Partnership Full Text
Nature and Attributes of the Partnership (Full)
[G.R. No. L-9996. October 15, 1957.]
EUFEMIA EVANGELISTA, MANUELA EVANGELISTA and FRANCISCA
EVANGELISTA, petitioners, vs. THE COLLECTOR OF INTERNAL REVENUE and THE COURT OF
TAX APPEALS, respondents.
SYLLABUS
1. TAXATION; TAX ON CORPORATIONS INCLUDES ORGANIZATION WHICH ARE NOT NECESSARY
PARTNERSHIP. — "Corporations" strictly speaking are distinct and different from "partnership".
When our Internal Revenue Code includes "partnership" among the entities subject to the tax
on "corporations", it must be allude to organization which are not necessarily "partnership" in
the technical sense of the term.
2. ID.; DULY REGISTERED GENERAL PARTNERSHIP ARE EXEMPTED FROM THE TAX UPON
CORPORATIONS. — Section 24 of the Internal Revenue Code exempts from the tax imposed
upon corporations "duly registered general partnership", which constitute precisely one of the
most typical form of partnership in this jurisdiction.
3. ID.; CORPORATION INCLUDES PARTNERSHIP NO MATTER HOW ORGANIZED. — As defined in
section 84 (b) of the Internal Revenue Code "the term corporation includes partnership, no
matter how created or organized." This qualifying expression clearly indicates that a joint
venture need not be undertaken in any of the standards form, or conformity with the usual
requirements of the law on partnerships, in order that one could be deemed constituted for
the purposes of the tax on corporations.
4. ID.; CORPORATIONS INCLUDES "JOINT ACCOUNT" AND ASSOCIATIONS WITHOUT LEGAL
PERSONALITY. — Pursuant to Section 84 (b) of the Internal Revenue Code, the term
"corporations" includes, among the others, "joint accounts (cuenta en participacion)" and
"associations", none of which has a legal personality of its own independent of that of its
members. For purposes of the tax on corporations, our National Internal Revenue
Code includes these partnership. — with the exception only of duly registered general
partnership. — within the purview of the term "corporations." Held: That the petitioners in the
case at bar, who are engaged in real estate transactions for monetary gain and divide the same
among themselves, constitute a partnership, so far as the said Code is concerned, and are
subject to the income tax for the corporation.
5. ID.; CORPORATION; PARTNERSHIP WITHOUT LEGAL PERSONALITY SUBJECT TO RESIDENCE
TAX ON CORPORATION. — The pertinent part of the provision of Section 2 of Commonwealth
Act No. 465 which says: "The term corporation as used in this Act includes joint-stock company,
partnership, joint account (cuentas en participacion), association or insurance company, no
matter how created or organized." is analogous to that of Section 24 and 84 (b) of our Internal
Revenue Code which was approved the day immediately after the approval of
said Commonwealth Act No. 565. Apparently, the terms "corporation" and "Partnership" are
used both statutes with substantially the same meaning, Held: That the petitioners are subject
to the residence tax corporations.
DECISION
CONCEPCION, J p:
This is a petition, filed by Eufemia Evangelista, Manuela Evangelista and Francisca Evangelista,
for review of a decision of the Court of Tax Appeals, the dispositive part of which reads:
"FOR ALL THE FOREGOING, we hold that the petitioners are liable for the income tax, real
estate dealer's tax and the residence tax for the years 1945 to 1949, inclusive, in accordance
with the respondent's assessment for the same in the total amount of P6,878.34, which is
hereby affirmed and the petition for review filed by petitioners is hereby dismissed with costs
against petitioners."
It appears from the stipulation submitted by the parties:
"1. That the petitioners borrowed from their father the sum of P59,140.00 which amount
together with their personal monies was used by them for the purpose of buying real
properties;
"2. That on February 2, 1943 they bought from Mrs. Josefina Florentino a lot with an area of
3,713.40 sq. m. including improvements thereon for the sum of P100,000.00; this property has
an assessed value of P57,517.00 as of 1948;
"3. That on April 3, 1944 they purchased from Mrs. Josefa Oppus 21 parcels of land with an
aggregate area of 3,718.40 sq. m. including improvements thereon for P18,000.00; this
property has an assessed value of P8,255.00 as of 1948;
"4. That on April 23, 1944 they purchased from the Insular Investments, Inc., a lot of 4,358 sq.
m. including improvements thereon for P108,825.00. This property has an assessed value of
P4,983.00 as of 1943;
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 Partnership Full Text

"5. That on April 28, 1944 they bought from Mrs. Valentin Afable a lot of 8,371 sq. m. including 1949...........................................................1,575.90
improvements thereon for P237,234.14. This property has an assessed value of P59,140.00 as
of 1948; _______________

"6. That in a document dated August 16, 1945, they appointed their brother Simeon Total including surcharge and compromise P6,157.09
Evangelista to 'manage their properties with full power to lease; to collect and receive rents; to
REAL ESTATE DEALER'S FIXED TAX
issue receipts therefor; in default of such payment, to bring suits against the defaulting tenant;
to sign all letters, contracts, etc., for and in their behalf, and to endorse and deposit all notes
1946.................................................................P37.50
and checks for them;
1947.................................................................150.00
"7. That after having bought the above-mentioned real properties, the petitioners had the
same rented or leased to various tenants; 1948.................................................................150.00

"8. That from the month of March, 1945 up to and including December, 1945, the total amount 1949.................................................................150.00
collected as rents on their real properties was P9,599.00 while the expenses amounted to
P3,650.00 thereby leaving them a net rental income of P5,948.33; ____________

"9. That in 1946, they realized a gross rental income in the sum of P24,786.30, out of which Total including penalty P527.50
amount was deducted the sum of P16,288.27 for expenses thereby leaving them a net rental
income of P7,498.13; RESIDENCE TAXES OF CORPORATION

"10. That in 1948 they realized a gross rental income of P17,453.00 out of the which amount 1945................................................................P38.75
was deducted the sum of P4,837.65 as expenses, thereby leaving them a net rental income of
1946..................................................................38.75
P12,615.35."
