HEIRS OF TAN ENG KEE vs.CA 341 SCRA 740, G.R. No.

126881, October 3, 2000

FACTS:
 
After the second World War, Tan EngKee and Tan Eng Lay, pooling their resources and industry together, entered into a
partnership engaged in the business of selling lumber and hardware and construction supplies. They named their
enterprise "Benguet Lumber" which they jointly managed until Tan EngKee's death. Petitioners herein averred that the
business prospered due to the hard work and thrift of the alleged partners. However, they claimed that in 1981, Tan Eng
Lay and his children caused the conversion of the partnership "Benguet Lumber" into a corporation called "Benguet
Lumber Company." The incorporation was purportedly a ruse to deprive Tan EngKee and his heirs of their rightful
participation in the profits of the business. Petitioners prayed for accounting of the partnership assets, and the dissolution,
winding up and liquidation thereof, and the equal division of the net assets of Benguet Lumber. The RTC ruled in favor of
petitioners, declaring that Benguet Lumber is a joint venture which is akin to a particular partnership. The Court of Appeals
rendered the assailed decision reversing the judgment of the trial court.
 
ISSUE: Whether the deceased Tan EngKee and Tan Eng Lay are joint adventurers and/or partners in a business venture
and/or particular partnership called Benguet Lumber and as such should share in the profits and/or losses of the business
venture or particular partnership
 
RULING:
 
There was no partnership whatsoever. Except for a firm name, there was no firm account, no firm letterheads submitted
as evidence, no certificate of partnership, no agreement as to profits and losses, and no time fixed for the duration of the
partnership. There was even no attempt to submit an accounting corresponding to the period after the war until Kee's
death in 1984. It had no business book, no written account nor any memorandum for that matter and no license
mentioning the existence of a partnership. Also, the trial court determined that Tan EngKee and Tan Eng Lay had entered
into a joint venture, which it said is akin to a particular partnership. A particular partnership is distinguished from a joint
adventure, to wit:(a) A joint adventure (an American concept similar to our joint accounts) is a sort of informal partnership,
with no firm name and no legal personality. In a joint account, the participating merchants can transact business under
their own name, and can be individually liable therefor. (b) Usually, but not necessarily a joint adventure is limited to a
SINGLE TRANSACTION, although the business of pursuing to a successful termination maycontinue for a number of
years; a partnership generally relates to a continuing business of various transactions of a certain kind. A joint venture
"presupposes generally a parity of standing between the joint co-ventures or partners, in which each party has an equal
proprietary interest in the capital or property contributed, and where each party exercises equal rights in the conduct of the
business. The evidence presented by petitioners falls short of the quantum of proof required to establish a partnership. In
the absence of evidence, we cannot accept as an established fact that Tan EngKee allegedly contributed his resources to
a common fund for the purpose of establishing a partnership. Besides, it is indeed odd, if not unnatural, that despite the
forty years the partnership was allegedly in existence, Tan EngKee never asked for an accounting. The essence of a
partnership is that the partners share in the profits and losses .Each has the right to demand an accounting as long as the
partnership exists. A demand for periodic accounting is evidence of a partnership. During his lifetime, Tan EngKee
appeared never to have made any such demand for accounting from his brother, Tang Eng Lay. We conclude that Tan
EngKee was only an employee, not a partner since they did not present and offer evidence that would show that Tan
EngKee received amounts of money allegedly representing his share in the profits of the enterprise. There being no
partnership, it follows that there is no dissolution, winding up or liquidation to speak of.
 IN THE MATTER OF THE PETITION FOR AUTHORITY TO CONTINUE USE OF THE FIRM NAME ‘OZAETA, ROMULO, ETC.

Facts: Two petitions were filed, one by the surviving partners of Atty. Herminio Ozaeta and the other by the surviving partners of Atty. Alexander Sycip praying that
they be allowed to continue using the names of partners who had passed away in their firm names. Both petitions were consolidated.

