1 BUSORG First Batch Case Digest
capital contributions of Rojas and Maglana as stipulated in both
1.
Rojas vs. Maglana
GR No. 30616
192 SCRA 110
Facts:
Maglana and Rojas executed their Articles of Co-Partnership called
Eastcoast Development Enterprise (EDE). The partnership has an
indefinite term of existence. It was registered with SEC in which the
purpose is to “apply or secure timber or forest lands and to operate,
develop and promote such forests rights and concessions.”
In the Articles of Co-partnership, Maglana shall manage the business
affairs of the partnership while Rojas shall be the logging
superintendent. It is also provided that all profits and losses of the
partnership shall be divided share and share alike between the
partners.
Rojas and Maglana availed the services of Pahamotang as industrial
partner. Thereafter, they executed their Article for the second
partnership under the same firm name. Aside from slight difference
in purpose, the second partnership is fixed to 30 years, everything
else in the article is the same with the first.
Later on, Pahamotang sold his share and interest in the partnership
to Rojas and Maglana. The two became the owners of all equipment
contributed by Pahamotang.
Rojas entered into a management contact with another logging
enterprise, the CMS Estate. He left and abandoned the partnership.
He withdrew his equipment in the partnership. Maglana reminded
Rojas of his obligation to contribute in the partnership. Rojas said
that he will not be able to comply with the promised contributions
and took funds from the partnership more than his contribution.
Maglana then notified Rojas that he dissolved the partnership. Rojas
filed an action for recovery of properties.
The trial court ruled that the nature of partnership of Maglana and
Rojas is one of a de facto and at will because there was no term
express or implied; no period fixed expressly and impliedly.
Issue:
1. What is the nature of the partnership of Maglana and
Rojas after Pahamotang retire from the second
partnership?
2. Whether or not Maglana can unilaterally dissolve the
partnership.
Held:
1.
The relationship of Maglana and Rojas after the withdrawal of
Pahamotang can neither be considered as a De Facto Partnership,
nor a partnership at Will for there is an existing partnership duly
registered.
It was not the intention of the partners to dissolve the first
partnership, upon the constitution of the second one which they
unmistakably called an “Additional Agreement”. The First Articles of
Partnership were only amended, in the form of Supplementary
Articles of Co-Partnership which was never registered. They still
used the same name EDE and pursued the same purposes and the
partnerships call for the same amounts.
2.
Yes. Article 1830 par. 2 of Civil Code, even if there is a specified
term, one partner can cause its dissolution by expressly withdrawing
even before the expiration of the period, with or without justifiable
cause. If the cause is not justified or no cause was given, the
withdrawing partner is liable for damages but in no case he be
compelled to remain in the firm.
It is a settled rule that when a partner who has undertaken to
contribute a sum of money fails to do so, he becomes a debtor of
the partnership for whatever he may have promised to contribute
and for interest and damages from the time he should have
complied with his obligation. Being a contract of partnership, each
partner must share in the profits and losses of the venture. That is
the essence of a partnership.
Maglana cannot be said to be in bad faith nor can he be liable for
damages, it can be recalled that after Pahamotang’s withdrawal,
Rojas entered into a management with another logging enterprise,
refused to contribute and abandoned their partnership.
2.
Campos Rueda vs. Pacific Commercial Co.
GR No. L-18703
Facts:
Campos, Rueda & Co., a limited partnership, is indebted to the
appellants: Pacific Commercial Co. , Asiatic Petroleum Co, and
International Banking Corporation amounting to not less than
P1,000.00 which were not paid more than 30 days prior to the date
of the filing by petitioners of the application for voluntary
insolvency.
The trial court denied the petition on the ground that it was not
proven, nor alleged, that the members of the aforesaid firm were
insolvent at the time the application was filed; and that was said
partners are personally and solidarily liable for the consequence of
the transactions of the partnership, it cannot be adjudged insolvent
so long as the partners are not alleged and proven to be insolvent.
Issue:
Whether or not a limited partnership, such as the appelle, which has
failed to pay its obligation with three creditors for more than thirty
days, may be held to have committed an act of insolvency, and
thereby be adjudged insolvent against its will.
Held:
Yes.
The Philippine statutes consider a limited partnership as a juridical
entity for all intents and purposes, which personality is recognized in
all its acts and contracts (art. 116, Code of Commerce). This being so
and the juridical personality of a limited partnership being different
from that of its members, it must, on general principle, answer for,
and suffer, the consequence of its acts as such an entity capable of
being the subject of rights and obligations. If, as in the instant case,
the limited partnership of Campos Rueda & Co. Failed to pay its
obligations with three creditors for a period of more than thirty
days, which failure constitutes, under our Insolvency Law, one of the
acts of bankruptcy upon which an adjudication of involuntary
2 BUSORG First Batch Case Digest
insolvency can be predicated, this partnership must suffer the
consequences of such a failure, and must be adjudged insolvent.
Therefore, it having been proven that the partnership Campos
Rueda & Co. failed for more than thirty days to pay its obligations to
the petitioners the Pacific Commercial Co. the Asiatic Petroleum Co.
and the International Banking Corporation, the case comes under
paragraph 11 of section 20 of Act No. 1956, and consequently the
petitioners have the right to a judicial decree declaring the
involuntary insolvency of said partnership.
Wherefore, the judgment appealed from is reversed, and it is
adjudged that the limited partnership Campos Rueda & Co. is and
was on December 28, 1921, insolvent and liable for having failed for
more than thirty days to meet its obligations with the three
petitioners herein.
3.
Ngo Tian Tek vs. Phil. Education Co.
GR. L-48113
April 7, 1947
FACTS:
The plaintiff, Philippine Education Co., Inc., instituted in the Court of
First Instance of Manila an action against the defendants, Vicente
Tan alias Chan Sy and the partnership of Ngo Tian Tek and Ngo Hay,
for the recovery of some P16,070.14, unpaid cost of merchandise
purchased by Lee Guan Box Factory from the plaintiff and five other
corporate entities which, though not parties to the action, had
previously assigned their credits to the plaintiff, together with
attorney's fees, interest and costs. /by agreement of the parties, the
case was heard before a referee, Attorney Francisco Dalupan, who in
due time submitted his report holding the defendants jointly and
severally liable to the plaintiff for the sum of P16,070.14 plus
attorney's fees and interest at the rates specified in the report.
On March 6, 1939, the Court of First Instance of Manila rendered
judgment was affirmed by the Court of Appeals in its decision of
January 31, 1941, now the subject of our review at the instance of
the partnership Ngo Tian Tek and Ngo Hay, petitioner herein.
ISSUE:
W/N Lee Guan Box Factory was a subsidiary of Modern Box Factory.
SC RULING:
Yes.
"It appears that," quoting from the decision of the Court of Appeals
whose findings of fact are conclusive, "as far back as the year 1925,
the Modern Box Factory was established at 603 Magdalena Street,
Manila. It was at first owned by Ngo Hay, who three years later was
joined by Ngo Tian Tek as a junior partner. The modern Box Factory
dealt in pare and similar merchandise and purchased goods from the
plaintiff and its assignors in the names of the Modern Box Factory,
Ngo Hay and Co., Go Hay Box Factory, or Go Hay.
Then about the year 1930, the Lee Guan Box Factory was
established a few meters from the Modern Box Factory, under the
management of Vicente Tan. When that concern, through Vicente
Tan, sought credit with the plaintiff and its assignors, Ngo Hay, in
conversations and interviews with their officers and employees,
represented that he was the principal owner of such factory, that
the Lee Guan Box Factory and the Modern Box Factory belonged to
the same owner, and that the Lee Guan Box Factory was a subsidiary
of the Modern Box Factory.
