EUFEMIA EVANGELISTA, MANUELA EVANGELISTA, and

FRANCISCA EVANGELISTA, petitioners,

vs. THE COLLECTOR OF INTERNAL REVENUE and THE COURT
OFTAX APPEALS, respondents.
G.R. No. L-9996, October 15, 1957

FACTS: Petitioners borrowed sum of money from their father and together with
their own personal funds they used said money to buy several real properties. They
then appointed their brother (Simeon) as manager of the said real properties with
powers and authority to sell, lease or rent out said properties to third persons. They
realized rental income from the said properties for the period 1945-1949.On
September 24, 1954 respondent Collector of Internal Revenue demanded the
payment of income tax on corporations, real estate dealer's fixed tax and corporation
residence tax for the years 1945-1949. The 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. CTA denied their petition and subsequent MR and New Trials were
denied. Hence this petition.

ISSUE:
1.) Whether or not petitioners have formed a partnership
2.) Whether it is subject to the tax on corporations

DECISION:
1.) YES. 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 present in the case at bar, for, admittedly, petitioners have agreed
to, and did, contribute money and property to a common fund. 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 of the following observations, among
others:
(1) Said common fund was not something they found already in existence;
(2) They invested the same, not merely in one transaction, but in a series of
transactions;
(3) The aforesaid lots were not devoted to residential purposes, or to other personal
uses, of petitioners herein. 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. For purposes of the tax on corporations, our National
Internal Revenue Code, includes these partnerships: - with the exception only of
duly registered general co-partnerships - within the purview of the term
“corporation." It is, therefore, clear to our mind that petitioners herein constitute a
partnership, insofar as said Code is concerned and are subject to the income tax for
corporations.
2.) YES. 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.
 LAGUNA TRANSPORTATION CO., INC., petitioner - appellant, vs.
SOCIAL SECURITY SYSTEM, respondent - appellee
G.R. No. L - 14606 , April 28, 1960

FACTS: SSS required Petitioner to register as a member and to remit the premiums
and contributions due from all the employees. Biñan Transportation Co., sold part
of the lines and equipment it operates to Mercado et al. After the sale, the vendees
formed an unregistered partnership under the name of Laguna Transportation
Company which continued to operate the lines and equipment bought from Biñan
Transpo in addition to the new lines it was able to secure from Public Service
Commission. The original partners with 2 new members organized Laguna
Transport Company. They requested to be exempted from coverage by the System
on the ground that it started operation only on June 20, 1956 and registered the SEC
on Nov 11, 1957. Petitioner filed a petition praying that an order be issued declaring
that it is not bound to register as a member of SSS and therefore, not required to pay
the contributions required under the Social Security Act. SSS filed an answer
praying for its dismissal due to petitioner’s failure to exhaust administrative
remedies and for a declaration that petitioner is covered by the said act since the
petitioner’s business has been in operation for at least 2 years prior to Sept 1, 1957.
Trial Court declared that the petitioner was an employer had been in actual operation
for at least 2 years, and hence, subject to compulsory coverage under the law.

ISSUE:
1.) Whether Petitioner is covered by the SS Law

DECISION:
YES. Although a corporation once formed is conferred a juridical personality
separate and distinct from the persons composing it, it is but a legal fiction
introduced for purposes of convenience and to subserve the ends of justice. The
concept cannot be extended to a point beyond its reasons and policy, and when
invoked in support of an end subversive of this policy, will be disregarded by the
courts. The weight of authority supports the view that where a corporation was
formed by, and consisted of members of a partnership whose business and property
was conveyed and transferred to the corporation for the purpose of continuing its
business, in payment for which corporate capital stock was issued, such corporation
is presumed to have assumed partnership debts, and is prima facie liable therefore.
The reason for the rule is that the members of the partnership may be said to have
simply put on a new coat, or taken on a corporate cloak and the corporation is a
mere continuation of the partnership.
 J. M. TUASON & CO., INC., represented by it Managing PARTNER,
GREGORIA ARANETA, INC., plaintiff - appellee, vs. QUIRINO
BOLAÑOS, defendant - appellant. 95 Phil. 106
G.R. No. L – 4935, May 28, 1954

FACTS: Plaintiff’s complaint against defendant was to recover possession of a

registered land. In the complaint, the plaintiff is represented by its Managing
Partner, Gregorio Araneta, Inc., another corporation. Defendant, in his answer, sets
up prescription and title in himself thru "open, continuous, exclusive and public and
notorious possession under claim of ownership, adverse to the entire world by
defendant and his predecessors in interest" from "time immemorial". After
trial, the lower court rendered judgment for plaintiff, declaring defendant to be
without any right to the land in question and ordering him to restore possession
thereof to plaintiff and to pay the latter a monthly rent. Defendant appealed directly
to the Supreme Court and contended, among others, that Gregorio Araneta, Inc. can
not act as managing partner for plaintiff on the theory that it is illegal for two
corporations to enter into a partnership.

ISSUE:
1.) Whether or not a corporation may enter into a joint venture with another
corporation.

