YULO VS. YANG CHIAO SENG (MIKKI)
All gains and profits are to be distributed among the partners
AUG 28, 1959 | LABRADOR | PERFECTED PARTNERSHIP (RULES)
PETITIONER: Rosario Yulo
RESPONDENTS: Yang Chiao Seng
SUMMARY: The parties entered into a partnership agreement, to
conduct and carry on the business of operating a theatre for the
exhibition of motion and talking pictures. They were both supposed to
contribute to the capital stock, with profits to be distributed among the
partners. When one of the so-called partners sought her share in the
profit, she was refused on the basis of there being no partnership
agreement. The Court held that the real intention of the parties was to
effect a sub-lease of the property and the partnership agreement was
resorted to in order to avoid the provision in the main lease agreement
prohibiting a sublease of the premises. The court took into
consideration the acts of the so-called demanding partner, who had
never contributed her supposed capital contribution, nor helped in the
management of the business.
DOCTRINE: A contract of partnership is consensual in nature and is
constituted by the real meeting of the minds; such that even when
formal articles of partnership are drawn-up between the parties, when
it fact the evidence shows that they never intended to enter into a
partnership, the article of partnership cannot create a partnership
when in fact there has never been a meeting of minds to constitute one.
The following are the requisites of partnership: (1) two or more
persons who bind themselves to contribute money, property, or
industry to a common fund; (2) intention on the part of the partners to
divide the profits among themselves. (Art. 1767, Civil Code.)
FACTS
1. In 1945, Yang Chiao Seng wrote a letter to Rosario Yulo proposing the
formation of a partnership to run and operate a theatre on the premises
occupied by Yang in Manila
2. Yang guaranteed that Yulo would receive P3000 payable quarterly, that
the business would run for 2 years, and that Yulo would be authorized
to personally conduct such businesses in the lobby of the building as
ordinarily carried on in lobbies of the theatre so long as it does not
obstruct the free ingress and egress of the patrons
3. Yulo agreed and the parties executed a partnership agreement
establishing the Yang & Co., Ltd.
a. Capital was fixed at P100,000, with P80,000 to be furnished by
Yang, and P20,000 by Yulo
b.
in the same proportion as their capital contribution, and
liability will be limited to capital contribution
4. In 1946, they executed a supplementary agreement extending the
partnership for a period of three years
a. Benefits are to be divided between them at a 50-50 rate
b. After the expiration of the period, the showhouse building shall
belong exclusively to Yulo
5. The land on which the theatre was constructed was actually being
leased by Yulo, and the lessors would later succeed in obtaining a
judgment in the CFI for the cancellation of the lease contract
6. Yulo demanded from Yang her share in the profit of the business, which
Yang refused through letter upon the advice of his counsel to suspend
payment because of the pendency of the ejectment suit by the owners
of the land against Yulo
7. Yang, in his letter, claimed that inasmuch as he was a sublessee and
inasmuch as Yulo has not paid to the lessors rentals in arrears, he was
retaining the payment (of rentals) to make good to the landowners the
rentals due from Yulo
a. Basically, Yang alleged that the partnership was adopted as a
mere subterfuge to get around the prohibition on the contract
of lease between the landowners and Yulo
8. CFI ruled that there was no partnership between them
ISSUE/s
1. WON the said agreements were of a partnership and not of a sub-
lease
RULING
1. NO. Judgment is affirmed. The agreements were not partnership
agreements.
RATIO
1. The agreement was a sublease, not a partnership
2. The following are the requisites of partnership pursuant to Art. 1767:
(1) two or more persons who bind themselves to contribute money,
property, or industry to a common fund; (2) the intention on the part of
the partners to divide the profits among themselves
3. In this case, Yulo did not furnish the supposed P20,000 capital, nor did
she furnish any help or intervention in the management of the theatre
4. Moreover, it does not appear that she has ever demanded from Yang
any accounting of the expenses and earnings of the business
5. Were she really a partner, her first concern should have been to find
out how the business was progressing, whether the expenses were
legitimate, whether the earnings were correct, etc.
6. She was absolutely silent with respect to any of the acts that a partner
should have done, all she did was to receive her share of 3,000 a month,
 which cannot be interpreted in any manner than a payment for the use
of the premises which she had leased from the owners
7. Furthermore, the court, after ocular inspection, found that said lobby
was very narrow which could not have been used for business purposes
under existing ordinances of the City of Manila (it would constitute a
hazard and danger to the patrons of the theatre)