There is evidence that many goods purchased in the name of the Lee
Guan Box Factory were delivered to the Modern Box Factory by the
employees of the plaintiff and its assignors upon the express
direction of Vicente Tan. There is also evidence that the collectors of
the sellers were requested by Vicente Tan to collect — and did
collect — from the Modern Box Factory the bills against the Lee
Guan Box Factory.
In the fact the record shows many checks signed by Ngo Hay or Ngo
Tian Tek in payment of accounts of the Lee Guan Box Factory.
Furthermore, — and this seems to be conclusive-Ngo Hay, testifying
for the defense, admitted that 'he' was the owner of the Lee Guan
Box Factory in and before the year 1934, but that in January, 1935,
'he' sold it, by the contract of sale Exhibit 7, to Vicente Tan, who had
been his manager of the business.
Tan declared also that before January, 1935, the Lee Guan Box
Factory pertained to Ngo Hay and Ngo Tian Tek. The contract Exhibit
7 was found by the referee, to be untrue and simulated, for various
convincing reasons that need no repetition here. And the quoted
statements serve effectively to confirm the evidence for the plaintiff
that it was Ngo Hay's representations of ownership of, and
responsibility for, Lee Guan Box Factory that induced them to open
credit for that concern. It must be stated that in this connection —
to answer appellant's fitting observation — that the plaintiff and the
assignors have considered Ngo Hay, the Modern Box Factory and
Ngo Hay and Co. as one and the same, through the acts of the
partners themselves, and that the proof as to Ngo Hay's statements
regarding the ownership of Lee Guan Box Factory must be taken in
that view. Ngo Hay was wont to say 'he' owned the Modern Box
Factory, meaning that he was the principal owner, his other partner
being Ngo Tian Tek.
Now, it needs no demonstration — for appellant does not deny it —
that the obligations of the Lee Guan Box Factory must rest upon its
known owner. And that owner in Ngo Tian Tek and Ngo Hay."
We must overrule petitioner's contention that the Court of Appeals
erred in holding that Lee Guan Box Factory was a subsidiary of the
Modern Box Factory and in disregarding the fact that the contracts
evidencing the debts in question were signed by Vicente Tan alias
Chan Sy, without any indication that tended to involve the Modern
Box Factory or the petitioner.
In the first place, we are concluded by the finding of the Court of
Appeals regarding the ownership by the petitioner of Lee Guan Box
Factory. Secondly, the circumstances that Vicente Tan alias Chan Sy
acted in his own name cannot save the petitioner, in view of said
ownership, and because contracts entered into by a factor of a
commercial establishment known to belong to a well-known
enterprise or association, shall be understood as made for the
account of the owner of such enterprise or association, even when
the factor has not so stated at the time of executing the same,
provided that such contracts involve objects comprised in the line
and business of the establishment. (Article 286, Code of Commerce.)
The fact that Vicente Tan did not have any recorded power of
attorney executed by the petitioner will not operate to prejudice
third persons, like the respondent Philippine Education Co., Inc., and
its assignors. (3 Echavarri, 133.)
3 BUSORG First Batch Case Digest
4.
Tai Tong Chuache and Co. vs. The Insurance Commission and
Travellers Multi Indemnity Corporation
GR No. L-55397
February 29, 1988
Facts:
Azucena Palomo obtained a loan from Tai Tong in the amount of
P100,000. To secure the payment of the loan, a mortgage was
executed over the land and the building in favor of Tai Tong.
Arsenio Chua, representative of Tai Tong insured the latter’s interest
with Travellers Multi-Indemnity Corporation for 100k (70k for the
building and 30K for the contents thereof).
Pedro Palomo secured a Fire Insurance Policy covering the building
for 50K with Zenith Insurance Corporation. Another Fire Insurance
Policy was procured from Phil. British Assurance Company covering
the same building for 50k and the contents thereof for 70K.
On July 31,1975, the building and the contents were totally razed by
fire.
The complainants were paid by the Insurance companies but the
Travellers Multi-Indemnity refused to pay its share in the loss. The
latter alleged that the building of complainants was secured by
Arsenio Chua, mortgage creditor for the purpose of protecting his
mortgage credit against the complainants; that Tai Tong is not
entitled to indemnity under its Fire Insurance Policy for lack of
insurable interest before the loss of the insured premises and that
the spouses Pedro and Azucena Palomo had already paid in full their
mortgage indebtedness to the intervenor.
Issue:
Whether or not Tai Tong has an insurable interest in the Insurance
Policy from Travellers considering that it was Arsenio Chua who took
the policy.
Held:
Yes.
It should be borne in mind that Tai Tong and Co. being a partnership
may sue and be sued in its name or by its duly authorized
representative. The fact that Arsenio Chua is that representative of
petitioner is not questioned. Thus, Chua as the managing partner of
the partnership may execute all acts of administration including the
right to sue debtors of the partnership in case of their failure to pay
their obligation when it became due and demandable. Or at the very
least, Chua being a partner of Tai Tong and Co. is an agent of the
partnership. Being an agent, it is understood that he acted for and in
behalf of the firm. Travellers allegation that the civil case filed by
Chua was in his capacity as personal creditor of spouses Palomo has
no basis.
Travellers insurance company having issued a policy in favor of
petitioner which policy was of legal force and effect at the time of
fire, it is bound by its terms and conditions.
5.
CIR vs. Suter
27 SCRA 152
Facts:
A limited partnership, named "William J. Suter 'Morcoin' Co., Ltd.,"
was formed on 30 September 1947 by herein respondent William J.
Suter as the general partner, and Julia Spirig and Gustav Carlson, as
the limited partners. The partners contributed, respectively,
P20,000.00, P18,000.00 and P2,000.00 to the partnership. On 1
October 1947, the limited partnership was registered with the
Securities and Exchange Commission.
In 1948, however, general partner Suter and limited partner Spirig
got married and, thereafter, on 18 December 1948, limited partner
Carlson sold his share in the partnership to Suter and his wife. The
sale was duly recorded with the Securities and Exchange
Commission on 20 December 1948.
The limited partnership had been filing its income tax returns as a
corporation, without objection by the herein petitioner,
Commissioner of Internal Revenue, until in 1959 when the latter, in
an assessment, consolidated the income of the firm and the
individual incomes of the partners-spouses Suter and Spirig resulting
in a determination of a deficiency income tax against respondent
Suter in the amount of P2,678.06 for 1954 and P4,567.00 for 1955.
Respondent Suter protested the assessment, and requested its
cancellation and withdrawal, as not in accordance with law, but his
request was denied. Unable to secure a reconsideration, he
appealed to the Court of Tax Appeals, which court, after trial,
rendered a decision, on 11 November 1965, reversing that of the
Commissioner of Internal Revenue.
Issue:
1 Whether or not the corporate personality of the William J. Suter
"Morcoin" Co., Ltd. should be disregarded for income tax purposes,
considering that respondent William J. Suter and his wife, Julia
SpirigSuter actually formed a single taxable unit; and
(b) Whether or not the partnership was dissolved after the marriage
of the partners, respondent William J. Suter and Julia Spirig Suter
and the subsequent sale to them by the remaining partner, Gustav
Carlson, of his participation of P2, 000.00 in the partnership for a
nominal amount of P1.00.
Held:
(1) Partners retained their separate interest- the view that by
the marriage of Suter and Spirig became a single proprietorship is
erroneous. Their capital contributions were separately owned and
contributed by them before their marriage and after they were
joined in wedlock, such contributions remained their respective
separate property. Thus the individual interest of Suter and Spirig
did not become a common property of both after their marriage.
The change in the membership of the firm is no ground for
withdrawing the partnership from the coverage of section 24 of the
National Internal Revenue code requiring it to pay income tax. Suter
and spirig did not enter to matrimony and thereafter buy the
interest of Carlson with the premeditated scheme or design to use
the partnership as a business conduit to dodge the tax laws.