DECISIONS:
Complaint states that the plaintiff is "represented herein by its Managing Partner
Gregorio Araneta, Inc.", another corporation, but there is nothing against
one corporation being represented by another person, natural or juridical, in a suit
in court. The contention that Gregorio Araneta, Inc. cannot act as managing partner
for plaintiff on the theory that it is illegal for two corporations to enter into a
partnership is without merit, for the true rule is that "though a corporation has no
power to enter into a partnership, it may nevertheless enter into a joint venture with
another where the nature of that venture is in line with the business authorized by
its charter." (Wyoming-Indiana Oil Gas Co. vs. Weston, 80 A. L. R., 1043, citing 2.
Fletcher Cyc. of Corp., 1082.). There is nothing in the record to indicate that the
venture in which plaintiff is represented by Gregorio Araneta, Inc. as "its managing
partner" is not in line with the corporate business of either of them.
 CHARLES F. WOODHOUSE, plaintiff-appellant, vs.
FORTUNATO F. HALILI, defendant-appellant.
G.R. No. L-4811, July 31, 1953

FACTS: On November 29, 1947, plaintiff Woodhouse entered into a written

agreement with defendant Halili stating among others that: 1) that they shall
organize a partnership for the bottling and distribution of Missionsoft drinks,
plaintiff to act as industrial partner or manager, and the defendant as a capitalist,
furnishing the capital necessary therefore; 2) that plaintiff was to secure the Mission
Soft Drinks franchise for and in behalf of the proposed partnership and 3) that the
plaintiff was to receive 30 per cent of the net profits of the business.
Prior to entering into this agreement, plaintiff had informed the Mission Dry
Corporation of Los Angeles, California, that he had interested a prominent financier
(defendant herein) in the business, who was willing to invest half a milliondollars
in the bottling and distribution of the said beverages, and requested, in order that he
may close the deal with him, that the right to bottle and distribute be granted him
for a limited time under the condition that it will finally be transferred to the
corporation. Pursuant to this request, plaintiff was given “a thirty days’ option on
exclusive bottling and distribution rights for the Philippines”. The contract was
finally signed by plaintiff. When the bottling plant was already in operation, plaintiff
demanded of defendant that the partnership papers be executed. Defendant Halili
gave excuses and would not execute said agreement, thus the complaint by the
plaintiff. Plaintiff prays for the: 1.execution of the contract of partnership; 2)
accounting of profits and 3) share thereof of 30 percent with 4) damages in the
amount of P200,000. The Defendant on the other hand claims that: 1) the
defendant’s consent to the agreement, was secured by the representation of plaintiff
that he was the owner, or was about to become owner of an exclusive bottling
franchise, which representation was false, and that plaintiff did not secure the
franchise but was given to defendant himself 2) that defendant did not fail to carry
out his undertakings, but that it was plaintiff who failed and 3)that plaintiff agreed
to contribute to the exclusive franchise to the partnership, but plaintiff failed to do
so with a 4) counterclaim for P200,00 as damages. The CFI ruling: 1) accounting of
profits and to pay plaintiff 15 % of the profits and that the 2) execution of contract
cannot be enforced upon parties. Lastly, the 3) fraud wasn’t proved
ISSUES:
1.) Whether plaintiff falsely represented that he had an exclusive franchise to
bottle Mission beverages
2.) Whether false representation, if it existed, annuls the agreement to form the
partnership
DECISION:
1.) Yes. Plaintiff did make false representations and this can be seen through his
letters to Mission Dry Corporation asking for the latter to grant him temporary
franchise so that he could settle the agreement with defendant. The trial court
reasoned, and the plaintiff on this appeal argues, that plaintiff only undertook in the
agreement “to secure the Mission Dry franchise for and in behalf of the proposed
partnership.” The existence of this provision in the final agreement does not militate
against plaintiff having represented that he had the exclusive franchise; it rather
strengthens belief that he did actually make the representation. The defendant
believed, or was made to believe, that plaintiff was the grantee of an exclusive
franchise. Thus it is that it was also agreed upon that the franchise was to be
transferred to the name of the partnership, and that, upon its dissolution or
termination, the same shall be reassigned to the plaintiff. Again, the immediate
reaction of defendant, when in California he learned that plaintiff did not have the
exclusive franchise, was to reduce, as he himself testified, plaintiff’s participation
in the net profits to one half of that agreed upon. He could not have had such a
feeling had not plaintiff actually made him believe that he (plaintiff) was the
exclusive grantee of the franchise.
2. No. In consequence, article 1270 of the Spanish Civil Code distinguishes two
kinds of (civil) fraud, the causal fraud, which may be ground for the annulment of a
contract, and the incidental deceit, which only renders the party who employs it
liable for damages only. The Supreme Court has held that in order that fraud may
vitiate consent, it must be the causal (dolo causante), not merely the incidental (dolo
incidente) inducement to the making of the contract.
The record abounds with circumstances indicative of the fact that the principal
consideration, the main cause that induced defendant to enter into the partnership
agreement with plaintiff, was the ability of plaintiff to get the exclusive franchise to
bottle and distribute for the defendant or for the partnership. The original draft
prepared by defendant’s counsel was to the effect that plaintiff obligated himself to
secure a franchise for the defendant. But if plaintiff was guilty of a false
representation, this was not the causal consideration, or the principal inducement,
that led plaintiff to enter into the partnership agreement. On the other hand, this
supposed ownership of an exclusive franchise was actually the consideration or
price plaintiff gave in exchange for the share of 30 per cent granted him in the net
profits of the partnership business. Defendant agreed to give plaintiff 30 per cent
share in the net profits because he was transferring his exclusive franchise to the
partnership.
Having arrived at the conclusion that the contract cannot be declared null and
void, may the agreement be carried out or executed? The SC finds no merit in the
claim of plaintiff that the partnership was already a fait accompli from the time of
the operation of the plant, as it is evident from the very language of the agreement
that the parties intended that the execution of the agreement to form a partnership
was to be carried out at a later date. The defendant may not be compelled against
his will to carry out the agreement nor execute the partnership papers. The law
recognizes the individual’s freedom or liberty to do an act he has promised to do, or
not to do it, as he pleases.
EVANGELISTA & CO., DOMING O C. EV ANGELISTA, JR., CONCHITA
B. NAVARRO and LEONARDA ATIENZA ABAD SABTOS, petitioners, vs.
ESTRELLA ABAD SANTOS, respondent.
G.R. No. L – 31684, June 28, 1973