Petitioners Arguments:

 Under the law, a partnership is not prohibited from continuing its business under a firm name which includes the name of a deceased partner. In fact, art. 1840 of
the civil code explicitly sanctions the practice.
 In regulating other professions, such as accountancy and engineering, the legislature has authorized the adoption of firm names without any restriction as to the
use, in such firm name, of the name of the deceased partner, the legislative authorization given to those engaged in the practice of accountancy – a profession
requiring the same degree of trust and confidence in respect of clients as that implicit in the relationship of attorney and client – to acquire and use a trade name,
strongly indicates that there us no fundamental policy that is offended by the continued use by a firm of professionals of a firm name which included the name of
a deceased partner, at least where such firm name has acquired the characteristics of a ‘trade name’
 The Canon of Professional Ethics are not transgressed by the continued use of the name of a deceased partner in the firm name of a law partnership as declared
by Canon 33 adopted by American Bar Association declaring that ‘The continued use of the name of a deceased or former partner when permissible by local
custom, is not unethical, but care should be taken that no imposition or deception is practiced through this use.’
 There is no possibility of imposition or deception because the deaths of their respective deceased partners were well – publicized in all newspapers of general
circulation for several days.
 No local custom prohibits the continued use of a deceased partner’s name in a professional firm name; and
 The continued use of a deceased partner’s name in the firm name of law partnerships has been consistently allowed by U.S. Courts and is an accepted practice in
legal profession of most countries in the world.

Issue: Whether or not a firm name engaged in the legal profession should continue using the name of partners who had passed away.

SC ruling: No.

 The use in partnership names of the names of deceased partners will run counter to Article 1825 of the CC which provides that names in a firm name of a
partnership must either be those of living partners and, in the case of non – partners, should be living persons who can be subjected to liability. In fact, art. 1825
prohibits a third person from including his name in the firm name under pain of assuming the liability of a partner. The heirs of a deceased partner in a law firm
cannot be held liable as the old members to the creditors of a firm particularly where they are non-lawyers. With regard to art. 1840, it treats more of a commercial
partnership with a good will to protect rather than a professional partnership, with no saleable good will but whose reputation depends on the personal
qualifications of its individual members. Thus, it has been held that a saleable goodwill can exist only in a commercial partnership and cannot arise in a
professional partnership consisting of lawyers.
 A partnership for the practice of law cannot be likened to partnerships formed by other professionals or for business. For one thing, the law on accountancy
specifically allows the use of a trade name in connection with the practice of accountancy. ‘A partnership for the practice of law is not a legal entity. It is a mere
relationship or association for a particular purpose.’ It is not a partnership formed for the purpose of carrying in a trade or business or of holding property. Thus, it
has been stated that the used of an assumed or trade name in law practice is improper.
 The right to practice law is not a natural or constitutional right but is in the nature of a privilege or franchise. It is limited to persons of good moral character with
special qualifications duly ascertained and certified. The right does not only presuppose in its possessor integrity, legal standing and attainment but also the
exercise of a special privilege, highly personal and partaking of the nature of a public trust.

The continued use of a deceased or former partner’s name in the firm names of law partnerships not sanctioned by local custom due to the possibility of deception upon
the public where the name of a deceased partner continues to be used. The possibility of deception upon the public, real or consequential, where the name of a deceased
partner continues to be used cannot be ruled out. A person in search of legal counsel might be guided by the familiar ring of a distinguished name appearing in a firm
title. In addition, there’s no local custom within our jurisdiction that sanctions the practice of continued use of a deceased partner’s name. Courts take no judicial notice
of custom. A local custom as a source of right cannot be considered by a court of justice unless such custom is properly established by competent evidence like any
other fact. Merely because something is done as a matter of practice does not mean that Courts can rely on the same for purposes of adjudication as a juridical custom.
Juridical custom must be differentiated from social custom. The former can supplement statutory law or be applied in the absence of such statute. Not so with the latter.