(2) Partnership as a particular one- the firm was not a universal
partnership, but a particular one. It follows that the partnership was
not one that the spouses were not forbidden to enter nor could the
subsequent marriage of the partners operate to dissolve it, such
4 BUSORG First Batch Case Digest
marriage not being one of the causes provided for that purpose by
law.
6.
Evangelista vs. CIR
G.R. No. L-9996
October 15, 1957
102 P 140
FACTS:
That the petitioners borrowed from their father the sum of
P59,1400.00 which amount together with their personal monies was
used by them for the purpose of buying real properties,. 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
from the sum of P100,000.00; this property has an assessed value of
P57,517.00 as of 1948; That in a document dated August 16, 1945,
they appointed their brother Simeon Evangelista to 'manage their
properties with full power to lease; to collect and receive rents; to
issue receipts therefor; in default of such payment, to bring suits
against the defaulting tenants; to sign all letters, contracts, etc., for
and in their behalf, and to endorse and deposit all notes and checks
for them; That after having bought the above-mentioned real
properties the petitioners had the same rented or leases to various
tenants; That from the month of March, 1945 up to an including
December, 1945, the total amount 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;
That on 1946, they realized a gross rental income of in the sum of
P24,786.30, out of which amount was deducted in the sum of
P16,288.27 for expenses thereby leaving them a net rental income
of P7,498.13; That in 1948, they realized a gross rental income of
P17,453.00 out of the which amount was deducted the sum of
P4,837.65 as expenses, thereby leaving them a net rental income of
P12,615.35.
Said letter of demand and corresponding assessments were
delivered to petitioners on December 3, 1954, whereupon they
instituted the present case in the Court of Tax Appeals, with a prayer
that "the decision of the respondent contained in his letter of
demand dated September 24, 1954" be reversed, and that they be
absolved from the payment of the taxes in question, with costs
against the respondent.
ISSUE:
W/N 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.
SC RULING:
Yes.
With respect to the tax on corporations, the issue hinges on the
meaning of the terms "corporation" and "partnership," as used in
section 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, properly, or industry to a common fund, with
the intention of dividing the profits among themselves.
Pursuant to the 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 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 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 P18,000.00. 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
the petitioners in February, 1943. In other words, one cannot but
perceive a character of habitually peculiar to business transactions
engaged in the purpose 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 and
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.
5 BUSORG First Batch Case Digest
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 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
participation)" and "associations," none of which has a legal
personality of its own, independent of that of its members.
Accordingly, the lawmaker could not have regarded that personality
as a condition essential to the existence of the partnerships therein
referred to. In fact, as above stated, "duly registered general
copartnerships" — which are possessed of the aforementioned
personality — have been expressly excluded by law (sections 24 and
84 [b] from the connotation of the term "corporation" 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 corporations, and is, therefore, an
additional argument in favor of the imposition of said tax on
corporations.
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 of 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: . . .
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. (emphasis supplied.)
Considering that the pertinent part of this provision is analogous to
that of section 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.
7.
Jose Fernandez vs. Francisco dela Rosa
GR No. 413
February 2, 1903
Facts:
Fernandez entered into a verbal agreement with dela Rosa to form a
partnership for the purchase of cascoes and the carrying on of the
business of letting the same for hire in Manila. Dela Rosa to buy the
cascoes and each partner to furnish for that purpose such amount of
money as he could, the profits to be divided proportionately.
Fernandez furnished dela Rosa 300 pesos to purchase a casco
designated as No.1515 which dela Rosa purchase for 500 pesos,
taking the title to his own name. Fernandez furnished further sums
aggregating about 300 pesos for repairs. He also furnished dela Rosa
825 pesos to purchase another casco designated No. 2089 which the
latter purchased for 1,000 pesos.
The parties undertook to draw up articles of partnership for the
purpose of embodying the same in an authentic document. But dela
Rosa was unwilling to include casco No. 2089 in the partnership, the
parties never come to an understanding and no written agreement
was executed.
Dela Rosa having in the meantime the control and management of
the two cascoes, Fernandez demanded for an accounting.
Dela Rosa denied all the material allegations that there was a
partnership agreement; that he only borrowed money from
Fernandez and that the same was already returned and Fernandez
accepted the sums. Fernandez admitted that he received the sums
of money but with an express reservation on his part of all his rights
as a partner.
Issue:
1. Did a partnership exist between the parties?
2. If such partnership existed, was it terminated as a result of
the act of Fernandez in receiving back the sum of money?
Held:
1.
Yes.
6 BUSORG First Batch Case Digest
Partnership – Is a contract by which two or more persons bind
themselves to contribute money, property, or industry to a common
fund, with the intention of dividing the profits among themselves.
There are two essential points upon which the minds of the parties
must meet in a contract of partnership:
a. Mutual contribution to a common stock; and
b. A joint interest in the profits.
The first element of the contract of partnership was established
when Fernandez furnished to dela Rosa a sum of money with the
understanding that it was to be used for the purchase of the
cascoes.
The second element was established when there was an intention to
share profits from the fact of the purchase of the cascoes in
common.
The execution of a written agreement was not necessary in order to
give efficacy to the verbal contract of partnership as a civil contract,
the contributions of the partners not having been in the form of
immovable or rights in immovable (Art. 1667 Old CC). The special
provision cited, requiring the execution of a public writing in the
single case mentioned and dispensing with all formal requirements
in other cases, renders inapplicable to this species of contract the
general provisions of article 1280 (of the Old CC.)
2.
No.
There was no intention on the part of Fernandez in accepting the
money to relinquish his rights as a partner. On the contrary, he
notified dela Rosa that he waived none of his rights in the
partnership. There is therefore, nothing upon which a waiver, either
express or implied can be predicated.
The defendant might have himself terminated the partnership
relation at any time, if he had chosen to do so, by recognizing the
Fernandez’s right in the partnership property and in the profits.
Having failed to do this he cannot be permitted to force a dissolution
upon his co-partner upon terms which the latter is unwilling to
accept.
8.
Tocao vs. Court of Appeals
342 SCRA 20
Facts:
William Belo introduced Nenita Anay to his girlfriend, Marjorie
Tocao. The three agreed to form a joint venture for the sale of
cooking wares. Belo was to contribute P2.5 million; Tocao also
contributed some cash and she shall also act as president and
general manager; and Anay shall be in charge of marketing. Belo and
Tocao specifically asked Anay because of her experience and
connections as a marketer. They agreed further that Anay shall
receive the following:
10% share of annual net profits
6% overriding commission for weekly sales
30% of sales Anay will make herself
2% share for her demo services
They operated under the name Geminesse Enterprise, this name
was however registered as a sole proprietorship with the Bureau of
Domestic Trade under Tocao. The joint venture agreement was not
reduced to writing because Anay trusted Belo’s assurances.
The venture succeeded under Anay’s marketing prowess.
But then the relationship between Anay and Tocao soured. One day,
Tocao advised one of the branch managers that Anay was no longer
a part of the company. Anay then demanded that the company be
audited and her shares be given to her.
ISSUE:
Whether or not there is a partnership.
HELD:
Yes, even though it was not reduced to writing, for a partnership can
be instituted in any form. The fact that it was registered as a sole
proprietorship is of no moment for such registration was only for the
company’s trade name.
Anay was not even an employee because when they ventured into
the agreement, they explicitly agreed to profit sharing this is even
though Anay was receiving commissions because this is only
incidental to her efforts as a head marketer.
The Supreme Court also noted that a partner who is excluded
wrongfully from a partnership is an innocent partner. Hence, the
guilty partner must give him his due upon the dissolution of the
partnership as well as damages or share in the profits “realized from
the appropriation of the partnership business and goodwill.” An
innocent partner thus possesses “pecuniary interest in every existing
contract that was incomplete and in the trade name of the co-
partnership and assets at the time he was wrongfully expelled.”
