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Heirs of Tan Eng Kee vs.

Court of Appeals money, property, or industry to a common fund, and (2) they
G.R. No. 126881, Oct. 3, 2000 intend to divide the profits among themselves. The essence of
De Leon, Jr., J.: partnership is that the partners share in the profits and losses.
Each has the right to demand an accounting as long as the
FACTS: partnership exists. It is indeed odd, if not unnatural, that
despite forty years the partnership was allegedly in existence,
Petitioners are the common-law spouse and children of the Tan Eng Kee never asked for an accounting. A demand for
deceased of Tan Eng Kee. Tan Eng Kee died on Sept. 13, periodic accounting evinces partnership.
1984. Following his demise, petitioners filed a complaint for
accounting, liquidation, and winding up against Benguet Also, petitioners contention that the deceased, during his
Lumber Company, represented by its president, Tan Eng Lay, lifetime, received his share in the profits of the business, as
brother of the deceased. Petitioners allege that Tan Eng Kee proof of the existence of the partnership, is untenable. What
and Tan Eng Lay combined their resources and industry the deceased received was his wages as Benguet Lumber
together and entered into a partnership engaged in the Companys employee. Art. 1769, par. 4 of the New Civil Code
business of selling lumber, hardware, and construction states that receipt of wages shall not draw an inference that a
supplies. They named their business Benguet Lumber. person is a partner in a business.
Petitioners also allege that in 1981, Tan Eng Lay caused the
conversion of the partnership into a corporation called Santos vs. Spouses Reyes
Benguet Lumber Company. The incorporation was G.R. No. 135813, Oct. 25, 2001
purportedly a ruse to deprive Tan Eng Lee and his heirs their Panganiban, J.:
rightful share in the profits of the business. The Regional Trial
Court of Baguio City, Branch 7 rendered a decision in favour of FACTS:
petitioners declaring that Tan Eng Kee and Tan Eng Lay
entered into a joint venture akin to a particular partnership. On Sometime in June 1986, Santos and Nieves were introduced
appeal, respondent Court of Appeals reversed the decision of to each other by one Meliton Zabat (Zabat) regarding a lending
the RTC. business venture proposed by Nieves. It was verbally agreed
that Santos would act as financier while Nieves and Zabat
ISSUE: would take charge of solicitation of members and collection of
loan payments. The venture was launched on June 13, 1986,
Whether or not Tan Eng Kee and Tan Eng Lay entered into a with the understanding that Santos would receive 70% of the
contract of partnership? profits while Nieves and Zabat would earn 15% each.

RULING: In July 1986, Nieves introduced Cesar Gragera (Gragera) to

Santos. Gragera, as chairman of the Monte Maria
No. In order to constitute a partnership, it must be established Development Corporation (Monte Maria), sought short-term
that (1) two or more persons bound themselves to contribute loans for members of the corporation. Santos and Gragera

executed an agreement providing funds for Monte Maria's that respondents were hired as salaried employees with
members. Under the agreement, Monte Maria, represented by respect to the partnership between him and Gragera.
Gragera, was entitled to P1.31 commission per thousand paid
daily to Santos. Nieves kept the books as representative of The trial court held that the respondents were partners, not
Santos while Arsenio, husband of Nieves, acted as credit mere employees. It further held that Gragera was only a
investigator. commission agent of Santos, and not his partner. Lastly, it
granted respondents counterclaim in the partnership and for
On August 6, 1986, Santos, Nieves and Zabat executed the damages.
Article of Agreement which formalized their earlier verbal
arrangement. However, Santos and Nieves later discovered The Court of Appeals upheld the decision of the trial court;
that their partner Zabat engaged in the same lending business however, it initially dismissed the counterclaim of the
in competition with their partnership. Zabat was thereby respondents. Upon the latters Motion for Reconsideration, CA
expelled from the partnership. The operations with Monte reinstated the decision of the trial court in toto.
Maria continued.
On June 5, 1987, Santos filed a complaint for recovery of sum
of money and damages. Santos charged respondents, Whether or not the parties relationship was one of
allegedly in their capacities as employees of Santos, with partnership?
having misappropriated funds intended for Gragera. Santos
asserted that he found that of the total amount of
P4,623,201.90 entrusted to respondents, only P3,068,133.20 RULING:
was remitted to Gragera, thereby leaving the balance of
P1,555,065.70 unaccounted for. Yes. Respondents were industrial partners of Santos. They
provided services without which the partnership would not
Respondents asserted that they were partners and not mere have had the wherewithal to carry on the purpose for which it
employees of Santos. The complaint, they alleged, was filed to was organized and as such were considered industrial
preempt and prevent them from claiming their rightful share to partners.
the profits of the partnership. Arsenio alleged that he was
enticed by Santos to take the place of Zabat after Santos The Articles of Agreement stipulated that the signatories shall
learned of Zabat's activities. Arsenio resigned from his job at share the profits of the business in a 70-15-15 manner, with
the Asian Development Bank to join the partnership. petitioner getting the lion's share. This stipulation clearly
proved the establishment of a partnership.
Santos claimed that after he discovered Zabat's activities, he
ceased infusing funds, thereby causing the extinguishment of The partnership was technically dissolved after the expulsion
the partnership. The agreement with Gragera was a distinct of Zabat, but the fact that Santos and Nieves continued the
partnership from that of Nieves and Zabat. Santos asserted business of partnership and even invited Arsenio to participate