1947..................................................................38.75
It further appears that on September 24, 1954, respondent Collector of Internal Revenue
demanded the payment of income tax on corporations, real estate dealer's fixed tax and 1948..................................................................38.75
corporation residence tax for the years 1945-1949, computed, according to the assessments
made by said officer, as follows: 1949..................................................................38.75

INCOME TAXES ______________

1945...........................................................P614.84 Total including surchage P193.75

1946...........................................................1,144.71 TOTAL TAXES DUE P6,878.34

1947..............................................................910.34 Said letter of demand and the corresponding assessments were delivered to petitioners on
December 3, 1954, whereupon they instituted the present case in the Court of Tax Appeals,
1948...........................................................1,912.30 with a prayer that "the decision of the respondent contained in his letter of demand dated

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 Partnership Full Text
September 24, 1954" be reversed, and that they be absolved from the payment of the taxes in
question, with costs against the respondent.
After appropriate proceedings, the Court of Tax Appeals rendered the above-mentioned
decision for the respondent, and, a petition for reconsideration and new trial having been
subsequently denied, the case is now before Us for review at the instance of the petitioners.
The issue in this case is 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, as well as to the residence tax for corporations and the real estate dealers'
fixed tax. With respect to the tax on corporations, the issue hinges on the meaning of the
terms "corporation" and "partnership", as used in sections 24 and 84 of said Code, the
pertinent parts of which read:
"SEC. 24. Rate of tax on corporations. — There shall be levied, assessed, collected, and paid
annually upon the total net income received in the preceding taxable year from all sources by
every corporation organized in, or existing under the laws of the Philippines, no matter how
created or organized but not including duly registered general co-partnerships (compañias
colectivas), a tax upon such income equal to the sum of the following: . . . ."
"Sec. 84(b). The term 'corporation' includes partnerships, no matter how created or organized,
joint-stock companies, joint accounts (cuentas en participacion), associations or insurance
companies, but does not include duly registered general copartnerships (compañias
colectivas)."
Article 1767 of the Civil Code of the Philippines provides:
"By the 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."
Pursuant to this article, 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, because:
1. Said common fund was not something they found already in existence. It was not a property
inherited by them pro indiviso. They created it purposely. What is more they jointly borrowed a
substantial portion thereof in order to establish said common fund.
2. They invested the same, not merely in one transaction, but in a series of transactions. On
February 2, 1943, they bought a lot for P100,000.00. On April 3, 1944, they purchased 21 lots
for P18,000.000. This was soon followed, on April 23, 1944, by the acquisition of another real
estate for P108,825.00. Five (5) days later (April 28, 1944), they got a fourth lot for
P237,234.14. The number of lots (24) acquired and transactions undertaken, as well as the
brief interregnum between each, particularly the last three purchases, is strongly indicative of
a pattern or common design that was not limited to the conservation and preservation of the
aforementioned common fund or even of the property acquired by petitioners in February,
1943. In other words, one cannot but perceive a character of habituality peculiar
to business transactions engaged in for purposes of gain.
3. The aforesaid lots were not devoted to residential purposes, or to other personal uses, of
petitioners herein. The properties were leased separately to several persons, who, from 1945
to 1948 inclusive, paid the total sum of P70,068.30 by way of rentals. Seemingly, the lots are
still being so let, for petitioners do not even suggest that there has been any change in the
utilization thereof.
4. Since August, 1945, the properties have been under the management of one person,
namely, Simeon Evangelista, with full power to lease, to collect rents, to issue receipts, to bring
suits, to sign letters and contracts, and to indorse and deposit notes and checks. Thus, the
affairs relative to said properties have been handled as if the same belonged to a corporation
or business enterprise operated for profit.
5. The foregoing conditions have existed for more than ten (10) years, or, to be exact, over
fifteen (15) years, since the first property was acquired, and over twelve (12) years, since
Simeon Evangelista became the manager.
6. Petitioners have not testified or introduced any evidence, either on their purpose in creating
the set up already adverted to, or on the causes for its continued existence. They did not even
try to offer an explanation therefor.
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
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 Partnership Full Text
on the existence of said intent in petitioners herein. Only one or two of the aforementioned
circumstances were present in the cases cited by petitioners herein, and, hence, those cases
are not in point.
Petitioners insist, however, that they are mere co-owners, not copartners, for, in consequence
of the acts performed by them, a legal entity, with a personality independent of that of its
members, did not come into existence, and some of the characteristics of partnerships are
lacking in the case at bar. This pretense was correctly rejected by the Court of Tax Appeals.
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 other, "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 copartner ships" — 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." It may not be amiss to add that petitioners'
allegation to the effect that their liability in connection with the leasing of the lots above
referred to, under the management of one person — even if true, on which we express no
opinion tends to increase the similarity between the nature of their venture and that of
corporations, and is, therefore, an additional argument in favor of the imposition of said tax on
corporations.
Under the Internal Revenue Laws of the United States, "corporations" are taxed differently
from "partnerships". By specific provision of said laws, such "corporations" include
"associations, joint-stock companies and insurance companies." However, the term
"association" is not used in the aforementioned laws
". . . in any narrow or technical sense. It includes any organization, created for the transaction
of designated affairs, or the attainment of some object, which, like a corporation, continues
notwithstanding that its members or participants change, and the affairs of which, like
corporate affairs, are conducted by a single individual, a committee, a board, or some other
group, acting in a representative capacity. It is immaterial whether such organization is created
by an agreement, a declaration of trust, a statute, or otherwise. It includes a voluntary
association, a joint-stock corporation or company, a 'business' trusts a 'Massachusetts' trust, a
'common law' trust, and 'investment' trust (whether of the fixed or the management type), an
interinsurance exchange operating through an attorney in fact, a partnership association, and
any other type of organization (by whatever name known) which is not, within the meaning of
the Code, a trust or an estate, or a partnership." (7A Merten's Law of Federal Income Taxation,
p. 788; italics ours.)
Similarly, the American Law.
". . . provides its own concept of a partnership. Under the term 'partnership' it includes not only
a partnership as known at 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; italics 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; italics 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.
