Busorg case digests

3-Manresa[Busorg case digests]

Benjamin Yu vs. NLRC

Facts:Benjamin Yu was formerly the Assistant General Manager of the marble quarrying and export business operated by a registered partnership with the firm name of "Jade Mountain Products Company Limited". The partnership was originally organized with Lea and Rhodora Bendal as general partners and Chin Shian Jeng, Chen Ho-Fu and Yu Chang, all Taiwanese, as limited partners.

Benjamin Yu was hired by virtue of a Partnership Resolution, as Assistant General Manager with a monthly salary of P4,000.00. According to Yu, however, he actually received only half of his stipulated monthly salary, as promised by partners that the balance would be paid when the firm shall have secured additional operating funds from abroad.Sometime in 1988, without the knowledge of Benjamin Yu, the general partners Lea and Rhodora Benda and Mr. Yu Chang, a limited partner,sold and transferred their interests in the partnership to private respondent Willy Co and to one Emmanuel Zapanta. The partnership now constituted solely by Willy Co and Emmanuel Zapanta continued to use the old firm name of Jade Mountain, though they moved the firm's main office from Makati to Mandaluyong.

Having learned of the transfer of the firm's main office, petitioner Benjamin Yu reported to the Mandaluyong office for work and there he was informed by Willy Co that it was for him to decide whether or not he was responsible for the obligations of the old partnership, including petitioner's unpaid salaries. Petitioner was in fact not allowed to work anymore in the Jade Mountain business enterprise. His unpaid salaries remained unpaid.Benjamin Yu filed a complaint for illegal dismissal and recovery of unpaid salaries, moral and exemplary damages and attorney's fees, against Jade Mountain, Mr. Willy Co and the other private respondents. The partnership and Willy Co contended that Benjamin Yu was never hired as an employee by the present or new partnership.

Labor Arbiter: Yu had been illegally dismissed. The Labor Arbiter decreed his reinstatement and awarded him his claim for unpaid salaries, backwages and attorney's fees.

NLRC (on appeal): Reversed the decision of the Labor Arbiter and dismissed petitioner's complaint. It held that a new partnership consisting of Mr. Willy Co and Mr. Emmanuel Zapanta had bought the Jade Mountain business, that the new partnership had not retained petitioner Yu in his original position as Assistant General Manager, and that there was no law requiring the new partnership to absorb the employees of the old partnership.

Benjamin Yu had not been illegally dismissed by the new partnership which had simply declined to retain him in his former managerial position or any other position. Finally, the NLRC held that Benjamin Yu's claim for unpaid wages should be asserted against the original members of the preceding partnership.

Issues:(1) Whether the partnership which had hired petitioner Yu as Assistant General Manager had been extinguished and replaced by a new partnerships composed of Willy Co and Emmanuel Zapanta; and (2) If indeed a new partnership had come into existence, whether petitioner Yu could nonetheless assert his rights under his employment contract as against the new partnership.

Held:(1) SC agreed with the NLRC. The legal effect of the changes in the membership of the partnership was the dissolution of the old partnership which had hired petitioner in 1984 and the emergence of a new firm composed of Willy Co and Emmanuel Zapanta in 1987.

The applicable law in this connection is Article 1828 of the Civil Code which provides as follows:

Art. 1828. The dissolution of a partnership is the change in the relation of the partnerscaused by any partner ceasing to be associated in the carrying onas distinguished from the winding upof the business. (Emphasis supplied)

Article 1830 of the same Code must also be noted:

Art. 1830. Dissolution is caused:(1) without violation of the agreement between the partners; XXX

(b) by the express will of any partner, who must act in good faith, when no definite term or particular undertaking is specified; XXX (2) in contravention of the agreement between the partners, where the circumstances do not permit a dissolution under any other provision of this article,by the express will of any partner at any time;

In the case at bar, just about all of the partners had sold their partnership interests, amounting to 82% of the total partnership interest, to Mr. Willy Co and Emmanuel Zapanta. The acquisition of 82% of the partnership interest by new partners, coupled with the retirement or withdrawal of the old partners, was enough to constitute a new partnership.

The occurrences of events which precipitate the legal consequence of dissolution of a partnership do not, however, automatically result in the termination of the legal personality of the old partnership. Article 1829 of the Civil Code states that:

[o]n dissolution the partnership is not terminated, but continues until the winding up of partnership affairs is completed.

The legal personality of the expiring partnership persists for the limited purpose of winding up and closing of the affairs of the partnership. In the case at bar, the business of the old partnership was simply continued by the new partners,withoutthe old partnership undergoing the procedures relating to dissolution and winding up of its business affairs.

In other words, the new partnership simply took over the business enterprise owned by the preceding partnership, and continued using the old name of Jade Mountain Products Company Limited, without winding up the business affairs of the old partnership, paying off its debts, liquidating and distributing its net assets, and then re-assembling the said assets or most of them and opening a new business enterprise.

(2) SC did not agree with NLRC. Under Article 1840 above, creditors of the old Jade Mountain are also creditors of the new Jade Mountain which continued the business of the old one without liquidation of the partnership affairs. Indeed, a creditor of the old Jade Mountain, like petitioner Benjamin Yu in respect of his claim for unpaid wages, is entitled to priorityvis--vis any claim of any retired or previous partner insofar as such retired partner's interest in the dissolved partnership is concerned. It is clear to the Court that under Article 1840 above, Benjamin Yu is entitled to enforce his claim for unpaid salaries, as well as other claims relating to his employment with the previous partnership, against the new Jade Mountain.

It is at the same time also evident to the Court that the new partnership was entitled to appoint and hire a new general or assistant general manager. The non-retention of Benjamin Yu as Assistant General Manager did not therefore constitute unlawful termination, or termination without just or authorized cause. We think that the precise authorized cause for termination in the case at bar wasredundancy. The new partnership had its own new General Manager, apparently Mr. Willy Co, the principal new owner himself. It follows that petitioner Benjamin Yu is entitled to separation pay at the rate of one month's pay for each year of service that he had rendered to the old partnership, a fraction of at least six (6) months being considered as a whole year.

Plus Moral Damages of Php 20,000 for Yus shabby treatment, legal interest of 6% per annum for unpaid wages and separation pay, and attorneys fees of 10% of to the total amount due from Jade Mountain.

G.R. No. 413 February 2, 1903

Jose Fernandez vs. Francisco de la Rosa

Facts:Fernandez and Dela Rosa entered into a verbal agreement to form a partnership for the purchase of cascoes and hiring the same in Manila. In their arrangement, each partner will furnish such amount of money for the purchase of the cascoes with the profits divided proportionally. Dela Rosa was designated to buy the cascoes. Thus, Fernandez furnished Dela Rosa 300 pesos for the purchase of casco no. 1515, 300 pesos for its repairs, and 825 for the purchase of casco no. 2089.

Subsequently, the parties undertook to draw up articles of partnership but no written agreement was executed because Dela Rosa allegedly presented a different draft of such articles, deliberately excluding casco no. 2089 in the partnership. This prompted Fernandez to demand for an accounting upon him.

Fernandez presented in evidence the following receipt: "I have this day received from D. Jose Fernandez eight hundred and twenty-five pesos for the cost of a casco which we are to purchase in company. Manila, March 5, 1900. Francisco de la Rosa." The casco being referred to be purchased in company according to the Supreme Court pertains to casco no. 2089, contrary to the claim of Dela Rosa that the same was for casco no. 1515.Dela Rosa admitted receiving 300 pesos as a loan from the bakery firm co-owned by Fernandez, and 825 pesos from Fernandez for the purchase of casco no. 1515 (not casco no. 2089) but maintained not receiving anything for the purchase of casco no. 2089. Verily, Dela Rosa, at some point, returned the sum of 1,125 pesos to Fernandez.

The lower court ruled in favor of Dela Rosa .

Issue:WON a partnership exists between Fernandez and Dela Rosa.

Held:Yes, a partnership exists between the parties.

Partnership is a contract by which two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves. (Civil Code, art. 1665). The essential points upon which the minds of the parties must meet in a contract of partnership are, therefore, (1) mutual contribution to a common stock, and (2) a joint interest in the profits (Civil Code, secs. 1689, 1695.)

As regards the first element, the Supreme Court found that money was indeed furnished by Fernandez and received by Dela Rosa with the understanding that it was to be used for the purchase of the cascoes in question. As regards the second element, namely, the intention to share profits, appears to be an unavoidable deduction from the fact of the purchase of the cascoes in common, in the absence of any other explanation of the object of the parties in making the purchase in that form, and, it may be added, in view of the admitted fact that prior to the purchase of the first casco the formation of a partnership had been a subject of negotiation between them.