as partner showed that there was no intention to dissolve the brothers went sour. And so Aurelio demanded an accounting
first. and the liquidation of his share in the partnership. Eduardo did
not heed and so Aurelio sued Eduardo.
In addition, Gragera and Santos were not partners. The
money-lending activities undertaken with Monte Maria was ISSUE: Whether or not there exists a partnership.
done in pursuit of the business for which the partnership
between Santos, Nieves and Zabat (later Arsenio) was RULING: No. The partnership is void and legally nonexistent.
organized. The documentary evidence presented by Aurelio, i.e. the letter
from Eduardo and the Memorandum, did not prove
(Not related to Partnership, but just in case) partnership. The 1973 letter from Eduardo on its face, contains
As regards the alleged misappropriation, the SC held that the typewritten entries, personal in tone, but is unsigned and
Santos utterly failed to demonstrate why a review of the factual undated. As an unsigned document, there can be no quibbling
findings of the lower courts was warranted. The lower courts that said letter does not meet the public instrumentation
found it unbelievable that Nieves had embezzled requirements exacted under Article 1771 (how partnership is
P1,555,068.70 from the partnership. She did not remit constituted) of the Civil Code. Moreover, being unsigned and
P1,214,296.10 to Gragera, because he had deducted his doubtless referring to a partnership involving more than
commissions before remitting his collections. P3,000.00 in money or property, said letter cannot be
presented for notarization, let alone registered with the
Litonjua Jr. vs. Litonjua Sr. Securities and Exchange Commission (SEC), as called for
G.R. No. 166299-300, Dec. 13, 2005 under the Article 1772 (capitalization of a partnership) of the
Garcia, J.: Code. And inasmuch as the inventory requirement under the
succeeding Article 1773 goes into the matter of validity when
Aurelio and Eduardo are brothers. In 1973, Aurelio alleged that immovable property is contributed to the partnership, the next
Eduardo entered into a contract of partnership with him. logical point of inquiry turns on the nature of Aurelios
Aurelio showed as evidence a letter sent to him by Eduardo contribution, if any, to the supposed partnership. The
that the latter is allowing Aurelio to manage their family Memorandum is also not a proof of the partnership for the
business (if Eduardos away) and in exchange thereof he will same is not a public instrument and again, no inventory was
be giving Aurelio P1 million or 10% equity, whichever is higher. made of the immovable property and no inventory was
A memorandum was subsequently made for the said attached to the Memorandum. Article 1773 of the Civil Code
partnership agreement. The memorandum this time stated that requires that if immovable property is contributed to the
in exchange of Aurelio, who just got married, retaining his partnership an inventory shall be had and attached to the
share in the family business (movie theatres, shipping and contract.
land development) and some other immovable properties, he
will be givenP1 Million or 10% equity in all these businesses
and those to be subsequently acquired by them whichever is
greater. In 1992 however, the relationship between the

Angeles vs. Secretary of Justice behalf of the Angeles spouses. It was their practice to enter
G.R. No. 142612, July 29, 2005 into business transactions with other people under the name of
Carpio, J.: Mercado because the Angeles spouses did not want to be
identified as the financiers. Attached bank receipts showing
DOCTRINE: deposits in behalf of Emerita Angeles and contracts under his
name for the Angeles spouses.
The purpose of registration of the contract of partnership
with the SEC is to give notice to third parties. Failure to During the barangay conciliation proceedings, Oscar Angeles
register the contract of partnership does not affect the stated that there was a written sosyo industrial agreement:
liability of the partnership and of the partners to third capital would come from the Angeles spouses while the profit
persons, nor does it affect the partnerships juridical would be divided evenly between Mercado and the Angeles
personality. A partnership may exist even if the partners spouses. Provincial Prosecution Office: first recommended
do not use the words partner or partnership. the filing of a criminal information for estafa, but after Mercado
filed his counter-affidavit and moved for reconsideration,
FACTS: issued an amended resolution dismissing the complaint.
Angeles spouses appealed to Sec. of Justice, saying that the
Angeles spouses filed a criminal complaint for estafa against document evidencing the contract of antichresis executed in
Mercado, their brother-in-law. Petitioners claimed that the name of the Mercado spouses, instead of the Angeles
Mercado convinced them to enter into a contract of spouses, and that such document alone proves Mercados
antichresis, to last for 5 years, covering 8 parcels of land misappropriation of their P210, 000. Sec. of Justice:
planted with fruit-bearing lanzones trees in Nagcarlan, Laguna dismissed the appeal. Angeles spouses failed to show
and owned by Juan Sanzo. The parties agreed that Mercado sufficient proof that Mercado deliberately deceived them in the
would administer the lands and complete the necessary. transaction o Mercado satisfactorily explained that the Angeles
spouses do not want to be revealed as the financiers .Under
After 3 years, the Angeles spouses asked for an accounting the circumstances, it was more likely that the Angeles spouses
from Mercado, and they claim that only after this demand for knew from the very start that the questioned document was
an accounting did they discover that Mercado had put the not really in their names. A partnership truly existed between
contract of antichresis over the subject land under Mercado the Angeles spouses and Mercado, which was clear from the
and his spouses names.Mercado denied the Angeles fact that they contributed money to a common fund and
spouses allegations o Claimed that there exists an industrial divided the profits among themselves. o Angeles spouses
partnership, colloquially known as sosyo industrial, between acknowledged their joint business venture in the barangay
him and his spouse as industrial partners and the Angeles conciliation proceedings although they assailed the manner
spouses as financiers, and that this had existed since 1991, the business was conducted o Although the legal formalities
before the contract of antichresis over the subject land o for the formation were not adhered to, the partnership
Mercado used his and his spouses earnings as part of the relationship was evident. There is no estafa where money is
capital in the business transactions which he entered into in delivered by a partner to his co-partner on the latters