As regards the residence tax for corporations, section 2 of Commonwealth Act No.
465 provides in part:
"Entities liable to residence tax. — Every corporation, no matter how created or
organized, whether domestic or resident foreign, engaged in or doing business in the
Philippines shall pay an annual residence tax of five pesos and an annual additional tax which,
in no case, shall exceed one thousand pesos, in accordance with the following schedule: . . .
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 Partnership Full Text
"The term 'corporation' as used in this Act includes joint-stock company, partnership, joint
account (cuentas en participacion), association or insurance company, no matter how created
or organized." (italics ours.)
Considering that the pertinent part of this provision is analogous to that of sections 24 and
84(b) of our National Internal Revenue Code (Commonwealth Act No. 466), and that the latter
was approved on June 15, 1939, the day immediately after the approval of
said Commonwealth Act No. 465 (June 14, 1939), it is apparent that the terms "corporation"
and "partnership" are used in both statutes with substantially the same meaning.
Consequently, petitioners are subject, also, to the residence tax for corporations.
Lastly, the records show that petitioners have habitually engaged in leasing the properties
above mentioned for a period of over twelve years, and that the yearly gross rentals of said
properties from 1945 to 1948 ranged from P9,599 to P17,453. Thus, they are subject to the tax
provided in section 193 (q) of our National Internal Revenue Code, for "real estate dealers,"
inasmuch as, pursuant to section 194(s) thereof:
"'Real estate dealer' includes any person engaged in the business of buying, selling,
exchanging, leasing, or renting property or his own account as principaland holding himself out
as a full or part- time dealer in real estate or as an owner of rental property or properties
rented or offered to rent for an aggregate amount of three thousand pesos or more a year. . .
.." (Italics ours.)
Wherefore, the appealed decision of the Court of Tax Appeals is hereby affirmed with costs
against the petitioners herein. It is so ordered.
[G.R. No. L-12541. August 28, 1959.]
ROSARIO U. YULO, assisted by her husband JOSE C. YULO, plaintiffs-appellants, vs. YANG
CHIAO SENG, defendant-appellee.
SYLLABUS
1. TRIAL; ABSENCE OF ONE PARTY PURSUANT TO AGREEMENT; EFFECT ON JUDGMENT. — If
the parties to a case agreed to postpone the trial of the same in view of a probable amicable
settlement, neither of them can take advantage of the other's absence in the hearing by
appearing therein and adducing evidence in his favor. The judgment rendered by the Court
based on such evidence should, in the interest of justice be set aside.
2. CONTRACTS; LEASE; CIRCUMSTANCES THAT NEGATE PARTNERSHIP. — Where one of the
parties to a contract does not contribute the capital he is supposed to contribute to a common
fund; does not furnish any help or intervention in the management of the business subject of
the contract; does not demand from the other party an accounting of the expenses and
earnings of the business; and is absolutely silent with respect to any of the acts that a partner
should have done, but, on the other hand, receives a fixed monthly sum from the other party,
there can be no other conclusion than that the contract between the parties is one of lease
and not of partnership.
DECISION
LABRADOR, J p:
Appeal from the judgment of the Court of First Instance of Manila, Hon. Bienvenido A. Tan,
presiding, dismissing plaintiff's complaint as well as defendant's counterclaim. The appeal is
prosecuted by plaintiff.
The record discloses that on June 17, 1945, defendant Yang Chiao Seng wrote a letter to the
plaintiff Mrs. Rosario U. Yulo, proposing the formation of a partnership between them to run
and operate a theatre on the premises occupied by former Cine Oro at Plaza Sta. Cruz, Manila.
The principal conditions of the offer are (1) that Yang Chiao Seng guarantees Mrs. Yulo a
monthly participation of P3,000, payable quarterly in advance within the first 15 days of each
quarter, (2) that the partnership shall be for a period of two years and six months, starting
from July 1, 1945 to December 31, 1947, with the condition that if the land is expropriated or
rendered impracticable for the business, or if the owner constructs a permanent building
thereon, or Mrs. Yulo's right of lease is terminated by the owner, then the partnership shall be
terminated even if the period for which the partnership was agreed to be established has not
yet expired; (3) that Mrs. Yulo is authorized personally to conduct such business in the lobby of
the building as is ordinarily carried on in lobbies of theatres in operation, provided the said
business may not obstruct the free ingress and egrees of patrons of the theatre; (4) that after
December 31, 1947, all improvements placed by the partnership shall belong to Mrs. Yulo, but
that if the partnership agreement is terminated before the lapse of one and a half years period
under any of the causes mentioned in paragraph (2) then Yang Chiao Seng shall have the right
to remove and take away all improvements that the partnership may place in the premises.
Pursuant to the above offer, which plaintiff evidently accepted, the parties executed a
partnership agreement establishing the "Yang & Company, Limited," which was to exist from
July 1, 1945 to December 31, 1947. It states that it will conduct and carry on the business of
operating a theatre for the exhibition of motion and talking pictures. The capital is fixed at
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 Partnership Full Text
P100,000, P80,000 of which is to be furnished by Yang Chiao Seng and P20,000, by Mrs. Yulo.
All gains and profits are to be distributed among the partners in the same proportion as their
capital contribution, and the liability of Mrs. Yulo, in case of loss, shall be limited to her capital
contribution (Exh. "B").
In June, 1946, they executed a supplementary agreement, extending the partnership for a
period of three years beginning January 1, 1948 to December 31, 1950. The benefits are to be
divided between them at the rate of 50-50 and after December 31, 1950, the showhouse
building shall belong exclusively to the second party, Mrs. Yulo.