An unjustified dissolution by a partner can subject him to action for
damages because by the mutual agency that arises in a partnership,
the doctrine of delectus personae allows the partners to have the
power, although not necessarily the right to dissolve the
partnership.
Tocao’s unilateral exclusion of Anay from the partnership is shown
by her memo to the Cubao office plainly stating that Anay was, as of
October 9, 1987, no longer the vice-president for sales of Geminesse
Enterprise. By that memo, petitioner Tocao effected her own
withdrawal from the partnership and considered herself as having
ceased to be associated with the partnership in the carrying on of
the business. Nevertheless, the partnership was not terminated
thereby; it continues until the winding up of the business.
7 BUSORG First Batch Case Digest

9. agreement it should be stated that the business is a partnership with

Estanislao vs. CA
160 SCRA 830
FACTS:
Petitioner and private respondents are brothers and sisters who are
co-owners of certain lots at the corner of Annapolis and Aurora
Blvd., Quezon City which were then being leased to the Shell
Company of the Philippines Limited (SHELL). They agreed to open
and operate a gas station thereat to be known as Estanislao Shell
Service Station with an initial investment of P 15,000.00 to be taken
from the advance rentals due to them from SHELL for the occupancy
of the said lots owned in common by them. A joint affidavit was
executed by them on April 11, 1966 which was prepared by Atty.
Democrito Angeles.
They agreed to help their brother, petitioner herein, by allowing him
to operate and manage the gasoline service station of the family.
They negotiated with SHELL. For practical purposes and in order not
to run counter to the company's policy of appointing only one
dealer, it was agreed that petitioner would apply for the dealership.
Respondent Remedios helped in managing the bussiness with
petitioner from May 3, 1966 up to February 16, 1967.
private respondents and not a sole proprietorship of petitioner.
Moreover other evidence in the record shows that there was in fact
such partnership agreement between the parties. This is attested by
the testimonies of private respondent Remedies Estanislao and Atty.
Angeles. Petitioner submitted to private respondents periodic
accounting of the business. 4 Petitioner gave a written authority to
private respondent Remedies Estanislao, his sister, to examine and
audit the books of their "common business' aming negosyo).
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.

On May 26, 1966, the parties herein entered into an Additional Cash
Pledge Agreement with SHELL wherein it was reiterated that the P
15,000.00 advance rental shall be deposited with SHELL to cover
advances of fuel to petitioner as dealer with a proviso that said
agreement "cancels and supersedes the Joint Affidavit dated 11 April
1966 executed by the co-owners."

For sometime, the petitioner submitted financial statements

regarding the operation of the business to private respondents, but
therafter petitioner failed to render subsequent accounting. Hence
through Atty. Angeles, a demand was made on petitioner to render
an accounting of the profits.

The financial report of December 31, 1968 shows that the business
was able to make a profit of P 87,293.79 and that by the year ending
1969, a profit of P 150,000.00 was realized.

ISSUE:
W/N partnership exists between members of the same family arising
from their joint ownership of certain properties.

SC RULING:
Yes.
Petitioner contends that because of the said stipulation cancelling
and superseding that previous Joint Affidavit, whatever partnership
agreement there was in said previous agreement had thereby been
abrogated. We find no merit in this argument. Said cancelling
provision was necessary for the Joint Affidavit speaks of P 15,000.00
advance rentals starting May 25, 1966 while the latter agreement
also refers to advance rentals of the same amount starting May 24,
1966.

There is, therefore, a duplication of reference to the P 15,000.00

hence the need to provide in the subsequent document that it
"cancels and supersedes" the previous one. True it is that in the
latter document, it is silent as to the statement in the Joint Affidavit
that the P 15,000.00 represents the "capital investment" of the
parties in the gasoline station business and it speaks of petitioner as
the sole dealer, but this is as it should be for in the latter document
SHELL was a signatory and it would be against its policy if in the
8 BUSORG First Batch Case Digest
10.
Yulo vs. Yang Chiao Seng
GR No. L-12541
August 28, 1959
Facts:
Yang Chiao Seng wrote a letter to Yulo proposing the formation of a
partnership between them to run and operate a theatre on the
premises occupied by former Cine Oro. The principal conditions of
the offer are the following:
1. That Seng guarantees Yulo a monthly participation of
3,000 pesos payable quarterly in advance within the first
15 days of each quarter;
2. That the partnership shall be for a period of 2 years and 6
months with the condition that if the land is expropriated
or rendered impracticable for the business, of if the owner
constructs a permanent building thereon, Yulo’s right of
lease is terminated by the owner, then the partnership
shall be terminated even if the period agreed has not yet
expired;
3. That Yulo is authorized personally to conduct such
business in the lobby of the building as is ordinarily carried
in the lobby of the theatres;
4. That after the expiration of the period, all improvements
placed by the partnership shall belong to Mrs. Yulo but if
the partnership agreement is terminated before the lapse
of one and half years period under any causes, then Seng
shall have the right to remove and take away all
improvements that the partnership may place in the
premises.
The land on which the theatre was constructed was leased by Yulo
from Carrion. The owners notified Yulo of its desire to cancel the
contract of lease. In a civil case, a judgment was rendered ordering
the ejectment of Yulo and to pay the monthly rentals.
Yulo demanded Seng her share in the profits of the business but
Seng refused alleging that in as much as Yulo has not paid the
lessors the rentals, he was retaining the rentals to make good to the
landowners the rentals due from Mrs. Yulo in arrears.
Yulo instituted an action alleging the existence of a partnership
between them.
Issue:
Whether the contract between Yulo and Seng is one of partnership
or a sublease?
Held:
The agreement was a sublease, not a partnership.
The following are the requisites of partnership;
a. Two or more persons who bind themselves to contribute
money, property, or industry to a common fund;
b. Intention on the part of the partners to divide the profits
among themselves.
First, Yulo did not furnish the supposed 20,000 capital.
Second, she did not furnish any help or intervention in the
management of the theatre.
Third, it does not appear that she ever demanded from defendant
any accounting of the expenses and earnings of the business.
Was 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 earning 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 3,000
pesos 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.
11.
Sy vs. Court of Appeals
398 SCRA 301
FACTS:
Sometime in 1958, private respondent Jaime Sahot] started working
as a truck helper for petitioners’ family-owned trucking business
named Vicente Sy Trucking. In 1965, he became a truck driver of the
same family business, renamed T. Paulino Trucking Service, later
6B’s Trucking Corporation in 1985, and thereafter known as SBT
Trucking Corporation since 1994. Throughout all these changes in
names and for 36 years, private respondent continuously served the
trucking business of petitioners.
When Sahot was 59 years old, he incurred several absences due to
various ailments. Particularly causing him pain was his left thigh,
which greatly affected the performance of his task as a driver. He
inquired about his medical and retirement benefits with the (SSS) on
April 25, 1994, but discovered that his premium payments had not
been remitted by his employer.
Sahot filed a week-long leave to get medical attention. He was
treated for EOR, presleyopia, hypertensive retinopathy G II and
heart enlargement. Because of such, Belen Paulino of the SBT
Trucking Service management told him to file a formal request for
extension of his leave. When Sahot applied for an extended leave,
he was threatened of termination of employment should he refuse
to go back to work.
Eventually, Sahot was dismissed from employment which prompted
the latter to file an illegal dismissal case with the NLRC. For their
part, petitioners admitted they had a trucking business in the 1950s
but denied employing helpers and drivers. They contend that private
respondent was not illegally dismissed as a driver because he was in
fact petitioner’s industrial partner. They add that it was not until the
year 1994, when SBT Trucking Corporation was established, and only
then did respondent Sahot become an employee of the company,
with a monthly salary that reached P4,160.00 at the time of his
separation.