representation that the amount shall be applied to the contribution of money & industry to a common fund and
business of their partnership. In case of the money received, division of profits between the Angeles spouses and Mercado.
the co-partners liability is civil in nature.
3. Mercado satisfactorily explained that the Angeles spouses
ISSUES: do not want to be revealed as the financiers, thus the
document which was in the name of Mercado and his spouse
1. W/N the Sec. of Justice committed grave abuse of fail to convince that there was deceit or false representation
discretion in dismissing the appeal - No that induced the Angeles spouses to part with their money.
2. W/N a partnership existed between Mercado and the Even the RTC of Sta. Cruz, Laguna, which handled the civil
Angeles spouses - Yes case filed by the Angeles spouses against Mercado and Leo
3. W/N there was misappropriation by Mercado No Cerayban stated that it was the practice to have the contracts
secured in Mercados name as the Angeles spouses fear
RULING: being kidnapped by the NPA or being questioned by the BIR
as Oscar Angeles was working with the government.
1. Angeles spouses fail to convince that the Secretary of Accounting of the proceeds is not a proper subject for the
Justice committed grave abuse of discretion when he present case.
dismissed their appeal. Moreover, they committed a
procedural error when they failed to file a motion for
reconsideration of the Sec. of Justices resolution, which is DISPOSITION:
already enough reason to dismiss the case.
Petition for certiorari dismissed. Decision of Sec. of Justice
2. Angeles spouses allege that they had no partnership with affirmed.
Mercado, relying on Arts. 1771 to 1773 of the Civil Code. The
Angeles spouses position that there is no partnership because Sunga-Chan vs. Sunga
of the lack of a public instrument indicating the same and a G.R. No. 143440, Aug. 15, 2001
lack of registration with the SEC holds no water. The Angeles Gonzaga-Reyes, J.:
spouses contributed money to the partnership and not
immovable property o Mere failure to register the contract of FACTS:
partnership with the SEC does not invalidate a contract that
has the essential requisites of a partnership. The purpose of Lamberto Chua alleged that in 1977, he verbally entered into a
registration is to give notice to third parties. Failure to partnership with Jacinto in the distribution of Shellane
register does not affect the liability of the partnership and Liquefied Petroleum Gas (LPG) in Manila. For business
of the partners to third persons, nor does it affect the convenience, Chua and Jacinto Sunga allegedly agreed to
partnerships juridical personality. The Angeles spouses register the business name of their partnership, SHELLITE
admit to facts that prove the existence of a partnership: GAS APPLIANCE CENTER (Shellite), under the name of
contract showing a sosyo industrial or industrial partnership, Jacinto as a sole proprietorship. Chua allegedly delivered his

initial capital contribution of P100,000.00 to Jacinto while the since registration is mandated by the Art. 1772 of the Civil
latter in turn produced P100,000.00 as his counterpart Code.
contribution, with the intention that the profits would be equally
divided between them. The partnership allegedly had Jacinto ISSUES:
as manager, assisted by Josephine Sy, a sister of the Chuas
wife, Erlinda Sy. As compensation, Jacinto would receive a 1. Is there a partnership? YES
manager's fee or remuneration of 10% of the gross profit and 2. Does the non-registration of the contract of partnership
Josephine would receive 10% of the net profits, in addition to invalidate the contract of partnership? NO
her wages and other remuneration from the business.
Allegedly, Shellites operation (opened for business on 1977)
was profitable due to their volume of orders and deliveries of 1. A partnership may be constituted in any form, except where
filled Shellane tanks supplied by Shell. While Jacinto furnished immovable property or real rights are contributed thereto, in
Chua with the merchandise inventories, balance sheets and which case a public instrument shall be necessary. Hence,
net worth of Shellite from 1977 to 1989, Chua however based on the intention of the parties, a verbal contract of
suspected that the amount indicated in these documents were partnership may arise. The essential points that must be
understated and undervalued by Jacinto and Josephine for proven to show that a partnership was agreed upon are (1)
their own selfish reasons and for tax avoidance. mutual contribution to a common stock, and (2) a joint interest
Upon Jacinto's death in the later part of 1989, his surviving in the profits. In view of the absence of a written contract of
wife, Cecilia Sunga-Chan and his daughter, Lilibeth, took over partnership between Chua and Jacinto, Chua resorted to the
the operations and management of Shellite without Chuas introduction of documentary and testimonial evidence to prove
consent. Despite Chuas repeated demands upon petitioners said partnership.
for accounting, inventory, winding up and restitution of his net
shares in the partnership, petitioners failed to comply. Lilibeth 2. True, Article 1772 of the Civil Code requires that
allegedly continued the operations of Shellite, converting to partnerships with a capital of P3,000.00 or more must register
her own use and advantage its properties. with the SEC, however, this registration requirement is not
mandatory. Article 1768 of the Civil Code explicitly provides
In 1992, Chua filed a complaint against for "Winding Up of that the partnership retains its juridical personality even if it
Partnership Affairs, Accounting, Appraisal and Recovery of fails to register. The failure to register the contract of
Shares and Damages with Writ of Preliminary Attachment" partnership does not invalidate the same as among the
with the RTC of Zamboanga del Norte. The RTC ruled in favor partners, so long as the contract has the essential requisites.
of Chua directing petitioners to render an accounting of the In the case at bar, non-compliance with this directory provision
assets and profits of Shellite. CA affirmed. of the law will not invalidate the partnership considering that
the totality of the evidence proves that Chua and Jacinto
Petitioners maintain that said partnership had an initial capital indeed forged the partnership in question.
of P200,000 and should have been registered with the SEC