The land on which the theatre was constructed was leased by plaintiff Mrs. Yulo from Emilia
Carrion Santa Marina and Maria Carrion Santa Marina. In the contract of lease it was stipulated
that the lease shall continue for an indefinite period of time, but that after one year the lease
may be cancelled by either party by written notice to the other party at least 90 days before
the date of cancellation. The last contract was executed between the owners and Mrs. Yulo on
April 5, 1948. But on April 12, 1949, the attorney for the owners notified Mrs. Yulo of the
owner's desire to cancel the contract of lease on July 31, 1949. In view of the above notice,
Mrs. Yulo and her husband brought a civil action in the Court of First Instance of Manila on July
3, 1949 to declare the lease of the premises one for an indefinite period. On August 17, 1949,
the owners on their part brought an action in the Municipal Court of Manila against Mrs. Yulo
and her husband and Yang Chiao Seng to eject them from the premises. On February 9, 1950,
the Municipal Court of Manila rendered judgment ordering the ejectment of Mrs. Yulo and Mr.
Yang. The judgment was appealed. In the Court of First Instance, the two cases were
afterwards heard jointly, and judgment was rendered dismissing the complaint of Mrs. Yulo
and her husband, and declaring the contract of lease of the premises terminated as of July 31,
1949, and fixing the reasonable monthly rentals of said premises at P100. Both parties
appealed from said decision and the Court of Appeals, on April 30, 1955, affirmed the
judgment.
On October 27, 1950, Mrs. Yulo demanded from Yang Chiao Seng her share in the profits of the
business. Yang answered the letter saying that upon the advice of his counsel he had to
suspend the payment (of the rentals) because of the pendency of the ejectment suit by the
owners of the land against Mrs. Yulo. In this letter Yang alleges that inasmuch as he is a
sublessee and inasmuch as Mrs. Yulo has not paid to the lessors the rentals from August, 1949,
he was retaining the rentals to make good to the landowners the rentals due from Mrs. Yulo in
arrears (Exh. "E").
In view of the refusal of Yang to pay to her the amount agreed upon, Mrs. Yulo instituted this
action on May 26, 1954, alleging the existence of a partnership between them, and that
defendant Yang Chiao Seng has refused to pay her share from December, 1949 to December,
1950; that after December 31, 1950 the partnership between Mrs. Yulo and Yang terminated,
as a result of which, plaintiff became the absolute owner of the building occupied by the Cine
Astor; that the reasonable rental that the defendant should pay therefor from January, 1951 is
P5,000; that the defendant has acted maliciously and refuses to pay the participation of the
plaintiff in the profits of the business amounting to P35,000 from November, 1949 to October,
1950, and that as a result of such bad faith and malice on the part of the defendant, Mrs. Yulo
has suffered damages in the amount of P160,000 and exemplary damages to the extent of
P5,000. The prayer includes a demand for the payment of the above sums plus the sum of
P10,000 for attorney's fees.
In answer to the complaint, defendant alleges that the real agreement between the plaintiff
and the defendant was one of lease and not of partnership; that the partnership was adopted
as a subterfuge to get around the prohibition contained in the contract of lease between the
owners and the plaintiff against the sublease of the said property. As to the other claims, he
denies the same and alleges that the fair rental value of the land is only P1,100. By way of
counterclaim he alleges that by reason of an attachment issued against the properties of the
defendant the latter has suffered damages amounting to P100,000.
The first hearing was had on April 19, 1955, at which time only the plaintiff appeared. The
court heard evidence of the plaintiff in the absence of the defendant and thereafter rendered
judgment ordering the defendant to pay to the plaintiff P41,000 for her participation in the
business up to December, 1950; P5,000 as monthly rental for the use and occupation of the
building from January 1, 1951 until defendant vacates the same, and P300 for the use and
occupation of the lobby from July 1, 1945 until defendant vacates the property. This decision,
however, was set aside on a motion for reconsideration. In said motion it is claimed that
defendant failed to appear at the hearing because of his honest belief that a joint petition for
postponement filed by both parties, in view of a possible amicable settlement, would be
granted; that in view of the decision of the Court of Appeals in two previous cases between the
owners of the land and the plaintiff Rosario Yulo, the plaintiff has no right to claim the alleged
participation in the profits of the business, etc. The court, finding the above motion well-
founded, set aside its decision and a new trial was held. After trial the court rendered the
decision making the following findings: that it is not true that a partnership was created
between the plaintiff and the defendant because defendant has not actually contributed the
sum mentioned in the Articles of Partnership, or any other amount; that the real agreement
between the plaintiff and the defendant is not one of partnership but one of lease for the
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 Partnership Full Text
reason that under the agreement the plaintiff did not share either in the profits or in the losses
of the business as required by Article 1769 of the Civil Code; and that the fact that plaintiff was
granted a "guaranteed participation" in the profits also belies the supposed existence of a
partnership between them. It, therefore, denied plaintiff's claim for damages or supposed
participation in the profits.
As to her claim for damages for the refusal of the defendant to allow the use of the supposed
lobby of the theatre, the court after ocular inspection fund that the said lobby was a very
narrow space leading to the balcony of the theatre which could not be used for business
purposes under existing ordinances of the City of Manila because it would constitute a hazard
and danger to the patrons of the theatre. The court, therefore, dismissed the complaint; so did
it dismiss the defendant's counterclaim, on the ground that defendant failed to present
sufficient evidence to sustain the same. It is against this decision that the appeal has been
prosecuted by plaintiff to this Court.
The first assignment of error imputed to the trial court is its order setting aside its former
decision and allowing a new trial. This assignment of error is without merit. As the parties had
agreed to postpone the trial because of a probable amicable settlement, the plaintiff could not
take advantage of defendant's absence at the time fixed for the hearing. The lower court,
therefore, did not err in setting aside its former judgment. The final result of the hearing
shown by the decision indicates that the setting aside of the previous decision was in the
interest of justice.
In the second assignment of error plaintiff-appellant claims that the lower court erred in not
striking out the evidence offered by defendant-appellee to prove that the relation between
him and the plaintiff is one of sublease and not of partnership. The action of the lower court in
admitting evidence is justified by the express allegation in the defendant's answer that the
agreement set forth in the complaint was one of lease and not of partnership, and that the
partnership formed was adopted in view of a prohibition contained in plaintiff's lease against a
sublease of the property.
The most important issue raised in the appeal is that contained in the fourth assignment of
error, to the effect that the lower court erred in holding that the written contracts, Exhs. "A",
"B", and "C", between plaintiff and defendant, are one of lease and not one of partnership. We
have gone over the evidence and we fully agree with the conclusion of the trial court that the
agreement was a sublease, not a partnership. 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.)