FACTS: On October 9, 1954 a co-partnership was formed under the name of

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

ISSUE:
1.) Whether or not Abad Santos is an industrial partner and is entitled to the shares
of the partnership
DECISION:
YES. It is clear that even as she was and still is a Judge of the City Court of Manila,
she has rendered services for appellants without which they would not have had the
ability to operate the business for which appellant company was organized. Article
1767 of the New Civil Code which provides that "By contract of partnership two or
more persons bind themselves, to contribute money, property, or industry to a
common fund, with the intention of dividing the profits among themselves, does not
specify the kind of industry that a partner may thus contribute, hence the said
services may legitimately be considered as appellee's contribution to the common
fund.
Another article of the same Code relied upon appellants reads: ART. 1789.
An industrial partner cannot engage in business for himself, unless the partnership
expressly permits him to do so; and if he should do so, the capitalist partners may
either exclude him from the firm or avail themselves of the benefits which he may
have obtained in violation of this provision, with a right to damages in either case.'
It is not disputed that the provision against the industrial partner engaging in
business for himself seeks to prevent any conflict of interest between the industrial
partner and the partnership and to insure faithful compliance by said partner with
this prestation. There is no pretense, however, even on the part of the appellee is
engaged in any business antagonistic to that of appellant company, since being a
Judge of one of the branches of the City Court of Manila can hardly be characterized
as a business and that the appellee has faithfully complied with her prestation.
 ISABELO MORAN, JR., petitioner, vs. THE HON. COURT OF APPEALS
and MARIANO E. PECSON, respondents.
G.R. No. L - 59956 October 31, 1984

FACTS: Pecson and Moran entered into an agreement for the printing of posters
containing the delegates of the 1971 Constitutional Convention. 95k posters were
supposed to be printed and sold at P2/each. Each would contribute P15k. Moran will
supervise the work, while Pecson would receive a P1k monthly commission. Pecson
gave Moran P10k for which the latter issued a receipt. Only 2k posters were printed,
but each was sold for P5. Moran then executed 2 promissory notes in favor of
Pecson. Pecson filed an action for the recovery of a sum of money for the return of
his P10k contribution, payment of his share in the profits that the partnership would
have earned
Each party is entitled to rescind the contract since both failed to fulfill their
respective promises (Moran – the printing of the 95k posters; Pecson – the P15k
contribution). Moran must pay Pecson, among others, the amount of expected
profits and the latter’s commission in the partnership.

ISSUE:
1.) Whether Moran is obliged to give Pecson the amount of expected profits
from their partnership.

DECISION:
No. 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 (Art. 1786) and for interests and damages from the time he should have
complied with his obligations (Art. 1788).
Being a contract of partnership, each partner must share in the profits and
losses of the venture, for that is the essence of partnership.
 Even in the assurance of the other partner that they would earn a huge amount
of profits, in the absence of fraud, the other cannot claim a right to recover the highly
speculative profits.
In the present case, the fantastic nature of expected profits is obvious that
various factors need to be considered.
The failure of COMELEC to proclaim all 320 candidates of the
Constitutional Convention on time was a major factor in Moran’s decision not to go
on with the printing of all 95,000 posters. Hidden risks in any business venture have
to be considered.
However, as it was shown that Pecson gave money to Moran (P10k) which the
latter used to print the first batch of posters, and since these posters were sold and
profits were realized from such sale, Pecson is entitled to recover his share of such
profits.
 THE LEYTE - SAMAR SALES CO., and RAYMUNDO TOMASSI,
petitioners, vs. SULPICIO V. CEA, in his capacity as Judge of the
Court of First Instance of Leyte and OLEGARIO LASTRILLA,
respondents. G.R. No. L – 5963, May 20, 1953
FACTS: This is a suit for damages by the Leyte-Samar Sales Co. (hereinafter called
LESSCO) and Raymond Tomassi against the Far Eastern Lumber & Commercial Co.
(unregistered commercial partnership hereinafter called FELCO), Arnold Hall, Fred
Brown and Jean Roxas, judgment against defendants jointly and severally for the
amount of P31,589.14 plus costs. The decision having become final, the sheriff sold
at auction on June 9, 1951 to Robert Dorfe and Pepito Asturias "all the rights,
interests, titles and participation" of the defendants in certain buildings and properties
described in the certificate on June 4, 1951 Olegario Lastrilla filed in the case a
motion, wherein he claimed to be the owner by purchase on September 29, 1949, of
all the "shares and interests" of defendant Fred Brown. June 13, 1951, granted
Lastrilla's motion. On August 14, 1951, modified its order of delivery and merely
declared that Lastrilla was entitled to 17% of the properties sold. The petitioners seek
relief by certiorari, their position being the such orders were null and void for lack of
jurisdiction.
ISSUE:
1.) Wherein the court acted with excess of its jurisdiction?
DECISION:
Yes. The parties were not notified, and obviously took no part in the proceedings on
the motion. A valid judgment cannot be rendered where there is a want of necessary
parties, and a court cannot properly adjudicate matters involved in a suit when
necessary and indispensable parties to the proceedings are not before it. All the
defendants would have reasonable motives to object to the delivery of 17% of the
proceeds to Lustrial, because it is so much money deducted, and for which the
plaintiffs might as another levy on their other holdings or resources.
 COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.
WILLIAM J. SUTER and THE COURT OF TAX APPEALS,
respondents
G.R. No. L - 25532 , February 28, 1969

FACTS: A limited partnership, named "William J. Suter 'Morcoin' Co., Ltd.," was
formed in 1947 by 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. The firm
engaged, among other activities, in the importation, marketing, distribution and
operation of automatic phonographs, radios, television sets and amusement
machines, their parts and accessories.
In 1948, however, general partner Suter and limited partner Spirig got
married and, thereafter, limited partner. Carlson sold his share in the partnership to
Suter and his wife.
The limited partnership had been filing its income tax returns as a corporation.
In 1959, the Commissioner, 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.