Eligio Estanislao Jr. v. CA, Remedios Estanislao, Emilio and Leocadio SantiagoApril 27, 1988 | GANCAYCO, J. | Partnership
AgreementPETITIONER: Eligio Estanislao Jr.RESPONDENTS: Remedios Estanislao, Emilio and Leocadio Santiago

SUMMARY: The petitioner and private respondents were brothers and sisters. They co-owned a parcels of land which
were then being leased to the Shell company. The family wanted to open and operate a SHELL gas station and they
decided that the petitioner will be the one named in their application for franchise. They executed an agreement with
SHELL asking for advance rentals which would then be used as a capital for the franchise agreement. They executed
another agreement stating that the P15,000 advance rentals should be applied to the account of petitioner with SHELL
to increase his credit limit from 10,000 to 25,000. Their agreement run smoothly and petitioner was able to manage the
station smoothly with the help of one of his sisters. After some time, petitioner failed to render accounts due to his
siblings. A demand letter was then sent by his siblings asking him to give them their shares. Petitioner did not heed to
their request. His siblings sued him and won in the lower court. Petitioner said that the second agreement effectively
cancelled the first thereby cancelling the partnership. The Court ruled in favor of respondents saying that there was a
partnership formed as evidenced by the first agreement. Other pieces of evidence also points out that the
petitioner recognized the agreement when he initially gave his siblings their shares in the profits.

DOCTRINE: A Partnership is formed when persons agreed to bind themselves to contribute money to a common fund
with the intention of dividing the profits among themselves.

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 ShellService Station with
an initial investment of P15,000.00 to be taken from the advance rentals due to them from SHELL for the
occupancy of the said lots owned in common by them. 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 co-managing
the business with petitioner from May 3, 1966 up to February 16, 1967. On May 26, 1966, the parties herein entered
into an Additional Agreement with a proviso that said agreement cancels and supersedes the original
agreement executed by the co-owners. For sometime, the petitioner submitted financial statements regarding the
operation of the business to private respondents, but thereafter petitioner failed to render subsequent
accounting. A demand was made on petitioner to render an accounting of the profits, to execute apublic document
embodying all the provisions of the partnership agreement, and to pay the plaintiffs their lawful shares and
participation in the net profits of the business.

Issue: Whether or not a partnership was formed when members of the same family bind themselves to contribute
money to a common fund with the intention of dividing the profits among themselves.

Held: YES. The Joint Affidavit of April 11, 1966 (Exhibit A), clearly stipulated by the members of the same family that the
P15,000.00 advance rental due to them from SHELL shall augment their "capital investment" in the operation of the
gasoline station. Said cancelling provision was necessary for the Joint Affidavit speaks ofP15,000.00 advance rentals
starting May 25, 1966 while the latter agreement also refers to advance rentals of the same amount starting
May 24, 1966. There is, therefore, a duplication of reference to the P15,000.00 hence the need to provide in the
subsequent document that it "cancels and supersedes" the previous one. True it is that in the latter document, it is silent
as to the statement in the Joint Affidavit that the P15,000.00 represents the "capital investment" of the parties in
the gasoline station business and it speaks of petitioner as the sole dealer, but this is as it should be for in the latter
document SHELL was a signatory and it would be against its policy if in the agreement it should be stated that the
business is a partnership with private respondents and not a sole proprietorship of petitioner. Other evidence in the
record also showed that petitioner submitted to private respondents periodic accounting of the business.
Petitioner gave a written authority to private respondent Remedios Estanislao, his sister, to examine and audit the books
of their "common business" (aming negosyo). Respondent Remedios assisted in therunning of the business. CA
AFFIRMED

ESTANISLAO, JR. VS. COURT OF APPEALS

Facts: The petitioner and private respondents are brothers and sisters who are co-owners of certain lots at the in Quezon City which were then being leased to SHELL.
They agreed to open and operate a gas station thereat to be known as Estanislao Shell Service Station with an initial investment of PhP15,000.00 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. The
respondents agreed to help their brother, petitioner therein, by allowing him to operate and manage the gasoline service station of the family. 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 co-managing the
business with petitioner from May 1966 up to February 1967.

On May 1966, the parties entered into an Additional Cash Pledge Agreement with SHELL wherein it was reiterated that the P15,000.00 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.”