The Civil Code provides that an action to enforce an oral On March 10, 1994, the Lazatins and Primelink,
contract prescribes 6 years while the right to demand an represented by Lopez, in his capacity as President,
accounting for a partner's interest as against the person entered into a Joint Venture Agreement (JVA) for the
continuing the business accrues at the date of dissolution, in development of the aforementioned property into a
the absence of any contrary agreement. Considering that the residential subdivision to be known as "Tagaytay Garden
death of a partner results in the dissolution of the partnership, Villas." Under the JVA, the Lazatin siblings obliged
in this case, it was after Jacinto's death that Chua as the themselves to contribute the two parcels of land as their
surviving partner had the right to an account of his interest as share in the joint venture. For its part, Primelink
against petitioners. While Jacinto's death dissolved the undertook to contribute money, labor, personnel,
partnership, the dissolution did not immediately terminate the machineries, equipment, contractor's pool, marketing
partnership. The Civil Code expressly provides that upon activities, managerial expertise and other needed
dissolution, the partnership continues and its legal personality resources to develop the property and construct therein
is retained until the complete winding up of its business, the units for sale to the public.
culminating in its termination. Wherefore, petition is denied.
For 4 years however, Primelink failed to develop the said land.
Primelink Properties and Development Corporation vs. So in 1998, the Lazatins
Lazatin-Magat filed a complaint to rescind the joint venture agreement with
G.R. No. 167379, June 27, 2006 prayer for preliminary injunction. In said case, Primelink was
Callejo, Sr., J.: declared in default or failing to file an answer and for asking
multiple motions for extension. The trial court eventually ruled
FACTS: in favor of the Lazatins and it ordered Primelink to return the
possession of said land to the Lazatins as well as some
Primelink Properties and Development Corporation improvements which Primelink had so far over the property
(Primelink for brevity) is a domestic corporation engaged without the Lazatins paying for said improvements. This
in real estate development. Rafaelito W. Lopez is its decision was affirmed by the Court of Appeals. Citing the
President and Chief Executive Officer. ruling of this Court in Aurbach v. Sanitary Wares
Manufacturing Corporation, the appellate court ruled that,
Ma. Clara T. Lazatin-Magat and her brothers, Jose Serafin under Philippine law, a joint venture is a form of
T. Lazatin, Jaime T. Lazatin and Jose Marcos T. Lazatin partnership and is to be governed by the laws of
(the Lazatins for brevity), are co-owners of two (2) partnership.
adjoining parcels of land, with a combined area of 30,000
square meters, located in Tagaytay City and covered by Primelink is now assailing the order; that turning over
Transfer Certificate of Title (TCT) No. T-10848 4 of the improvements to the Lazatins without reimbursement is unjust;
Register of Deeds of Tagaytay City. that the Lazatins did not ask the properties to be placed under
their possession but they merely asked for rescission.

accounts are determined, it cannot be ascertained how much
ISSUE: Whether or not the improvements made by Primelink any of the parties is entitled to, if at all.
should also be turned over under the
possession of the Lazatins.
Pascual vs. CIR
RULING: G.R. No. L-78133, Oct. 18, 1988
Gancayco, J.:
Yes. In the first place, even though the Lazatins did specifically
pray for possession the same (placing of improvements under FACTS:
their possession) is incidental in the relief they prayed for.
They are therefore entitled possession over the parcel of land On June 22, 1965, petitioners bought two (2) parcels of land
plus the improvements made thereon made by Primelink. In from Santiago Bernardino, et al. and eventually sold both
this jurisdiction, joint ventures are governed by the laws of lands to Marenir Development Corporation. They realized a
partnership. Under the laws of partnership, when a partnership net profit of P165,224.70 in such sale. On May 28, 1966, they
is dissolved, as in this case when the trial court rescinded the bought another three (3) parcels of land from Juan Roque. The
joint venture agreement, the innocent party has the right to three parcels of land were also sold by petitioners to Erlinda
wind up the partnership affairs. With the rescission of the JVA Reyes and Maria Samson on March 19,1970. In this sale, they
on account of petitioners fraudulent acts, all authority of any realized a net profit of P60,000. The petitioners paid the
partner to act for the partnership is terminated except so far as corresponding capital gains taxes on their profits in 1973 and
may be necessary to wind up the partnership affairs or to 1974.
complete transactions begun but not yet finished. On
dissolution, the partnership is not terminated but continues However, in a letter dated March 31, 1979 of then Acting BIR
until the winding up of partnership affairs is completed. Commissioner Efren I. Plana, petitioners were assessed and
Winding up means the administration of the assets of the required to pay a total amount of P107,101.70 as alleged
partnership for the purpose of terminating the business and deficiency corporate income taxes for the years 1968 and
discharging the obligations of the partnership. 1970. Petitioners protested the said assessment asserting that
they had availed of tax amnesties way back in 1974 and thus
It must be stressed, too, that although the Lazatins acquired exempted from other taxes.
possession of the lands and the improvements thereon, the
said lands and improvements remained partnership property, In a reply, respondent Commissioner informed petitioners that
subject to the rights and obligations of the parties, inter se, of in the years 1968 and 1970, petitioners as co-owners in the
the creditors and of third parties and subject to the outcome of real estate transactions formed an unregistered partnership or
the settlement of the accounts between the parties, absent any joint venture taxable as a corporation under Section 20(b) and
agreement of the parties in their JVA to the contrary (here no its income was subject to the taxes prescribed under Section
agreement in the JVA as to winding up). Until the partnership 24, both of the National Internal Revenue Code that the
unregistered partnership was subject to corporate income tax

as distinguished from profits derived from the partnership by the profits among the contracting parties. In the present case,
them which is subject to individual income tax. Furthermore, there is no evidence that petitioners entered into an
the availment of tax amnesty under P.D. No. 23, as amended, agreement to contribute money, property or industry to a
by petitioners relieved petitioners of their individual income tax common fund, and that they intended to divide the profits
liabilities but did not relieve them from the tax liability of the among themselves. Respondent commissioner and/ or his
unregistered partnership. Hence, the petitioners were required representative just assumed these conditions to be present on
to pay the deficiency income tax assessed. the basis of the fact that petitioners purchased certain parcels
of land and became co-owners thereof.
The petitioners filed a petition for review with the respondent
Court of Tax. The respondent court by a majority decision Petitioners bought two (2) parcels of land in 1965. They did not
affirmed the decision and action taken by respondent sell the same nor make any improvements thereon. In 1966,
commissioner with costs against petitioners. It ruled that they bought another three (3) parcels of land from one seller. It
on the basis of the principle that an unregistered partnership was only 1968 when they sold the two (2) parcels of land after
was in fact formed by petitioners which like a corporation was which they did not make any additional or new purchase. The
subject to corporate income tax distinct from that imposed on remaining three (3) parcels were sold by them in 1970. The
the partners. transactions were isolated. The character of habituality
peculiar to business transactions for the purpose of gain was
ISSUE: not present.