ISSUES:
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 Spirig Suter actually formed a single taxable
unit; and
2.) 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.

DECISION:
1.) CIR has evidently failed to observe the fact that the partnership was not a
universal partnership, but a particular one. A universal partnership requires
either that the object of the association be all the present property of the
partners, as contributed by them to the common fund, or else "all that the
partners may acquire by their industry or work during the existence of the
partnership". William J. Suter "Morcoin" Co., Ltd. was not such a universal
partnership, since the contributions of the partners were fixed sums of
money, P20,000.00 by William Suter and P18,000.00 by Julia Spirig and
neither one of them was an industrial partner. It follows that William J. Suter
"Morcoin" Co., Ltd. was not a partnership that spouses were forbidden to
enter by Article 1677 of the Civil Code of 1889.
The appellant's view, that by the marriage of both partners the
company became a single proprietorship, is equally erroneous. The capital
contributions of partners William J. Suter and Julia Spirig were separately
owned and contributed by them before their marriage; and after they were
joined in wedlock, such contributions remained their respective separate
property under the Spanish Civil Code (Article 1396):
The following shall be the exclusive property of each spouse:
(a) That which is brought to the marriage as his or her own; thus, the
individual interest of each consort in the partnership did not become common
property of both after their marriage in 1948. The change in its membership, brought
about by the marriage of the partners and their subsequent acquisition of all interest
therein, is no ground for withdrawing the partnership from the coverage of Section
24 of the tax code, requiring it to pay income tax. The code (NIRC) taxes a limited
partnership on its income, but not a general copartnership (compañia colectiva),
because it is in the case of compañias colectivas that the members, and not the firm,
are taxable in their individual capacities for any dividend or share of the profit
derived from the duly registered general partnership.
(b) The firm was not a universal partnership, but a particular one. It follows that the
partnership was not one that A and B were forbidden to enter under Article 1677.
(now Art. 1782.) nor could the subsequent marriage of the partners operate to
dissolve it, such marriage not being one of the causes provided for that purpose by
law.
 PEDRO R. PALTING, petitioner, vs. SAN JOSE PETROLEUM
INCORPORATED, respondent
G.R. No. L – 14441, December 17, 1966

FACTS: September 7, 1956: San Jose Petroleum (SJP) filed with the Philippine
Securities and Exchange Commission a sworn registration statement, for the
registration and licensing for sale in the Philippines Voting Trust Certificates
representing 2,000,000 shares of its capital stock of a par value of $0.35 a share, at
P1.00 per share. It was alleged that the entire proceeds of the sale of said securities
will be devoted or used exclusively to finance the operations of San Jose Oil
Company, Inc. (Domestic Mining Oil Company). Express condition of the sale that
every purchaser of the securities shall not receive a stock certificate, but a registered
or bearer-voting-trust certificate from the voting trustees James L. Buckley and
Austin G.E. Taylor. June 20, 1958: SJP amended Statement increasing 2,000,000 to
5,000,000, at a reduced offering price of from P1.00 to P0.70 per share. Pedro R.
Palting together with other investors in the share of SJP filed with the SEC an
opposing the registration and licensing of the securities on the grounds that:
1. tie-up between the issuer, SJP, a Panamanian corp. and San Jose Oil (SJO), a
domestic corporation, violates the Constitution of the Philippines, the
Corporation Law and the Petroleum Act of 1949
2. issuer has not been licensed to transact business in the Philippines
3. sale of the shares of the issuer is fraudulent, and works or tends to work a fraud
upon Philippine purchasers
4. issuer as an enterprise, as well as its business, is based upon unsound business
principles

ISSUES:
1. Wherein Pedro R. Palting, as a "prospective investor" in SJP's securities, has
personality to file
 2. Wherein the tie-up violates the Constitution of the Philippines, the
Corporation Law and the Petroleum Act of 1949
3. ) Up to what level do you apply the grandfather rule?

DECISION:
Motion of respondent to dismiss this appeal, is denied and the orders of the
Securities and Exchange Commissioner, allowing the registration of Respondent's
securities and licensing their sale in the Philippines are hereby set aside. The case is
remanded to the Securities and Exchange Commission for appropriate action in
consonance with this decision.
1.) YES. Any person (who may not be "aggrieved" or "interested" within the legal
acceptation of the word) is allowed or permitted to file an opposition to the
registration of securities for sale in the Philippines Eliminating the word
"aggrieved" appearing in the old Rule, being procedural in nature, and in view
of the express provision of Rule 144 that the new rules made effective on
January 1, 1964 shall govern not only cases brought after they took effect but
all further proceedings in cases then pending, except to the extent that in the
opinion of the Court their application would not be feasible or would work
injustice, in which event the former procedure shall apply *amiscus curae -
stranger to the case