For sometime, the petitioner submitted financial statement regarding the operation of the business to the private respondents, but thereafter petitioner failed to render
subsequent accounting. Hence , the private respondents filed a complaint against the petitioner praying among others that the latter be ordered:

(1) To execute a public document embodying all the provisions of the partnership agreement they entered into;
(2) To render a formal accounting of the business operation veering the period from May 6, 1966 up to December 21, 1968, and from January 1, 1969 up to the
time the order is issued and that the same be subject to proper audit;
(3) To pay the plaintiffs their lawful shares and participation in the net profits of the business; and
(4) To pay the plaintiffs attorney’s fees and costs of the suit.

Issue: Can a partnership exist between members of the same family arising from their joint ownership of certain properties?

Trial Court: The complaint (of the respondents) was dismissed. But upon a motion for reconsideration of the decision, another decision was rendered in favor of the
respondents.

CA: Affirmed in toto

Petitioner: The CA erred in interpreting the legal import of the Joint Affidavit vis-à-vis the Additional Cash Pledge Agreement. Because of the stipulation cancelling
and superseding the Joint Affidavit, whatever partnership agreement there was in said previous agreement had thereby been abrogated. Also, the CA erred in declaring
that a partnership was established by and among the petitioner and the private respondents as regards the ownership and /or operation of the gasoline service station
business.

Held: There is no merit in the petitioner’s contention that because of the stipulation cancelling and superseding the previous joint affidavit, whatever partnership
agreement there was in said previous agreement had thereby been abrogated. Said cancelling provision was necessary for the Joint Affidavit speaks of P15,000.00
advance rental starting May 25, 1966 while the latter agreement also refers to advance rentals of the same amount starting May 24, 1966. There is therefore a
duplication of reference to the P15,000.00 hence the need to provide in the subsequent document that it “cancels and supercedes” the previous none. Indeed, it is true
that the latter document is silent as to the statement in the Join Affidavit that the value represents the “capital investment” of the parties in the business and it speaks of
the 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 their policy if in the agreement it
should be stated that the business is a partnership with private respondents and not a sole proprietorship of the petitioner.

Furthermore, there are other evidences in the record which show that there was in fact such partnership agreement between parties. The petitioner submitted to the
private respondents periodic accounting of the business and gave a written authority to the private respondent Remedios Estanislao to examine and audit the books of
their “common business” (aming negosyo). The respondent Remedios, on the other hand, assisted in the running of the business. Indeed, the parties hereto formed a
partnership when they bound themselves to contribute money in a common fund with the intention of dividing the profits among themselves.

NGO TIAN TEK and NGO HAY, vs. PHILIPPINE EDUCATION CO., INC.,
G.R. No. L-48113             April 7, 1947

Facts: Philippine Education Co., Inc., instituted in the Court of First Instance of Manila an action against
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 Philippine Education Co.,
Inc., and five other corporate entities which had previously assigned their credits to the latter.

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 Philippine Education Co., Inc., and its assignors. 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. Lee Guan Box Factory, 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 Philippine Education Co., Inc., 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 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.

Petitioner (Ngo Tian Tek and Ngo Hay) contend 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.

Issue: Whether or not Ngo Tian Tek and Ngo Hay can be held liable for the credit contracted by Vicente Tan?

Ruling: 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. 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.

G.R. No. L-17295             July 30, 1962

ANG PUE & COMPANY, ET AL., plaintiffs-appellants,

vs.
SECRETARY OF COMMERCE AND INDUSTRY, defendant-appellee.

Felicisimo E. Escaran for plaintiffs-appellants.

Office of the Solicitor General for defendant-appellee.

DIZON, J.:

Action for declaratory relief filed in the Court of First Instance of Iloilo by Ang Pue & Company, Ang Pue and Tan
Siong against the Secretary of Commerce and Industry to secure judgment "declaring that plaintiffs could extend for
five years the term of the partnership pursuant to the provisions of plaintiffs' Amendment to the Article of Co-
partnership."

The answer filed by the defendant alleged, in substance, that the extension for another five years of the term of the
plaintiffs' partnership would be in violation of the provisions of Republic Act No. 1180.