Whether or not the petitioners formed an unregistered The common ownership of property does not itself create a
partnership or joint venture and thus liable for corporate partnership between the owners, though they may use it for
income tax, residence tax for corporations, and real estate the purpose of making gains; and they may, without becoming
dealers' fixed tax in pursuant to the National Internal Revenue partners, agree among themselves as to the management,
Code. and use of such property and the application of the proceeds
therefrom. (Spurlock vs. Wilson, 142 S.W. 363,160 No. App.
RULING: 14.)

No. Article 1767 of the Civil Code of the Philippines provides: In the present case, there is clear evidence of co-ownership
By the contract of partnership two or more persons bind between the petitioners. There is no adequate basis to
themselves to contribute money, property, or industry to a support the proposition that they thereby formed an
common fund, with the intention of dividing the profits among unregistered partnership. The two isolated transactions
themselves. whereby they purchased properties and sold the same a few
years thereafter did not thereby make them partners. They
Pursuant to this article, the essential elements of a partnership shared in the gross profits as co- owners and paid their capital
are two, namely: (a) an agreement to contribute money, gains taxes on their net profits and availed of the tax amnesty
property or industry to a common fund; and (b) intent to divide thereby. Under the circumstances, they cannot be considered

to have formed an unregistered partnership which is thereby person of Ms. Florence Yap to translate its contents into
liable for corporate income tax, as the respondent English. Florence Yap issued a certification and testified that
commissioner proposes. the translation to the best of her knowledge and belief was
And even assuming for the sake of argument that such correct.) Yiu identified the signature on the receipt as that of
unregistered partnership appears to have been formed, since the petitioner because it was affixed by the latter in his
there is no such existing unregistered partnership with a presence. Witnesses So Sia and Antonio Ah Heng
distinct personality nor with assets that can be held liable for corroborated Yiu's testimony to the effect that they were both
said deficiency corporate income tax, then petitioners can be present when the receipt was signed by the petitioner.
held individually liable as partners for this unpaid obligation of
the partnership. However, as petitioners have availed of the Furthermore, Yiu received from the petitioner P12,000.00
benefits of tax amnesty as individual taxpayers in these covered by the latter's Equitable Banking Corporation Check
transactions, they are thereby relieved of any further tax No. 13389470-B from the profits of the operation of the
liability arising therefrom. restaurant for the year 1974. Witness Teodulo Diaz, Chief of
the Savings Department of the China Banking Corporation
Fue Leung vs. IAC testified that said check was deposited by and duly credited to
G.R. No. 70926 the Yius savings account with the bank after it was cleared by
Gutierrez Jr., J.: the drawee bank, the Equitable Banking Corporation. Another
witness Elvira Rana of the Equitable Banking Corporation
FACTS: testified that the check in question was in fact and in truth
drawn by petitioner and debited against his own account in
The Sun Wah Panciteria, a restaurant, located at Florentino said bank. This fact was clearly shown and indicated in the
Torres Street, Sta. Cruz, Manila, was established sometime in petitioner's statement of account after the check was duly
October, 1955 and was registered as a single proprietorship cleared. Rana further testified that upon clearance of the
and its licenses and permits were issued to and in favor of check and pursuant to normal banking procedure, said check
petitioner Dan Fue Leung as the sole proprietor. Yiu adduced was returned to the petitioner as the maker thereof.
evidence during the trial of the case to show that Sun Wah
Panciteria was actually a partnership and that he was one of Petitioner denied having received from the private respondent
the partners having contributed P4,000.00 to its initial the amount of P4,000.00. He contested and impugned the
establishment. genuineness of the receipt. He maintained that he did not
receive any contribution at the time he started the Sun Wah
About the time the Sun Wah Panciteria started to become Panciteria; that he used his savings from his salaries as an
operational, respondent Yiu gave P4,000.00 as his employee at Camp Stotsenberg in Clark Field and later as
contribution to the partnership evidenced by a receipt wherein waiter at the Toho Restaurant amounting to a little more than
the petitioner acknowledged his acceptance of such paymenT, P2,000.00 as capital in establishing Sun Wah Panciteria. To
affixing his signature thereto. The receipt was written in bolster his contention that he was the sole owner of the
Chinese characters (RTC commissioned an interpreter in the restaurant, the petitioner presented various government