The NLRC and the CA ruled that Sahot was an employee of the
petitioner.
ISSUE:
Whether Sahot is an industrial partner.
RULING:
No. Article 1767 of the Civil Code states that in a 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.
Not one of these circumstances is present in this case. No written
agreement exists to prove the partnership between the parties.
Private respondent did not contribute money, property or industry
for the purpose of engaging in the supposed business. There is no
proof that he was receiving a share in the profits as a matter of
9 BUSORG First Batch Case Digest
course, during the period when the trucking business was under
operation.
Neither is there any proof that he had actively participated in the
management, administration and adoption of policies of the
business. Thus, the NLRC and the CA did not err in reversing the
finding of the Labor Arbiter that private respondent was an
industrial partner from 1958 to 1994. On this point, the Court
affirmed the findings of the appellate court and the NLRC.
Private respondent Jaime Sahot was not an industrial partner but an
employee of petitioners from 1958 to 1994. The existence of an
employer-employee relationship is ultimately a question of fact and
the findings thereon by the NLRC, as affirmed by the Court of
Appeals, deserve not only respect but finality when supported by
substantial evidence. Substantial evidence is such amount of
relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion.
12.
Arbes vs. Polistico
53 P 489
G.R. No. 31057
September 7, 1929
FACTS:
This is an action to bring about liquidation of the funds and property
of the association called "Turnuhan Polistico & Co." The plaintiffs
were members or shareholders, and the defendants were
designated as president-treasurer, directors and secretary of said
association.
It is well to remember that this case is now brought before the
consideration of this court for the second time. The first one was
when the same plaintiffs appeared from the order of the court
below sustaining the defendant's demurrer, and requiring the
former to amend their complaint within a period, so as to include all
the members of "Turnuhan Polistico & Co.," either as plaintiffs or as
a defendants.
This court held then that in an action against the officers of a
voluntary association to wind up its affairs and enforce an
accounting for money and property in their possessions, it is not
necessary that all members of the association be made parties to
the action. (Borlasa vs. Polistico, 47 Phil., 345.) The case having been
remanded to the court of origin, both parties amend, respectively,
their complaint and their answer, and by agreement of the parties,
the court appointed Amadeo R. Quintos, of the Insular Auditor's
Office, commissioner to examine all the books, documents, and
accounts of "Turnuhan Polistico & Co.," and to receive whatever
evidence the parties might desire to present.
ISSUE: W/N a partnership exists.
SC RULING:
No.
There is no question that "Turnuhan Polistico & Co." is an unlawful
partnership (U.S. vs. Baguio, 39 Phil., 962), but the appellants allege
that because it is so, some charitable institution to whom the
partnership funds may be ordered to be turned over, should be
included, as a party defendant. The appellants refer to article 1666
of the Civil Code, which provides:
A partnership must have a lawful object, and must be established for
the common benefit of the partners.
When the dissolution of an unlawful partnership is decreed, the
profits shall be given to charitable institutions of the domicile of the
partnership, or, in default of such, to those of the province.
Appellant's contention on this point is untenable. According to said
article, no charitable institution is a necessary party in the present
case of determination of the rights of the parties. The action which
may arise from said article, in the case of unlawful partnership, is
that for the recovery of the amounts paid by the member from
those in charge of the administration of said partnership, and it is
not necessary for the said parties to base their action to the
existence of the partnership, but on the fact that of having
contributed some money to the partnership capital. And hence, the
charitable institution of the domicile of the partnership, and in the
default thereof, those of the province are not necessary parties in
this case.
The article cited above permits no action for the purpose of
obtaining the earnings made by the unlawful partnership, during its
existence as result of the business in which it was engaged, because
for the purpose, as Manresa remarks, the partner will have to base
his action upon the partnership contract, which is to annul and
without legal existence by reason of its unlawful object; and it is self
evident that what does not exist cannot be a cause of action. Hence,
paragraph 2 of the same article provides that when the dissolution
of the unlawful partnership is decreed, the profits cannot inure to
the benefit of the partners, but must be given to some charitable
institution.
We deem in pertinent to quote Manresa's commentaries on article
1666 at length, as a clear explanation of the scope and spirit of the
provision of the Civil Code which we are concerned. Commenting on
said article Manresa, among other things says:
When the subscriptions of the members have been paid to the
management of the partnership, and employed by the latter in
transactions consistent with the purposes of the partnership may
the former demand the return of the reimbursement thereof from
the manager or administrator withholding them?
Apropos of this, it is asserted: If the partnership has no valid
existence, if it is considered juridically non-existent, the contract
entered into can have no legal effect; and in that case, how can it
give rise to an action in favor of the partners to judicially demand
from the manager or the administrator of the partnership capital,
each one's contribution?
The authors discuss this point at great length, but Ricci decides the
matter quite clearly, dispelling all doubts thereon. He holds that the
partner who limits himself to demanding only the amount
contributed by him need not resort to the partnership contract on
which to base his action. And he adds in explanation that the
partner makes his contribution, which passes to the managing
partner for the purpose of carrying on the business or industry
which is the object of the partnership; or in other words, to breathe
the breath of life into a partnership contract with an objection
forbidden by law. And as said contrast does not exist in the eyes of
the law, the purpose from which the contribution was made has not
come into existence, and the administrator of the partnership
holding said contribution retains what belongs to others, without
any consideration; for which reason he is not bound to return it and
he who has paid in his share is entitled to recover it.
10 BUSORG First Batch Case Digest
But this is not the case with regard to profits earned in the course of
the partnership, because they do not constitute or represent the
partner's contribution but are the result of the industry, business or
speculation which is the object of the partnership, and therefor, in
order to demand the proportional part of the said profits, the
partner would have to base his action on the contract which is null
and void, since this partition or distribution of the profits is one of
the juridical effects thereof. Wherefore considering this contract as
non-existent, by reason of its illicit object, it cannot give rise to the
necessary action, which must be the basis of the judicial complaint.
Furthermore, it would be immoral and unjust for the law to permit a
profit from an industry prohibited by it.
Hence the distinction made in the second paragraph of this article of
this Code, providing that the profits obtained by unlawful means
shall not enrich the partners, but shall upon the dissolution of the
partnership, be given to the charitable institutions of the domicile of
the partnership, or, in default of such, to those of the province.
This is a new rule, unprecedented by our law, introduced to supply
an obvious deficiency of the former law, which did not describe the
purpose to which those profits denied the partners were to be
applied, nor state what to be done with them.
The profits are so applied, and not the contributions, because this
would be an excessive and unjust sanction for, as we have seen,
there is no reason, in such a case, for depriving the partner of the
portion of the capital that he contributed, the circumstances of the
two cases being entirely different.
Our Code does not state whether, upon the dissolution of the
unlawful partnership, the amounts contributed are to be returned
by the partners, because it only deals with the disposition of the
profits; but the fact that said contributions are not included in the
disposal prescribed profits, shows that in consequences of said
exclusion, the general law must be followed, and hence the partners
should reimburse the amount of their respective contributions. Any
other solution is immoral, and the law will not consent to the latter
remaining in the possession of the manager or administrator who
has refused to return them, by denying to the partners the action to
demand them. (Manresa, Commentaries on the Spanish Civil Code,
vol. XI, pp. 262-264)
13.
City of Manila vs. Gambe
GR No. 3666
13 P 677 August 17, 1909
Facts:
The City of Manila commenced an action against Francisco Gambe,
Manuel Perez, Antonio Herranz and Florencio Garriz who constitute
the commercial firm of Herranz and Garriz, for the purpose of
recovering the sum of 5,000 USD for certain damages occasioned by
the steamship Alfred to the Spanish Bridge in the city of Manila.
CFI of Manila rendered a judgment against Francisco Game for the
sum of 1,300 USD. Gambe was a member of Pilots’ Association of
Manila and was at the time of the alleged accident and injury in
charge of the said steamship Alfred.