While the Supreme Court was unable to find that there was any specific verbal agreement of partnership, the same may be implied from the fact as to the purchase of the casco. It is thus apparent that a complete and perfect contract of partnership was entered into by the parties.

As to the absence of a written instrumentThe execution of a written agreement was not necessary in order to give efficacy to the verbal contract of partnership as a civil contract, the contributions of the partners not having been in the form of immovables or rights in immovables. (Civil Code, art. 1667.)

As to the return of Fernandezs money contributionThe amount returned fell short of that which the plaintiff had contributed to the capital of the partnership, since it did not include the sum which he had furnished for the repairs of casco No. 1515. Moreover, it is quite possible that a profit may have been realized from the business during the period in which the defendant have been administering it prior to the return of the money, and if so he still retained that sum in his hands. For these reasons the acceptance of the money by the plaintiff did not have the effect of terminating the legal existence of the partnership by converting it into asocietas leonine.

There was no intention on the part of the plaintiff in accepting the money to relinquish his rights as a partner, nor is there any evidence that by anything that he said or by anything that he omitted to say he gave the defendant any ground whatever to believe that he intended to relinquish them. On the contrary he notified the defendant that he waived none of his rights in the partnership.

Collective partnership or en comanditaA contract of partnership subject to a suspensive condition, postponing its operation until an agreement was reached as to the respective participation of the partners in the profits

Council Red Men vs. Veterans Army

Facts:This case involves the Veteran Army of the Philippines.

Their Constitution provides for the organization of posts. Among the posts thus organized is the General Henry W. Lawton Post, No. 1.

March 1, 1903: a contract of lease of parts of a certain buildings in the city of Manila was signed by Lewis, Stovall, and Hayes (as trustees of the Apache Tribe, No. 1, Improved Order of Red Men) as lessors, and McCabe (citing for and on behalf of Lawton Post, Veteran Army of the Philippines) as lessee.

The lease was for the term of two years commencing February 1, 903, and ending February 28, 1905.

The Lawton Post occupied the premises in controversy for thirteen months, and paid the rent for that time. Thereafter, it abandoned the premises.

Council Red Men then filed an action to recover the rent for the unexpired term of the lease.

Judgment was rendered in the court below on favor of the defendant McCabe, acquitting him of the complaint.

Judgment was rendered also against the Veteran Army of the Philippines for P1,738.50, and the costs.

It is claimed by the Veterans Army that the action cannot be maintained by the Council Red Men as this organization did not make the contract of lease.

It is also claimed that the action cannot be maintained against the Veteran Army of the Philippines because it never contradicted, either with the Council Red Men or with Apach Tribe, No. 1, and never authorized anyone to so contract in its name.

Issue: Whether or not Article 1695 of the Civil Code is applicable to the Veteran Army of the Philippines. NO

Held: Council Red Men must show that the contract of lease was authorized by the Veterans Army

The view most favorable to the appellee (Council Red Men) is the one that makes the appellant (Veterans Army) a civil partnership. Assuming that is such, and is covered by the provisions of title 8, book 4 of the Civil Code, it is necessary for the appellee (Council Red Men) to prove that the contract in question was executed by some authorized to so by the Veteran Army of the Philippines.

Article 1695 of the Civil Code is not applicable in this caseArticle 1695 of the Civil Code provides as follows:

"Should no agreement have been made with regard to the form of management, the following rules shall be observed: 1. All the partners shall be considered as agents, and whatever any one of them may do by himself shall bind the partnership; but each one may oppose the act of the others before they may have produced any legal effect."

One partner, therefore, is empowered to contract in the name of the partnership only when the articles of partnership make no provision for the management of the partnership business.

The constitution of the Veteran Army of the Philippines makes provision for the management of its affairs, so that article 1695 of the Civil Code, making each member an agent of the partnership in the absence of such provision, is not applicable to that organization.

In the case at bar we think that the articles of the Veteran Army of the Philippines do so provide. It is true that an express disposition to that effect is not found therein, but we think one may be fairly deduced from the contents of those articles. They declare what the duties of the several officers are. In these various provisions there is nothing said about the power of making contracts, and that faculty is not expressly given to any officer. We think that it was, therefore, reserved to the department as a whole; that is, that in any case not covered expressly by the rules prescribing the duties of the officers, the department were present. It is hardly conceivable that the members who formed this organization should have had the intention of giving to any one of the sixteen or more persons who composed the department the power to make any contract relating to the society which that particular officer saw fit to make, or that a contract when so made without consultation with, or knowledge of the other members of the department should bind it.

The contract of lease is not binding on the Veterans Army absent showing that it was authorized in a meeting of the department

We therefore, hold, that no contract, such as the one in question, is binding on the Veteran Army of the Philippines unless it was authorized at a meeting of the department. No evidence was offered to show that the department had never taken any such action.

In fact, the proof shows that the transaction in question was entirely between Apache Tribe, No. 1, and the Lawton Post, and there is nothing to show that any member of the department ever knew anything about it, or had anything to do with it.

Judgment against the appellant is reversed, and the Veteran Army of the Philippines is acquitted of the complaint. No costs will be allowed to either party in this court.

NOTE: Whether a fraternal society, such as the Veteran Army of the Philippines, is a civil partnership is not decided.

Mariano P. Pascual vs. CIR and Court of Tax Appeals

The distinction between co-ownership and an unregistered partnership or joint venture for income tax purposes is the issue in this petition.

Facts:On June 22, 1965, petitioners bought two (2) parcels of land from Santiago Bernardino, et al. and on May 28, 1966, they bought another three (3) parcels of land from Juan Roque. The first two parcels of land were sold by petitioners in 1968 toMarenir Development Corporation, while the three parcels of land were sold by petitioners to Erlinda Reyes and Maria Samson on March 19,1970. Petitioners realized a net profit in the sale made in 1968 in the amount of P165,224.70, while they realized a net profit of P60,000.00 in the sale made in 1970. The corresponding capital gains taxes were paid by petitioners in 1973 and 1974 by availing of the tax amnesties granted in the said years.

However, in a letter of then Acting BIR Commissioner Efren I. Plana, petitioners were assessed and required to pay a total amount of P107,101.70 as alleged deficiency corporate income taxes for the years 1968 and 1970.

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 Codethat 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 or not petitioners formed an unregistered partnership subject to corporate income tax. NO!

Held:Article 1767 of the Civil Code of the Philippines provides:By the contract of partnership two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves.

Pursuant to this article,the essential elements of a partnership are two, namely: (a) an agreement to contribute money, property or industry to a common fund; and (b) intent to divide the profits among the contracting parties.

In the present case, there is no evidence that petitioners entered into an agreement to contribute money, property or industry to a common fund, and that they intended to divide the profits among themselves. Respondent commissioner and/ or his representative just assumed these conditions to be present on the basis of the fact that petitioners purchased certain parcels of land and became co-owners thereof.

In the instant case, petitioners bought two (2) parcels of land in 1965. They did not sell the same nor make any improvements thereon. In 1966, they bought another three (3) parcels of land from one seller. It was only 1968 when they sold the two (2) parcels of land after which they did not make any additional or new purchase. The remaining three (3) parcels were sold by them in 1970. The transactions were isolated. The character of habituality peculiar to business transactions for the purpose of gain was not present.

Article 1769 of the new Civil Code lays down the rule for determining when a transaction should be deemed a partnership or a co-ownership. Said article paragraphs 2 and 3, provides;

(2) Co-ownership or co-possession does not itself establish a partnership, whether such co-owners or co-possessors do or do not share any profits made by the use of the property;(3) The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived; xxxx

The sharing of returns does not in itself establish a partnership whether or not the persons sharing therein have a joint or common right or interest in the property. There must be a clear intent to form a partnership, the existence of a juridical personality different from the individual partners, and the freedom of each party to transfer or assign the whole property.In the present case, there is clear evidence of co-ownership between the petitioners. There is no adequate basis to support the proposition that they thereby formed an unregistered partnership. The two isolated transactions whereby they purchased properties and sold the same a few years thereafter did not thereby make them partners. They shared in the gross profits as co- owners and paid their capital gains taxes on their net profits and availed of the tax amnesty thereby. Under the circumstances, they cannot be considered to have formed an unregistered partnership which is thereby liable for corporate income tax, as the respondent commissioner proposes.And even assuming for the sake of argument that such unregistered partnership appears to have been formed, since there is no such existing unregistered partnership with a distinct personality nor with assets that can be held liable for said deficiency corporate income tax, then petitioners can be held individually liable as partners for this unpaid obligation of the partnership.However, as petitioners have availed of the benefits of tax amnesty as individual taxpayers in these transactions, they are thereby relieved of any further tax liability arising therefrom.