licenses and permits showing the Sun Wah Panciteria was Therefore, the lower courts did not err in construing the
and still is a single proprietorship solely owned and operated complaint as one wherein the private respondent asserted his
by himself alone. Fue Leung also flatly denied having issued to rights as partner of the petitioner in the establishment of the
the private respondent the receipt and the Equitable Banking Sun Wah Panciteria, notwithstanding the use of the
Corporation's Check No. 13389470 B in the amount of term financial assistance therein. The appellate court's
P12,000.00 The RTC, in an amended decision, ruled in favor observation to the effect that ". . . given its ordinary meaning,
of Yiu declaring him a partner of Dan Fue Leung in the financial assistance 'is the giving out of money to another
business of Sun Wah Panciteria and ordering the latter to pay without the expectation of any returns therefrom, was correct.
the former his share in the annual profits of the said It connotes an ex gratia dole out in favor of someone driven
restaurant. The IAC affirmed said decision. Hence this petition into a state of destitution. But this circumstance under which
arguing that private respondent extended 'financial assistance' the P4,000.00 was given to the petitioner does not obtain in
to petitioner at the time of the establishment of the Sun Wah this case." The complaint explicitly stated that "as a return for
Panciteria, in return of which private respondent allegedly will such financial assistance, plaintiff (private respondent) would
receive a share in the profits of the restaurant. be entitled to 22% of the annual profit derived from the
operation of the said panciteria." The well-settled doctrine is
that the ". . . nature of the action filed in court is determined by
ISSUE: the facts alleged in the complaint as constituting the cause of
WON Yiu is petitioners partner in the establishment of the Sun
Wah Panciteria The private respondent is a partner of the petitioner in Sun
Wah Panciteria. The requisites of a partnership which are
RULING: 1) two or more persons bind themselves to contribute money,
property, or industry to a common fund; and 2) intention on the
YES. In essence, the private respondent alleged that when part of the partners to divide the profits among themselves
Sun Wah Panciteria was established, he gave P4,000.00 to have been established. As stated by the respondent, a partner
the petitioner with the understanding that he would be entitled shares not only in profits but also in the losses of the firm. If
to twenty-two percent (22%) of the annual profit derived from excellent relations exist among the partners at the start of
the operation of the said panciteria. These allegations, which business and all the partners are more interested in seeing the
were proved, make Yiu and petitioner partners in the firm grow rather than get immediate returns, a deferment of
establishment of Sun Wah Panciteria because Article 1767 of sharing in the profits is perfectly plausible. It would be incorrect
the Civil Code provides that: to state that if a partner does not assert his rights anytime
within ten years from the start of operations, such rights are
By the contract of partnership two or more persons bind irretrievably lost. The private respondent's cause of action is
themselves to contribute money, property or industry to a premised upon the failure of the petitioner to give him the
common fund, with the intention of dividing the profits among agreed profits in the operation of Sun Wah Panciteria. In effect

the private respondent was asking for an accounting of his development of the subdivision, but in furtherance of his own
interests in the partnership. company, Universal Umbrella Company. On the other hand,
respondent alleged that he used the loan to effect the survey
There shall be a liquidation and winding up of partnership and the subdivision of the lots. He secured the Lapu Lapu City
affairs, return of capital, and other incidents of dissolution Councils approval of the subdivision project which he
because the continuation of the partnership has become advertised in a local newspaper. He also caused the
inequitable. construction of roads, curbs and gutters. Likewise, he entered
into a contract with an engineering firm for the building of sixty
WHEREFORE, the petition for review is hereby DISMISSED low-cost housing units and actually even set up a model house
for lack of merit. The decision of the respondent court is on one of the subdivision lots. He did all of these for a total
AFFIRMED with a MODIFICATION that as indicated above, expense of P85,000. Respondent claimed that the subdivision
the partnership of the parties is ordered dissolved. So ordered. project failed, however, because petitioners and their relatives
had separately caused the annotations of adverse claims on
Tocao vs. Court of Appeals the title to the land, which eventually scared away prospective
G.R. No. 70926, Jan. 31, 1989 buyers. Despite his requests, petitioners refused to cause the
Ynares-Santiago, J.: clearing of the claims, thereby forcing him to give up on the
Torres vs. Court of Appeals
G.R. No. 134559, Dec. 9, 1999 In affirming the trial court, the Court of Appeals held that
Panganiban, J.: petitioners and respondent had formed a partnership for the
development of the subdivision. Thus, they must bear the loss
FACTS: suffered by the partnership in the same proportion as their
share in the profits stipulated in the contract.
Sisters Antonia Torres and Emeteria Baring, herein petitioners,
entered into a "joint venture agreement" with Respondent ISSUE:
Manuel Torres for the development of a parcel of land into a
subdivision. Pursuant to the contract, they executed a Deed of WON the transaction between the petitioners and respondent
Sale covering the said parcel of land in favor of respondent, was that of a joint venture/partnership?
who then had it registered in his name. By mortgaging the
property, respondent obtained from Equitable Bank a loan of
P40,000 which, under the Joint Venture Agreement, was to be RULING:
used for the development of the subdivision. The project did
not push through, and the land was subsequently foreclosed Yes. A reading of the terms embodied in the Agreement
by the bank. According to petitioners, the project failed indubitably shows the existence of a partnership. Petitioners
because of respondents lack of funds or means and skills. would contribute property to the partnership in the form of land
They add that respondent used the loan not for the which was to be developed into a subdivision; while

respondent would give, in addition to his industry, the amount Lim Tong Lim vs. Philippine Fishing Gear Industries
needed for general expenses and other costs. Furthermore, G.R. No. 136448, Nov. 3, 1999
the income from the said project would be divided according to Panganiban, J.:
the stipulated percentage. Clearly, the contract manifested the
intention of the parties to form a partnership. FACTS:

Petitioners argue that the Joint Venture Agreement is void On behalf of "Ocean Quest Fishing Corporation," Chua and
under Article 1773 of the Civil Code Yao entered into a contract for the purchase of fishing net from
ART. 1773. A contract of partnership is void, whenever respondent. They claimed that they were engaged in a
immovable property is contributed thereto, if an inventory of business venture with petitioner, who however, was not a
said property is not made, signed by the parties, and attached signatory to the agreement. The buyers, however, failed to
to the public instrument. pay, hence respondent filed a collection suit against Chua,
Yao and Lim. The lower courts ruled that Lim is to be jointly
We clarify. First, Article 1773 was intended primarily to protect liable with Chua and Yao reasoning that the three have formed
third persons. the execution of a public instrument would be a partnership for a specific undertaking and for the division of
useless if there is no inventory of the property contributed, profits.
because without its designation and description, they cannot
be subject to inscription in the Registry of Property, and their ISSUE:
contribution cannot prejudice third persons. This will result in
fraud to those who contract with the partnership in the belief in WON by their acts, Lim, Chua, and Yao could be deemed to
the efficacy of the guaranty in which the immovables may have entered into a partnership.
consist. Thus, the contract is declared void by the law when no
such inventory is made. The case at bar does not involve third RULING:
parties who may be prejudiced.
From the factual findings of both lower courts, it is clear that
Second, petitioners themselves invoke the allegedly void Chua, Yao and Lim had decided to engage in a fishing
contract as basis for their claim that respondent should pay business, which they started by buying boats worth P3.35
them 60 percent of the value of the property.They cannot in million, financed by a loan secured from Jesus Lim who was
one breath deny the contract and in another recognize it, petitioners brother. In their Compromise Agreement, they
depending on what momentarily suits their purpose. subsequently revealed their intention to pay the loan with the
proceeds of the sale of the boats, and to divide equally among
them the excess or loss. These boats, the purchase and the
repair of which were financed with borrowed money, fell under
the term common fund under Article 1767. The contribution to
such fund need not be cash or fixed assets; it could be an
intangible like credit or industry. That the parties agreed that

any loss or profit from the sale and operation of the boats accounting to her of the partnership business and to pay her
would be divided equally among them also shows that they corresponding share in the partnership profits.
had indeed formed a partnership.
In their defense, the plaintiffs denied ever having declared
Moreover, it is clear that the partnership extended not only to dividends or distributed profits of the partnership and denied
the purchase of the boat, but also to that of the nets and the likewise that the plaintiff ever demanded that she be allowed to
floats. The fishing nets and the floats, both essential to fishing, examine the partnership books. In fact, they contend that the
were obviously acquired in furtherance of their business. It Articles of Co-partnership did not express the true agreement
would have been inconceivable for Lim to involve himself so of the parties which provide that, in actuality, the plaintiff was
much in buying the boat but not in the acquisition of the not an industrial partner as she did not contribute any industry
aforesaid equipment, without which the business could not to the partnership. Her share was merely based on the profits
have proceeded. which might be realized by the partnership until full payment of
the loan which it had obtained from the Rehabilitation Finance
Evangelista & Co. vs. Abad Santos Corporation in the sum of P30,000.00 for which the plaintiff
G.R. No. L-31684, June 28, 1973 had signed a promissory note as co-maker and mortgaged her
Makalintal, Actg. C.J.: property as security.

FACTS: Despite this fact, both the trial court and the appellate court
ruled in favor of the respondent in that, regardless of the fact
On October 9, 1954, a co-partnership with herein petitioners that the wording of the Articles of Co-partnership did not
as capitalist partners was formed under the name Evangelista express the real intention of the parties, the testimonies from
& Co., with the Articles of Co-partnership being later amended the witnesses and the evidence produced points to the fact
to include the respondent, Estrella Abad Santos, as an that the partnership, indeed, recognized Abad Santos as an
industrial partner. The modified scheme provided for the profits industrial partner.
and losses would be divided and distributed among the first
three partners at the proportion of 70%; and the last 30% ISSUE:
would include the respondent.
Can Estrella Abad Santos be considered as an industrial
On December 17, 1963 the respondent filed suit against the partner?
three other partners and alleged that they had been paying
dividends to the partners except to her; and that RULING:
notwithstanding her demands the defendants continued to
refuse to let examine the partnership books, give her Yes, Estrella Abad Santos is an industrial partner. Despite her
information regarding the partnership affairs, or pay her any non-contribution of commercial industry work into the
share in the dividends declared by the partnership. She partnership, that she was a judge and performed her legal
therefore prayed that the defendants be ordered to render duties in favor of the partnership without which they would

not have been able to organize is in itself considered a Mobil Oil Philippines vs. CFI of Rizal
contribution to the common fund. The reason for this is that G.R. No. 40457, May 8, 1992
Article 1767 does not specify the kind of industry that a partner Nocon, J.:
may thus contribute, only that the partners contribute industry
thereto. Hence the said legal services performed by the FACTS:
respondent may legitimately be considered as appellee's
contribution to the common fund. On Nov 8, 1972, Mobil Oil Philippines filed a complaint in the
Court of First Instance of Rizal against the partnership La
The petitioners further contend that Article 1789 provides that Mallorca and it general partners, which included Geminiano
An industrial partner cannot engage in business for himself, Yabut and Agueda Yabut, for collection of a sum of money
unless the partnership expressly permits him to do so; and if arising from gasoline purchased on credit but not paid, for
he should do so, the capitalist partners may either exclude him damages and attorneys fees.
from the firm or avail themselves of the benefits which he may
have obtained in violation of this provision, with a right to On Dec 22, 1972, petitioner filed an Amended Complaint
damages in either case. They cite this article as their impleading the heirs of the deceased partners as defendants.
justification for excluding Abad Santos since by serving as a Consequently, on July 25, 1974, a decision was rendered in
judge of the City Court of Manila, the respondent cannot be favor of the petitioner.
expected to contribute to the partnership since she cannot be
expected to give her full attention into the business. Private respondents filed a Petition to Modify Decision and/or
Petition for Reconsideration, which was opposed by petitioner
The Court, however, dismissed this reason for the simple on the following grounds: a) that there was no stipulation or
reason that being a judge cannot be characterized as a agreement of the parties on the award of attorneys fees; b)
business in any way, and yet the petitioners somehow reached that Miguel Enriquez, not being a general partner, could not
the decision that the respondent should be excluded from and bind the partnership in the Sales Agreement he signed with
deprived of her share because of this. Moreover, the fact that plaintiff; and c) Geminiano Yabut already withdrew as
they knew that the respondent is a judge even before she partner and president of La Mallorca.
joined the partnership and that they waited for several years
before deciding to exclude her is testament to bad faith on Respondent court issued it disputed order declaring its
their part. Thus, the assailed decision of the lower court thus decision null and void on the ground that there was no
stands the respondent is rightfully entitled to her share in the evidence to show that the counsel for the defendants had
partnership. been duly authorized by their respective clients to enter into a
stipulation or facts, a compromise agreement or a confession
judgment with petitioner, a ground never raised by the parties.
Petitioner filed a Motion for Reconsideration and Clarification
but respondent court denied the motion, as well as petitioners