The City of Manila attempted to attach whatever money or effects
which Gambe had in the said Pilots’ Association; that the said
association has in its possession and under its control, property of
Gambe exceeding 800 pesos.; that the officers of the said
association were duly notified by the sheriff of the city of Manila.
The officers of Pilots’ Association denied having in their possession
and refused to deliver any such goods, effects, interests, credit or
money belonging to Gambe.
From the evidences presented in the trial court, it appears that each
member of the Pilots’ Association before becoming such, must
deposit with the association the sum of 800 pesos to be retained by
the association for the purpose of satisfying damages which may be
incurred by others by reason of negligence or fault on the part of the
association in the transaction of its business; that persons thus
depositing could not withdraw the money; that it is property of the
association, even in the case of death of a member.
Issue:
Whether or not the said Pilots' Association had debts, credits, or
personal property, not capable of manual delivery, in its possession
or under its control, belonging to the Gambe.
Held:
No.
The test whether or not the interests of Gambe, if he has any, in said
association may be attached by virtue of said section is whether
Gambe could maintain an action against the said association for the
recovery of the specific debt, credit, or personal property. It would
seem clear and conclusive that if Gambe himself could not maintain
an action against the said association for the recovery of the specific
debt, credit, or personal property which the City of Manila here is
attempting to get possession of by virtue of the action, that said
plaintiff could not recover the same under the form of action
adopted by it. If Gambe could successfully maintain an action
against the said Pilots' Association for the recovery of a specific sum
of money or specific personal property, then, in our opinion, his
judgment creditors, or the plaintiff in this case, might also maintain
the present action, but not otherwise.
In our opinion it is also essential that the debt, credit, or the
personal property which is attempted to be subjected to the
payment of the obligation of Gambe, and which is alleged to be in
the possession of the person attached, must exist in some definite
and ascertainable form at the time of the attachment.
The said Pilots' Association is purely a voluntary association of the
pilots of the city of Manila. The association is expressly recognized
under the law. No one can become a member of said association
who has not shown special qualifications as a pilot, and no one can
act as a pilot who has not been expressly recommended and
approved by the collector of the port of Manila, and no one can
become a member of said association without having paid a certain
sum of money into the treasury of said association. This funds
becomes the property of the association for the purpose of
protecting its members against losses occasioned by its members
to ships while said ships are under the control of a member or
members of said association. The money paid in by one member of
said association becomes a part of a general fund of said association,
subject to be paid out for damages done to ships by any member of
the association. The fund created by the contributions of the
members no longer belongs to the members of the association; it
belongs to the association. The association has a distinct and
separate entity from the individual members who make it up. The
fund is created for a specific purpose.
11 BUSORG First Batch Case Digest
Said association had no debts, credits, or personal property, not
capable of manual delivery, in its possession, belonging to Gambe,
which are subject to be attached.
14.
Lyons vs. Rosentock
56 P 632
Facts:
Henry W. Elser was engaged in buying, selling, and administering
real estate. E. S. Lyons joined with him, the profits being shared by
the two in equal parts.
Lyons, whose regular vocation was that of a missionary, went on
leave to the United States and was gone for nearly a year and a half.
Elser made written statements showing that Lyons was, at that time,
half owner with Elser of three particular pieces of real property.
Concurrently with this act Lyons execute in favor of Elser a general
power of attorney empowering him to manage and dispose of said
properties at will and to represent Lyons fully and amply, to the
mutual advantage of both. The attention of Elser was drawn to a
piece of land, referred to as the San Juan Estate. He obtained the
loan of P50,000 to complete the amount needed for the first
payment on the San Juan Estate. The lender insisted that he should
procure the signature of the Fidelity & Surety Co. on the note to be
given for said loan.
Elser mortgaged to the Fidelity & Surety Co. the equity of
redemption in the property owned by himself and Lyons on Carriedo
Street to secure the liability thus assumed by it. The case for the
plaintiff supposes that, when Elser placed a mortgage for P50,000
upon the equity of redemption in the Carriedo property, Lyons, as
half owner of said property became, as it were, involuntarily the
owner of an undivided interest in the property acquired partly by
that money; and it is insisted for him that, in consideration of this
fact, he is entitled to the four hundred forty-six and two-thirds
shares of J. K. Pickering & Company, with the earnings thereon, as
claimed in his complaint.
Issue:
Whether there was a general relation of partnership.
RULING:
No.
The position of the appellant is, in our opinion, untenable. If Elser
had used any money actually belonging to Lyons in this deal, he
would under article 1724 of the Civil Code and article 264 of the
Codeof Commerce, be obligated to pay interest upon the money so
applied to his own use.
Under the law prevailing in this jurisdiction a trust does not
ordinarily attach with respect to property acquired by a person who
uses money belonging to another (Martinez vs. Martinez, 1 Phil.,
647; Enriquez vs. Olaguer,25 Phil., 641.).
Of course, if an actual relation of partnership had existed in the
money used, the case might be different; and much emphasis is laid
in the appellant's brief upon the relation of partnership which, it is
claimed, existed. But there was clearly no general relation of
partnership, under article 1678of the Civil Code.
It is clear that Elser, in buying the San Juan Estate, was not acting for
any partnership composed of himself and Lyons, and the law cannot
be distorted into a proposition which would make Lyons a
participant in this deal contrary to his express determination. It
seems to be supposed that the doctrines of equity worked out in the
jurisprudence of England and the United States with reference to
trust supply a basis for this action.
The doctrines referred to operate, however, only where money
belonging to one person is used by another for the acquisition of
property which should belong to both; and it takes but little
discernment to see that the situation here involved is not one for
the application of that doctrine, for no money belonging to Lyons or
any partnership composed of Elser and Lyons was in fact used by
Elser in the purchase of the San Juan Estate. Of course, if any
damage had been caused to Lyons by the placing of the mortgage
upon the equity of redemption in the Carriedo property, Elser's
estate would be liable for such damage. But it is evident that Lyons
was not prejudice by that act.
15.
Pascual vs. CIR
166 SCRA 560
G.R. No. 78133
October 18, 1988
FACTS:
On June 22, 1965, petitioners bought two (2) parcels of land from
Santiago Bernardino, et al. and on May 28, 1966, they bought
another three (3) parcels of land from Juan Roque. The first two
parcels of land were sold by petitioners in 1968 toMarenir
Development Corporation, while the three parcels of land were sold
by petitioners to Erlinda Reyes and Maria Samson on March
19,1970. Petitioners realized a net profit in the sale made in 1968 in
the amount of P165,224.70, while they realized a net profit of
P60,000.00 in the sale made in 1970. The corresponding capital
gains taxes were paid by petitioners in 1973 and 1974 by availing of
the tax amnesties granted in the said years.
However, in a letter dated March 31, 1979 of then Acting BIR
Commissioner Efren I. Plana, petitioners were assessed and required
to pay a total amount of P107,101.70 as alleged deficiency corporate
income taxes for the years 1968 and 1970.
Petitioners protested the said assessment in a letter of June 26,
1979 asserting that they had availed of tax amnesties way back in
1974.
In a reply of August 22, 1979, respondent Commissioner informed
petitioners that in the years 1968 and 1970, petitioners as co-
owners in the real estate transactions formed an unregistered
partnership or joint venture taxable as a corporation under Section
20(b) and its income was subject to the taxes prescribed under
Section 24, both of the National Internal Revenue Code 1 that the
unregistered partnership was subject to corporate income tax as
distinguished from profits derived from the partnership by them
which is subject to individual income tax; and that the availment of
tax amnesty under P.D. No. 23, as amended, by petitioners relieved
petitioners of their individual income tax liabilities but did not
12 BUSORG First Batch Case Digest
relieve them from the tax liability of the unregistered partnership.
