay their obligations when it became due and demandable. Or at the very least,
Chua being a partner of petitioner Tai Tong Chuache & Company is an agent of the partnership. Being an agent, it is
understood that he acted for and in behalf of the firm. 13 Public respondent's allegation that the civil case flied by
Arsenio Chua was in his capacity as personal creditor of spouses Palomo has no basis.
The respondent insurance company having issued a policy in favor of herein petitioner which policy was of legal force
and effect at the time of the fire, it is bound by its terms and conditions. Upon its failure to prove the allegation of lack
of insurable interest on the part of the petitioner, respondent insurance company is and must be held liable.
IN VIEW OF THE FOREGOING, the decision appealed from is hereby SET ASIDE and ANOTHER judgment is rendered
order private respondent Travellers Multi-Indemnity Corporation to pay petitioner the face value of Insurance Policy No.
599-DV in the amount of P100,000.00. Costs against said private respondent.
SO ORDERED.
Teehankee, C.J., Narvasa, Cruz and Grio-Aquino, JJ., concur.

G.R. No. L-19342 May 25, 1972

LORENZO T. OA and HEIRS OF JULIA BUALES, namely: RODOLFO B. OA, MARIANO B. OA, LUZ B. OA,
VIRGINIA B. OA and LORENZO B. OA, JR., petitioners,
vs.
THE COMMISSIONER OF INTERNAL REVENUE, respondent.
Orlando Velasco for petitioners.
Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General Felicisimo R. Rosete, and Special Attorney
Purificacion Ureta for respondent.

BARREDO, J.:p
Petition for review of the decision of the Court of Tax Appeals in CTA Case No. 617, similarly entitled as above, holding
that petitioners have constituted an unregistered partnership and are, therefore, subject to the payment of the
deficiency corporate income taxes assessed against them by respondent Commissioner of Internal Revenue for the
years 1955 and 1956 in the total sum of P21,891.00, plus 5% surcharge and 1% monthly interest from December 15,
1958, subject to the provisions of Section 51 (e) (2) of the Internal Revenue Code, as amended by Section 8 of Republic
Act No. 2343 and the costs of the suit, 1 as well as the resolution of said court denying petitioners' motion for
reconsideration of said decision.
The facts are stated in the decision of the Tax Court as follows:
Julia Buales died on March 23, 1944, leaving as heirs her surviving spouse, Lorenzo T. Oa and her
five children. In 1948, Civil Case No. 4519 was instituted in the Court of First Instance of Manila for the

settlement of her estate. Later, Lorenzo T. Oa the surviving spouse was appointed administrator of
the estate of said deceased (Exhibit 3, pp. 34-41, BIR rec.). On April 14, 1949, the administrator
submitted the project of partition, which was approved by the Court on May 16, 1949 (See Exhibit K).
Because three of the heirs, namely Luz, Virginia and Lorenzo, Jr., all surnamed Oa, were still minors
when the project of partition was approved, Lorenzo T. Oa, their father and administrator of the
estate, filed a petition in Civil Case No. 9637 of the Court of First Instance of Manila for appointment as
guardian of said minors. On November 14, 1949, the Court appointed him guardian of the persons and
property of the aforenamed minors (See p. 3, BIR rec.).
The project of partition (Exhibit K; see also pp. 77-70, BIR rec.) shows that the heirs have undivided
one-half (1/2) interest in ten parcels of land with a total assessed value of P87,860.00, six houses with
a total assessed value of P17,590.00 and an undetermined amount to be collected from the War
Damage Commission. Later, they received from said Commission the amount of P50,000.00, more or
less. This amount was not divided among them but was used in the rehabilitation of properties owned
by them in common (t.s.n., p. 46). Of the ten parcels of land aforementioned, two were acquired after
the death of the decedent with money borrowed from the Philippine Trust Company in the amount of
P72,173.00 (t.s.n., p. 24; Exhibit 3, pp. 31-34 BIR rec.).
The project of partition also shows that the estate shares equally with Lorenzo T. Oa, the
administrator thereof, in the obligation of P94,973.00, consisting of loans contracted by the latter with
the approval of the Court (see p. 3 of Exhibit K; or see p. 74, BIR rec.).
Although the project of partition was approved by the Court on May 16, 1949, no attempt was made to
divide the properties therein listed. Instead, the properties remained under the management of
Lorenzo T. 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 from P105,450.00 in 1949 to
P480,005.20 in 1956 as can be gleaned from the following year-end balances:

Yea
r

Investment

Land

Building

Account

Account

Account

1949

P87,860.00

P17,590.00

1950

P24,657.65

128,566.72

96,076.26

1951

51,301.31

120,349.28

110,605.11

1952

67,927.52

87,065.28

152,674.39

1953

61,258.27

84,925.68

161,463.83

1954

63,623.37

99,001.20

167,962.04

1955

100,786.00

120,249.78

169,262.52

1956

175,028.68

135,714.68

169,262.52

(See Exhibits 3 & K t.s.n., pp. 22, 25-26, 40, 50, 102-104)
From said investments and properties petitioners derived such incomes as profits from installment
sales of subdivided lots, profits from sales of stocks, dividends, rentals and interests (see p. 3 of Exhibit
3; p. 32, BIR rec.; t.s.n., pp. 37-38). The said incomes are recorded in the books of account kept by
Lorenzo T. Oa where the corresponding shares of the petitioners in the net income for the year are
also known. Every year, petitioners returned for income tax purposes their shares in the net income
derived from said properties and securities and/or from transactions involving them (Exhibit 3, supra;
t.s.n., pp. 25-26). However, petitioners did not actually receive their shares in the yearly income.
(t.s.n., pp. 25-26, 40, 98, 100). The income was always left in the hands of Lorenzo T. Oa who, as
heretofore pointed out, invested them in real properties and securities. (See Exhibit 3, t.s.n., pp. 50,
102-104).
On the basis of the foregoing facts, respondent (Commissioner of Internal Revenue) decided that
petitioners formed an unregistered partnership and therefore, subject to the corporate income tax,
pursuant to Section 24, in relation to Section 84(b), of the Tax Code. Accordingly, he assessed against
the petitioners the amounts of P8,092.00 and P13,899.00 as corporate income taxes for 1955 and
1956, respectively. (See Exhibit 5, amended by Exhibit 17, pp. 50 and 86, BIR rec.). Petitioners
protested against the assessment and asked for reconsideration of the ruling of respondent that they
have formed an unregistered partnership. Finding no merit in petitioners' request, respondent denied it
(See Exhibit 17, p. 86, BIR rec.). (See pp. 1-4, Memorandum for Respondent, June 12, 1961).
The original assessment was as follows:
1955
Net income as per investigation ................ P40,209.89
Income tax due thereon ............................... 8,042.00
25% surcharge .............................................. 2,010.50
Compromise for non-filing .......................... 50.00
Total ............................................................... P10,102.50
1956
Net income as per investigation ................ P69,245.23
Income tax due thereon ............................... 13,849.00
25% surcharge .............................................. 3,462.25
Compromise for non-filing .......................... 50.00
Total ............................................................... P17,361.25
(See Exhibit 13, page 50, BIR records)
Upon further consideration of the case, the 25% surcharge was eliminated in line with the ruling of
Supreme Court in Collector v. Batangas Transportation Co., G.R. No. L-9692, Jan. 6, 1958, so that
questioned assessment refers solely to the income tax proper for the years 1955 and 1956 and
"Compromise for non-filing," the latter item obviously referring to the compromise in lieu of