Estanislao vs. CA, Estanislao and Santiago

Facts: Petitioner and private respondents are brothers and sisters who are co-owners of certain lots at Quezon City which were then being leased to the Shell Company. They agreed to operate a gas station thereat with an initial investment of P 15,000.00 to be taken from the advance rentals due to them from SHELL for the occupancy of the said lots owned by them in common.

They executed a joint affidavit where they agreed to help their brother, petitioner herein, by allowing him to operate and manage the gasoline service station of the family. And in order not to run counter to the policy of Shell of appointing only one dealer, it was agreed that petitioner would apply for the dealership.

Thereafter, the parties entered into an Additional Cash Pledge Agreement which canceled and superseded the Joint Affidavit previously executed by the co-owners.

For sometime, petitioner submitted financial statements regarding the operation of the business to private respondents, but thereafter petitioner failed to render subsequent accounting. Hence, a demand was made on petitioner to render an accounting of the profits.

The financial report shows that the business was able to make a profit of P 87,293.79 for 1968 and P150, 000.00 for 1969 was realized.

Private respondents filed a complaint in the CFI of Rizal against petitioner:

1) to execute a public document embodying all the provisions of the partnership agreement2) to render a formal accounting3) to pay the plaintiffs their lawful shares and participation in the net profits of the business

CFI ruled in favor of private respondents. CA affirmed.

Issue:Whether a partnership exists between members of the same family arising from their joint ownership of certain properties;YES

Held:Petitioner relies heavily on the provisions of the Joint Affidavit and the Additional Cash Pledge Agreement (See Full Text for contents).

Petitioner contends that because of the stipulation in the Cash Pledge Agreement cancelling and superseding the previous Joint Affidavit, whatever partnership agreement there was in said previous agreement had thereby been abrogated.We find no merit in this argument. Said cancelling provision was necessary for the Joint Affidavit speaks of P15,000.00 advance rentals startingMay 25, 1966while the latter agreement also refers to advance rentals of the same amount startingMay 24, 1966.Further, evidence in the record shows that there was in fact such partnership agreement between the parties:

1. This is attested by the testimonies of private respondent Remedios Estanislao and Atty. Angeles.2. Petitioner submitted to private respondents periodic accounting of the business.3. Petitioner gave a written authority to private respondent Remedies Estanislao, his sister, to examine and audit the books of their "common business'.4. Respondent Remedios assisted in the running of the business.

There is no doubt that the parties hereto formed a partnership when they bound themselves to contribute money to a common fund with the intention of dividing the profits among themselves.

The sole dealership by the petitioner and the issuance of all government permits and licenses in the name of petitioner was in compliance with the afore-stated policy of SHELL and the understanding of the parties of having only one dealer of the SHELL products.

Ang Pue vs. Sec of Commerce and Industry

Facts: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.

On June 19, 1954 Republic Act No. 1180 was enacted which provided that a partnership not wholly formed by Filipinos could continue to engage in the retail business until the expiration of its term.

Prior to the expiration of the five-year term of the partnership but after the enactment of the RA 1180, the partners amended the original articles of part ownership 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, registration was refused upon the ground that the extension was in violation of the aforesaid Act.

Ang Pue & Company filed an action for declaratory relief 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." TC dismissed the same.

Issue:Whether the terms of partnership may still be extended for 5 more years;NO

Held:To organize a corporation or a partnership that could claim a juridical personality of its own and transact business as such, isnot a matter of absolute right but a privilegewhich may be enjoyed only under such terms as the State may deem necessary to impose.

RA No. 1180 was clearly intended to apply to partnership already existing at the time of the enactment of the law.To argue that because the original articles of partnership provided that the partners could extend the term of the partnership, the provisions of Republic RA 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 contained 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.

Obillos vs. CIR & Court of Tax Appeals

Facts:Jose Obillos, Sr. transferred his rights to his four children, the petitioners, to enable them to build their residences. Presumably, the Torrens titles issued to them would show that they were co-owners of the two lots.

After having held the two lots for more than a year, the petitioners resold them from which they derived a total profit ofP134,341.88 or P33,584 for each of them. They treated the profit as a capital gain and paid an income tax of P16,792.One day before the expiration of the five-year prescriptive period, the Commissioner of Internal Revenue required the petitioners to pay corporate income tax in addition to individual income tax. Further, he considered the share of the profits of each petitioner as taxable in full and not a mere capital gain of which is taxable. Petitioners are being held liable for deficiency income taxes and penalties totaling to P127,781.76.Commissioner acted on the theory that the four petitioners had formed an unregistered partnership or joint venture within the meaning of sections 24(a) and 84(b) of the Tax Code.

Issue:Whether petitioners formed an unregistered partnership;NO

It is error to consider the petitioners as having formed a partnership under article 1767 of the Civil Code simply because they allegedly contributed P178,708.12 to buy the two lots, resold the same and divided the profit among themselves.As testified by Jose Obillos, Jr., they had no such intention. They were co-owners pure and simple. Their original purpose was to divide the lots for residential purposes. The division of the profit was merely incidental to the dissolution of the co-ownership.

Article 1769(3) of the Civil Code provides that "the sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived".There must be an unmistakable intention to form a partnership or joint venture.

All co-ownerships are not deemed unregistered partnership.Co-Ownership who own properties which produce income should not automatically be considered partners of an unregistered partnership, or a corporation, within the purview of the income tax law. To hold otherwise, would be to subject the income of all co-ownerships of inherited properties to the tax on corporations, inasmuch as if a property does not produce an income at all, it is not subject to any kind of income tax, whether the income tax on individuals or the income tax on corporation.

In the instant case, what the Commissioner should have investigated was whether the father donated the two lots to the petitioners and whether he paid the donor's tax.

Lim Tong Lim vs. Philippine Fishing

Facts:On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter Yao entered into a Contract for the purchase of fishing nets from the Philippine Fishing Gear Industries, Inc.. Chua and Yao claimed that they were engaged in a business venture with Lim Tong Lim, who however was not a signatory to the agreement.

Buyers, however, failed to pay for the fishing nets and the floats. Private respondents filed a collection suit against Chua, Yao and Lim Tong Lim. The suit was brought against the three in their capacities as general partners, on the allegation that "Ocean Quest Fishing Corporation" was a nonexistent corporation as shown by a Certification from the Securities and Exchange Commission.

RTC ruled that defendants are jointly liable to plaintiff, that their joint liability could be presumed from the equal distribution of the profit and loss. CA affirmed.

Issue: Whether by their acts, Lim, Chua and Yao could be deemed to have entered into a partnership;YES

From the factual findings of both lower courts, it is clear that Chua, Yao and Lim had decided to engage in a fishing business, which they started by buying boats worth P3.35 million, financed by a loan secured from Jesus Lim who was petitioner's brother. In their Compromise Agreement, they subsequently revealed their intention to pay the loan with the proceeds of the sale of the boats, and to divide equally among them the excess or loss. These boats, the purchase and the repair of which were financed with borrowed money, fell under the term "common fund" under Article 1767. The contribution to such fund need not be cash or fixed assets; it could be an intangible like credit or industry. That the parties agreed that any loss or profit from the sale and operation of the boats would be divided equally among them also shows that they had indeed formed a partnership.

Partnership extended not only to the purchase of the boat, but also to that of the nets and the floats. The fishing nets and the floats, both essential to fishing, were obviously acquired in furtherance of their business.

Defense:Lim disclaims any direct participation in the purchase of the nets, alleging that the negotiations were conducted by Chua and Yao only, and that he has not even met the representatives of the respondent company. Petitioner further argues that he was a lessor, not a partner, of Chua and Yao, for the "Contract of Lease.

We are not convinced by petitioner's argument that he was merely the lessor of the boats to Chua and Yao, not a partner in the fishing venture.

He would like this Court to believe that he consented to the sale of his own boats to pay a debt of Chua and Yao, with the excess of the proceeds to be divided among the three of them. No lessor would do what petitioner did. Indeed, his consent to the sale proved that there was a preexisting partnership among all three.