2.) YES
 SJO (domestic)-90% owned by SJP (foreign) wholly owned by Pantepec Oil
Co. and Pancoastel Petroleum, both organized and existing under the laws of
Venezuela
 CANNOT go beyond the level of what is reasonable
 SJO is not a party and it is not necessary to do so to dispose of the present
controversy.
 SJP actually lost $4,550,000.00, which was received by SJO
 Articles of Incorporation of SJP is unlawful:
1. the directors of the Company need not be shareholders;
2. that in the meetings of the board of directors, any director may be represented
and may vote through a proxy who also need not be a director or stockholder;
and
3. that no contract or transaction between the corporation and any other
association or partnership will be affected, except in case of fraud, by the fact
that any of the directors or officers of the corporation is interested in, or is a
director or officer of, such other association or partnership, and that no such
contract or transaction of the corporation with any other person or persons,
firm, association or partnership shall be affected by the fact that any director
or officer of the corporation is a party to or has an interest in, such contract or
transaction, or has in any way connected with such other person or persons,
firm, association or partnership; and finally, that all and any of the persons
who may become director or officer of the corporation shall be relieved from
all responsibility for which they may otherwise be liable by reason of any
contract entered into with the corporation, whether it be for his benefit or for
the benefit of any other person, firm, association or partnership in which he
may be interested.
 INVOLUNTARY INSOLVENCY OF CAMPOS RUEDA & CO., S. en
C., appellee, vs. PACIFIC COMMERCIAL CO., ASIATIC
PETROLEUM CO., and INTERNATIONAL BANKING
CORPORATION, petitioners-appellants
G.R. No. L-18703, August 28, 1922

FACTS: Maria Cerdeira, a Spanish national ( Filipina married to a spanish citizen)

who lived in Tangier, Morocco from 1931 until the time of her death in 1955, left
the respondent Antonio Campos Rueda to administer her intangible properties.
Rueda filed a provisional estate and inheritance tax return on all the properties of
Maria Cerdeira.
On the real estate the respondent, as administrator of Cerdeira’s estate, paid
the sum of P 111, 582 as tax and the sum of P151, 791 as inheritance tax, on the
transfer of the real properties in the Philippines, but refused to pay the corresponding
deficiency estate and inheritance taxes due on transfer of her intangible personal
properties, claiming that the estate is exempt from the payment of said taxes
pursuant to section 122 of the Tax Code and that he could avail of the reciprocal
provisions of our Tax Code.
The Collector of Internal Revenue denied the exemption of the said taxes on
the grounds that there is no reciprocity because Tangier is a mere principality not a
foreign country. In a decision CIR assessed the estate of the deceased, as deficiency
estate and inheritance taxes, the sum of P161, 874.95 including interest and
penalties, on the transfer of intangible personal properties of Maria Cerdeira.
The matter was elevated to the Court of Tax Appeals. CTA affirmed the
exemption of taxes on Rueda in accordance with Tangier law.
The case was elevated to the Supreme Court and as brought back to CTA for
review.
ISSUE:
1.) Whether or not the requisites of statehood, or at least so much thereof as may
be necessary for the acquisition of an international personality, must be satisfied
for a “foreign country” to fall within the exemption of Section 122 of the
National Internal Revenue Code.

DECISION:
“Foreign Country” used in Sec. 122 of the National Internal Revenue Code, refers
to a government of that foreign power although not an international person in the
sense of international law, does not impose transfer of death taxes upon intangible
personal properties of citizens not residing therein. Or whose law allows a similar
exemption from such taxes. It is not necessary that Tangier should have been
recognized by our government in order to entitle the petitioner to the exemption
benefits provided by our Tax Law.
 TAI TONG CHUACHE & CO., petitioner, vs. THE INSURANCE
COMMISSION and TRAVELLERS MULTI-INDEMNITY
CORPORATION, respondents
G.R. No. L-55397, February 29, 1988

FACTS: Azucena Palomo bought a parcel of land and building from Rolando
Gonzales and assumed a mortgage of the building in favor of S.S.S. which was
insured with S.S.S. Accredited Group of Insurers. On April 19, 1975: Azucena
Palomo obtained a loan from Tai Tong Chuache Inc. in the amount of P100,000 and
to secure it, the land and building was mortgaged. In June 11, 1975: Pedro Palomo
secured a Fire Insurance Policy covering the building for P50,000 with Zenith
Insurance Corporation. In July 16, 1975: another Fire Insurance policy was procured
from Philippine British Assurance Company, covering the same building for
P50,000 and the contents thereof for P70,000. Before the occurrence of the peril
insured against the Palomos had already paid their credit due.
July 31, 1975: building and the contents were totally razed by fire. Palomo was
able to claim P41,546.79 from Philippine British Assurance Co., P11,877.14 from
Zenith Insurance Corporation and P5,936.57 from S.S.S. Group of Accredited
Insurers but Travellers Multi-Indemnity refused so it demanded the balance from
the other three but they refused so they filed against them.
Insurance Commission, CFI: absolved travellers on the basis that Arsenio
Cua was claiming and NOT Tai Tong Chuache, Palomo appealed.
Travellers reasoned that the policy is endorsed to Arsenio Chua, mortgage
creditor. Tai Tong Chuache & Co. filed a complaint in intervention claiming the
proceeds of the fire Insurance Policy issued by travelers. Affirmative defense of lack
of insurable interest that before the occurrence of the peril insured against the
Palomos had already paid their credit due the petitioner.
ISSUE:
2.) Wherein Tai Tong Chuache & Co. has insurable interest

DECISION:
YES. Travellers Multi-Indemnity Corporation to pay Tai Tong Chuache & Co.
 when the creditor is in possession of the document of credit, he need not prove
non-payment for it is presumed
 The validity of the insurance policy taken by petitioner was not assailed by
private respondent. Moreover, petitioner's claim that the loan extended to the
Palomos has not yet been paid was corroborated by Azucena Palomo who
testified that they are still indebted to herein petitioner
 Chua being a partner of petitioner Tai Tong Chuache & Company is an agent of
the partnership. Being an agent, it is understood that he acted for and in behalf
of the firm
Upon its failure to prove the allegation of lack of insurable interest on the part
of the petitioner, Travellers must be held liable.
 MARIANO P. PASCUAL and RENATO P. DRAGON, petitioners, vs. THE
COMMISSIONER OF INTERNAL REVENUE and COURT OF TAX
APPEALS, respondents
G.R. No. 78133, October 18, 1988

FACTS: Petitioners bought two (2) parcels of land and a year after, they bought
another three (3) parcels of land. Petitioners subsequently sold the said lots in 1968
and 1970, and realized net profits. 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, the Acting BIR Commissioner assessed and required Petitioners 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 asserting that
they had availed of tax amnesties way back in 1974. In a reply, 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
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 relieve them from the tax liability of the unregistered partnership. Hence,
the petitioners were required to pay the deficiency income tax assessed.