the
the
the
the

criminal liability for failure of petitioners to file the corporate income tax returns for said years. (See
Exh. 17, page 86, BIR records). (Pp. 1-3, Annex C to Petition)
Petitioners have assigned the following as alleged errors of the Tax Court:
I.
THE COURT OF TAX APPEALS ERRED IN HOLDING THAT THE PETITIONERS FORMED AN UNREGISTERED
PARTNERSHIP;
II.
THE COURT OF TAX APPEALS ERRED IN NOT HOLDING THAT THE PETITIONERS WERE CO-OWNERS OF
THE PROPERTIES INHERITED AND (THE) PROFITS DERIVED FROM TRANSACTIONS THEREFROM (sic);
III.
THE COURT OF TAX APPEALS ERRED IN HOLDING THAT PETITIONERS WERE LIABLE FOR CORPORATE
INCOME TAXES FOR 1955 AND 1956 AS AN UNREGISTERED PARTNERSHIP;
IV.
ON THE ASSUMPTION THAT THE PETITIONERS CONSTITUTED AN UNREGISTERED PARTNERSHIP, THE
COURT OF TAX APPEALS ERRED IN NOT HOLDING THAT THE PETITIONERS WERE AN UNREGISTERED
PARTNERSHIP TO THE EXTENT ONLY THAT THEY INVESTED THE PROFITS FROM THE PROPERTIES
OWNED IN COMMON AND THE LOANS RECEIVED USING THE INHERITED PROPERTIES AS COLLATERALS;
V.
ON THE ASSUMPTION THAT THERE WAS AN UNREGISTERED PARTNERSHIP, THE COURT OF TAX APPEALS
ERRED IN NOT DEDUCTING THE VARIOUS AMOUNTS PAID BY THE PETITIONERS AS INDIVIDUAL INCOME
TAX ON THEIR RESPECTIVE SHARES OF THE PROFITS ACCRUING FROM THE PROPERTIES OWNED IN
COMMON, FROM THE DEFICIENCY TAX OF THE UNREGISTERED PARTNERSHIP.
In other words, petitioners pose for our resolution the following questions: (1) Under the facts found by the Court of Tax
Appeals, should petitioners be considered as co-owners of the properties inherited by them from the deceased Julia
Buales and the profits derived from transactions involving the same, or, must they be deemed to have formed an
unregistered partnership subject to tax under Sections 24 and 84(b) of the National Internal Revenue Code? (2)
Assuming they have formed an unregistered partnership, should this not be only in the sense that they invested as a
common fund the profits earned by the properties owned by them in common and the loans granted to them upon the
security of the said properties, with the result that as far as their respective shares in the inheritance are concerned,
the total income thereof should be considered as that of co-owners and not of the unregistered partnership? And (3)
assuming again that they are taxable as an unregistered partnership, should not the various amounts already paid by
them for the same years 1955 and 1956 as individual income taxes on their respective shares of the profits accruing
from the properties they owned in common be deducted from the deficiency corporate taxes, herein involved,
assessed against such unregistered partnership by the respondent Commissioner?
Pondering on these questions, the first thing that has struck the Court is that whereas petitioners' predecessor in
interest died way back on March 23, 1944 and the project of partition of her estate was judicially approved as early as
May 16, 1949, and presumably petitioners have been holding their respective shares in their inheritance since those
dates admittedly under the administration or management of the head of the family, the widower and father Lorenzo
T. Oa, the assessment in question refers to the later years 1955 and 1956. We believe this point to be important
because, apparently, at the start, or in the years 1944 to 1954, the respondent Commissioner of Internal Revenue did
treat petitioners as co-owners, not liable to corporate tax, and it was only from 1955 that he considered them as
having formed an unregistered partnership. At least, there is nothing in the record indicating that an earlier
assessment had already been made. Such being the case, and We see no reason how it could be otherwise, it is easily
understandable why petitioners' position that they are co-owners and not unregistered co-partners, for the purposes of
the impugned assessment, cannot be upheld. Truth to tell, petitioners should find comfort in the fact that they were
not similarly assessed earlier by the Bureau of Internal Revenue.
The Tax Court found that instead of actually distributing the estate of the deceased among themselves pursuant to the
project of partition approved in 1949, "the properties remained under the management of Lorenzo T. Oa who used
said properties in business by leasing or selling them and investing the income derived therefrom and the proceed

from the sales thereof in real properties and securities," as a result of which said properties and investments steadily
increased yearly from P87,860.00 in "land account" and P17,590.00 in "building account" in 1949 to P175,028.68 in
"investment account," P135.714.68 in "land account" and P169,262.52 in "building account" in 1956. And all these
became possible because, admittedly, petitioners never actually received any share of the income or profits from
Lorenzo T. Oa and instead, they allowed him to continue using said shares as part of the common fund for their
ventures, even as they paid the corresponding income taxes on the basis of their respective shares of the profits of
their common business as reported by the said Lorenzo T. Oa.
It is thus incontrovertible that petitioners did not, contrary to their contention, merely limit themselves to holding the
properties inherited by them. Indeed, it is admitted that during the material years herein involved, some of the said
properties were sold at considerable profit, and that with said profit, petitioners engaged, thru Lorenzo T. Oa, in the
purchase and sale of corporate securities. It is likewise admitted that all the profits from these ventures were divided
among petitioners proportionately in accordance with their respective shares in the inheritance. In these
circumstances, it is Our considered view that from the moment petitioners allowed not only the incomes from their
respective shares of the inheritance but even the inherited properties themselves to be used by Lorenzo T. Oa as a
common fund in undertaking several transactions or in business, with the intention of deriving profit to be shared by
them proportionally, such act was tantamonut to actually contributing such incomes to a common fund and, in effect,
they thereby formed an unregistered partnership within the purview of the above-mentioned provisions of the Tax
Code.
It is but logical that in cases of inheritance, there should be a period when the heirs can be considered as co-owners
rather than unregistered co-partners within the contemplation of our corporate tax laws aforementioned. Before the
partition and distribution of the estate of the deceased, all the income thereof does belong commonly to all the heirs,
obviously, without them becoming thereby unregistered co-partners, but it does not necessarily follow that such status
as co-owners continues until the inheritance is actually and physically distributed among the heirs, for it is easily
conceivable that after knowing their respective shares in the partition, they might decide to continue holding said
shares under the common management of the administrator or executor or of anyone chosen by them and engage in
business on that basis. Withal, if this were to be allowed, it would be the easiest thing for heirs in any inheritance to
circumvent and render meaningless Sections 24 and 84(b) of the National Internal Revenue Code.
It is true that in Evangelista vs. Collector, 102 Phil. 140, it was stated, among the reasons for holding the appellants
therein to be unregistered co-partners for tax purposes, that their common fund "was not something they found
already in existence" and that "it was not a property inherited by them pro indiviso," but it is certainly far fetched to
argue therefrom, as petitioners are doing here, that ergo, in all instances where an inheritance is not actually divided,
there can be no unregistered co-partnership. As already indicated, 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 for this 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. This is exactly what
happened to petitioners in this case.
In this connection, petitioners' reliance on Article 1769, paragraph (3), of the Civil Code, providing that: "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," and, for that matter, on any other
provision of said code on partnerships is unavailing. In Evangelista, supra, this Court clearly differentiated the concept
of partnerships under the Civil Code from that of unregistered partnerships which are considered as "corporations"
under Sections 24 and 84(b) of the National Internal Revenue Code. Mr. Justice Roberto Concepcion, now Chief Justice,
elucidated on this point thus:
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 confirmity with the usual
requirements of the law on partnerships, in order that one could be deemed constituted for purposes
of the tax on corporation. 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 co-partnerships" 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." ....
xxx xxx xxx
Similarly, the American Law
... provides its own concept of a partnership. Under the term "partnership" it includes
not only a partnership as known in common law but, as well, a syndicate, group, pool,
joint venture, or other unincorporated organization which carries on any business,
financial operation, or venture, and which is not, within the meaning of the Code, a
trust, estate, or a corporation. ... . (7A Merten's Law of Federal Income Taxation, p. 789;
emphasis ours.)
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 Merten's Law of Federal Income Taxation, p.
562 Note 63; emphasis ours.)
For purposes of the tax on corporations, our National Internal Revenue Code includes these
partnerships 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.
We reiterated this view, thru Mr. Justice Fernando, in Reyes vs. Commissioner of Internal Revenue, G. R. Nos. L-2402021, July 29, 1968, 24 SCRA 198, wherein the Court ruled against a theory of co-ownership pursued by appellants
therein.
As regards the second question raised by petitioners about the segregation, for the purposes of the corporate taxes in
question, of their inherited properties from those acquired by them subsequently, We consider as justified the following
ratiocination of the Tax Court in denying their motion for reconsideration:
In connection with the second ground, it is alleged that, if there was an unregistered partnership, the
holding should be limited to the business engaged in apart from the properties inherited by petitioners.
In other words, the taxable income of the partnership should be limited to the income derived from the
acquisition and sale of real properties and corporate securities and should not include the income
derived from the inherited properties. It is admitted that the inherited properties and the income
derived therefrom were used in the business of buying and selling other real properties and corporate
securities. Accordingly, the partnership income must include not only the income derived from the
purchase and sale of other properties but also the income of the inherited properties.
Besides, as already observed earlier, the income derived from inherited properties may be considered as individual
income of the respective heirs only so long as the inheritance or estate is not distributed or, at least, partitioned, but
the moment their respective known shares are used as part of the common assets of the heirs to be used in making
profits, it is but proper that the income of such shares should be considered as the part of the taxable income of an
unregistered partnership. This, We hold, is the clear intent of the law.
Likewise, the third question of petitioners appears to have been adequately resolved by the Tax Court in the
aforementioned resolution denying petitioners' motion for reconsideration of the decision of said court. Pertinently, the
court ruled this wise:
In support of the third ground, counsel for petitioners alleges:
Even if we were to yield to the decision of this Honorable Court that the herein
petitioners have formed an unregistered partnership and, therefore, have to be taxed
as such, it might be recalled that the petitioners in their individual income tax returns
reported their shares of the profits of the unregistered partnership. We think it only fair
and equitable that the various amounts paid by the individual petitioners as income
tax on their respective shares of the unregistered partnership should be deducted from
the deficiency income tax found by this Honorable Court against the unregistered