The sale of the boats, as well as the division among the three of the balance remaining after the payment of their loans, proves beyond cavil that F/B Lourdes, though registered in his name, was not his own property but an asset of the partnership. It is not uncommon to register the properties acquired from a loan in the name of the person the lender trusts, who in this case is the petitioner himself. After all, he is the brother of the creditor, Jesus Lim.

Being partner, they are all liable for debts incurred by or on behalf of the partnership. The liability for a contract entered into on behalf of an unincorporated association or ostensible corporation may lie in a person who may not have directly transacted on its behalf, but reaped benefits from that contract.

Aguila vs. CA & Vda. De Abrogar

Facts:Petitioner is the manager of A.C. Aguila & Sons, Co., a partnership engaged in lending activities. Private respondent, with the consent of her late husband, and A.C. Aguila & Sons, Co., represented by petitioner, entered into a Memorandum of Agreement (See full text for details).

A.C Aguila bought the property of private respondent and her late husband for P200,000. On the same day, parties executed the deed of absolute sale.

Private respondent failed to redeem the property within the 90-day period. Hence, petitioner caused the cancellation of TCT No. 195101 and the issuance of a new certificate of title in the name of A.C. Aguila and Sons, Co.

Thereafter, private respondent was demanded to vacate the premises within 15 days after receipt of the letter and surrender its possession peacefully to A.C. Aguila & Sons. Upon the refusal of private respondent to vacate the subject premises, A.C. Aguila & Sons, Co. filed an ejectment case.MTC ruled in favor of A.C. Aguila & Sons, Co. RTC and CA affirmed.

Private respondent then filed a petition for declaration of nullity of a deed of sale with the Regional Trial Court signature of her husband on the deed of sale was a forgery because he was already dead when the deed was supposed to have been executed on June 11, 1991.

RTC ruled in favor of petitioner. CA reversed ruling that transaction is an equitable mortgage.Petitioner now contends that he is not the real party in interest but A.C. Aguila & Co., against which this case should have been brought.

Issue:Whether petitioner is a real party in interest;NO

Held:Under Art. 1768 of the Civil Code, a partnership "has a juridical personality separate and distinct from that of each of the partners." The partners cannot be held liable for the obligations of the partnership unless it is shown that the legal fiction of a different juridical personality is being used for fraudulent, unfair, or illegal purposes.

In this case, private respondent has not shown that A.C. Aguila & Sons, Co., as a separate juridical entity, is being used for fraudulent, unfair, or illegal purposes. Moreover, the title to the subject property is in the name of A.C. Aguila & Sons, Co. and the Memorandum of Agreement was executed between private respondent, with the consent of her late husband, and A.C. Aguila & Sons, Co., represented by petitioner. Hence, it is the partnership, not its officers or agents, which should be impleaded in any litigation involving property registered in its name.

Ona & Heirs of Bunales vs. CIR

Facts:Julia Buales died leaving as heirs her surviving spouse and her five children. The surviving spouse as administrator of the estate submitted the project of partition which was approved by the Court.

Although the project of partition was approved by the Court, no attempt was made to divide the properties therein listed. Instead, the properties remained under the management of Lorenzo T. Oa who used said properties in business by leasing or selling them and investing the income derived therefrom and the proceeds from the sales thereof in real properties and securities. From said investments and properties petitioners derived such incomes as profits from installment sales of subdivided lots, profits from sales of stocks, dividends, rentals and interests.

Commissioner of Internal Revenue decided that petitioners formed an unregistered partnership subject to the corporate income tax, pursuant to Section 24, in relation to Section 84(b), of the Tax Code. Petitioners were assessed for P8,092.00 and P13,899.00 as corporate income taxes for 1955 and 1956. Petitioners protested but CIR denied the same.

Issue:WON petitioners are co-owners of the properties inherited by them from the deceased Julia Buales and the profits derived from transactions involving the same or an unregistered partnership subject to tax under Sections 24 and 84(b) of the National Internal Revenue Code;UNREGISTERED PARTNERSHIP

Held:Petitioners did not merely limit themselves to holding the properties inherited by them. Some of the said properties were sold at considerable profit, and from the said profit were the purchase and sale of corporate securities. All the profits from these ventures were divided among petitioners proportionately in accordance with their respective shares in the inheritance.From the moment petitioners allowed not only the incomes from their respective shares of the inheritance but even the inherited properties themselves to be used by Lorenzo T. Oa as a common fund in undertaking several transactions or in business, with the intention of deriving profit to be shared by them proportionally, such act was tantamount to actually contributing such incomes to a common fund and, in effect, they thereby formed an unregistered partnership within the purview of the provisions of the Tax Code.

In cases of inheritance, there should be a period when the heirs can be considered as co-owners rather than unregistered co-partners within the contemplation of our corporate tax laws. Before the partition and distribution of the estate of the deceased, all the income thereof does belong commonly to all the heirs, without them becoming thereby unregistered co-partners, but it does not necessarily follow that such status as co-owners continues until the inheritance is actually and physically distributed among the heirs. After knowing their respective shares in the partition, they might decide to continue holding said shares under the common management of the administrator or executor or of anyone chosen by them and engage in business on that basis.

Co-ownership of inherited properties is automatically converted into an unregistered partnership the moment the said common properties and/or the incomes derived therefrom are used as a common fund with intent to produce profits for the heirs in proportion to their respective shares in the inheritance as determined in a project partition either duly executed in an extrajudicial settlement or approved by the court in the corresponding testate or intestate proceeding.

Partnerships under the civil code are different from that of unregistered partnerships which are considered as "corporations" under sections 24 and 84(b) of the NIRC.When NIRC includes "partnerships" among the entities subject to the tax on "corporations", said Code must allude, therefore, to organizations which are not necessarily "partnerships", in the technical sense of the term. Section 24 of said Code exempts from the aforementioned tax "duly registered general partnerships,"

In section 84(b) of said Code, "the term corporation includes partnerships, no matter how created or organized." The term "corporation" includes, among others, "joint accounts" and "associations", none of which has a legal personality of its own, independent of that of its members.

Kiel vs. Estate of P.S. Sabert

Facts:In 1907, Albert F. Kiel along with WilliamMilfeilcommenced to work on certain public lands situated in the municipality ofParang, Province ofCotabato, known asParangPlantation Company. Kiel subsequently took over the interest ofMilfeil.In 1910, Kiel and P. S.Sabertentered into an agreement to develop theParangPlantation Company.Sabertwas 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 ofSabert, 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 theNituanPlantation Company, with a subscribed capital of P40,000. On April 10, 1922, P. S.Saberttransferred all of his rights in two parcels of land situated in the municipality ofParang, Province ofCotabato, embraced within his homestead application No. 21045 and his purchase application No. 1048, in consideration of the sum of P1, to theNituanPlantation Company.

In this same period, Kiel appears to have tried to secure a settlement fromSabert. At least in a letter dated June 6, 1918,Sabertwrote Kiel that he had offered "to sell all property that I have for P40,000or take in a partner who is willing to develop the plantation, to take up the K. & S. debt no matter which wayI willstraitenout with you."

ButSabert'sdeath came before any amicable arrangement could be reached and before an action by Kiel against Sabertcould be decided.So these proceedings against the estate ofSabert.

Issues:(1) Whether a trust in the land had been established by the evidence in the case. NO(2) Whether a co-partnership between Kiel and the deceased Sabert existed. NO

Held:It is conceivable, that the facts in this case could have been so presented to the court by means of allegations in the complaint, as to disclose characteristics of a resulting trust. But thecomplaint as framed asks for astraight money judgment against an estate. In no partof the complaint did plaintiff (Kiel)allege any interest in land, claim any interest in land, or pretend to establish a resulting trust in land. ThatKieldid not care to press such an action is demonstrated by the relation of the fact ofalienagewith the rule, that 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.

No partnership agreement in writing was entered into by Kiel andSabert. The question consequently is whether or not the alleged verbalcopartnershipformed by Kiel andSaberthas 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 thedeclarations 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 thatthe existence of a partnership cannot be established by general reputation, rumor, or hearsay.The testimony of the plaintiff's witnesses, together with the documentary evidence, leaves the firm impression with us thatKiel andSabertdid 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.

(The court remanded the case to the TC to determine how much Kiel is entitled to asfor his share.)

Alicbusan vs. CA

Facts:Cesar Cordero and Leopoldo Alicbusan were partners in the operation of Babys Canteen located in the Philtranco terminal in Pasay City. Pursuant to their agreement, Cordero assumed the position of Managing partner while Alicbusan took care of accounting, records keeping and other comptrollership functions.