Hence, the petitioners were required to pay the deficiency income
tax assessed.
ISSUE:
W/N there exists a partnership.
SC RULING:
NO! A co-ownership exists, not a partnership.
In the present case, there is no evidence that petitioners entered
into an agreement to contribute money, property or industry to a
common fund, and that they intended to divide the profits among
themselves. Respondent commissioner and/ or his representative
just assumed these conditions to be present on the basis of the fact
that petitioners purchased certain parcels of land and became co-
owners thereof.
In the instant case, petitioners bought two (2) parcels of land in
1965. They did not sell the same nor make any improvements
thereon. In 1966, they bought another three (3) parcels of land from
one seller. It was only 1968 when they sold the two (2) parcels of
land after which they did not make any additional or new purchase.
The remaining three (3) parcels were sold by them in 1970. The
transactions were isolated. The character of habituality peculiar to
business transactions for the purpose of gain was not present.
In Evangelista, the properties were leased out to tenants for several
years. The business was under the management of one of the
partners. Such condition existed for over fifteen (15) years. None of
the circumstances are present in the case at bar. The co-ownership
started only in 1965 and ended in 1970.
Thus, in the concurring opinion of Mr. Justice Angelo Bautista in
Evangelista he said:
I wish however to make the following observation Article 1769 of
the new Civil Code lays down the rule for determining when a
transaction should be deemed a partnership or a co-ownership. Said
article paragraphs 2 and 3, provides;
(2) Co-ownership or co-possession does not itself establish a
partnership, whether such co-owners or co-possessors do or do not
share any profits made by the use of the property;
(3) The sharing of gross returns does not of itself establish a
partnership, whether or not the persons sharing them have a joint
or common right or interest in any property from which the returns
are derived;
From the above it appears that the fact that those who agree to
form a co- ownership share or do not share any profits made by the
use of the property held in common does not convert their venture
into a partnership. Or the sharing of the gross returns does not of
itself establish a partnership whether or not the persons sharing
therein have a joint or common right or interest in the property. This
only means that, aside from the circumstance of profit, the presence
of other elements constituting partnership is necessary, such as the
clear intent to form a partnership, the existence of a juridical
personality different from that of the individual partners, and the
freedom to transfer or assign any interest in the property by one
with the consent of the others (Padilla, Civil Code of the Philippines
Annotated, Vol. I, 1953 ed., pp. 635-636)
It is evident that an isolated transaction whereby two or more
persons contribute funds to buy certain real estate for profit in the
absence of other circumstances showing a contrary intention cannot
be considered a partnership.
Persons who contribute property or funds for a common enterprise
and agree to share the gross returns of that enterprise in proportion
to their contribution, but who severally retain the title to their
respective contribution, are not thereby rendered partners. They
have no common stock or capital, and no community of interest as
principal proprietors in the business itself which the proceeds
derived. (Elements of the Law of Partnership by Flord D. Mechem
2nd Ed., section 83, p. 74.)
A joint purchase of land, by two, does not constitute a co-
partnership in respect thereto; nor does an agreement to share the
profits and losses on the sale of land create a partnership; the
parties are only tenants in common. (Clark vs. Sideway, 142 U.S.
682,12 Ct. 327, 35 L. Ed., 1157.)
Where plaintiff, his brother, and another agreed to become owners
of a single tract of realty, holding as tenants in common, and to
divide the profits of disposing of it, the brother and the other not
being entitled to share in plaintiffs commission, no partnership
existed as between the three parties, whatever their relation may
have been as to third parties. (Magee vs. Magee 123 N.E. 673, 233
Mass. 341.)
In order to constitute a partnership inter sese there must be: (a) An
intent to form the same; (b) generally participating in both profits
and losses; (c) and such a community of interest, as far as third
persons are concerned as enables each party to make contract,
manage the business, and dispose of the whole property.-Municipal
Paving Co. vs. Herring 150 P. 1067, 50 III 470.)
The common ownership of property does not itself create a
partnership between the owners, though they may use it for the
purpose of making gains; and they may, without becoming partners,
agree among themselves as to the management, and use of such
property and the application of the proceeds therefrom. (Spurlock
vs. Wilson, 142 S.W. 363,160 No. App. 14.) 6
The sharing of returns does not in itself establish a partnership
whether or not the persons sharing therein have a joint or common
right or interest in the property. There must be a clear intent to form
a partnership, the existence of a juridical personality different from
the individual partners, and the freedom of each party to transfer or
assign the whole property.
In the present case, there is clear evidence of co-ownership between
the petitioners. There is no adequate basis to support the
proposition that they thereby formed an unregistered partnership.
The two isolated transactions whereby they purchased properties
and sold the same a few years thereafter did not thereby make
them partners. They shared in the gross profits as co- owners and
paid their capital gains taxes on their net profits and availed of the
tax amnesty thereby. Under the circumstances, they cannot be
considered to have formed an unregistered partnership which is
thereby liable for corporate income tax, as the respondent
commissioner proposes.
And even assuming for the sake of argument that such unregistered
partnership appears to have been formed, since there is no such
existing unregistered partnership with a distinct personality nor with
assets that can be held liable for said deficiency corporate income
tax, then petitioners can be held individually liable as partners for
this unpaid obligation of the partnership p. 7 However, as
petitioners have availed of the benefits of tax amnesty as individual
13 BUSORG First Batch Case Digest
taxpayers in these transactions, they are thereby relieved of any
further tax liability arising therefrom.
16. Ortega vs. CA, SEC and Joaquin Misa
GR No. 109248
July 3, 1995
Facts:
Ortega, then a senior partner in the law firm Bito, Misa, and Lozada
withdrew in said firm.
He filed with SEC a petition for dissolution and liquidation of
partnership.
SEC en banc ruled that withdrawal of Misa from the firm had
dissolved the partnership. The reason is that, since it is partnership
at will, the law firm could be dissolved by any partner at anytime,
such as by withdrawal therefrom, regardless of good faith or bad
faith, since no partner can be forced to continue in the partnership
against his will.
Issue:
1. WON the partnership of Bito, Misa and Lozada is a
partnership at will.
2. WON the withdrawal of Misa dissolved the partnership
regardless of his good faith or bad faith.
Held:
1. Yes. The partnership agreement of the firm provides that
the partnership shall continue so long as mutually
satisfactory and upon the death or legal incapacity of one
of the partners, shall be continued by the surviving
partners.
2. Yes. Any one of the partners may at his sole pleasure,
dictate dissolution of the partnership at will. He must,
however, act in good faith, not that the attendance of bad
faith can prevent the dissolution of the partnership but
that it can result in a liability for damages.
17.
Kilosbayan vs. Guingona, Jr.
232 SCRA 110
G.R NO. 113375
MAY 5, 1994
FACTS:
In 1993, the Philippine Charity Sweepstakes Office decided to put up
an on-line lottery system which will establish a national network
system that will in turn expand PCSO’s source of income.A bidding
was made. Philippine Gaming Management Corporation (PGMC)
won it. A contract of lease was awarded in favor of PGMC.Kilosbayan
opposed the said agreement between PCSO and PGMC as it alleged
that:
PGMC does not meet the nationality requirement because it is 75%
foreign owned (owned by a Malaysian firm Berjaya Group
Berhad);PCSO, under Section 1 of its charter (RA 1169), is prohibited
from holding and conducting lotteries “in collaboration, association
or joint venture with any person, association, company or
entity”;The network system sought to be built by PGMC for PCSO is
a telecommunications network. Under the law (Act No. 3846), a
franchise is needed to be granted by the Congress before any person
may be allowed to set up such;
PGMC’s articles of incorporation, as well as the Foreign Investments
Act (R.A. No. 7042) does not allow it to install, establish and operate
the on-line lotto and telecommunications systems.PGMC and PCSO,
through Teofisto Guingona, Jr. and Renato Corona, Executive
Secretary and Asst. Executive Secretary respectively, alleged that
PGMC is not a collaborator but merely a contractor for a piece of
work, i.e., the building of the network; that PGMC is a mere lessor of
the network it will build as evidenced by the nature of the contract
agreed upon, i.e., Contract of Lease.