ISSUE:
1.) Whether the Petitioners should be treated as an unregistered partnership or
a co-ownership for the purposes of income tax.
DECISION:
The Petitioners are simply under the regime of co-ownership and not under
unregistered partnership.
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 (Art. 1767, Civil Code of the Philippines). 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. 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.
Hence, 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.
 JOHN FORTIS, plaintiff-appellee, vs. GUTIERREZ HERMANOS,
defendants-appellants Hartigan, Rohde and Gutierrez, for appellants. W. A.
Kincaid, for appellee.
G.R. No. L-2484, April 11, 1906

FACTS: Plaintiff Fortis is an employee of defendant Gutierrez Hermanos. The

former brought an action to recover a balance due him as salary for the year 1902.
He also alleged that he was entitled, as salary, to 5 per cent of the net profits of the
business of the defendant’s foresaid year. The complaint also contained a cause of
action for the sum of 600 pesos, money expended by plaintiff for the defendants
during the year 1903. The lower court ruled in favor of the plaintiff. The total
judgment rendered amounted to P13, 025.40, which was reduced to Philippine
currency. The defendants moved for new trial but were denied. They brought the
case in the SC thru bill of exceptions; the appellants (defendants) alleged that that
the contract made the plaintiff a copartner of the defendants in the business, which
they were carrying on.

ISSUE:
1.) Whether the plaintiff is a co-partner of the defendants in the business.

DECISION:
NO. It was a mere contract of employment. The plaintiff had neither voice nor vote
in the management of the affairs of the company. The fact that the compensation
received by him was to be determined with reference to the profits made by the
defendants in their business did not in any sense make by a partner therein. The
articles of partnership between the defendants provided that the profits should be
divided among the partners named in a certain proportion. The contract made
between the plaintiff and the then manager of the defendant partnership did not in
any way vary or modify this provision of the articles of partnership.
 The rule is that, receipt of a person in a share of profits of business is a prima
facie evidence that he is a partner. Exception is if the profit is for the payment of
wages of an employee.
Bill of exceptions- A written statement from a trial judge to an appellate court
listing a party’s objections or exceptions made during the trial and the grounds on
which they were based.
 INOCENCIA DELUAO and FELIPE DELUAO plaintiffs-appellees, vs.
NICANOR CASTEEL and JUAN DEPRA, defendants, NICANOR
CASTEEL, defendant-appellant.
G.R. No. L-21906, December 24, 1968

FACTS: In 1940 Nicanor Casteel filed a fishpond application for a big tract of
swampy land in the then Sitio of Malalag, Municipality of Padada, Davao. No action
was taken thereon by the authorities concerned. During the Japanese occupation, he
filed another fishpond application for the same area, but because of the conditions
then prevailing, it was not acted upon either. On December 12, 1945 he filed a third
fishpond application for the same area but it was again disapproved since it was
discovered that the area applied for was still needed for firewood production.
Meanwhile, several applications were submitted by other persons for portions of the
area covered by Casteel's application, including Leoncio Aradillos, Victor Carpio,
Alejandro Cacam, and Deluao.
Casteel realized the urgent necessity of expanding his occupation thereof by
constructing dikes and cultivating marketable fishes, in order to prevent old and new
squatters from usurping the land. But lacking financial resources at that time, he
sought financial aid from his uncle Felipe Deluao to finance the needed
improvements on the fishpond. Hence, a wide productive fishpond was built.
The Director of Fisheries nevertheless rejected Casteel's application and
required him to remove all the improvements which he had introduced on the land,
and ordered that the land be leased through public auction.
Inocencia Deluao (wife of Felipe Deluao), and Nicanor executed a contract
of service. At the same time, Inocencia executed a special power of attorney in favor
of Jesus Donesa, extending to the latter the authority "To represent me in the
administration of the fishpond at Malalag, Municipality of Padada, Province of
Davao, Philippines, which has been applied for fishpond permit by Nicanor Casteel,
but rejected by the Bureau of Fisheries, and to supervise, demand, receive, and
collect the value of the fish that is being periodically realized from it...."
Then, the Director of Fisheries rejected the application filed by Felipe Deluao
and Victorio Carpio while Alejandro Cacam’s permit was cancelled and revoked.
Casteel had been reinstated and given due course for the area and is required to pay
the improvements to Alejandro Cacam.
Nicanor Casteel forbade Inocencia Deluao from further administering the
fishpond, and ejected the latter's representative (encargado), Jesus Donesa, from the
premises. Alleging violation of the contract of service entered into between
Inocencia Deluao and Nicanor Casteel, Felipe and Inocencia filed an action in the
CFI Davao for specific performance and damages against Nicanor Casteel and Juan
Depra (who, they alleged, instigated Casteel to violate his contract).
Plaintiffs filed an ex parte motion for the issuance of a preliminary injunction
which was granted. Casteel then filed a motion to dissolve the injunction, alleging
among others, that he was the owner, lawful applicant and occupant of the fishpond
in question.
ISSUE:
2.) Whether or not the reinstatement of Casteel dissolved the partnership with
Deluao.
DECISION:
Apparently, the court a quo relied on — the so-called "contract of service" — and
the appellees' contention that it created a contract of co-ownership and partnership
between Inocencia Deluao and the appellant over the fishpond in question.
The appellee Inocencia Deluao and the appellant entered into the so-called "contract
of service" on November 25, 1949, there were two pending applications over the
fishpond. Clearly, although the fishpond was then in the possession of Casteel,
neither he nor, Felipe Deluao was the holder of a fishpond permit over the area. But
be that as it may, they were not however precluded from exploiting the fishpond
pending resolution of Casteel's appeal or the approval of Deluao's application over
the same area — whichever event happened first. No law, rule or regulation
prohibited them from doing so. Thus, rather than let the fishpond remain idle they
cultivated it.
The evidence preponderates in favor of the view that the initial intention of the
parties was not to form a co-ownership but to establish a partnership — Inocencia
Deluao as capitalist partner and Casteel as industrial partner — the ultimate
undertaking of which was to divide into two equal parts such portion of the fishpond
as might have been developed by the amount extended by the plaintiffs- appellees,
with the further provision that Casteel should reimburse the expenses incurred by
the appellees over one-half of the fishpond that would pertain to him.
Although denominated a "contract of service," was actually the
memorandum of their partnership agreement. The arrangement under the so-called
"contract of service" continued until the decisions both dated September 15, 1950
were issued by the Secretary of Agriculture and Natural Resources in DANR Cases
353 and 353-B. This development, by itself, brought about the dissolution of the
partnership. Moreover, subsequent events likewise reveal the intent of both parties
to terminate the partnership because each refused to share the fishpond with the
other. The approval of the appellant's fishpond application by the decisions in
DANR Cases 353 and 353-B brought to the fore several provisions of law which
made the continuation of the partnership unlawful and therefore caused its ipso facto
dissolution.
Since the partnership had for its object the division into two equal parts of
the fishpond between the appellees and the appellant after it shall have been awarded
to the latter, and therefore it envisaged the unauthorized transfer of one-half thereof
to parties other than the applicant Casteel, it was dissolved by the approval of his
application and the award to him of the fishpond. The approval was an event which
made it unlawful for the business of the partnership to be carried on or for the
members to carry it on in partnership.
 MAURO LOZANA, plaintiff-appellee, vs. SERAFIN DEPAKAKIBO,
defendant-appellant.
G.R. No. L-13680, April 27, 1960