The partnership was to exist for a fixed term, between July 1981 up to July 1984. Upon expiration of the said period, both of them continued their relationship under the original term.

On May 11, 1990, Cordero filed a complaint for collection for various sums totaling P209, 497. 36 which he later on amended to P309, 681. 51. This represented the collectibles he had from Philtranco, by virtue of an arrangement whereby Philtranco employees were allowed to buy goods and items from Babys Canteen on credit, which payments were subsequently deducted by Philtranco from the employees salaries. Philtranco would remit the amount to them 15 days later.

According to Cordero, the remittances of salary deductions for the months of February up to May 1990 were withheld by Philtranco due to Alicbusans instigation. He averred that Alicbusan had done this in bad faith because of business differences which arose between him and Alicbusan in another partnership operation in Quezon.

Alicbusans defense is to aver that he transferred all his rights and interests over Babys Canteen for the sum of P250,000 as evidenced by a Deed of Sale and Transfer of Right between the parties on April 5, 1989. Under the said deed Cordero allegedly bound himself to pay the downpayment of P50,000, while the balance would be payable in 20 monthly installments at P10,000 per month.

RTC ruled in favor of Cordero and Babys Canteen, upholding the existence of a partnership between Cordero and Alicbusan.

CA affirmed the ruling of the RTC.

Issue:Whether a partnership still exists between Cordero and Alicbusan. YES

Held:Cordero argues that the court should not have disregarded the legal presumptions in favor of the validity of the deed of sale os his partnership rights, namely:

1. that the private transactions have been fair and regular2. that the ordinary course of business has been followed3. there is sufficient consideration for a contract

However, these presumptions are disputable and can be rebutted by the evidence to the contrary. The calibration of this evidence and the relative weight accorded to them are within the exclusive domain of both the trial and appellate courts which cannot be set aside by the Supreme Court absent any showing that there is no evidence to support the conclusion already established.

Contrary to Alicbusans assertion, the record is replete with evidence establishing the fact that the deed of sale was fictitious and simulated.

First, payments were never madethe downpayment or the subsequent installments of P10,000. What were presented as payment were a series of checks with varying amounts.

Second, Alicbusan continued to perform his functions of comptrollership after the deed was signed. Alicbusan continued to oversee and check daily sales and report vouches. He was the approving authority as far as check vouchers were concerned. Furthermore, the evidence shows that he subsequently delegated this function to his wife. The balance sheet lists the Partners capital for each of them. During this time, Alicbusan did not object to his inclusion in the report as partner of Babys Canteen, which he would have if the sale were not terminated.

Hence Alicbusan is liable to pay Cordero P30,000 as moral damages.

Yulo vs. Yang Chiao Seng

Facts:

Yang Chiao Seng proposed to form a partnership with Rosario Yulo to run and operate a theatre on the premises occupied by Cine Oro,PlazaSta. Cruz, Manila, the principal conditions of the offer being:

(1) Yang guarantees Yulo a monthly participation ofP3,000;(2) partnership shall be fora period of 2 years and 6 months with the condition that if the land isexpropriated, rendered impracticable forbusiness, owner constructs a permanent building, then Yulos right tolease and partnership even if period agreed upon has notyet expired;(3) Yulo is authorized topersonally conduct business in the lobby of thebuilding; and(4) after Dec 31, 1947, all improvements placed by partnership shall belong to Yulo but ifpartnership is terminated before lapse of 1 and years, Yang shall have right to removeimprovements.

Parties established, Yang and Co. Ltd.,to exist fromJuly 1,1945 Dec 31, 1947.

The land on which the theater wasconstructed was leased by Yulo from owners, Emilia Carrion andMaria Carrion Santa Marina for an indefinite period but that after 1 year, such lease maybe cancelled by either party upon 90-day notice. In Apr 1949,the owners notified Yulo of their desire tocancel the lease contract come July. Yulo and husband brought a civil action to declare the lease fora indefinite period. Owners brought their own civil action forejectment upon Yulo and Yang.

CFI: Two cases wereheard jointly; Complaint of Yulo and Yang dismissed declaring contract oflease terminated.

CA: Affirmed thejudgment.In 1950, Yulo demanded from Yang hershare in the profits of thebusiness. Yang answered saying he had to suspend payment because ofpending ejectment suit.Yulo filed present action in 1954, alleging the existence of a partnership between them and thatYang has refused to payher shares

Defendants Position: The real agreement between plaintiff and defendant was one of lease and not of partnership; that thepartnership was adopted as a subterfuge to getaround the prohibition contained in the contract of lease between the owners and the plaintiff against the sublease of the property.

Trial Court: Dismissal. It is not true that a partnership was created between them because defendant has not actually contributed the sum mentioned in the Articles of Partnership orany other amount. The agreement is a lease because plaintiffdidnt share either in the profits or in the losses ofthe business as required by Art1769 (CC) and because plaintiff was granted a guaranteed participation inthe profits belies thesupposed existence of apartnership.

Issue: Was the agreement a contract a lease or a partnership? SUBLEASE

Held: The agreement was a sublease not a partnership.

The following are the requisites ofpartnership:1. two or more persons who bind themselves to contribute money,property or industry to a common fund;1. The intention on the part of the partners to divide the profits among themselves (Article 1761, CC)

Plaintiff did not furnishthe supposed P20,000 capital nor did she furnish any help or intervention in the management ofthe theatre. Neither has she demanded from defendant any accounting of the expenses and earnings of the business. She was absolutely silent with respect to any ofthe acts that a partner should have done; all shedid was to receive her share of P3,000 amonth which cannot be interpreted in any manner than a payment forthe use of premises which she had leased fromthe owners.

Gatchalian vs. Collector of Internal Revenue

Policy: A partnership is formed when two or more persons contributed money to buy a sweepstakes ticket with the intention to divide the prize which they may win.

Facts:Plaintiffs purchased, in the ordinary course of business, from one of the duly authorized agents of the National Charity Sweepstakes Office one ticket for the sum of two pesos (P2), said ticket was registered in the name of Jose Gatchalian and Company. The ticket won one of the third-prizes in the amount of P50,000.

Jose Gatchalian was required to file the corresponding income tax return covering the prize won. Defendant-Collector made an assessment against Jose Gatchalian and Co. requesting the payment of the sum of P1,499.94 to the deputy provincial treasurer of Pulilan, Bulacan. Plaintiffs, however through counsel made a request for exemption. It was denied

If a partnership had been formed by A, B, etc. then it was liable for income tax pursuant to law then in force; if merely a community of property, then such co-ownership was not liable, not having a legal personality of its own.

Issue: Did the plaintiff form a partnership or merely a community of property? Partnership

Held:The plaintiff formed a partnership. Hence, they are liable to pay the income tax.

According to the stipulation facts the plaintiffs organized a partnership of a civil nature because each of them put up money to buy a sweepstakes ticket for the sole purpose of dividing equally the prize which they may win, as they did in fact in the amount of P50,000.

The partnership was not only formed, but upon the organization thereof and the winning of the prize, Jose Gatchalian personally appeared in the office of the Philippines Charity Sweepstakes, in his capacity as co-partner, as such collection the prize, the office issued the check for P50,000 in favor of Jose Gatchalian and company, and the said partner, in the same capacity, collected the said check. All these circumstances repel the idea that the plaintiffs organized and formed a community of property only.

Having organized and constituted a partnership, the entity is bound to pay the income tax Act No. 2833. Being the partnership liable to the income tax, the tax must be paid collectively by the partnership and not by the plaintiffs individually.

EUFEMIA EVANGELISTA, MANUELA EVANGELISTA, and FRANCISCA EVANGELISTA, petitioners, vs. THE COLLECTOR OF INTERNAL REVENUE and THE COURT OF TAX APPEALS, respondents.

Facts:Eufemia, Manuela and Fransisca Evangelista were siblings who bought several (4) real estate properties from 1943-1944. The money to buy these properties came from a 59k loan from their father and from their own money.

1945 they appointed their brother Simeon to manage their properties with full power to lease, to collect and receive rents; to bring suits against defaulting tenants, to sign all letters, contract, etc.

The Evangelista sisters leased the properties they bought to tenants, earning net profits:1945 5.8k1946 7.4k1947 12.6k

In 1954, the CIR demanded the payment of the following taxes:

Income taxes (1945-1949) 6.1kReal estate dealers fixed tax (1946-9) 527 pesosResidence taxes of corporation (1945-9) 6.8k

The sisters filed a case with the CTA, claiming that they were not subject to the aforementioned taxes since the said taxes were imposed upon corporations provided for in Section 24 of Commonwealth Act 84.