partnership. (page 7, Memorandum for the Petitioner in Support of Their Motion for
Reconsideration, Oct. 28, 1961.)
In other words, it is the position of petitioners that the taxable income of the partnership must be
reduced by the amounts of income tax paid by each petitioner on his share of partnership profits. This
is not correct; rather, it should be the other way around. The partnership profits distributable to the
partners (petitioners herein) should be reduced by the amounts of income tax assessed against the
partnership. Consequently, each of the petitioners in his individual capacity overpaid his income tax
for the years in question, but the income tax due from the partnership has been correctly assessed.
Since the individual income tax liabilities of petitioners are not in issue in this proceeding, it is not
proper for the Court to pass upon the same.
Petitioners insist that it was error for the Tax Court to so rule that whatever excess they might have paid as individual
income tax cannot be credited as part payment of the taxes herein in question. It is argued that to sanction the view of
the Tax Court is to oblige petitioners to pay double income tax on the same income, and, worse, considering the time
that has lapsed since they paid their individual income taxes, they may already be barred by prescription from
recovering their overpayments in a separate action. We do not agree. As We see it, the case of petitioners as regards
the point under discussion is simply that of a taxpayer who has paid the wrong tax, assuming that the failure to pay
the corporate taxes in question was not deliberate. Of course, such taxpayer has the right to be reimbursed what he
has erroneously paid, but the law is very clear that the claim and action for such reimbursement are subject to the bar
of prescription. And since the period for the recovery of the excess income taxes in the case of herein petitioners has
already lapsed, it would not seem right to virtually disregard prescription merely upon the ground that the reason for
the delay is precisely because the taxpayers failed to make the proper return and payment of the corporate taxes
legally due from them. In principle, it is but proper not to allow any relaxation of the tax laws in favor of persons who
are not exactly above suspicion in their conduct vis-a-vis their tax obligation to the State.
IN VIEW OF ALL THE FOREGOING, the judgment of the Court of Tax Appeals appealed from is affirm with costs against
petitioners.

G.R. No. L-45425

April 29, 1939

JOSE GATCHALIAN, ET AL., plaintiffs-appellants,

vs.
THE COLLECTOR OF INTERNAL REVENUE, defendant-appellee.
Guillermo B. Reyes for appellants.
Office of the Solicitor-General Tuason for appellee.
IMPERIAL, J.:
The plaintiff brought this action to recover from the defendant Collector of Internal Revenue the sum of P1,863.44, with
legal interest thereon, which they paid under protest by way of income tax. They appealed from the decision rendered
in the case on October 23, 1936 by the Court of First Instance of the City of Manila, which dismissed the action with the
costs against them.
The case was submitted for decision upon the following stipulation of facts:
Come now the parties to the above-mentioned case, through their respective undersigned attorneys, and
hereby agree to respectfully submit to this Honorable Court the case upon the following statement of facts:
1. That plaintiff are all residents of the municipality of Pulilan, Bulacan, and that defendant is the Collector of
Internal Revenue of the Philippines;
2. That prior to December 15, 1934 plaintiffs, in order to enable them to purchase one sweepstakes ticket
valued at two pesos (P2), subscribed and paid therefor the amounts as follows:

1. Jose Gatchalian ....................................................................................................

P0.18

2. Gregoria Cristobal ...............................................................................................

.18

3. Saturnina Silva ....................................................................................................

.08

4. Guillermo Tapia ...................................................................................................

.13

5. Jesus Legaspi ......................................................................................................

.15

6. Jose Silva .............................................................................................................

.07

7. Tomasa Mercado ................................................................................................

.08

8. Julio Gatchalian ...................................................................................................

.13

9. Emiliana Santiago ................................................................................................

.13

10. Maria C. Legaspi ...............................................................................................

.16

11. Francisco Cabral ...............................................................................................

.13

12. Gonzalo Javier ....................................................................................................

.14

13. Maria Santiago ...................................................................................................

.17

14. Buenaventura Guzman ......................................................................................

.13

15. Mariano Santos .................................................................................................

.14

Total ........................................................................................................

2.00

3. That immediately thereafter but prior to December 15, 1934, plaintiffs purchased, in the ordinary course of
business, from one of the duly authorized agents of the National Charity Sweepstakes Office one ticket bearing
No. 178637 for the sum of two pesos (P2) and that the said ticket was registered in the name of Jose
Gatchalian and Company;
4. That as a result of the drawing of the sweepstakes on December 15, 1934, the above-mentioned ticket
bearing No. 178637 won one of the third prizes in the amount of P50,000 and that the corresponding check
covering the above-mentioned prize of P50,000 was drawn by the National Charity Sweepstakes Office in favor
of Jose Gatchalian & Company against the Philippine National Bank, which check was cashed during the latter
part of December, 1934 by Jose Gatchalian & Company;
5. That on December 29, 1934, Jose Gatchalian was required by income tax examiner Alfredo David to file the
corresponding income tax return covering the prize won by Jose Gatchalian & Company and that on December
29, 1934, the said return was signed by Jose Gatchalian, a copy of which return is enclosed as Exhibit A and
made a part hereof;
6. That on January 8, 1935, the defendant made an assessment against Jose Gatchalian & Company requesting
the payment of the sum of P1,499.94 to the deputy provincial treasurer of Pulilan, Bulacan, giving to said Jose
Gatchalian & Company until January 20, 1935 within which to pay the said amount of P1,499.94, a copy of
which letter marked Exhibit B is enclosed and made a part hereof;
7. That on January 20, 1935, the plaintiffs, through their attorney, sent to defendant a reply, a copy of which
marked Exhibit C is attached and made a part hereof, requesting exemption from payment of the income tax
to which reply there were enclosed fifteen (15) separate individual income tax returns filed separately by each
one of the plaintiffs, copies of which returns are attached and marked Exhibit D-1 to D-15, respectively, in
order of their names listed in the caption of this case and made parts hereof; a statement of sale signed by
Jose Gatchalian showing the amount put up by each of the plaintiffs to cover up the attached and marked as
Exhibit E and made a part hereof; and a copy of the affidavit signed by Jose Gatchalian dated December 29,
1934 is attached and marked Exhibit F and made part thereof;
8. That the defendant in his letter dated January 28, 1935, a copy of which marked Exhibit G is enclosed,
denied plaintiffs' request of January 20, 1935, for exemption from the payment of tax and reiterated his