In the first place, plaintiff did not furnish the supposed P20,000 capital. In the second place,
she did not furnish any help or intervention in the management of the theatre. In the third
place, it does not appear that she has ever demanded from defendant any accounting of the
expenses and earnings of the business. 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. She was absolutely silent with respect to any of the
acts that a partner should have done; all that she did was to receive her share of P3,000 a
month, which can not be interpreted in any manner than a payment for the use of the
premises which she had leased from the owners. Clearly, plaintiff had always acted in
accordance with the original letter of defendant of June 17, 1945 (Exh. "A"), which shows that
both parties considered this offer as the real contract between them.
Plaintiff claims the sum of P41,000 as representing her share or participation in the business
from December, 1949. But the original letter of the defendant, Exh. "A", expressly states that
the agreement between the plaintiff and the defendant was to end upon the termination of
the right of the plaintiff to the lease. Plaintiff's right having terminated in July, 1949 as found
by the Court of Appeals, the partnership agreement or the agreement for her to receive a
participation of P3,000 automatically ceased as of said date.
We find no error in the judgment of the court below and we affirm it in toto, with costs against
plaintiff-appellant.
[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.
SYLLABUS
1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; PARTNERSHIP; FORMED WHERE MEMBERS OF
THE SAME FAMILY BOUND THEMSELVES TO CONTRIBUTE MONEY TO A COMMON FUND WITH
THE INTENTION OF DIVIDING THE PROFITS AMONG THEMSELVES. — The Joint Affidavit of April
7
 Partnership Full Text

11, 1966 (Exhibit A), clearly stipulated by the members of the same family that the P15,000.00 SHELL to cover advances of fuel to petitioner as dealer with a proviso that said agreement
advance rental due to them from SHELL shall augment their "capital investment" in the "cancels and supersedes the Joint Affidavit dated 11 April 1966 executed by the co-owners." 2
operation of the gasoline station. 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 For sometime, the petitioner submitted financial statements regarding the operation of the
private respondent Remedios Estanislao and Atty. Angeles. Petitioner submitted to private business to private respondents, but thereafter petitioner failed to render subsequent
respondents periodic accounting of the business. Petitioner gave a written authority to private accounting. Hence through Atty. Angeles, a demand was made on petitioner to render an
respondent Remedios Estanislao, his sister, to examine and audit the books of their "common accounting of the profits.
business" (aming negosyo). Respondent Remedios assisted in the running of the business.
The financial report of December 31, 1968 shows that the business was able to make a profit of
There is no doubt that the parties hereto formed a partnership when they bound themselves
P87,293.79 and that by the year ending 1969, a profit of P150,000.00 was realized. 3
to contribute money to a common fund with the intention of dividing the profits among
themselves.
Thus, on August 25, 1970 private respondents filed a complaint in the Court of First Instance of
Rizal against petitioner saying among others that the latter be ordered:
2. REMEDIAL LAW; EVIDENCE; FINDINGS OF FACT OF THE COURT OF APPEALS, GENERALLY
CONCLUSIVE ON APPEAL. — The findings of facts of the respondent court are conclusive in this
"1. to execute a public document embodying all the provisions of the partnership agreement
proceeding, and its conclusion based on the said facts are in accordance with the applicable
entered into between plaintiffs and defendants provided in Article 1771 of the New Civil Code;
law.
"2. to render a formal accounting of the business operation covering the period from May 6,
DECISION
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;
GANCAYCO, J p:
"3. to pay the plaintiffs their lawful shares and participation in the net profits of the business in
By this petition for certiorari the Court is asked to determine if a partnership exists between
an amount of no less than P150,000.00 with interest at the rate of 1% per month from date of
members of the same family arising from their joint ownership of certain properties.
demand until full payment thereof for the entire duration of the business; and
Petitioner and private respondents are brothers and sisters who are co-owners of certain lots
"4. to pay the plaintiffs the amount of P10,000.00 as attorney's fees and costs of the suit." (pp.
at the corner of Annapolis and Aurora Blvd., Quezon City which were then being leased to the
13-14 Record on Appeal.)"
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
After trial on the merits, on October 15, 1975, Hon. Lino Anover, who was then the temporary
P15,000.00 to be taken from the advance rentals due to them from SHELL for the occupancy of
presiding judge of Branch IV of the trial court, rendered judgment dismissing the complaint and
the said lots owned in common by them. A joint affidavit was executed by them on April 11,
counterclaim and ordering private respondents to pay petitioner P3,000.00 attorney's fee and
1966 which was prepared by Atty. Democrito Angeles. 1 They agreed to help their brother,
costs. Private respondent filed a motion for reconsideration of the decision. On December 1,
petitioner herein, by allowing him to operate and manage the gasoline service station of the
1975, Hon. Ricardo Tensuan who was the newly appointed presiding judge of the same branch,
family. They negotiated with SHELL. For practical purposes and in order not to run counter to
set aside the aforesaid decision and rendered another decision in favor of said
the company's policy of appointing only one dealer, it was agreed that petitioner would apply
respondents. cdll
for the dealership. Respondent Remedios helped in co-managing the business with petitioner
from May 3, 1966 up to February 16, 1967. The dispositive part thereof reads as follows:

On May 26, 1966, the parties herein entered into an Additional Cash Pledge Agreement with 'WHEREFORE, the Decision of this Court dated October 14, 1975 is hereby reconsidered and a
SHELL wherein it was reiterated that the P15,000.00 advance rental shall be deposited with new judgment is hereby rendered in favor of the plaintiffs and as against the defendant:
8
 Partnership Full Text
(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 P150,000.00, 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 P5,000.00 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 described 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 PHILIPPINES LIMITED, advanced
rentals in the total amount of FIFTEEN THOUSAND PESOS (P15,000.00) 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 said SHELL COMPANY OF THE PHILIPPINES LIMITED out of its benevolence and
desire to help us in augmenting our capital investment in the operation of the said gasoline
station, has agreed to give us the said amount of P15,000.00, 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 (P15,000,00) from the SHELL COMPANY OF THE PHILIPPINES
LIMITED, the said sum as ADVANCED RENTALS to us be applied as monthly rentals for the said
two lots under our Lease Agreement starting on the 25th of May, 1966 until such time that the
said amount of P15,000.00 be applicable, which time to our estimate will cover at four 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 & 111, 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 CO-OWNERS 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 (P3,382.29), Philippine Currency;
9
 Partnership Full Text
"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 11th May 1966, he
deposited to SHELL in cash the amount of PESOS TEN THOUSAND (P10,000), Philippine
Currency, to secure his purchases on credit of Shell petroleum products; . . . cdll
"WHEREAS, said DEALER, in his desire to be granted an increased credit limit up to P25,000, 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 P15,000, commencing 24th
May 1966, this P15,000 shall be treated as additional cash deposit to SHELL under the same
terms and conditions of the aforementioned Cash Pledge Agreement dated 11th 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:
"1. The CO-OWNERS do hereby waive in favour of DEALER the monthly rentals due to all CO-
OWNERS, collectively, under the above described 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 P10,000 to P25,000, for such purpose, the SHELL, CO-
OWNERS and DEALER hereby irrevocably assign to SHELL the monthly rental of P3,382.29
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 P15,000.