Commonwealth Act 84:SEC. 24. Rate of tax on corporations.There shall be levied, assessed, collected, and paid annually upon the total net income received in the preceding taxable year from all sources by every corporation organized in, or existing under the laws of the Philippines, no matter how created or organized but not including duly registered general co-partnerships (compaias colectivas), a tax upon such income equal to the sum of the following:

SEC. 84 (b). The term 'corporation' includes partnerships, no matter how created or organized, joint-stock companies, joint accounts (cuentas en participacion), associations or insurance companies, but does not include duly registered general copartnerships.

The sisters claim they are mere co-owners and not copartners.

Issue: Whether the Evangelistas were properly subject to the taxes assessed by the CIR. YES

HELD: Ruling summary: The SC upheld the ruling of the CTA against the Evangelistas because the two elements of a partnership were present:1. there was an agreement to contribute money, property or industy to a common fund1. they had the intent to divide the profits among the contracting parties

First element: agreement to contribute MPIThis element is undisputed because the sister pooled their own money and even borrowed money from their father. The funds they used to buy the properties were not something they found already in existence. They created it purposely.

Second element intent to gain1. they invested the money in numerous properties and entered into numerous transactions - strongly indicative of a pattern or common design that was not limited to the conservation and preservation of the aforementioned common fund or even of the property acquired; instead, the Court was convinced of the habitual character peculiar to business transactions engaged in the purpose of gain1. lots they purchased were not residential, but were leased to tenants1. appointment of Simeon as manager Simeons appointment and his functions indicate that the affairs relative to said properties have been handled as if the same belonged to a corporation or business and enterprise operated for profit.1. ^ the aforementioned conditions have existed for over 10 years 1. The Evangelistas did not present nor explain their purpose in creating the set up or the causes for its continued existence.

The arrangement created by the sisters are covered by the taxThe tax in question is one imposed upon "corporations", which, strictly speaking, are distinct and different from "partnerships". When our Internal Revenue Code includes "partnerships" among the entities subject to the tax on "corporations", said Code must allude, therefore, to organizations which are not necessarily "partnerships", in the technical sense of the term. Thus, for instance, section 24 of said Code exempts from the aforementioned tax "duly registered general partnerships which constitute precisely one of the most typical forms of partnerships in this jurisdiction. . Likewise, as defined in section 84(b) of said Code, "the term corporation includes partnerships, no matter how created or organized."

Again, pursuant to said section 84(b), the term "corporation" includes, among other, joint accounts, and "associations," none of which has a legal personality of its own, independent of that of its members.

For purposes of tax on corporations, the NIRC includes partnershipsPartnerships included: syndicate, group, pool, joint venture or other unincorporated organization, through or by means of which any business, financial operation, or venture is carried on

Partnerships excluded: duly registered general copartnerships

Evangelista sisters also subject to real estate dealer taxReal estate dealer' includes any person engaged in the business of buying, selling, exchanging, leasing, or renting property or his own account as principal and holding himself out as a full or part time dealer in real estate or as an owner of rental property or properties rented or offered to rent for an aggregate amount of three thousand pesos or more a year.

Reyes vs. CIR

Facts: Petitioners Florencio and Angel Reyes, father and son, purchased a lot and building for P 835,000.00. The initial payment of P 375,000.00 was shared equally by them. The balance of P 460,000.00 was left, which represents the mortgage obligation of the vendors with a bank, which mortgage obligations were assumed by the vendees. At the time of the purchase, the building was leased to various tenants, whose rights under the lease contracts with the original owners, the purchaser, petitioners herein, agreed to respect. Petitioners divided equally the income of operation and maintenance. An assessment as to the income tax due was made against petitioners by the CIR. This assessment was appealed to the Court of Tax Appeals. The CTA ruled that petitioners are liable for the income tax due from the partnership formed by petitioners.

The CTA applied the provisions of the NIRC on corporations. The first cited provision imposes an income tax on corporations "organized in, or existing under the laws of the Philippines, no matter how created or organized but not including duly registered general co-partnerships" a term, which according to the second provision cited, includes partnerships "no matter how created or organized, ...," and applying the leading case of Evangelista v. Collector of Internal Revenue.

Issue: Whether or not petitioners form a partnership as to make them liable to the income tax assessed by the CTA - YES

Held: Petitioners are subject to the tax on corporations as provided for in the NIRC. Applying the leading case of Evangelista v. Collector of Internal Revenue, and section 84(b) of the NIRC, which explicitly provides that the term corporation "includes partnerships" and to Article 1767 of the Civil Code of the Philippines, defining what a contract of partnership is, "the essential elements of a partnership are two, namely:

(a) an agreement to contribute money, property or industry to a common fund; and

(b) intent to divide the profits among the contracting parties. The first element is undoubtedly present in the case at bar, for, admittedly, petitioners have agreed to and did, contribute money and property to a common fund. Hence, the issue narrows down to their intent in acting as they did. Upon consideration of all the facts and circumstances surrounding the case, we are fully satisfied that their purpose was to engage in real estate transactions for monetary gain and then divide the same among themselves.Also, the SC said that for purposes of the tax on corporations, our National Internal Revenue Code, include 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.

Navarro vs. CA

CASE: Petition for annulment of judgment: by Sps Navarro; dismissed by the CA:

Facts:On July 23, 1976, Olivia V. Yanson filed a complaint against Lourdes Navarro for "Delivery of Personal Properties With Damages". The complaint incorporated an application for a writ of replevin. (*was subsequently amended to include private respondent's husband, Ricardo B. Yanson, as co-plaintiff, and petitioner's husband, as co-defendant.)

On July 27, 1976, then Executive Judge Oscar R. Victoriano approved Yansons application for a writ of replevin. By virtue of the same, Yanson has recovered the subject chattels.

Subsequently, the Presiding judge rendered a decision disposing that

1. all chattels already recovered by [Yanson] by virtue of the Writ of Replevin and as listed in the complaint are sustained to belong to [Yanson] being the owner of these properties; 1. the motor vehicle (Ford Fiera Jeep) registered in and which had remain in the possession of the [Navarro] was likewise declared to belong to Yanson, however, [Navarro] is ordered to reimburse [Yanson] the sum of P6,500.00 representing the amount advanced to pay part of the price for the Jeep. 1. [Navarro] was likewise ordered to return to [Yanson] such other equipment[s] as were brought by the latter to and during the operation of their business as were listed in the complaint and not recovered as yet by virtue of the previous Writ of Replevin.

This decision was subsequently declared final and executory.

The trial court issued a writ of execution. The Sheriff's Return of Service declared that the writ was "duly served and satisfied". A receipt for the amount of P6,500.00 issued by Mrs. Lourdes Yanson, co-petitioner in this case, was likewise submitted by the Sheriff

Sps Navarro filed with the CA a petition for annulment of the trial court's decision, claiming that the trial judge erred in declaring the non-existence of a partnership, contrary to the evidence on record. (Which petition was outrightly dismissed by the CA due to absence of extrinsic or collateral fraud, observing further that an appeal was the proper remedy.)

Sps Navarro claim:

that the trial judge ignored evidence that would show that the parties "clearly intended to form, and (in fact) actually formed a verbal partnership engaged in the business of Air Freight Service Agency in Bacolod"; and that the decision sustaining the writ of replevin is void since the properties belonging to the partnership do not actually belong to any of the parties until the final disposition and winding up of the partnership"

Sps Navarro keep on pressing that the idea of a partnership exists on account of the so-called admissions in judicio.

Issue:Whether a partnership existed between the parties in the present case. NO.

Held:As a premise, Article 1767 of the New Civil Code defines the contract of partnership:

Art. 1767. 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 proceeds among themselves.

xxx xxx xxxCorollary to this definition is the provision in determining whether a partnership exist as so provided under Article 1769, to wit:xxx xxx xxx

Furthermore, the Code provides under Article 1771 and 1772 that 1. while a partnership may be constituted in any form, a public instrument is necessary where immovables or any rights is constituted. 1. Likewise, if the partnership involves a capitalization of P3,000.00 or more in money or property, the same must appear in a public instrument which must be recorded in the Office of the Securities and Exchange Commission.

Failure to comply with these requirements shall only affect liability of the partners to third persons.