It appears that on May 1, 1953, Ang Pue and Tan Siong, both Chinese citizens, organized the partnership Ang Pue
& Company for a term of five years from May 1, 1953, extendible by their mutual consent. The purpose of the
partnership was "to maintain the business of general merchandising, buying and selling at wholesale and retail,
particularly of lumber, hardware and other construction materials for commerce, either native or foreign." The
corresponding articles of partnership (Exhibit B) were registered in the Office of the Securities & Exchange
Commission on June 16, 1953.
On June 19, 1954 Republic Act No. 1180 was enacted to regulate the retail business. It provided, among other
things, that, after its enactment, a partnership not wholly formed by Filipinos could continue to engage in the retail
business until the expiration of its term.

On April 15, 1958 — prior to the expiration of the five-year term of the partnership Ang Pue & Company, but after
the enactment of the Republic Act 1180, the partners already mentioned amended the original articles of part
ownership (Exhibit B) so as to extend the term of life of the partnership to another five years. When the amended
articles were presented for registration in the Office of the Securities & Exchange Commission on April 16, 1958,
registration was refused upon the ground that the extension was in violation of the aforesaid Act.

From the decision of the lower court dismissing the action, with costs, the plaintiffs interposed this appeal.

The question before us is too clear to require an extended discussion. To organize a corporation or a partnership
that could claim a juridical personality of its own and transact business as such, is not a matter of absolute right but
a privilege which may be enjoyed only under such terms as the State may deem necessary to impose. That the
State, through Congress, and in the manner provided by law, had the right to enact Republic Act No. 1180 and to
provide therein that only Filipinos and concerns wholly owned by Filipinos may engage in the retail business can not
be seriously disputed. That this provision was clearly intended to apply to partnership already existing at the time of
the enactment of the law is clearly showing by its provision giving them the right to continue engaging in their retail
business until the expiration of their term or life.

To argue that because the original articles of partnership provided that the partners could extend the term of the
partnership, the provisions of Republic Act 1180 cannot be adversely affect appellants herein, is to erroneously
assume that the aforesaid provision constitute a property right of which the partners can not be deprived without due
process or without their consent. The agreement contain therein must be deemed subject to the law existing at the
time when the partners came to agree regarding the extension. In the present case, as already stated, when the
partners amended the articles of partnership, the provisions of Republic Act 1180 were already in force, and there
can be not the slightest doubt that the right claimed by appellants to extend the original term of their partnership to
another five years would be in violation of the clear intent and purpose of the law aforesaid.

WHEREFORE, the judgment appealed from is affirmed, with costs.

Pascual and Dragon v. CIR, G.R. No. 78133, October 18, 1988

25MAR

[GANCAYCO, J.]

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:

Whether the Petitioners should be treated as an unregistered partnership or a co-ownership for the purposes of income
tax.

RULING:

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.
The reason for this is simple. From the moment of such partition, the heirs are entitled already to their respective
definite shares of the estate and the incomes thereof, for each of them to manage and dispose of as exclusively his own
without the intervention of the other heirs, and, accordingly he becomes liable individually for all taxes in connection
therewith. If after such partition, he allows his share to be held in common with his co-heirs under a single management
to be used with the intent of making profit thereby in proportion to his share, there can be no doubt that, even if no
document or instrument were executed for the purpose, for tax purposes, at least, an unregistered partnership is
formed. This is exactly what happened to petitioners in this case.
NOBIO SARDANE, petitioner, vs. THE COURT OF APPEALS and ROMEO J. ACOJEDO, respondents. G.R. No. L-
47045 November 22, 1988
 
 
 
FACTS:
 
Petitioner brought an action in the collection of a sum of P5,217.25 based on promissory notes executed by the herein
private respondent NobioSardane in favor of the herein petitioner. Petitioner based his right to collect on the promissory
notes executed by respondent on different dates. It has been established in the trial court that on many occasions, the
petitioner demanded the payment of the total amount of P5,217.25. The failure of the private respondent to pay the said
amount prompted the petitioner to seek the services of lawyer who made a letter (Exhibit 1) formally demanding the return
of the sum loaned. Because of the failure of the private respondent to heed the demands extrajudicially made by the
petitioner, the latter was constrained to bring an action for collection of sum of money.During the scheduled day for trial,
private respondent failed to appear and to file an answer. On motion of petitioner, he was granted to present evidence ex
parte. Private respondent filed a motion to lift the order of default which was granted by the City Court in an order dated
May 24, 1976, taking into consideration that the answer was filed within two hours after the hearing of the evidence
presented ex-parte by the petitioner. The trial court favored plaintiff’s petition. One of the questions raised in the review
was whether the oral testimony for the therein private respondent Sardane that a partnership existed between him and
therein petitioner Acojedo are admissible to vary the meaning of the abovementioned promissory notes.
 