"2. The above stated monthly rentals accumulated shall be treated as additional cash deposit
by DEALER to SHELL, thereby increasing his credit limit from P10,000 to P25,000. This
agreement, therefore, cancels and supersedes the Joint Affidavit dated 11 April 1966 executed
by the CO-OWNERS.
"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 P25,000.
"4. This increase in the credit limit shall also be subject to the same terms and conditions of the
above-mentioned Cash Pledge Agreement dated 11th 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 P15,000.00 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 P15,000.00.
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 P15,000.00 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 CO-OWNERS."
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 P15,000.00 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 P15,000.00 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
P15,000.00 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. LibLex
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
Remedios Estanislao and Atty. Angeles. Petitioner submitted to private respondents periodic
accounting of the business. 4 Petitioner gave a written authority to private respondent
Remedios 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.
10
 Partnership Full Text
Further, the findings of facts of the respondent court are conclusive in this proceeding, and its
conclusion based on the said facts are in accordance with 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 shall be entertained.
July 30, 1979
PETITION FOR AUTHORITY TO CONTINUE USE OF THE FIRM NAME "SYCIP, SALAZAR,
FELICIANO, HERNANDEZ & CASTILLO." LUCIANO E. SALAZAR, FLORENTINO P. FELICIANO,
BENILDO G. HERNANDEZ. GREGORIO R. CASTILLO. ALBERTO P. SAN JUAN, JUAN C. REYES. JR.,
ANDRES G. GATMAITAN, JUSTINO H. CACANINDIN, NOEL A. LAMAN, ETHELWOLDO E.
FERNANDEZ, ANGELITO C. IMPERIO, EDUARDO R. CENIZA, TRISTAN A. CATINDIG, ANCHETA K.
TAN, and ALICE V. PESIGAN, petitioners.
IN THE MATTER OF THE PETITION FOR AUTHORITY TO CONTINUE USE OF THE FIRM NAME
"OZAETA, ROMULO, DE LEON, MABANTA & REYES." RICARDO J. ROMULO, BENJAMIN M. DE
LEON, ROMAN MABANTA, JR., JOSE MA, REYES, JESUS S. J. SAYOC, EDUARDO DE LOS
ANGELES, and JOSE F. BUENAVENTURA, petitioners.
RESOLUTION
MELENCIO-HERRERA, J.:
Two separate Petitions were filed before this Court 1) by the surviving partners of Atty.
Alexander Sycip, who died on May 5, 1975, and 2) by the surviving partners of Atty. Herminio
Ozaeta, who died on February 14, 1976, praying that they be allowed to continue using, in the
names of their firms, the names of partners who had passed away. In the Court's Resolution of
September 2, 1976, both Petitions were ordered consolidated.
Petitioners base their petitions on the following arguments:
1. Under the law, a partnership is not prohibited from continuing its business under a firm
name which includes the name of a deceased partner; in fact, Article 1840 of the Civil Code
explicitly sanctions the practice when it provides in the last paragraph that:
The use by the person or partnership continuing the business of the partnership name, or the
name of a deceased partner as part thereof, shall not of itself make the individual property of
the deceased partner liable for any debts contracted by such person or partnership. 1
2. In regulating other professions, such as accountancy and engineering, the legislature has
authorized the adoption of firm names without any restriction as to the use, in such firm name,
of the name of a deceased partner; 2 the legislative authorization given to those engaged in the
practice of accountancy — a profession requiring the same degree of trust and confidence in
respect of clients as that implicit in the relationship of attorney and client — to acquire and use
a trade name, strongly indicates that there is no fundamental policy that is offended by the
continued use by a firm of professionals of a firm name which includes the name of a deceased
partner, at least where such firm name has acquired the characteristics of a "trade name." 3
3. The Canons of Professional Ethics are not transgressed by the continued use of the name of
a deceased partner in the firm name of a law partnership because Canon 33 of the Canons of
Professional Ethics adopted by the American Bar Association declares that:
... The continued use of the name of a deceased or former partner when permissible by local
custom, is not unethical but care should be taken that no imposition or deception is practiced
through this use. ... 4
4. There is no possibility of imposition or deception because the deaths of their respective
deceased partners were well-publicized in all newspapers of general circulation for several
days; the stationeries now being used by them carry new letterheads indicating the years when
their respective deceased partners were connected with the firm; petitioners will notify all
leading national and international law directories of the fact of their respective deceased
partners' deaths. 5
5. No local custom prohibits the continued use of a deceased partner's name in a professional
firm's name; 6 there is no custom or usage in the Philippines, or at least in the Greater Manila
Area, which recognizes that the name of a law firm necessarily Identifies the individual
members of the firm. 7
6. The continued use of a deceased partner's name in the firm name of law partnerships has
been consistently allowed by U.S. Courts and is an accepted practice in the legal profession of
most countries in the world.8
The question involved in these Petitions first came under consideration by this Court in 1953
when a law firm in Cebu (the Deen case) continued its practice of including in its firm name
that of a deceased partner, C.D. Johnston. The matter was resolved with this Court advising the
firm to desist from including in their firm designation the name of C. D. Johnston, who has long
been dead."