In consideration of the above, it is undeniable that both the plaintiff (Yanson) and the defendant-wife (Navarro) made admission to have entered into an agreement of operating this Allied Air Freight Agency of which the Yanson personally constituted with the Manila Office in a sense that the Yanson did supply the necessary equipments and money while her brother Atty. Rodolfo Villaflores was the Manager and the defendant the Cashier.

It was also admitted that part of this agreement was an equal sharing of whatever proceeds realized.

Consequently, Yanson brought into this transaction certain chattels in compliance with her obligation. The same has been done by the herein brother and Navarro who started to work in the business. A cursory examination of the evidences presented no proof that a partnership, whether oral or written had been constituted at the inception of this transaction.

True it is that even up to the filing of this complaint those movables brought by Yanson for the use in the operation of the business remain registered in her name.

While there may have been co-ownership or co-possession of some items and/or any sharing of proceeds by way of advances received by both Yanson and Navarro, these are not indicative and supportive of the existence of any partnership between them. Article 1769 of the New Civil Code is explicit.

In view of the above factual findings of the Court it follows inevitably therefore that there being no partnership that existed, any dissolution, liquidation or winding up is beside the point.

Biglangawa and Espiritu vs. Pastor Constantino

Facts:January 1950: Biglangawa and Espiritu appointed Constantino as their exclusive agent to develop the area they owned into a subdivision and sell them. As compensation they promised commission (of 30% on the gross sales) and a fee (of 10% on the collections made by him). He advanced all expenses in the development, administration and advertisement of such area

October 1951: Constantino was able to dispose more than half of the area

Later in October 1951: Owners terminated the contract but acknowledged that they will pay the unpaid commission in monthly installments (they had a practice of paying Constantino lesser than what was expressed on the January 1950 contract, such that, when liquidation was made, there was still a balance on Constantinos commission)

March 1953: Owners refused to make the necessary settlement regarding the unpaid commission and the remaining fees due him

Constantino filed a CIVIL CASE against the owner.

April 1955: Pending such civil case, Constantino filed with the ROD a notice of LIS PENDENS on the area/property which was converted into a subdivision

May 1955: Owners sold it to Santos. ROD made annotation of the LP on owners and Santos title

June 1955: They filed a PETITION for cancellation of said LP

July 1955: Lower court decided in favor of the owners and ordered the cancellation of the LP stating that Constantinos civil action was purely and clearly a claim for money judgment which does not affect the title or the right of possession of real property annotated with LP and it being a settled rule in this jurisdiction that a notice of lis pendens may be invoked as a remedy in cases where the very lis mota of the pending litigation concerns directly the possession of, or title to a specific real property

Constantinos theory: Such holding that his was purely a money judgement claim is wrong. Instead he is contending that the agreement whereby he is to be paid commission and fee actually converted him into a partner and gave him 1/5 participation of the property itself, thus, his suit is one for the settlement and adjustment of partnership interest or a partition action or proceeding

Issue: Whether there is partnership amongst Constantino and Biglangawa/Espiritu. NONE

RULING:There is no word nor expression in the contract that suggests any idea of partnership. On the contrary, Constantino expressly avers in his complaint that Biglangawa and Espiritu appointed him as their EXCLUSIVE AGENT to develop xxx. Categorically, he referred to himself as agent, not a partner, entitled to compensation in the form of commission and/or fee, not participation and not in the form of share.

It is true that he made advances for the expenses incurred in the development and administration of the property but this was never considered as contributions to business as to make him a partner, otherwise, he would have stated that in his complaint. In fact, after a liquidation of these advances and the commissions due to appellant at the time of the termination of the agency, the whole balance was considered as Biglangawa and Espiritus indebtedness.

Hence, the lower court was right. His civil action was not one affecting the title of right of possession of the real property nor one to recover possession of real estate, or to quiet title, or to remove cloud upon title, or for partition, or any similar action affecting the title, use and occupation of the real estate and its buildings. Hence LP cannot lie.

Bastida vs. Menzi

Heirs of Jose Lim vs. Lim

Facts:In 1980, the heirs of Jose Lim alleged that Jose Lim entered into a partnership agreement with Jimmy Yu and Norberto Uy. The three contributed P50,000.00 each and used the funds to purchase a truck to start their trucking business. A year later however, Jose Lim died. The eldest son of Jose Lim, Elfledo Lim, took over the trucking business and under his management, the trucking business prospered. Elfledo was able to but real properties in his name. From one truck, he increased it to 9 trucks, all trucks were in his name however. He also acquired other motor vehicles in his name.

In 1993, Norberto Uy was killed. In 1995, Elfledo Lim died of a heart attack. Elfledos wife, Juliet Lim, took over the properties but she intimated to Jimmy and the heirs of Norberto that she could not go on with the business. So the properties in the partnership were divided among them.

Now the other heirs of Jose Lim, represented by Elenito Lim, required Juliet to do an accounting of all income, profits, and properties from the estate of Elfledo Lim as they claimed that they are co-owners thereof. Juliet refused hence they sued her.

The heirs of Jose Lim argued that Elfledo Lim acquired his properties from the partnership that Jose Lim formed with Norberto and Jimmy. In court, Jimmy Yu testified that Jose Lim was the partner and not Elfledo Lim. The heirs testified that Elfledo was merely the driver of Jose Lim.

Issue: Who is the partner between Jose Lim and Elfledo Lim? Elfledo Lim

HELD: It is Elfledo Lim based on the evidence presented regardless of Jimmy Yus testimony in court that Jose Lim was the partner. If Jose Lim was the partner, then the partnership would have been dissolved upon his death . A partnership is dissolved upon the death of the partner. Further, no evidence was presented as to the articles of partnership or contract of partnership between Jose, Norberto and Jimmy. Unfortunately, there is none in this case, because the alleged partnership was never formally organized.

But at any rate, the Supreme Court noted that based on the functions performed by Elfledo, he is the actual partner.The following circumstances tend to prove that Elfledo was himself the partner of Jimmy and Norberto:

1.) Cresencia testified that Jose gave ElfledoP50,000.00, as share in the partnership, on a date that coincided with the payment of the initial capital in the partnership;2.) Elfledo ran the affairs of the partnership, wielding absolute control, power and authority, without any intervention or opposition whatsoever from any of petitioners herein;3.) all of the properties, particularly the nine trucks of the partnership, were registered in the name of Elfledo;4.) Jimmy testified that Elfledo did not receive wages or salaries from the partnership, indicating that what he actually received were shares of the profits of the business;and5.) none of the heirs of Jose, the alleged partner, demanded periodic accounting from Elfledo during his lifetime.

As repeatedly stressed in the case of Heirs of Tan Eng Kee,a demand for periodic accounting is evidence of a partnership.

Furthermore, petitioners failed to adduce any evidence to show that the real and personal properties acquired and registered in the names of Elfledo and Juliet formed part of the estate of Jose, having been derived from Joses alleged partnership with Jimmy and Norberto.

Elfledo was not just a hired help but one of the partners in the trucking business, active and visible in the running of its affairs from day one until this ceased operations upon his demise. The extent of his control, administration and management of the partnership and its business, the fact that its properties were placed in his name, and that he was not paid salary or other compensation by the partners, are indicative of the fact that Elfledo was a partner and a controlling one at that. It is apparent that the other partners only contributed in the initial capital but had no say thereafter on how the business was ran. Evidently it was through Elfredos efforts and hard work that the partnership was able to acquire more trucks and otherwise prosper. Even the appellant participated in the affairs of the partnership by acting as the bookkeeper sans salary.

JOSE MIGUEL ANTON VS. SPOUSES ERNESTO OLIVA AND CORAZON OLIVA (G.R. NO. 182563 | 2011-04-11)

Facts:On September 9, 2008 respondents Ernesto and Corazon Oliva (the Olivas) filed an action for accounting and specific performance with damages against petitioner spouses Jose Miguel and Gladys Miriam Anton (the Antons) before the Regional Trial Court (RTC) of Quezon City.

The Olivas alleged that they entered into three Memoranda of Agreement (MOA) with Gladys Miriam, their daughter, and Jose Miguel, their son-in-law, setting up a business partnership covering three fast food stores, known as "Pinoy Toppings" that were to be established at SM Megamall, SM Cubao, and SM Southmall.

Under the MOAs, the Olivas wer,e entitled to 30% share of the net profits of the SM Megamall store and 20% in the cases of SM Cubao and SM Southmall stores.

The pertinent portions of the first MOA dated May 2, 1992, covering the SM Megamall store (see full text).