FACTS: Lozana and Depakakibo established a partnership for the purpose of

maintaining, operating, and distributing electric light and power in the Municipality
of Dumangas. The partnership is capitalized at the sum ofP30, 000.00 where Lozana
agreed to furnish 60% while Depakakibo, 40%. However, the franchise for venture
in favor of Buenaflor was cancelled and revoked by the Public Service Commission.
Lozana thereafter sold Generator Buda [Lozana’s contribution to the partnership;
no liquidation made] to Decologon. When the decision was appealed, a temporary
certificate of public convenience was issued in the name of Decolongon.
Depakakibo sold one Crossly Diesel Engine [Depakakibo’s contribution to the
partnership] to Spouses Jimenea and Harder. Lozana brought action against
Depakakibo alleging the latter wrongfully detained the Generator Buda and wooden
posts to which he is entitled to the possession of. Lozano prayed the properties be
delivered back to him. CFI ordered sheriff to take possession of the properties and
the delivery thereof to Lozano. Depakakibo alleged properties have been
contributed to the partnership and therefor he is not unlawfully detaining them. In
addition, Lozano sold his contribution to partnership in violation of terms of their
agreement. CFI declared Lozano owner of and entitled to the equipment.
Depakakibo appealed decision to the Supreme Court.

ISSUE:
1.) Wherein partnership is void or the act of the partnership in furnishing electric
current to the franchise holder without previous approval of Public Service
Commission render the partnership void?
2.) Wherein disposal of contribution of parties is allowed.
DECISION:
1.) Validity of the Partnership. Partnership is valid. The fact of furnishing the
current to the holder of the franchise alone, without the previous approval of the
Public Service Commission, does not per se make the contract of partnership
null and void from the beginning and render the partnership entered into by the
parties for the purpose also void and non-existent
2.) Disposal of Contributed Property to the Partnership. Facts show that parties
entered into the contract of partnership, Lozana contributing the amount of P18,
000, and there has not been liquidation prior to the sale of the contributed
properties: Buda Diesel Engine and 70 posts. It necessarily follows that the Buda
diesel engine contributed by the plaintiff had become the property of
the partnership. As properties of the partnership, the same could not be disposed
of by the party contributing the same without the consent or approval of the
partnership or of the other partner. (Clemente vs. Galvan, 67 Phil., 565
 ALBERT F. KIEL, plaintiff-appellee, vs.
ESTATE OF P. S. SABERT, defendant-appellant.
G.R. No. 21639, September 25, 1924

FACTS: Albert F. Kiel commenced to work on certain public lands situated in the
municipality of Parang, Cotabato, known as Parang Plantation Company. In 1910
Kiel and P. S. Sabert entered into an agreement to develop the plantation. Sabert
was to furnish the capital and Kiel was to manage it. It seems that this partnership
was formed so that the land could be acquired in the name of Sabert, Kiel being a
German citizen and not deemed eligible to acquire public lands in the Philippines.
Kiel was deported from the Philippines. Five persons, including P.S. Sabert,
organized the Nituan Plantation Company, to which Sabert transferred all the rights
and interests of the Parang Plantation Company. Kiel appears to have tried to secure
a settlement from Sabert. But Sabert’s death came before any amicable arrangement
could be reached and before an action by Kiel against Sabert could be decided. So
these proceedings against the estate of Sabert.

ISSUE:
1.) What is the nature of the proceeding?
2.) Is this an action to establish a resulting trust in the land of Sabert?