11
 Partnership Full Text
The same issue was raised before this Court in 1958 as an incident in G. R. No. L-11964,
entitled Register of Deeds of Manila vs. China Banking Corporation. The law firm of Perkins &
Ponce Enrile moved to intervene as amicus curiae.Before acting thereon, the Court, in a
Resolution of April 15, 1957, stated that it "would like to be informed why the name of Perkins
is still being used although Atty. E. A. Perkins is already dead." In a Manifestation dated May
21, 1957, the law firm of Perkins and Ponce Enrile, raising substantially the same arguments as
those now being raised by petitioners, prayed that the continued use of the firm name "Perkins
& Ponce Enrile" be held proper.
On June 16, 1958, this Court resolved:
After carefully considering the reasons given by Attorneys Alfonso Ponce Enrile and Associates
for their continued use of the name of the deceased E. G. Perkins, the Court found no reason
to depart from the policy it adopted in June 1953 when it required Attorneys Alfred P. Deen
and Eddy A. Deen of Cebu City to desist from including in their firm designation, the name of C.
D. Johnston, deceased. The Court believes that, in view of the personal and confidential nature
of the relations between attorney and client, and the high standards demanded in the canons
of professional ethics, no practice should be allowed which even in a remote degree could give
rise to the possibility of deception. Said attorneys are accordingly advised to drop the name
"PERKINS" from their firm name.
Petitioners herein now seek a re-examination of the policy thus far enunciated by the Court.
The Court finds no sufficient reason to depart from the rulings thus laid down.
A. Inasmuch as "Sycip, Salazar, Feliciano, Hernandez and Castillo" and "Ozaeta, Romulo, De
Leon, Mabanta and Reyes" are partnerships, the use in their partnership names of the names
of deceased partners will run counter to Article 1815 of the Civil Code which provides:
Art. 1815. Every partnership shall operate under a firm name, which may or may not include
the name of one or more of the partners.
Those who, not being members of the partnership, include their names in the firm name, shall
be subject to the liability, of a partner.
It is clearly tacit in the above provision that names in a firm name of a partnership must either
be those of living partners and. in the case of non-partners, should be living persons who can
be subjected to liability. In fact, Article 1825 of the Civil Code prohibits a third person from
including his name in the firm name under pain of assuming the liability of a partner. The heirs
of a deceased partner in a law firm cannot be held liable as the old members to the creditors of
a firm particularly where they are non-lawyers. Thus, Canon 34 of the Canons of Professional
Ethics "prohibits an agreement for the payment to the widow and heirs of a deceased lawyer
of a percentage, either gross or net, of the fees received from the future business of the
deceased lawyer's clients, both because the recipients of such division are not lawyers and
because such payments will not represent service or responsibility on the part of the recipient.
" Accordingly, neither the widow nor the heirs can be held liable for transactions entered into
after the death of their lawyer-predecessor. There being no benefits accruing, there ran be no
corresponding liability.
Prescinding the law, there could be practical objections to allowing the use by law firms of the
names of deceased partners. The public relations value of the use of an old firm name can tend
to create undue advantages and disadvantages in the practice of the profession. An able
lawyer without connections will have to make a name for himself starting from scratch.
Another able lawyer, who can join an old firm, can initially ride on that old firm's reputation
established by deceased partners.
B. In regards to the last paragraph of Article 1840 of the Civil Code cited by
petitioners, supra, the first factor to consider is that it is within Chapter 3 of Title IX of the Code
entitled "Dissolution and Winding Up." The Article primarily deals with the exemption from
liability in cases of a dissolved partnership, of the individual property of the deceased partner
for debts contracted by the person or partnership which continues the business using the
partnership name or the name of the deceased partner as part thereof. What the law
contemplates therein is a hold-over situation preparatory to formal reorganization.
Secondly, Article 1840 treats more of a commercial partnership with a good will to protect
rather than of a professional partnership, with no saleable good will but whose reputation
depends on the personal qualifications of its individual members. Thus, it has been held that a
saleable goodwill can exist only in a commercial partnership and cannot arise in a professional
partnership consisting of lawyers.
As a general rule, upon the dissolution of a commercial partnership the succeeding partners or
parties have the right to carry on the business under the old name, in the absence of a
stipulation forbidding it, (s)ince the name of a commercial partnership is a partnership asset
inseparable from the good will of the firm. ... (60 Am Jur 2d, s 204, p. 115) (Emphasis supplied)
On the other hand,
12
 Partnership Full Text
... a professional partnership the reputation of which depends or; the individual skill of the
members, such as partnerships of attorneys or physicians, has no good win to be distributed as
a firm asset on its dissolution, however intrinsically valuable such skill and reputation may be,
especially where there is no provision in the partnership agreement relating to good will as an
asset. ... (ibid, s 203, p. 115) (Emphasis supplied)
C. A partnership for the practice of law cannot be likened to partnerships formed by other
professionals or for business. For one thing, the law on accountancy specifically allows the use
of a trade name in connection with the practice of accountancy.10
A partnership for the practice of law is not a legal entity. It is a mere relationship or association
for a particular purpose. ... It is not a partnership formed for the purpose of carrying on trade
or business or of holding property." 11 Thus, it has been stated that "the use of a nom de
plume, assumed or trade name in law practice is improper. 12
The usual reason given for different standards of conduct being applicable to the practice of
law from those pertaining to business is that the law is a profession.
Dean Pound, in his recently published contribution to the Survey of the Legal Profession, (The
Lawyer from Antiquity to Modern Times, p. 5) defines a profession as "a group of men pursuing
a learned art as a common calling in the spirit of public service, — no less a public service
because it may incidentally be a means of livelihood."
xxx xxx xxx
Primary characteristics which distinguish the legal profession from business are:
1. A duty of public service, of which the emolument is a byproduct, and in which one may
attain the highest eminence without making much money.