The pertinent terms of the second MOA dated May 6, 1993, covering the SM Cubao store (see full text).

The pertinent portions of the third MOA dated April 20, 1995, covering the SM Southmall Branch (see full text).

The Olivas alleged that while the Antons gave them a total of P2,547,000.00 representing their monthly shares of the net profits from the operations of the SM Megamall and SM Southmall stores, the Antons did not give them their shares of the net profits from the store at SM Cubao.

Further, Jose Miguel did not render to them an account of the operations of the three stores. And, beginning November 1997, the Antons altogether stopped giving the Olivas their share in the net profits of the three stores.

The Olivas demanded an accounting of partnership funds but, in response, Jose Miguel terminated their partnership agreements.

JOSE MIGUEL ALLEGED: that he and his wife, Gladys Miriam, never partnered with the Olivas in the operations of the three stores. The Antons merely borrowed money from the Olivas to finance the opening of those stores. Gladys Miriam, who managed the operations of the business, remitted to the Olivas the amounts due them even after the loans had been paid. If any accounting was needed, it should orily be for the purpose of ascertaining the correctness the payments made. GLADYS MIRIAM'S PART: she affirmed having managed the three stores up until she and Jose Miguel separated. They paid the Olivas in checks, representing their share in the profits of the business. Gladys Miriam filed a case for legal separation against her husband, Jose Miguel, prompting the latter to terminate their business partnership with her parents. RTC: no partnership relation existed between the Olivas and the Antons but Jose Miguel had an obligation to render an accounting from the start of the business until the termination of their MOAs and, thereafter, pay the Olivas their share of the net profits, if any, plus interests.

CA: affirmed and modified the RTC decision.

Issue:Whether the CA erred in holding that, notwithstanding the absence of a partnership between the Olivas and the Antons, the latter have the obligation to pay the former their shares of the net profits of the three stores plus legal interest on those shares until they have been paid. NO.

HELD: The Court will not disturb the finding of both the RTC and the CA that, based on the terms of the MOAs and the circumstances surrounding its implementation, the relationship between the Olivas and the Antons was one of creditor-debtor, not of partnership.

The finding is sound since, although the MOA denominated the Olivas as "partners." the amounts they gave did not appear to be capital contributions to the establishment of the stores. Indeed, the stores had to pay the amounts back with interests. Moreover, the MOAs forbade the Olivas from interfering with the running of the stores. At any rate, none of the parties has made an issue of the common finding of the courts below respecting the nature of their relationship.

On Jose Miguels contention: since the Olivas were not the Antons' partners in the stores, they were not entitled to receive percentage shares of the net profits from the stores' operations.

But, as the CA correctly held, although the Olivas were mere creditors, not partners, the Antons agreed to compensate them for the risks they had taken. The Olivas gave the loans with no security and they were to be paid such loans only if the stores made profits. Had the business suffered loses and could not pay what it owed, the Olivas would have ultimately assumed those loses just by themselves. Still there was nothing illegal or immoral about this compensation scheme. Thus, unless the MOAs are subsequently rescinded on valid grounds or the parties mutually terminate them, the same remain valid and enforceable.

It did not matter that the Antons had already paid for two of the loans and their interests. Their obligation to share net profits with the Olivas was not extinguished by such payment. Indeed, the Antons paid the Olivas their share of the profits from two stores although the loans corresponding to them had in the meantime been paid. Only after Jose Miguel's marital relation with Gladys Miriam turned sour in November 1997 did he cease to pay the Olivas their shares of the profits.The CA also correctly ruled that, since the Olivas were mere creditors, not partners, they had no right to demand that the Antons make an accounting of the money loaned out to them. Still, the Olivas were entitled to know from the Antons how much net profits the three stores were making annually since the Olivas were entitled to certain percentages of those profits. Indeed, the third and second MO A directed the Antons to provide the Olivas with copies of the monthly sales reports from the operations of the stores involved, apparently to enable them to know how much were due them. There is no reason why the Antons should not furnish the Olivas copies of similar reports from the operations of the store at SM Megamall, this merely being a consequence of the Antons' obligation to share with the Olivas the net profits from that store.

Jose Miguel also complains that the CA had no basis in awarding interest on the third loan covering the establishment of the SM SouthiAall store since the particular MOA did not provide for such interest. But, actually, the interests that the CA awarded to the Olivas referred, not to interests on the loans they gave, but to interest that their unpaid shares of the net profits of the three stores should earn on account of Jose Miguel's unjustified refusal to pay them beginning November 1997.

Given that the legal interests that the CA directed the Antons to pay referred to the Olivas' unpaid shares of the net profits of the three stores from November 1997, such interests cannot be regarded as forbearance for money that warrants an interest of 12% per annum. Rather, they were for unjust withholding of the Olivas" shares of the net profits from the Antons' three stores that would warrant an interest of 6% per annum.

The Court DENIES the petition and AFFIRMS the decision of the Court of Appeals with MODIFICATIONS.

VICENTE W. PASTOR vs. MANUEL GASPAR, ET ALG.R. No. L-1256 October 23, 1903

Facts:In November, 1900, there existed in Manila a partnership composed of Macario Nicasio and the defendant Gaspar under the name "Nicasio and Gaspar." It owned the steam launchLuisa, and its only business was the relating to this launch.

On November 24, 1900, in its desire to increase this business, a contract was made between the firm of Nicasio and Gaspar on one side, and Eguia, Iboleon, and Monserrat, and one Hermoso on the other side.

This contract recites that Nicasio and Gaspar, by writing of the same date, have enlarged the business of their partnership; have bought 6 lorchas, and that, needing money with which to pay for the lorchas and the necessary repairs thereon, while Eguia et al. furnished them 28,000 pesos as loan. The firm of Nicasio and Gaspar then acknowledges the receipt of these amounts.

The 5th clause of the contract is as follows:Fifth. The partnership of Nicasio and Gaspar undertakes to return to the said Eguia, Monserrat, Iboleon, Pastor, and Hermoso the said total sum of 28,000 pesos within the period of ten years from the date of the instrument, and to guarantee the fulfillment of said payment they pledge to said parties the said lorchas Pepay, Lola, Consuelo, India, Niceta, and Castellana, in the sums respectively which said parties have furnished for the purchase and repair of said vessels, as before stated, ceding and assigning to said parties, in like proportions the profits and gains which may be realized from the exploitation of said vessels;

the said vessels to be the property of said Eguia, Monserrat, Iboleon, Pastor, and Hermoso, and of the parties of the first part, proportionate with the sums which the said parties have invested in said vessels; the management of said vessels during the time in which said debt remains unpaid to remain with the partnership of Nicasio and Gaspar, with the understanding that whatever may be the result of the business of said vessels, neither the said partnership nor the parties of the first part shall become responsible for the payment of said debt, except in so far as the said vessels shall respond therefor, and in no event shall they respond therefor with any other property;

injuries to and all losses of said lorchas to be shared by all the parties hereto, as well as crews' expenses and other outlays necessary for the preservation of said vessels, in the proportion which corresponds to each party hereto according to his investment; the parties of the first part binding themselves not to encumber or pledge said vessels while said debt remains unsatisfied to the parties of the second part.The contract entered into on November 24, 1900, was dissolved and terminated in July, 1901, and the lorchas was sold by mutual consent.

In its complaint it was set forth that there was actually a partnership between the parties to the Nov. 24 contract, and that the consent of the agent of the plaintiff to its dissolution and the sale of the lorchas was obtained by fraud of the defendants.

Issue:Whether Pastor is a partner or a creditor. Creditor

Held:The opinion of the writer is that held by the court below, viz, that upon the face of the contract the plaintiff was a creditor and not a partner. The contract is not clearly drawn, but the following seem to indicate that the transaction was rather a loan than a contract of partnership:

1. In the beginning it is twice stated positively that Nicasio and Gaspar are the only partners and the only persons interested in the partnership of Nicasio and Gaspar. These statements the plaintiff assented to when he signed the document. 1. In the 2nd par, and again in the 4th, it is stated, also, distinctly and positively, that the money has been furnishedas a loan. 1. In the 5th paragraph, hereinbefore quoted, Nicasio and Gaspar bind themselves to repay the amount, something that they would not be bound to do were the contract one of partnership. 1. In the same par. Nicasio and Gaspar create in favor of the plaintiff and his associates a right of pledge over the lorchas, a thing inconsistent with the idea of partnership.

This par. should not be construed as transferring the ownership of the lorchas themselves to t