Agency and Partnership Digests #6

Partnership Compiled Digests #1 AJ | Amin | Cha | Janz | Krizel | Paco | Vien | Yen
Agad v. Mabato 23 SCRA 1223

G.R. Nos. L-24193 | June 28, 1968 | C. J. Concepcion | Appeal Petitioner: MAURICIO AGAD Respondents: SEVERINO MABATO and MABATO and AGAD COMPANY Facts: Petitioner Agad alleges that he and Respondent Mabato are partners in a fishpond business, pursuant to a public instrument dated August 29, 1952, partners in a fishpond business, to the capital of which Agad contributed P1,000, with the right to receive 50% of the profits Respondent Mabato handled the partnership fund and 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 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 Mabato however alleged that the partnership never existed, on the ground that the contract therefor had not been perfected, despite the execution of the public document, because Agad had allegedly failed to give his P1,000 contribution to the partnership capital. Respondent prayed that the complain be dismissed and that the partnership be declared void ab initio Respondent also filed a motion to dismiss on the grounds that 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. The court (CFI) issued the order appealed from, granting the motion to dismiss the complaint for failure to state a cause of action. On the ground that the contract of partnership, 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. 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.
It should be noted, however, that, as stated in contract of partnership, that 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. Dispositive: Appeal Granted 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.
Torres v. CA 320 SCRA 428

Facts Sisters Antonia Torres and Emeteria Baring, herein petitioners, entered into a "joint venture agreement" with Respondent Manuel Torres for the development of a parcel of land into a subdivision. Pursuant to the contract, they executed a Deed of Sale covering the said parcel of land in favor of respondent, who then had it registered in his name. By mortgaging the property, respondent obtained from Equitable Bank a loan of P40,000 which, under the Joint Venture Agreement, was to be used for the development of the subdivision. All three of them also agreed to share the proceeds from the sale of the subdivided lots. The project did not push through, and the land was subsequently foreclosed by the bank. PETITIONERS: the project failed because of "respondent's lack of funds or means and skills." They add that respondent used the loan not for the development of the subdivision, but in furtherance of his own company, Universal Umbrella Company. RESPONDENT: he used the loan to implement the Agreement. With the said amount, he was able to effect the survey and the subdivision of the lots. He secured the Lapu Lapu City Council's approval of the subdivision project which he advertised in a local newspaper. He also caused the construction of roads, curbs and gutters. Likewise, he entered into a contract with an engineering firm for the building of sixty low-cost housing units and actually even set up a model house on one of the subdivision lots. He did all of these for a total expense of P85,000. Respondent claimed that the subdivision project failed, however, because petitioners and their relatives had separately caused the annotations of adverse claims on the
Issue: WON "immovable property or real rights" have been contributed to the partnership under consideration, thus the partnership is void due to the violation of Art. 1773. Held: No Ratio:
title to the land, which eventually scared away prospective buyers. Despite his requests, petitioners refused to cause the clearing of the claims, thereby forcing him to give up on the project. Subsequently, petitioners filed a criminal case for estafa against respondent and his wife, who were however acquitted. Thereafter, they filed the present civil case TC: Dismissed the case, CA: remand to RTC, RTC: dismissed the complaint, CA: affirms Issue WON the transaction between the petitioners and respondent was that of a joint venture/partnership- YES. Existence of a Partnership A reading of the terms embodied in the Agreement indubitably shows the existence of a partnership pursuant to Article 1767 of the Civil Code, which provides: 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 profits among themselves. Under the Agreement, petitioners would contribute property to the partnership in the form of land which was to be developed into a subdivision; while respondent would give, in addition to his industry, the amount needed for general expenses and other costs. Furthermore, the income from the said project would be divided according to the stipulated percentage. Clearly, the contract manifested the intention of the parties to form a partnership. It should be stressed that the parties implemented the contract. Thus, petitioners transferred the title to the land to facilitate its use in the name of the respondent. On the other hand, respondent caused the subject land to be mortgaged, the proceeds of which were used for the survey and the subdivision of the land. As noted earlier, he developed the roads, the curbs and the gutters of the subdivision and entered into a contract to construct low-cost housing units on the property. Respondent's actions clearly belie petitioners' contention that he made no contribution to the partnership. Under Article 1767 of the Civil Code, a partner may contribute not only money or property, but also industry. Petitioners Bound by Terms of Contract Under Article 1315 of the Civil Code, contracts bind the parties not only to what has been expressly stipulated, but also to all necessary consequences thereof, as follows: Art. 1315. Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. It is undisputed that petitioners are educated and are thus presumed to have understood the terms of the contract they voluntarily signed. If it was not in consonance with their expectations, they should have objected to it and insisted on the provisions they wanted. Courts are not authorized to extricate parties from the necessary consequences of their acts, and the fact that the contractual stipulations may turn out to be financially disadvantageous will not relieve parties thereto of their obligations. They cannot now disavow the relationship formed from such agreement due to their supposed misunderstanding of its terms. Alleged Nullity of the Partnership Agreement Petioners contend that since the parties did not make, sign or attach to the public instrument an inventory of the real property contributed, the partnership is void. SC clarifies. First, Article 1773 was intended primarily to protect third persons. The case at bar does not involve third parties who may be prejudiced.Second, petitioners themselves invoke the allegedly void contract as basis for their claim that respondent should pay them 60 percent of the value of the property. They cannot in one breath deny the contract and in another recognize it, depending on what momentarily suits their purpose. Parties cannot adopt inconsistent positions in regard to a contract and courts will not tolerate, much less approve, such practice. In short, the alleged nullity of the partnership will not prevent courts from considering the Joint Venture Agreement an ordinary contract from which the parties' rights and obligations to each other may be inferred and enforced. Partnership Agreement Not the Result of an Earlier Illegal Contract Petitioners also contend that the Joint Venture Agreement is void under Article 1422 of the Civil Code, because it is the direct result of an earlier illegal contract, which was for the sale of the land without valid consideration.- WRONG!! The Joint Venture Agreement clearly states that the consideration for the sale was the expectation of profits from the subdivision project. Its first stipulation states that petitioners did not actually receive payment for the parcel of land sold to respondent. Consideration, more properly denominated as cause, can take different forms, such as the prestation or promise of a thing or service by another. In this case, the cause of the contract of sale consisted not in the stated peso value of the land, but in the expectation of profits from the subdivision project, for which the land was intended to be used.
Arbes v. Polistico 53 Phil. 489