demand for the payment of the sum of P1,499.94 as income tax and gave plaintiffs until February 10, 1935
within which to pay the said tax;
9. That in view of the failure of the plaintiffs to pay the amount of tax demanded by the defendant,
notwithstanding subsequent demand made by defendant upon the plaintiffs through their attorney on March
23, 1935, a copy of which marked Exhibit H is enclosed, defendant on May 13, 1935 issued a warrant of
distraint and levy against the property of the plaintiffs, a copy of which warrant marked Exhibit I is enclosed
and made a part hereof;
10. That to avoid embarrassment arising from the embargo of the property of the plaintiffs, the said plaintiffs
on June 15, 1935, through Gregoria Cristobal, Maria C. Legaspi and Jesus Legaspi, paid under protest the sum
of P601.51 as part of the tax and penalties to the municipal treasurer of Pulilan, Bulacan, as evidenced by
official receipt No. 7454879 which is attached and marked Exhibit J and made a part hereof, and requested
defendant that plaintiffs be allowed to pay under protest the balance of the tax and penalties by monthly
installments;
11. That plaintiff's request to pay the balance of the tax and penalties was granted by defendant subject to the
condition that plaintiffs file the usual bond secured by two solvent persons to guarantee prompt payment of
each installments as it becomes due;
12. That on July 16, 1935, plaintiff filed a bond, a copy of which marked Exhibit K is enclosed and made a part
hereof, to guarantee the payment of the balance of the alleged tax liability by monthly installments at the rate
of P118.70 a month, the first payment under protest to be effected on or before July 31, 1935;
13. That on July 16, 1935 the said plaintiffs formally protested against the payment of the sum of P602.51, a
copy of which protest is attached and marked Exhibit L, but that defendant in his letter dated August 1, 1935
overruled the protest and denied the request for refund of the plaintiffs;
14. That, in view of the failure of the plaintiffs to pay the monthly installments in accordance with the terms
and conditions of bond filed by them, the defendant in his letter dated July 23, 1935, copy of which is attached
and marked Exhibit M, ordered the municipal treasurer of Pulilan, Bulacan to execute within five days the
warrant of distraint and levy issued against the plaintiffs on May 13, 1935;
15. That in order to avoid annoyance and embarrassment arising from the levy of their property, the plaintiffs
on August 28, 1936, through Jose Gatchalian, Guillermo Tapia, Maria Santiago and Emiliano Santiago, paid
under protest to the municipal treasurer of Pulilan, Bulacan the sum of P1,260.93 representing the unpaid
balance of the income tax and penalties demanded by defendant as evidenced by income tax receipt No.
35811 which is attached and marked Exhibit N and made a part hereof; and that on September 3, 1936, the
plaintiffs formally protested to the defendant against the payment of said amount and requested the refund
thereof, copy of which is attached and marked Exhibit O and made part hereof; but that on September 4, 1936,
the defendant overruled the protest and denied the refund thereof; copy of which is attached and marked
Exhibit P and made a part hereof; and
16. That plaintiffs demanded upon defendant the refund of the total sum of one thousand eight hundred and
sixty three pesos and forty-four centavos (P1,863.44) paid under protest by them but that defendant refused
and still refuses to refund the said amount notwithstanding the plaintiffs' demands.
17. The parties hereto reserve the right to present other and additional evidence if necessary.
Exhibit E referred to in the stipulation is of the following tenor:
To whom it may concern:
I, Jose Gatchalian, a resident of Pulilan, Bulacan, married, of age, hereby certify, that on the 11th day of
August, 1934, I sold parts of my shares on ticket No. 178637 to the persons and for the amount indicated
below and the part of may share remaining is also shown to wit:
Purchaser

Amount

Address

1. Mariano Santos ...........................................

P0.14

Pulilan, Bulacan.

2. Buenaventura Guzman ...............................

.13

- Do -

3. Maria Santiago ............................................

.17

- Do -

4. Gonzalo Javier ..............................................

.14

- Do -

5. Francisco Cabral ..........................................

.13

- Do -

6. Maria C. Legaspi ..........................................

.16

- Do -

7. Emiliana Santiago .........................................

.13

- Do -

8. Julio Gatchalian ............................................

.13

- Do -

9. Jose Silva ......................................................

.07

- Do -

10. Tomasa Mercado .......................................

.08

- Do -

11. Jesus Legaspi .............................................

.15

- Do -

12. Guillermo Tapia ...........................................

.13

- Do -

13. Saturnina Silva ............................................

.08

- Do -

14. Gregoria Cristobal .......................................

.18

- Do -

15. Jose Gatchalian ............................................

.18

- Do -

2.00

Total cost of said

ticket; and that, therefore, the persons named above are entitled to the parts of whatever prize that might be
won by said ticket.
Pulilan, Bulacan, P.I.
(Sgd.) JOSE GATCHALIAN
And a summary of Exhibits D-1 to D-15 is inserted in the bill of exceptions as follows:
RECAPITULATIONS OF 15 INDIVIDUAL INCOME TAX RETURNS FOR 1934 ALL DATED JANUARY 19, 1935
SUBMITTED TO THE COLLECTOR OF INTERNAL REVENUE.

Name

Exhibit
No.

Purchase
Price

Price
Won

Expenses

Net
prize

1. Jose Gatchalian ..........................................

D-1

P0.18

P4,425

P 480

3,945

2. Gregoria Cristobal ......................................

D-2

.18

4,575

2,000

2,575

3. Saturnina Silva .............................................

D-3

.08

1,875

360

1,515

4. Guillermo Tapia ..........................................

D-4

.13

3,325

360

2,965

5. Jesus Legaspi by Maria Cristobal .........

D-5

.15

3,825

720

3,105

6. Jose Silva ....................................................

D-6

.08

1,875

360

1,515

7. Tomasa Mercado .......................................

D-7

.07

1,875

360

1,515

8. Julio Gatchalian by Beatriz Guzman .......

D-8

.13

3,150

240

2,910

9. Emiliana Santiago ......................................

D-9

.13

3,325

360

2,965

10. Maria C. Legaspi ......................................

D-10

.16

4,100

960

3,140

11. Francisco Cabral ......................................

D-11

.13

3,325

360

2,965

12. Gonzalo Javier ..........................................

D-12

.14

3,325

360

2,965

13. Maria Santiago ..........................................

D-13

.17

4,350

360

3,990

14. Buenaventura Guzman ...........................

D-14

.13

3,325

360

2,965

15. Mariano Santos ........................................

D-15

.14

3,325

360

2,965

2.00

50,000

<="" td="">

The legal questions raised in plaintiffs-appellants' five assigned errors may properly be reduced to the two following:
(1) Whether the plaintiffs formed a partnership, or merely a community of property without a personality of its own; in
the first case it is admitted that the partnership thus formed is liable for the payment of income tax, whereas if there
was merely a community of property, they are exempt from such payment; and (2) whether they should pay the tax
collectively or whether the latter should be prorated among them and paid individually.
The Collector of Internal Revenue collected the tax under section 10 of Act No. 2833, as last amended by section 2 of
Act No. 3761, reading as follows:
SEC. 10. (a) There shall be levied, assessed, collected, and paid annually upon the total net income received in
the preceding calendar year from all sources by every corporation, joint-stock company, partnership, joint
account (cuenta en participacion), association or insurance company, organized in the Philippine Islands, no
matter how created or organized, but not including duly registered general copartnership (compaias
colectivas), a tax of three per centum upon such income; and a like tax shall be levied, assessed, collected,
and paid annually upon the total net income received in the preceding calendar year from all sources within
the Philippine Islands by every corporation, joint-stock company, partnership, joint account (cuenta en
participacion), association, or insurance company organized, authorized, or existing under the laws of any
foreign country, including interest on bonds, notes, or other interest-bearing obligations of residents, corporate
or otherwise: Provided, however, That nothing in this section shall be construed as permitting the taxation of
the income derived from dividends or net profits on which the normal tax has been paid.
The gain derived or loss sustained from the sale or other disposition by a corporation, joint-stock company,
partnership, joint account (cuenta en participacion), association, or insurance company, or property, real,
personal, or mixed, shall be ascertained in accordance with subsections (c) and (d) of section two of Act
Numbered Two thousand eight hundred and thirty-three, as amended by Act Numbered Twenty-nine hundred
and twenty-six.
The foregoing tax rate shall apply to the net income received by every taxable corporation, joint-stock
company, partnership, joint account (cuenta en participacion), association, or insurance company in the
calendar year nineteen hundred and twenty and in each year thereafter.
There is no doubt that if the plaintiffs merely formed a community of property the latter is exempt from the payment of
income tax under the law. But 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 (article 1665, Civil Code). 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.
Having organized and constituted a partnership of a civil nature, the said entity is the one bound to pay the income tax
which the defendant collected under the aforesaid section 10 (a) of Act No. 2833, as amended by section 2 of Act No.
3761. There is no merit in plaintiff's contention that the tax should be prorated among them and paid individually,
resulting in their exemption from the tax.
In view of the foregoing, the appealed decision is affirmed, with the costs of this instance to the plaintiffs appellants.
So ordered.
Avancea, C.J., Villa-Real, Diaz, Laurel, Concepcion and Moran, JJ., concur.