Motion for Issuance of a Writ of Execution and Appointment of From the foregoing, it is evident that the court a quo erred in
Special Sheriff. Hence, this petition. issuing the Orders nullifying the decision and dismissing the
complaint against private respondents Geminiano Yabut and
Agueda Enriquez-Yabut.

Ramnani vs. Court of Appeals
a.) Whether or not Miguel Enriquez cannot be bind in G.R. No. 85494, May 7, 1991
partnership. Gancayco, J.:

b.) Whether or not Geminiano Yabut cannot be held liable as a FACTS:

In the latter part of 1965, Spouses Ishwar Jethmal Ramnani,
RULING: an American citizen, and Sonya Jethmal Ramnani, both from
New York, invested substantial amount of money for a
a.) Miguel Enriquez became a general partner of the profitable business venture in the Philippines. Since they could
partnership La Maloorca being one of the heirs of the not personally manage their investments, they appointed two
deceased partner Mariano Enriquez in accordance with Article of Ishwars brothers, Choithram Jethmal Ramnani and Navalrai
IV of the uncontested Articles of Co-Partnership of La Jethmal Ramnani, as their attorneys-in-fact. Choithram
Mallorca. decided to invest in the real estate business. On February 1,
1966 and May 16, 1966, Choithram, in his capacity as
b.) The Court is not convinced that respondent Geminiano attorney-in-fact of Ishwar, bought two parcels of land located in
Yabuts claim that he cannot be liable as a partner. The debt Barrio Ugong, Pasig, Rizal from Ortigas & Company, Ltd.
was incurred long before his withdrawal and his resignation as Partnership (Ortigas). Instead of paying for the lots in cash,
President of La Mallorca on Sept 14, 1972. Respondent Choithram paid in installments and used the balance of the
Geminiano Yabut could not just withdraw unilaterally from the capital entrusted to him, plus a loan, to build a building from
partnership to avoid his liability as general partner to third whose profits sprouted three more buildings. 2 buildings were
persons like the petitioner in the instant case. burned later but neverthess, through the industry and genius
of Choithram, Ishwars property was developed and improved
This is likewise true with regard to the alleged non-active into a valuable asset worth millions of pesos.
participation of respondent Agueda Yabut in the partnership.
Active partnership in a partnership is not a condition Unfortunately, Choithram, while showing himself to be a good
precedent for membership in a partnership so as to be entitled manager, proved unfaithful to the trust reposed in him by
to its profits nor be burdened with its liabilities. spouses Ishwar. Without their knowledge, Choithram started to
appropriate his brothers property and other assets as his own.
Spouses Ishwar learned what Choithram was doing. Hence,

they asked him to render an accounting for the income and
expenses from 1967 to 1970, but there was none forthcoming. Yes. Choithram violated the trust relationship between him and
Choithram failed and refused to render such accounting. As a Ishwar. However, despite the fact that Choithram had
consequence, on February 4, 1971, Ishwar revoked the committed acts which demonstrate their bad faith and scheme
general power of attorney Ortigas was informed of such fact to defraud spouses Ishwar and Sonya of their rightful share in
and such revocation was also published in the SEC and the properties in litigation, the Court cannot ignore the fact that
Manila Times. Choithram must have been motivated by a strong conviction
that as the industrial partner in the acquisition of said assets
In 1973, upon complete payments of Ishwars lots purchased he has as much claim to said properties as Ishwar, the
from Ortigas, Choithram caused the latter to execute the capitalist partner in the joint venture. Through the industry and
corresponding deeds of sale in favor of his daughter-in-law, genius of Choithram, Ishwar's property was developed and
Nirmla. Eventually, TCT Nos. 403150 and 403152 were issued improved into what it is now. Justice and equity dictate that the
by the Registry of Deeds of Rizal in her favor. Choithram two share equally the fruit of their joint investment and efforts.
repudiated all well-meaning efforts to solve the controversy The Court applied the Solomonic solution by dividing equally
within the Ramnani family. Moreover, he denied the genuine between spouses Ishwar and the Choithram family the two
nature of the trust relationship between him and his brother parcels of land subject of the litigation, including all the
Ishwar. improvements thereon and income from 1967.

CFI: Spouses Ishwar filed on October 6, 1982 with the Court The Court also ruled that Ortigas is solidarily liable with
of First Instance of Rizal a complaint for reconveyance and Choithram family to spouses Ishwar because of its bad faith in
damages against Choithram and his son Moti and daughter-in- executing the deeds of sale in favor of Nirmla despite its
law Nirmla. CFI dismissed the complaint and recognized knowledge that Choithrams general power of attorney had
Choithrams full ownership of the questioned two parcels of been revoked by Ishwar.

CA: CA reversed the CFI, finding that spouses Ishwar

entrusted capital to Choithram to be invested in the
Philippines. The appellate court held the Choithram family and
Ortigas jointly and severally liable to spouses Ishwar. Court of
Appeals modified its earlier decision by dismissing the case
against Ortigas.

ISSUE: Is there a trust relationship between Ishwar and