Ponente: Villamor, J. Nature: Action to bring about liquidation of the funds and property of Turnuhan Polistico Facts: Arbes et al (plaintiffs) were members or shareholders of Turnuhan Polistico and Polistico et al (defendants) were directors, president-treasurer and secretary of the association. This case has been brought for the second time to the SC. The first one was when the same plaintiffs appeared from the order of the court below sustaining the defendant's demurrer, and requiring the former to amend their complaint within a period, so as to include all the members of "Turnuhan Polistico & Co.," either as plaintiffs or as defendants. This court held then that in an action against the officers of a voluntary association to wind up its affairs and enforce an accounting for money and property in their possessions, it is not necessary that all members of the association be made parties to the action. (Borlasa vs. Polistico, 47 Phil., 345.) Quintos, of the Insular Auditor's Office, was appointed to examine all the books, documents, and accounts of "Turnuhan Polistico & Co.," and to receive whatever evidence the parties might desire to present. Polistico et al objected to the commissioner's report.
The TC, however, held that the association "Turnuhan Polistico & Co." is unlawful, and sentenced the defendants jointly and severally to return the amount of P24,607.80, as well as the documents showing the uncollected credits of the association, to Arbes, et al in and to the rest of the members of the said association represented by said plaintiffs. Polistico et al contend that because "Turnuhan Polistico & Co.," is unlawful, some charitable institution to whom the partnership funds may be ordered to be turned over, should be included, as a party defendant. The appellants refer to article 1666 of the Civil Code, which provides: A partnership must have a lawful object, and must be established for the common benefit of the partners. When the dissolution of an unlawful partnership is decreed, the profits shall be given to charitable institutions of the domicile of the partnership, or, in default of such, to those of the province. Issue: WON the charitable institutions be considered as necessary parties for the total disposition of this case? Ratio: No. According to said article, no charitable institution is a necessary party in the present case of determination of the rights of the parties. The action which may arise from said article, in the case of unlawful partnership, is that for the recovery of the amounts paid by the member from those in charge of the administration of said partnership, and it is not necessary for the said parties to base their action to the existence of the partnership, but on the fact that of having contributed some money to the partnership capital. And hence, the charitable institution of the domicile of the partnership, and in the default thereof, those of the province are not necessary parties in this case. The article cited above permits no action for the purpose of obtaining the earnings made by the unlawful partnership, during its existence as result of the business in which it was engaged, because for the purpose, as Manresa remarks, the partner will have to base his action upon the partnership contract, which is to annul and without legal existence by reason of its unlawful object; and it is self evident that what does not exist cannot be a cause of action. Hence, paragraph 2 of the same article provides that when the dissolution of the unlawful partnership is decreed, the profits cannot inure to the benefit of the partners, but must be given to some charitable institution. The profits are so applied, and not the contributions, because this would be an excessive and unjust sanction for, as we have seen, there is no reason, in such a case, for depriving the partner of the portion of the capital that he contributed, the circumstances of the two cases being entirely different. Our Code does not state whether, upon the dissolution of the unlawful partnership, the amounts contributed are to be returned to the partners, because it only deals with the disposition of the profits; but the fact that said contributions are not included in the disposal prescribed for said profits, shows that in consequence of said exclusion, the general rules of law must be followed, and hence, the partners must be reimbursed the amount of their respective contributions. Any other solution would be immoral, and the law will not consent to the latter remaining in the possession of the manager or administrator who has refused to return them, by denying to the partners the action to demand them. (Ibid, at p. 495, quoting from MANRESA, COMMENTARIES ON THE SPANISH CIVIL CODE, Vol. XI, pp. 262-264.) In short, the court decreed that the partners had the right to recover the contribution.
Tocao v. CA 342 SCRA 20