G.R. Nos. L-24020-21

July 29, 1968

FLORENCIO REYES and ANGEL REYES, petitioners,

vs.
COMMISSIONER OF INTERNAL REVENUE and HON. COURT OF TAX APPEALS, respondents.
Jose W. Diokno and Domingo Sandoval for petitioners.
Office of the Solicitor General for respondents.
FERNANDO, J.:
Petitioners in this case were assessed by respondent Commissioner of Internal Revenue the sum of P46,647.00 as
income tax, surcharge and compromise for the years 1951 to 1954, an assessment subsequently reduced to
P37,528.00. This assessment sought to be reconsidered unsuccessfully was the subject of an appeal to respondent
Court of Tax Appeals. Thereafter, another assessment was made against petitioners, this time for back income taxes

plus surcharge and compromise in the total sum of P25,973.75, covering the years 1955 and 1956. There being a
failure on their part to have such assessments reconsidered, the matter was likewise taken to the respondent Court of
Tax Appeals. The two cases 1 involving as they did identical issues and ultimately traceable to facts similar in character
were heard jointly with only one decision being rendered.
In that joint decision of respondent Court of Tax Appeals, the tax liability for the years 1951 to 1954 was reduced to
P37,128.00 and for the years 1955 and 1956, to P20,619.00 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.3 A reconsideration of the aforesaid decision was sought and denied by respondent Court of Tax
Appeals. Hence this petition for review.
The facts as found by respondent Court of Tax Appeals, which being supported by substantial evidence, must be
respected4 follow: "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 gross income from rentals of the building amounted to about P90,000.00 annually." 5
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.1wph1.t Consequently they allege that the reliance by respondent Court of Tax Appeals was
unwarranted and the decision should be set aside. If their interpretation of the authoritative doctrine therein set forth
commands assent, then clearly what respondent Court of Tax Appeals did fails to find shelter in the law. That is the
crux of the matter. A perusal of the Evangelista decision is therefore unavoidable.
As noted in the opinion of the Court, penned by the present Chief Justice, 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, ..."10
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."11 The conclusion that emerged had all the imprint of inevitability. Thus: "Although, taken
singly, they might not suffice to establish the intent necessary to constitute a partnership, the collective effect of these
circumstances is such as to leave no room for doubt on the existence of said intent in petitioners herein." 12
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 ..." 13
Differences of such slight significance do not call for a different ruling.
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
In the light of the above, it cannot be said that the respondent Court of Tax Appeals decided the matter incorrectly.
There is no warrant for the assertion that it failed to apply the settled law to uncontroverted facts. Its decision cannot
be successfully assailed. Moreover, an observation made in Alhambra Cigar & Cigarette Manufacturing Co. v.
Commissioner of Internal Revenue,17 is well-worth recalling. Thus: "Nor as a matter of principle is it advisable for this
Court to set aside the conclusion reached by an agency such as the Court of Tax Appeals which is, by the very nature
of its functions, dedicated exclusively to the study and consideration of tax problems and has necessarily developed
an expertise on the subject, unless, as did not happen here, there has been an abuse or improvident exercise of its
authority."
WHEREFORE, the decision of the respondent Court of Tax Appeals ordering petitioners "to pay the sums of P37,128.00
as income tax due from the partnership formed by herein petitioners for the years 1951 to 1954 and P20,619.00 for
the years 1955 and 1956 within thirty days from the date this decision becomes final, plus the corresponding
surcharge and interest in case of delinquency," is affirmed. With costs against petitioners.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro and Angeles, JJ., concur.

[G.R. Nos. L-11483-84. February 14, 1958.]

In the matter of the Testate Estate of the deceased Edward E. Christensen, ADOLFO CRUZ AZNAR,
Petitioner. MARIA LUCY CHRISTENSEN DANEY and ADOLFO CRUZ AZNAR, Petitioners-Appellants, v. MARIA
HELEN CHRISTENSEN GARCIA and BERNARDA CAMPOREDONDO, Oppositors-Appellees.
BERNARDA CAMPOREDONDO, Plaintiff-Appellee, v. ADOLFO CRUZ AZNAR, as Executor of the Deceased
EDWARD E. CHRISTENSEN, Defendant-Appellant.
M. R. Sotelo for Appellants.
Leopoldo M. Abellera and Amado A. Munda for appellee Maria Helen Christensen Garcia.
Pedro P. Suarez and Oscar Breva for appellee Bernarda Camporedondo.

SYLLABUS

1. NATIONAL CHILDREN; ACKNOWLEDGMENT OF; FACTORS TO BE CONSIDERED IN DETERMINING THE STATUS OF THE
CHILD. Where, as in the recent case, the child had established that she had been in continuous possession of the
status of natural child of the deceased, the latters act in disavowing his paternity to the child cannot be made the
criterion in determining whether the child was his or not, for human frailty and parental arrogance sometimes may
draw a person to adopt unnatural or harsh measures against an erring child or one who displeases him just so the
weight of his authority could be felt. In the consideration of a claim that one is a natural child, the attitude or direct
acts of the person against them whom such motion is directed or that of his family before the controversy arose or
during his lifetime if he predeceases the claimant, and not at a single opportunity or on isolated occasions but as a
whole, must be taken into account. The possession of such status is one of the cases that gives rise to the right in
favor
of
the
child
of
compulsory
recognition.
(Art.
2833,
Civil
Code).
2. ID.; ID.; ID.; EFFECT OF COURTS DECLARATION THAT THE CHILD HAS ACQUIRED STATUS OF NATURAL CHILD. In
cases of compulsory recognition, as in the case at bar, it would be sufficient that a competent court, after taking into
account all the evidence on record, would declare that under any of the circumstances specified by Article 283 of the
Civil ode, a child has acquired the status of a natural child of the presumptive parent and as such is entitled to all the
rights granted to it by law, for such declaration is by itself already a judicial recognition of the paternity of the parent
concerned which the heirs of the latter against whom the action is directed, are bound to respect.
3. INFORMAL CIVIL PARTNERSHIP; REQUISITE BEFORE A PARTY MAY BE ENTITLED TO SHARE IN THE PROPERTIES
ACQUIRED DURING THE COHABITATION; CASE AT BAR. Before Republic Act No. 386 (Civil Code of the Philippines)
went into operation on August 30, 1950, this court had already 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 each of
them has an equal interest in the properties acquired during said union and is entitled to participate therein if said
properties were the product of their JOINT effort (Marata v. Diono G.R. No. 24449, December 31, 1925; Lecasa v. Felix
Vda. de Lesaca, 91 Phil., 135; Flores v. Rehabilitation Finance Corporation, 94 Phil., 451, 50 Off. Gaz. 1029). In the case
at bar, aside from the observation of the trial court that appellee was an illiterate woman, there appears no evidence
to prove appellees contribution or participation in the acquisition of the properties involved; therefore, following the
aforecited ruling of this Court, appellees claim for 1/2 of the properties cannot be granted. Even assuming for the sake
of argument that this case falls under the provisions of Article 144 of the Civil Code which recognizes the parties as coowners of the properties acquires during the union, the law would be applicable only as far as properties acquired after
the Act are concerned and to no other, for such law cannot be given retroactive effect to govern those already
possessed before August 30, 1950.