ISSUE: Whether a partnership exists between the parties
 
RULING: The Court of Appeals held, and agreed with by the Court, that even if evidence aliunde other than the
promissory notes may be admitted to alter the meaning conveyed thereby, still the evidence is insufficient to prove that a
partnership existed between the private parties hereto. As manager of the basnig Sarcado naturally some degree of
control over the operations and maintenance thereof had to be exercised by herein petitioner. The fact that he had
received 50% of the net profits does not conclusively establish that he was a partner of the private respondent herein.
Article 1769(4) of the Civil Code is explicit that while the receipt by a person of a share of the profits of a business is prima
facie evidence that he is a partner in the business, no such inference shall be drawn if such profits were received in
payment as wages of an employee. Furthermore, herein petitioner had no voice in the management of the affairs of the
Basnig. Under similar facts, this Court in the early case of Fortis vs. Gutierrez Hermanos, in denying the claim of the
plaintiff therein that he was a partner in the business of the defendant, declared: This contention cannot be sustained. It
was a mere contract of employment. The plaintiff had no 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 defendant
in their business did not in any sense make him a partner therein. ... Hence, there no partnership exists in the case.
Kiel vs Sabert

Facts: This action relates to the legal right of Albert F. Kiel to secure from the estate of P. S. Sabert the sum of
P20,000, on a claim first presented to the commissioners and disallowed, then on appeal to the Court of First
Instance allowed, and ultimately the subject-matter of the appeal taken to this court.

A skeletonized statement of the case and the facts based on the complaint, the findings of the trial judge, and the
record, may be made in the following manner:

In 1907, Albert F. Kiel along with William Milfeil commenced to work on certain public lands situated in the
municipality of Parang, Province of Cotabato, known as Parang Plantation Company. Kiel subsequently took over
the interest of Milfeil. In 1910, Kiel and P. S. Sabert entered into an agreement to develop the Parang Plantation
Company. Sabert was to furnish the capital to run the plantation and Kiel was to manage it. They were to share and
share alike in the property. 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.

By virtue of the agreement, from 1910 to 1917, Kiel worked upon and developed the plantation. During the World
War, he was deported from the Philippines.

On August 16, 1919, five persons, including P. S. Sabert, organized the Nituan Plantation Company, with a
subscribed capital of P40,000. On April 10, 1922, P. S. Sabert transferred all of his rights in two parcels of land
situated in the municipality of Parang, Province of Cotabato, embraced within his homestead application No. 21045
and his purchase application No. 1048, in consideration of the sum of P1, to the Nituan Plantation Company.

In this same period, Kiel appears to have tried to secure a settlement from Sabert. At least in a letter dated June 6,
1918, Sabert wrote Kiel that he had offered "to sell all property that I have for P40,000 or take in a partner who is
willing to develop the plantation, to take up the K. & S. debt no matter which way I will straiten out with you." 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: WON copartnership exists between plaintiff and Sabert

Ruling: No partnership agreement in writing was entered into by Kiel and Sabert. The question consequently is
whether or not the alleged verbal copartnership formed by Kiel and Sabert has been proved, if we eliminate the
testimony of Kiel and only consider the relevant testimony of other witnesses. In performing this task, we are not
unaware of the rule of partnership that the declarations of one partner, not made in the presence of his copartner,
are not competent to prove the existence of a partnership between them as against such other partner, and that the
existence of a partnership cannot be established by general reputation, rumor, or hearsay. (Mechem on Partnership,
sec. 65; 20 R. C. L., sec. 53; Owensboro Wagon Company vs. Bliss [1901], 132 Ala., 253.)