SYNOPSIS For having been excluded from the partnership "Geminesse Enterprises," Nenita Anay brought a complaint for sum of money with damages against Marjorie D. Tocao and William Belo before the Regional Trial Court of Makati. In their answer, Tocao and Belo asserted that Geminesse Enterprises was the sole proprietorship of Tocao and that Anay merely acted as Marketing Demonstrator of Geminesse. Thus, Tocao and Belo theorized that Anay's complaint which pertains to her compensation or dismissal, should have been lodged with the Department of Labor. At the pre-trial, the parties defined as the main issue, the question of whether or not Anay was a partner of Tocao and Belo. The trial court ruled that she was. Tocao and Belo admitted that Anay had the expertise to engage in the business of distributorship of cookware. Anay contributed such expertise to the partnership and, hence, under the law, she was the industrial or managing partner. It was through her reputation that the partnership was able to open the business of distributorship; it was through the same efforts that the business was propelled to financial success. Moreover, Anay had a voice in the management of the affairs of the business, including selection of people who would constitute the administrative staff and the sales force. Likewise, Tocao admitted that, like her who owned Gimenesse Enterprises, Anay received only commissions and transportation and representation allowances and not a fixed salary. If indeed Tocao was Anay's employer, it was difficult to believe that they shall receive the same income in the business.
Aguila v. CA 319 SCRA 246