DECISION

FELIX, J.:

From the records of the above-entitled cases, it appears that as of 1913, Edward E. Christensen, an American citizen,
was already residing in Davao and on the following year became the manager of the Mindanao Estates located in the
municipality of Padada of the same province. At a certain time, which the lower court placed at 1917, a group of
laborers recruited from Argao, Cebu, arrived to work in the said plantation. Among the group was a young girl,
Bernarda Camporedondo, who became an assistant to the cook. Thereafter, this girl and Edward E. Christensen, who
was also unmarried started living together as husband and wife and although the records failed to establish the exact
date when such relationship commenced, the lower court found the same to have 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

G.

R.

born.
No.

L-11484.

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. Said will contains, among others, the following provisions:chanrob1es virtual 1aw
library
x

"3. I declare . . that I have but one (1) child named MARIA LUCY CHRISTENSEN (now Mrs. Bernard Daney) who was born
in the Philippines about twenty-eight years ago, and who is now residing at No. 665 Rodger Young Village, Los Angeles,
California,
U.S.A.
"4. I further declare that I now have no living ascendants and no descendants except my above named daughter
MARIA LUCY CHRISTENSEN DANEY.
x

"7. I give devise and bequeath unto MARIA HELEN CHRISTENSEN, now married to Eduardo Garcia about eighteen years
of age and who notwithstanding the fact that she was baptized Christensen, is not in any way related to me, nor has
she been at any time adopted by me, and who, from all information I have now resides in Egpit, Digos, Davao,
Philippines, the sum of THREE THOUSAND SIX HUNDRED PESOS (P3,600) Philippine Currency, the same to be
deposited in trust for the said Maria Helen Christensen with the Davao Branch of the Philippine National Bank, and paid
to her at the rate of One Hundred Pesos (P100), Philippine Currency per month until the principal thereof as well as any
interest
which
may
have
accrued
thereon,
is
exhausted.
"8. I give, devise and bequeath unto BERNARDA CAMPOREDONDO, now residing in Padada, Davao, Philippines, the
sum of One Thousand Pesos (P1,000), Philippine Currency.
x

"12. I hereby give, devise and bequeath, unto my well-beloved daughter, the said MARIA LUCY CHRISTENSEN DANEY
(Mrs. Bernard Daney), now residing as aforesaid at No. 665 Rodger Young Village Los Angeles, California, U.S.A., all the
income from the rest, remainder, and residue of my property and estate, real, personal and/or mixed, of whatsoever
kind or character, and wheresoever situated, of which I may be possessed at my death and which may have come to
me from any source whatsoever, during her lifetime, Provided, however, that should the said MARIA LUCY
CHRISTENSEN DANEY at any time prior to her decease having living issue, then, and in that event, the life interest
herein given shall terminate, and if so terminatad, then I give, devise, and bequeath to my said daughter, the said
MARIA LUCY CHRISTENSEN DANEY, the rest, remainder and residue of my property, with the same force and effect as if
I had originally so given, devised and bequeathed it to her; and provided, further, that should the said Maria Lucy
Christensen Daney die without living issue, then, and in that event, I give, devise and bequeath all the rest, remainder
and residue of my property, one-half (1/2) to my well-beloved sister, Mrs. CARRIE LOUISE C. BORTON, now residing at
No. 2124 Twentieth Street, Bakersfield, California, U.S.A., and one-half (1/2) to the children of my deceased brother,
JOSEPH
C.
CHRISTENSEN,
.
.
.
.
"13. I hereby nominate and appoint Mr. Adolfo Cruz Aznar, of Davao City, Philippines, my executor, and the executor of
this, my last will and testament.
x
(Exh.

x
A)

Oppositions to the probate of this will were separately filed by Maria Helen Christensen Garcia and Bernarda
Camporedondo, the first contending that the will lacked the formalities required by law; that granting that it had, the
dispositions made therein were illegal because although she and Lucy Christensen were both children had by the
deceased with Bernarda Camporedondo, 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 that of the estate. It was therefore
prayed by this 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.
Bernarda Camporedondo, on the other hand, claimed ownership over one-half of the entire estate in virtue of her

relationship with the deceased, it being alleged that she and the testator having lived together as husband and wife
continuously for a period of over 30 years, the properties acquired during such cohabitation should be governed by the
rules on co-ownership. This opposition was dismissed by the probate court on the ground that she had no right to
intervene in said proceeding, for as such common-law wife she had no successional right that might be affected by the
probate of the will, and likewise, she could not be allowed to establish her title and co- ownership over the properties
therein for such questions must be ventilated in a court of general jurisdiction. In view of this ruling of the Court and in
order to attain the purpose sought by her overruled opposition Bernarda Camporedondo had to institute, as she did
institute Civil Case No. 1076 of the Court of First Instance of Davao (G. R. No. L-11483) which we will consider and
discuss
hereinafter.
In the meantime, Adolfo Cruz Aznar was appointed special administrator of the estate after filing a bond for P5,000
pending the appointment of a regular one, and letters of special administration were correspondingly issued to him on
May
21,
1953.
The records further show that subsequent to her original opposition, Helen Christensen Garcia filed a supplemental
opposition and motion to declare her an acknowledged natural child of Edward E. Christensen, alleging that she was
conceived during the time when her mother Bernarda Camporedondo was living with the deceased as his common-law
wife; that she had been in continuous possession of the status of a natural child of the deceased; that she had in her
favor evidence and/or proof that Edward Christensen was her father; and that she and Lucy had the same civil status
as children of the decedent and Bernarda Camporedondo. This motion was opposed jointly by the executor and Maria
Lucy Christensen Daney asserting that before, during and after the conception and birth of Helen Christensen Garcia,
her mother was generally known to be carrying relations with 3 different men; that during the lifetime of the decedent
and even years before his death, Edward Christensen verbally as well as in writing disavowed relationship with said
oppositor, that oppositor appropriated and used the surname Christensen illegally and without permission from the
deceased. Thus they prayed the Court that the will be allowed; that Maria Helen Christensen Garcia be declared not in
any
way
related
to
the
deceased;
and
that
the
motion
of
said
oppositor
be
denied.
After due hearing, the lower court in a decision dated February 28, 1953, found that oppositor Maria Helen Christensen
had been in continuous possession of the status of a natural child of the deceased Edward Christensen
notwithstanding the fact that she was disowned by him in his will, for such action must have been brought about by
the latters disapproval of said oppositors marriage to a man he did not like. But taking into consideration that such
possession of the status of a natural child did not of itself constitute acknowledgment but may only be availed of to
compel acknowledgment, the lower Court directed Maria Lucy Christensen Daney to acknowledge the oppositor as a
natural child of Edward E. Christensen. The will was, however, allowed and letters testamentary consequently issued to
Adolfo Cruz Aznar, the executor named therein. From the portion of the decision requiring Lucy Christensen to
acknowledge Helen as a natural child of the testator, the former and the executor interposed an appeal to the Court of
Appeals (CA-G. R. No 13421-R), but the appellate tribunal elevated the same to Us on the ground that the case
involves an estate the value of which far exceeds P50,000.00 and thus falls within the exclusive appellate jurisdiction
of
this
Court
pursuant
to
Section
17
(5),
Republic
Act
No.
296.
The principal issue in this litigation is whether the lower Court erred in finding that the oppositor Maria Helen
Christensen Garcia had been in continuous possession of the status of a natural child of the deceased Edward E.
Christensen and in directing Maria Lucy Christensen Daney, recognized daughter and instituted heir of the decedent,
to
acknowledge
the
former
as
such
natural
child.
Maria Lucy Christensen was born on April 25, 1922, and Maria Helen Christensen on July 2, 1934, of the same mother,
Bernarda Camporedondo, during the period when the latter was publicly known to have been living as common-law
wife of Edward E. Christensen. From the facts of the case there can be no question as to Lucys parentage, but
controversy arose when Edward Christensen, in making his last will and testament, disavowed such paternity to Helen
and gave her only a legacy of P3,600. In the course of the proceeding for the probate of the will (Exh. A), Helen
introduced documentary and testimonial evidence to support her claim that she, like Lucy, was a natural child of the
deceased and, therefore, entitled to the hereditary share corresponding to such descendant. Several witnesses
testified in her favor, including her mother Bernarda Camporedondo, her former teachers and other residents of the
community, tending to prove that she was known in the locality as a child of the testator and was introduced by the
latter to the circle of his friends and acquaintances as his daughter. Family portraits, greeting cards and letters were
likewise presented to bolster her assertion that she had always been treated by the deceased and by Lucy herself as a
member
of
the
family.
Lucy Christensen and Adolfo Cruz Aznar, as executor, tried to repudiate her claim by introducing evidence to prove
that on or about the period when she was conceived and born, her mother was carrying an affair with another man,
Zosimo Silva, a former laborer in her Paligue plantation. Silva executed an affidavit and even took the witness stand to
testify to this effect. Appellants also strived to show that the decedents solicitations for Helens welfare and the help
extended to her merely sprang out of generosity and hammered on the fact that on several occasions, the deceased
disclaimed any relationship with her (Exh. O-Daney, Exh. Q-Daney, Exh. Z-Daney, Exh. 8-Helen).
Going over the evidence adduced during the trial, It appears indubitable that on or about the period when Helen was
born, Bernarda Camporedondo had established residence at her plantation at Paligue, Davao, and that although
Edward Christensen stayed in Davao City to manage his merchandising business, he spent the weekends with the