ISSUE:
Whether or not Kilosbayan is correct.
HELD:
Yes, but only on issues 2, 3, and 4.
On the issue of nationality, it seems that PGMC’s foreign ownership
was reduced to 40% though.
On issues 2, 3, and 4, Section 1 of R.A. No. 1169, as amended by B.P.
Blg. 42, prohibits the PCSO from holding and conducting lotteries “in
collaboration, association or joint venture with any person,
association, company or entity, whether domestic or foreign.” There
is undoubtedly collaboration between PCSO and PGMC and not
merely a contract of lease. The relations between PCSO and PGMC
cannot be defined simply by the designation they used, i.e., a
contract of lease.
Pursuant to the wordings of their agreement, PGMC at its own
expense shall build, operate, and manage the network system
including its facilities needed to operate a nationwide online lottery
system. PCSO bears no risk and all it does is to provide its franchise –
in violation of its charter. Necessarily, the use of such franchise by
PGMC is a violation of Act No. 3846.
18.
Binglawa vs. Constantino
109 P 168
G.R. No. L-9965
August 29, 1960
FACTS:
1. Plaintiff and defendants are residents of Malabon, Rizal.
2. Defendants Lucina Biglangawa and Lucia Espiritu were or have
been the owners of a parcel of land in Marulas, Polo, Bulacan, more
particularly described in "Transfer Certificate of Title No. 5459 as
follows: . . . .
3. On January 14, 1950, defendant Lucina Biglangawa, with the
consent of her co-owner Lucia Espiritu, appointed plaintiff their
exclusive agent to develop the area described in paragraph 2 into
subdivision lots and to sell them to prospective homeowners; and as
compensation for his services, defendants promised to pay him a
commission of 20% on the gross sales and a fee of 10% on the
collections made by him payable from "the first collections received
from the purchasers in respect to each lot sold . . . .
4. The power thus conferred by Lucina Biglangawa to plaintiff was
confirmed in a notarial document executed on March 3, 1950 by her
and her co-defendants, who are husband and wife, with the added
14 BUSORG First Batch Case Digest
stipulation that they could not revoke the contract of agency
without plaintiff's consent. . . .
5. Advancing all the expenses incurred in the development and
administration of the project, plaintiff caused the subdivision of said
property into 203 lots and advertised them for sale under the name
"BBB MARULAS SUBDIVISION No. 3'; and up to October, 1951
plaintiff had disposed of more than half of the entire area at P10.00
and P12.00 per square meter.
6. Although under the express terms of the contract of January 14,
1950 (Exhibit "A") the commissions of plaintiff for making 37 3 those
sales and his collection fees of 10% were to be paid to him "from the
first collections received from the purchasers in respect to each lot
sold", defendants, in contravention of that agreement, oppressively
and in bad faith adopted the practice of paying the latter's
compensation out of 30% only of the gross monthly collections from
the sales, such that, as of October 15, 1951 when a liquidation was
made, there was still a balance on plaintiff's commissions in the
amount of P48,899.20.
7. Later, in October, 1951, defendants wantonly, oppressively, and in
evident bad faith terminated the agency contracts Exhibits "A" and
"B" depriving plaintiff of his rights to commission fees of 20% on the
sale of the remaining lots and 10% fee on the cash receipts of the
business every month.
8. Defendants nevertheless, expressly acknowledge their liability to
plaintiff in the sum of P48,899.20 for unpaid commissions as of
October 16, 1951; and they promised to pay indebtedness to
plaintiff in successive monthly installments beginning November,
1951, as follows: . . . .
9. Plaintiff consented to the settlement of the balance of his
commission in monthly installments after the termination of the
agency in consideration of defendant's promises that they would
compute and faithfully pay the percentage of monthly installments
on the basis of their monthly gross collections from the operation of
"BBB MARULAS SUBDIVISION No. 3", as stipulated in Exhibit "C", and
shall follow that procedure until their total indebtedness is fully
settled.
10. From October 16, 1951 to March 31, 1953, defendants made a
total monthly gross collection of around P52,849.63 from the
business, and out of these receipts plaintiff was entitled to minimum
payments of P8,711.13 pursuant to Exhibit "C"; but again defendant
wantonly, fraudulently, oppressively, and in evident bad faith paid
plaintiff only the sum of P6,204.13 or P2,507.00 short of what
plaintiff should have received during the period.
11. Upon gaining information of the breach of the contract by
defendants about the end of March, 1953 and verifying the
existence of such breach, plaintiff immediately demanded of
defendants the difference between the amounts due to him under
the contract Exhibit "C" and those actually paid by them, but
defendants wantonly, fraudulently, and without cause refused to
make necessary settlement.
ISSUE:
W/N a partnership was created.
SC RULING:
No.
Respondent-appellant claims that the lower court erred in holding
that his pending action (Civil Case No. 2138) in the Court of First
Instance of Rizal, is purely a claim for money judgment which does
not affect the title or right of possession of petitioners' real
property, covered by Transfer Certificate of Title No. T-5459.
Instead, he contends that the agreement whereby he was to be paid
a commission of 20% on the gross sales and a fee of 10% on the
collections made by him, converted him into a partner and gave him
1/5 participation in the property itself. Hence, he argues, his suit is
one for the settlement and adjustment of partnership interest or a
partition action or proceeding.
Appellant's theory is neither supported by the allegations of his
complaint, nor borne out by the purpose of his action. There is no
word or expression in the various paragraphs of his amended
complaint that suggests any idea of partnership. On the contrary,
appellant expressly averred that petitioners "appointed plaintiff
(appellant) their exclusive agent to develop the area described in
paragraph 2 into subdivision lots and to sell them to prospective
homeowners; and as compensation for his services defendants
(appellees) promised to pay him a commission of 20% on the gross
sales and a fee of 10% on the collections made by him. . . ." (See
paragraph 3 of amended complaint.) Categorically, appellant
referred to himself as an agent, not a partner; entitled to
compensation, not participation, in the form of commission or fee,
not a share.
It is true that in paragraph 5 of the amended complaint (supra)
appellant claims to have made advances for the expenses incurred
in the development and administration of the property. But again he
never considered these as contributions to the business as to make
him a partner; otherwise, he would have so stated it in his
complaint. In fact, after a liquidation of these advances and the
commissions due to appellant at the time of the termination of the
agency, the whole balance was considered as appellees'
indebtedness which appellant consented to be settled in monthly
installments (see paragraphs 6, 8, and 9 of the amended complaint).
While it is true again that the prayer in a complaint does not
determine the nature of the action, it not being a material part of
the cause of action, still it logically indicates, as it does in this case,
the purpose of the actor. The four paragraphs of the prayer seeks
the recovery of fixed amounts of underpayments and commissions
and fees; not liquidation or accounting or partition as now insisted
upon by appellant.
Appellants's amended complaint, not being "an action affecting the
title or the right of possession of real property",1nor one "to recover
possession of real estate, or to quiet title thereto, or to remove
clouds upon the title thereof, or for partition or other proceeding of
any kind in court affecting the title to real estate or the use or
occupation thereof or the buildings thereon . . .",2 the same cannot
be the basis for annotating a notice of lis pendens on the title of the
petitioners-appellees.
Having reached the above conclusion, this Court finds it unnecessary
to decide the incidental matters raised by the parties during the
pendency of this appeal.
Wherefore, finding no error in the appealed order of the court a
quo, the same is hereby affirmed, with costs against the respondent-
appellant. So ordered.