2. A relation as an "officer of court" to the administration of justice involving thorough
sincerity, integrity, and reliability.
3. A relation to clients in the highest degree fiduciary.
4. A relation to colleagues at the bar characterized by candor, fairness, and unwillingness to
resort to current business methods of advertising and encroachment on their practice, or
dealing directly with their clients. 13
"The right to practice law is not a natural or constitutional right but is in the nature of a
privilege or franchise. 14 It is limited to persons of good moral character with special
qualifications duly ascertained and certified. 15 The right does not only presuppose in its
possessor integrity, legal standing and attainment, but also the exercise of a special
privilege, highly personal and partaking of the nature of a public trust." 16
D. Petitioners cited Canon 33 of the Canons of Professional Ethics of the American Bar
Association" in support of their petitions.
It is true that Canon 33 does not consider as unethical the continued use of the name of a
deceased or former partner in the firm name of a law partnership when such a practice
is permissible by local custom but the Canon warns that care should be taken that no
imposition or deception is practiced through this use.
It must be conceded that in the Philippines, no local custom permits or allows the continued
use of a deceased or former partner's name in the firm names of law partnerships. Firm names,
under our custom, Identify the more active and/or more senior members or partners of the law
firm. A glimpse at the history of the firms of petitioners and of other law firms in this country
would show how their firm names have evolved and changed from time to time as the
composition of the partnership changed.
The continued use of a firm name after the death of one or more of the partners designated
by it is proper only where sustained by local custom and not where by custom this purports to
Identify the active members....
There would seem to be a question, under the working of the Canon, as to the propriety of
adding the name of a new partner and at the same time retaining that of a deceased
partner who was never a partner with the new one. (H.S. Drinker, op. cit., supra, at pp. 207208)
(Emphasis supplied).
The possibility of deception upon the public, real or consequential, where the name of a
deceased partner continues to be used cannot be ruled out. A person in search of legal counsel
might be guided by the familiar ring of a distinguished name appearing in a firm title.
E. Petitioners argue that U.S. Courts have consistently allowed the continued use of a deceased
partner's name in the firm name of law partnerships. But that is so because it is sanctioned by
custom.
13
 Partnership Full Text
In the case of Mendelsohn v. Equitable Life Assurance Society (33 N.Y.S. 2d 733) which
petitioners Salazar, et al. quoted in their memorandum, the New York Supreme Court
sustained the use of the firm name Alexander & Green even if none of the present ten partners
of the firm bears either name because the practice was sanctioned by custom and did not
offend any statutory provision or legislative policy and was adopted by agreement of the
parties. The Court stated therein:
The practice sought to be proscribed has the sanction of custom and offends no statutory
provision or legislative policy. Canon 33 of the Canons of Professional Ethics of both the
American Bar Association and the New York State Bar Association provides in part as follows:
"The continued use of the name of a deceased or former partner, when permissible by local
custom is not unethical, but care should be taken that no imposition or deception is practiced
through this use." There is no question as to local custom. Many firms in the city use the names
of deceased members with the approval of other attorneys, bar associations and the
courts. The Appellate Division of the First Department has considered the matter and reached
The conclusion that such practice should not be prohibited. (Emphasis supplied)
xxx xxx xxx
Neither the Partnership Law nor the Penal Law prohibits the practice in question. The use of
the firm name herein is also sustainable by reason of agreement between the partners. 18
Not so in this jurisdiction where there is no local custom that sanctions the practice. Custom
has been defined as a rule of conduct formed by repetition of acts, uniformly observed
(practiced) as a social rule, legally binding and obligatory. 19Courts take no judicial notice of
custom. A custom must be proved as a fact, according to the rules of evidence. 20 A local
custom as a source of right cannot be considered by a court of justice unless such custom is
properly established by competent evidence like any other fact. 21 We find such proof of the
existence of a local custom, and of the elements requisite to constitute the same, wanting
herein. Merely because something is done as a matter of practice does not mean that Courts
can rely on the same for purposes of adjudication as a juridical custom. Juridical custom must
be differentiated from social custom. The former can supplement statutory law or be applied in
the absence of such statute. Not so with the latter.
Moreover, judicial decisions applying or interpreting the laws form part of the legal
system. 22 When the Supreme Court in the Deen and Perkins cases issued its Resolutions
directing lawyers to desist from including the names of deceased partners in their firm
designation, it laid down a legal rule against which no custom or practice to the contrary, even
if proven, can prevail. This is not to speak of our civil law which clearly ordains that a
partnership is dissolved by the death of any partner. 23 Custom which are contrary to law,
public order or public policy shall not be countenanced. 24
The practice of law is intimately and peculiarly related to the administration of justice and
should not be considered like an ordinary "money-making trade."
... It is of the essence of a profession that it is practiced in a spirit of public service. A trade ...
aims primarily at personal gain; a profession at the exercise of powers beneficial to mankind. If,
as in the era of wide free opportunity, we think of free competitive self assertion as the highest
good, lawyer and grocer and farmer may seem to be freely competing with their fellows in
their calling in order each to acquire as much of the world's good as he may within the allowed
him by law. But the member of a profession does not regard himself as in competition with his
professional brethren. He is not bartering his services as is the artisan nor exchanging the
products of his skill and learning as the farmer sells wheat or corn. There should be no such
thing as a lawyers' or physicians' strike. The best service of the professional man is often
rendered for no equivalent or for a trifling equivalent and it is his pride to do what he does in a
way worthy of his profession even if done with no expectation of reward, This spirit of public
service in which the profession of law is and ought to be exercised is a prerequisite of sound
administration of justice according to law. The other two elements of a profession, namely,
organization and pursuit of a learned art have their justification in that they secure and
maintain that spirit. 25
In fine, petitioners' desire to preserve the Identity of their firms in the eyes of the public must
bow to legal and ethical impediment.
ACCORDINGLY, the petitions filed herein are denied and petitioners advised to drop the names
"SYCIP" and "OZAETA" from their respective firm names. Those names may, however, be
included in the listing of individuals who have been partners in their firms indicating the years
during which they served as such.
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