DECISION:
1.) No partnership agreement in writing was entered into by Kiel and Sabert. Thus
the real issue is whether or not the alleged verbal copartnership formed by Kiel
and Sabert has been proved. The court held that declarations of one partner, not
made in the presence of his copartner, are not competent to prove the existence
of a partnership between them, and that the existence of a partnership cannot be
established by general reputation, rumor, or hearsay.
 Even competent evidence exists establishing the partnership, Kiel under the facts
had no standing in court to ask for any part of the land and in fact he does not do
so. His only legal right is to ask for what is in effect an accounting with reference
to its improvements and income when Sabert became the trustee of the estate on
behalf of Kiel. Kiel is not entitled to any share in the land itself, but he has
clearly shown his right to one-half of the value of the improvements and
personal property on the land. The value of these improvements and of the
personal property cannot be ascertained from the record and the case must
therefore be remanded for further proceedings.
2.) NO. The court held that a ruling on the issue of establishing trust is not needed.
Note that the complaint as framed asks for a straight money judgment against an
estate. In no part of the complaint did plaintiff allege any interest in land claim
any interest in land, or pretend to establish a resulting trust in land. This is not
an action to establish trust in the land, because a trust will not be created when,
for the purpose of evading the law prohibiting one from taking or holding real
property he takes a conveyance thereof in the name of a third person.
 MAURICIO AGAD, plaintiff-appellant, vs. SEVERINO MABATO and
MABATO and AGAD COMPANY, defendants-appellees
G.R. No. L-24193, June 28, 1968

FACTS: Mauricio Agad and Severino Mabato executed a public instrument to form
a partnership engaged in a fishpond business. Agad Contributed P1,000.00 with the
right to receive 50% of the profits. Mabato handled the partnership funds and
rendered accounts of the operations of the partnership. However, for the years 1957
to 1963, Mabato failed to render accounts and pay Agad his share in the profits.
Thus, Agad filed a complaint for the recovery of the amount. However, Mabato
contended that no partnership had ever existed since the contract was not perfected
because Agad allegedly failed to contribute his P1,000.00 contribution. The court
dismissed the complaint since the contract was void for being in violation of Art.
1773 in because no inventory of the fishpond had been attached with the instrument

ISSUE:
1.) Does the provision on Art. 1773 of the Civil Code apply?

DECISION:
No. The Court held that Art. 1773 cannot apply. The public instrument forming the
supposed partnership indicated that it was established “to operate a fishpond” and
not to “engage in a fishpond business.” Moreover, no fishpond or a real right to any
was contributed, even if a fishpond or a real right thereto could become part of its
assets, and that contributions merely consisted of P1, 000.00 each from both parties.
Thus, Art. 1773 and 1771 are inapplicable as a basis for the dismissal of the
complaint since no immovable property or real rights were contributed.
 WOLRGANG AURBACH, JOHN GRIFFIN, DAVID P. WHITTINGHAM
and CHARLES CHAMSAY, petitioners, vs. SANITARY WARES
MANUFACTURING CORPORATOIN, ERNESTO V. LAGDAMEO,
ERNESTO R. LAGDAMEO, JR., ENRIQUE R. LAGDAMEO, GEORGE F.
LEE, RAUL A. BONCAN, BALDWIN YOUNG and AVELINO V. CRUZ,
respondents
G.R. No. 75951 December 15, 1989

FACTS: This consolidated petition assailed the decision of the CA directing a

certain manner of election of officers in the board of directors.
There are two groups in this case, the Lagdameo group composed of Filipino
investors and the American Standard Inc. (ASI) composed of foreign investors.
The ASI Group and petitioner Salazar (G.R. Nos. 75975-76) contend that the actual
intention of the parties should be viewed strictly on the "Agreement" dated August
15,1962 wherein it is clearly stated that the parties' intention was to form a
corporation and not a joint venture.

ISSUE:
1.) Who were the duly elected directors of Saniwares for the year 1983 during its
annual stockholders' meeting held on March 8, 1983?
2.) What is the nature of the business established by the parties whether it was a
joint venture or a corporation?

DECISION:
It appears that the parties thereto disclaim being partners or joint venturers such
disclaimer is directed at third parties and is not inconsistent with, and does not
preclude, the existence of two distinct groups of stockholders in Saniwares one of
which (the Philippine Investors) shall constitute the majority, and the other ASI shall
constitute the minority stockholder. In any event, the evident intention of the
Philippine Investors and ASI in entering into the Agreement is to enter into a joint
venture enterprise.
Examination of the Agreement shows that certain provisions were inccuded
to protect the interests of ASI as the minority. For example, the vote of 7 out of 9
directors is required in certain enumerated corporate acts. ASI is contractually
entitled to designate a member of the Executive Committee and the vote of this
member is required for certain transactions.
The Agreement also requires a 75% super-majority vote for the amendment
of the articles and by-laws of Saniwares. ASI is also given the right to designate the
president and plant manager .The Agreement further provides that the sales policy
of Saniwares shall be that which is normally followed by ASI and that Saniwares
should not export "Standard" products otherwise than through ASI's Export
Marketing Services. Under the Agreement, ASI agreed to provide technology and
know-how to Saniwares and the latter paid royalties for the same.
The legal concept of a joint venture is of common law origin. It has no
precise legal definition but it has been generally understood to mean an organization
formed for some temporary purpose. It is in fact hardly distinguishable from the
partnership, since their elements are similar community of interest in the business,
sharing of profits and losses, and a mutual right of control.
The main distinction cited by most opinions in common law jurisdictions is
that the partnership contemplates a general business with some degree of
continuity, while the joint venture is formed for the execution of a single
transaction, and is thus of a temporary nature.