former and their child Lucy in the Christensen plantation. Even granting that Zosimo Silva at this stage fitted himself
into the picture, it cannot be denied that Helens mother and the deceased were generally and publicly known to be
living together as husband and wife. This must have been the reason why Christensen from Helens birth in 1934
provided for her maintenance; shouldered the expenses for her education to the extent that she was even enrolled as
an intern in an exclusive college for girls in Manila; tolerated or allowed her carrying the surname "Christensen", and in
effect gave her the attention and care that a father would only do to his offspring. We should take note that nothing
appears on record to show that Christensen ever entertained any doubt or disputed Helens paternity. His repudiations
of her relationship with him came about only after he and Bernarda Camporedondo parted ways in March, 1950, and
apparently after Helen took sides with her mother. Furthermore, it seems that despite the decedents desire that she
continue her studies, Helen ignored the same and got married to a man for whom Christensen held no high esteem.
We may state at this juncture that while it is true that herein appellants introduced witnesses to disprove oppositors
claim, the lower Court that had the opportunity to observe the conduct of the witnesses while testifying and could
better gauge their credibility and impartiality in the case, arrived at the conclusion that Maria Helen Christensen had
established that she had been in continuous possession of the status of a natural child of the deceased. Considering
the preponderant evidence on record, We see no reason to reverse said ruling. The testators last acts cannot be made
the criterion in determining whether oppositor was his child or not, for human frailty and parental arrogance
sometimes may draw a person to adopt unnatural or harsh measures against an erring child or one who displeases
him just so the weight of his authority could be felt. In the consideration of a claim that one is a natural child, the
attitude or direct acts of the person against whom such action is directed or that of his family before the controversy
arose or during his lifetime if he predeceases the claimant, and not at a single opportunity or on isolated occasions but
as a whole, must be taken into account. The possession of such status is one of the cases that gives rise to the right, in
favor
of
the
child,
of
compulsory
recognition.
(Art.
283,
Civil
Code).
The lower Court, however, after making its finding directed Maria Lucy Christensen Daney, an heir of the decedent, to
recognize oppositor as a natural child of the deceased. This seems improper. The Civil Code provides for 2 kinds of
acknowledgment of a natural child: voluntary and compulsory. In the first instance, which may be effected in the
record of birth, a will, a statement before a court of record or in an authentic writing (Art. 278, Civil Code), court
intervention is very nil if not altogether wanting, whereas in the second, judicial pronouncement is essential, and while
it is true that the effect of a voluntary and a compulsory acknowledgment on the rights of the child so recognized is
the same, to maintain the view of the lower Court would eliminate the distinction between voluntary acts and those
brought about by judicial dicta. And if We consider that in the case where the presumed parent dies ahead of the child
and action for compulsory recognition is brought against the heirs of the deceased, as in the instant case, the situation
would take an absurd turn for, the heirs would be compelled to recognize such child as a natural child of the deceased
without a proper provision of the law, for as it now stands, the Civil Code only requires a declaration by the court of the
childs status as a natural child of the parent who, if living, would be compelled to recognize his offspring as such.
Therefore, We hold that in cases of compulsory recognition, as in the case at bar, it would be sufficient that a
competent court, after taking into account all the evidence on record, would declare that under any of the
circumstances specified by Article 283 of the Civil Code, a child has acquired the status of a natural child of the
presumptive parent and such is entitled to all rights granted to it by law, for such declaration is by itself already a
judicial recognition of the paternity of the parent concerned which is hers against whom the action is directed, are
bound
to
respect.
G.R.

No.

L-11483

Coming now to Civil Case No. 1076 of the Court of First Instance of Davao, Bernarda Camporedondo claimed in her
complaint of the properties of the deceased as co-owner thereof in virtue of her relations with the deceased. She
alleged as basis for her action that she and the deceased Edward E. Christensen had lived and cohabited as husband
and wife, continuously and openly for a period of 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 seemed 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 Camporedondo,
not otherwise suffering from any impediment to contract marriage, lived together as husband and wife without marital
ties continuously for over 30 years until the formers 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 the Civil 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 to 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
its
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 courts
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
Camporedondo 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 case as found by the trial court, with
the modification that the cohabitation should appear as continuous from the early 20s 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
latters
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 bringing properties unto
said union, and probably realizing that while same may not be acceptable from the moral point of view they are as
much entitled to the protection of the laws as any other property owners, the lawmakers incorporated Article 144 in
Republic Act No. 386 (Civil Code of the Philippines) to govern their property relations. Said article read as
follows:chanrob1es
virtual
1aw
library
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
on
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
those 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 it ever
existed, same may be considered terminated upon their separation or desistance to continue said relations. The
Spanish Civil Code which was then in force contains to counterpart of Article 144 and as the records in the instant case
failed to show that a subsequent reconciliation ever took place and considering that Republic Act No. 386 which
recognized such form of co-ownership went into operation only on August 30, 1950, evidently, this later enactment
cannot
be
invoked
as
basis
for
appellees
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 (Marata v. Dionio G. R. No. 24449, Dec. 31,
1925). In another case, this Court similarly held that although there is no technical marital partnership between
persons living maritally without being lawfully married, nevertheless there is between them an informal civil
partnership, and the parties would be entitled to an equal interest where the property is acquired through their JOINT
efforts
(Lesaca
v.
Felix
Vda.
de
Lesaca,
91
Phil.,
135).
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 and/or acquisition of the same. 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 same was acquired through their joint efforts and labor (Flores v.
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 Camporedondo. We may further state that, even granting, for the sake of
argument, that this case falls under the provisions of Article 144 of the Civil Code, same would be applicable only as
far as properties acquired after the effectivity of Republic Act 386 are concerned and to no other, for such 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.
Article 2252 of the same Code is explicit in this respect when it states:chanrob1es virtual 1aw library
SEC. 2252. Changes made and new provisions and rules laid down by this Code which may prejudice or impair vested
or acquired rights in accordance with the old legislation, shall have no retroactive effect.
x

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.
With regard to appellant Aznars contention that the lower Court erred in admitting the testimony of appellee Bernarda
Camporedondo dealing with facts that transpired before the death of Edward Christensen on the ground that it is
prohibited by Section 26-(c), Rule 123 of the Rules of Court, We deem it unnecessary to delve on the same because
even admitting that the court a quo committed the error assigned, yet it will not affect anymore the outcome of the
case
in
view
of
the
conclusion
We
have
already
arrived
at
on
the
main
issue.
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 Maria Lucy Christensen Deney 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.
The decision appealed from in case G. R. No. L-11483 is hereby reversed and another one rendered, dismissing
plaintiffs
complaint.
Costs are taxed against appellants in G. R. No. L-11484 and against appellee Bernarda Camporedondo in G. R. No. L11483.
It
is
so
ordered.
Paras, C.J., Bengzon, Padilla, Reyes, A., Bautista Angelo, Concepcion, Reyes, J. B. L. and Endencia, JJ., concur.