The testimony of the plaintiff's witnesses, together with the documentary evidence, leaves the firm impression with
us that Kiel and Sabert did enter into a partnership, and that they were to share equally. Applying the tests as to the
existence of partnership, we feel that competent evidence exists establishing the partnership. Even more primary
than any of the rules of partnership above announced, is the injunction to seek out the intention of the parties, as
gathered from the facts and as ascertained from their language and conduct, and then to give this intention effect.
AGAD vs MABATO

In this appeal, taken by plaintiff Mauricio Agad, from an order of dismissal of the Court of First Instance of Davao,
we are called upon to determine the applicability of Article 1773 of our Civil Code to the contract of partnership on
which the complaint herein is based.

Alleging that he and defendant Severino Mabato are — pursuant to a public instrument dated August 29, 1952, copy
of which is attached to the complaint as Annex "A" — partners in a fishpond business, to the capital of which Agad
contributed P1,000, with the right to receive 50% of the profits; that from 1952 up to and including 1956, Mabato
who handled the partnership funds, had yearly rendered accounts of the operations of the partnership; and that,
despite repeated demands, Mabato had failed and refused to render accounts for the years 1957 to 1963, Agad
prayed in his complaint against Mabato and Mabato & Agad Company, filed on June 9, 1964, that judgment be
rendered sentencing Mabato to pay him (Agad) the sum of P14,000, as his share in the profits of the partnership for
the period from 1957 to 1963, in addition to P1,000 as attorney's fees, and ordering the dissolution of the
partnership, as well as the winding up of its affairs by a receiver to be appointed therefor.

In his answer, Mabato admitted the formal allegations of the complaint and denied the existence of said partnership,
upon the ground that the contract therefor had not been perfected, despite the execution of Annex "A", because
Agad had allegedly failed to give his P1,000 contribution to the partnership capital. Mabato prayed, therefore, that
the complaint be dismissed; that Annex "A" be declared void ab initio; and that Agad be sentenced to pay actual,
moral and exemplary damages, as well as attorney's fees.

Subsequently, Mabato filed a motion to dismiss, upon the ground that the complaint states no cause of action and
that the lower court had no jurisdiction over the subject matter of the case, because it involves principally the
determination of rights over public lands. After due hearing, the court issued the order appealed from, granting the
motion to dismiss the complaint for failure to state a cause of action. This conclusion was predicated upon the
theory that the contract of partnership, Annex "A", is null and void, pursuant to Art. 1773 of our Civil Code, because
an inventory of the fishpond referred in said instrument had not been attached thereto. A reconsideration of this
order having been denied, Agad brought the matter to us for review by record on appeal.

Articles 1771 and 1773 of said Code provide:

Art. 1771. A partnership may be constituted in any form, except where immovable property or real rights are
contributed thereto, in which case a public instrument shall be necessary.

Art. 1773. A contract of partnership is void, whenever immovable property is contributed thereto, if inventory
of said property is not made, signed by the parties; and attached to the public instrument.

The issue before us hinges on whether or not "immovable property or real rights" have been contributed to the
partnership under consideration. Mabato alleged and the lower court held that the answer should be in the
affirmative, because "it is really inconceivable how a partnership engaged in the fishpond business could exist
without said fishpond property (being) contributed to the partnership." It should be noted, however, that, as stated in
Annex "A" the partnership was established "to operate a fishpond", not to "engage in a fishpond business".
Moreover, none of the partners contributed either a fishpond or a real right to any fishpond. Their contributions were
limited to the sum of P1,000 each. Indeed, Paragraph 4 of Annex "A" provides:

That the capital of the said partnership is Two Thousand (P2,000.00) Pesos Philippine Currency, of which
One Thousand (P1,000.00) pesos has been contributed by Severino Mabato and One Thousand
(P1,000.00) Pesos has been contributed by Mauricio Agad.

The operation of the fishpond mentioned in Annex "A" was the purpose of the partnership. Neither said fishpond nor
a real right thereto was contributed to the partnership or became part of the capital thereof, even if a fishpond or a
real right thereto could become part of its assets.
WHEREFORE, we find that said Article 1773 of the Civil Code is not in point and that, the order appealed from
should be, as it is hereby set aside and the case remanded to the lower court for further proceedings, with the costs
of this instance against defendant-appellee, Severino Mabato. It is so ordered