G.R. No. L-2484 April 11, 1906

JOHN FORTIS,Plaintiff-Appellee, vs. GUTIERREZ HERMANOS,Defendants-Appellants.
Hartigan, Rohde and Gutierrez, for appellants.
W. A. Kincaid, for appellee.
WILLARD, J.:
Plaintiff, an employee of defendants during the years 1900, 1901, and 1902, brought this action to recover a balance
due him as salary for the year 1902. He alleged that he was entitled, as salary, to 5 per cent of the net profits of the
business of the defendants for said year. The complaint also contained a cause of action for the sum of 600 pesos,
money expended by plaintiff for the defendants during the year 1903. The court below, in its judgment, found that the
contract had been made as claimed by the plaintiff; that 5 per cent of the net profits of the business for the year 1902
amounted to 26,378.68 pesos, Mexican currency; that the plaintiff had received on account of such salary 12,811.75
pesos, Mexican currency, and ordered judgment against the defendants for the sum 13,566.93 pesos, Mexican
currency, with interest thereon from December 31, 1904. The court also ordered judgment against the defendants for
the 600 pesos mentioned in the complaint, and intereat thereon. The total judgment rendered against the defendants
in favor of the plaintiff, reduced to Philippine currency, amounted to P13,025.40. The defendants moved for a new trial,
which was denied, and they have brought the case here by bill of exceptions. chanroblesvirtualawlibrary chanrobles
virtual law library

(1) The evidence is sufifcient to support the finding of the court below to the effect that the plaintiff worked for the
defendants during the year 1902 under a contract by which he was to receive as compensation 5 per cent of the net
profits of the business. The contract was made on the part of the defendants by Miguel Alonzo Gutierrez. By the
provisions of the articles of partnership he was made one of the managers of the company, with full power to transact
all of the business thereof. As such manager he had authority to make a contract of employment with the
plaintiff.chanroblesvirtualawlibrary chanrobles virtual law library
(2) Before answering in the court below, the defendants presented a motion that the complaint be made more definite
and certain. This motion was denied. To the order denying it the defendants excepted, and they have assigned as error
such ruling of the court below. There is nothing in the record to show that the defendants were in any way prejudiced
by this ruling of the court below. If it were error it was error without prejudice, and not ground for reversal. (Sec. 503,
Code of Civil Procedure.)chanrobles virtual law library
(3) It is claimed by the appellants that the contract alleged in the complaint made the plaintiff a copartner of the
defendants in the business which they were carrying on. This contention can not bo sustained. It was a mere contract
of employnent. The plaintiff had no voice nor vote in the management of the affairs of the company. The fact that the
compensation received by him was to be determined with reference to the profits made by the defendants in their
business did not in any sense make by a partner therein. The articles of partnership between the defendants provided
that the profits should be divided among the partners named in a certain proportion. The contract made between the
plaintiff and the then manager of the defendant partnership did not in any way vary or modify this provision of the
articles of partnership. The profits of the business could not be determined until all of the expenses had been paid. A
part of the expenses to be paid for the year 1902 was the salary of the plaintiff. That salary had to be deducted before
the net profits of the business, which were to be divided among the partners, could be ascertained. It was undoubtedly
necessary in order to determine what the salary of the plaintiff was, to determine what the profits of the business
were, after paying all of the expenses except his, but that determination was not the final determination of the net
profits of the business. It was made for the purpose of fixing the basis upon which his compensation should be
determined.chanroblesvirtualawlibrary chanrobles virtual law library
(4) It was no necessary that the contract between the plaintiff and the defendants should be made in writing. (Thunga
Chui vs. Que Bentec, 1 1 Off. Gaz., 818, October 8, 1903.)chanrobles virtual law library
(5) It appearred that Miguel Alonzo Gutierrez, with whom the plaintiff had made the contract, had died prior to the trial
of the action, and the defendants claim that by reasons of the provisions of section 383, paragraph 7, of the Code of
Civil Procedure, plaintiff could not be a witness at the trial. That paragraph provides that parties to an action against
an executor or aministrator upon a claim or demand against the estate of a deceased person can not testify as to any
matter of fact occurring before the death of such deceased person. This action was not brought against the
administrator of Miguel Alonzo, nor was it brought upon a claim against his estate. It was brought against a partnership
which was in existence at the time of the trial of the action, and which was juridical person. The fact that Miguel Alonzo
had been a partner in this company, and that his interest therein might be affected by the result of this suit, is not
sufficient to bring the case within the provisions of the section above cited.chanroblesvirtualawlibrary chanrobles
virtual law library
(6) The plaintiff was allowed to testify against the objection and exception of the defendants, that he had been paid as
salary for the year 1900 a part of the profits of the business. This evidence was competent for the purpose of
corroborating the testimony of the plaintiff as to the existence of the contract set out in the
complaint.chanroblesvirtualawlibrary chanrobles virtual law library
(7) The plaintiff was allowed to testify as to the contents of a certain letter written by Miguel Glutierrez, one of the
partners in the defendant company, to Miguel Alonzo Gutierrez, another partner, which letter was read to plaintiff by
Miguel Alonzo. It is not necessary to inquire whether the court committed an error in admitting this evidence. The case
already made by the plaintiff was in itself sufficient to prove the contract without reference to this letter. The error, if
any there were, was not prejudicial, and is not ground for revesal. (Sec. 503, Code of Civil Procedure.)chanrobles
virtual law library
(8) For the purpose of proving what the profits of the defendants were for the year 1902, the plaintiff presented in
evidence the ledger of defendants, which contained an entry made on the 31st of December, 1902, as follows:
Perdidas y Ganancias ...................................... a Varios Ps. 527,573.66 Utilidades liquidas obtenidas durante el ano y
que abonamos conforme a la proporcion que hemos establecido segun el convenio de sociedad.
The defendant presented as a witness on, the subject of profits Miguel Gutierrez, one of the defendants, who testiffied,
among other things, that there were no profits during the year 1902, but, on the contrary, that the company suffered
considerable loss during that year. We do not think the evidence of this witnees sufficiently definite and certain to
overcome the positive evidence furnished by the books of the defendants themselves.chanroblesvirtualawlibrary
chanrobles virtual law library

(9) In reference to the cause of action relating to the 600 pesos, it appears that the plaintiff left the employ of the
defendants on the 19th of Macrh, 1903; that at their request he went to Hongkong, and was there for about two
months looking after the business of the defendants in the matter of the repair of a certain steamship. The appellants
in their brief say that the plaintiff is entitled to no compensation for his services thus rendered, because by the
provisions of article 1711 of the Civil Code, in the absence of an agreement to the contrary, the contract of agency is
supposed to be gratuitous. That article i not applicable to this case, because the amount of 600 pesos not claimed as
compensation for services but as a reimbursment for money expended by the plaintiff in the business of the
defendants. The article of the code that is applicable is article 1728.chanroblesvirtualawlibrary chanrobles virtual law
library
The judgment of the court below is affirmed, with the costs, of this instance against the appellants. After the expiration
of twenty days from the date of this decision let final judgment be entered herein, and ten days thereafter let the case
be remanded to the lower court for execution. So ordered.chanroblesvirtualawlibrary chanrobles virtual law library
Arellano, C.J., Torres, Mapa, Johnson and Carson, JJ., concur.