Alfredo AGUILA (petitioner) is the manager of A.C. Aguila & Sons, Co., a partnership engaged in lending activities while private respondent Felicidad ABROGAR and her late husband, Ruben, were the registered owners of a house and lot in Marikina April 1991: ABROGAR, with the consent of her late husband, and A.C. Aguila & Sons, Co., represented by AGUILA, entered into a Memorandum of Agreement (MOA) where the parties agreed on the sale with right of repurchase of the abovementioned house and lot for the consideration of P200K. In the MOA, ABROGAR (seller) was given a 90-day period of redemption On even date, ABROGAR executed in favor of AGUILA a pre-dated (June 1991) Deed of Absolute Sale over the property and also executed in favor of AGUILA a POA, giving him authority to cause the cancellation of the original TCT and the issuance of a new one in his name
Pursuant to the MOA, 15 days after the expiration of the 90-day redemption period, AGUILA sent notice to ABROGAR for her to vacate the premises and surrender possession of the same. ABROGAR refused. Hence, AGUILA filed with the MTC an ejectment case against her MTC ruled in favor of AGUILA. ABROGAR appealed all the way up to the SC, and she lost all the way ABROGAR then filed a Petition for Declaration of Nullity of the Deed of Sale with the RTC of Marikina on the ground that her signature and her husbands appearing on the deed of sale were forged because husband was already dead (vehicular accident) when the deed was supposed to have been executed on June 1991. As for her, she was allegedly at such time in the QMMC recuperating from wounds she suffered from the same vehicular accident RTC dismissed ABROGARs petition. RTC took judicial notice of lending institutions common business practice of pre-dating contracts like the subject deed of sale for various purposes, e.g. evasion of taxes. Hence, it ruled that the subject contract, together with the MOA and POA were all duly signed by the parties on even date, April 1991. RTC also pointed out that ABROGAR never denied having received P200K from AGUILA and it is highly improbable that an established lending firm as A.C. Aguila & Sons would part with such a huge amount without protecting its interest by having its clients sign all the required documents On appeal to the CA, RTC was reversed. The CA nullified the Deed of Sale by ruling that the transaction between AGUILA and ABROGAR was in fact an Equitable Mortgage (Art. 1602, CC) owing to the fact that P200K was an unusually inadequate amount for the real value of the property; that the ABROGARS continued to be in actual possession of the property; and that they continued paying the taxes therefor. Their transaction being a mortgage, the automatic transfer/appropriation of the property in favor of lender AGUILA is found by the CA to be pactum commissorium, therefor the assailed deed of absolute sale is void for being contrary to law Aggrieved, AGUILA brought the instant petition alleging grave abuse of discretion on the part of the CA for reversing the RTCs decision ISSUES: WON AGUILA is the real party in interest (only relevant issue) HELD: AGUILAs petition is meritorious. He is not the real party in interest! All other issues need not be tackled. CA decision is REVERSED RATIO: Under Rule 3, Sec 2 of the Rules of Court, every action must be prosecuted and defended in the name of the real party in interest. A real party in interest is one who would be benefited or injured by the judgment, or who is entitled to the avails of the suit. Any decision rendered against a person who is not a real party in interest in the case cannot be executed. Hence, a complaint filed against such a person should be dismissed for failure to state a cause of action 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 THE CASE AT BAR, ABROGAR 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 MOA was executed between ABROGAR, with the consent of her late husband, and A. C. Aguila & Sons, Co., represented by AGUILA Hence, it is the partnership, not its officers or agents, which should be impleaded in any litigation involving property registered in its name. A violation of this rule will result in the dismissal of the complaint. We cannot understand why both the RTC and the CA sidestepped this issue when it was squarely raised before them by AGUILA
Tan v. del Rosario 237 SCRA 324

From: http://www.scribd.com/doc/23910277/TaxationCases-1-3 and http://www.scribd.com/doc/34676683/TaxDigests Topic: Taxation of general professional partnerships v. ordinary business partnerships Facts: RA 7496 : Simplified Net Income Taxation Scheme for the Self-Employed and Professionals Engaged in the Practice of their profession Revenue Regulations No. 2-93 : Sec 6. General Professional Partnershipthe general professional partners (GPP) and the partners comprising the GPP are covered by RA 7496. Thus, in determining the net profit of the partnership, only the direct costs mentioned in said law are to be deducted from partnership income. Also, the expenses paid or incurred by partners in their individual capacities in the practice of their profession which are not reimbursed or paid by the partnership but are not considered as direct cost, are not deductible from his gross income. Petitioners assails RA 7496 and corresponding regulations as violative of the constitutional requirement that taxation shall be uniform and equitable. Issue: WON RA 7496 and the corresponding regulations are violative of the constitutional requirement that taxation shall be uniform and equitable. Ruling: Petition denied. Ratio Decidendi: Uniformity of taxation means that (1) the standards that are used therefore are substantial and not arbitrary, (2) the categorization is germane to achieve legislative purpose, (3) the law applies, all things being equal, to both present and future conditions and (4) the classification applies equally well to all those belonging to the same class. Deliberations during the hearing for the bill show that the income tax is imposed not on the professional partnership, which is tax exempt, but on partners themselves in their individual capacity computed on their distributive shares of partnership profits. There is no distinction in income tax liability between a person who practices his profession alone or individually and one who does it through partnership with others in the exercise of a common profession
[PARTNERSHIP RELEVANT] 1. W/N the SNIT applies to partners in general professional partnerships. YES. There is no distinction in income tax liability between a person who practices his profession alone or individually and one who does it through a partnership (whether registered or not) with others in the exercise of a common profession. Under the present income tax system, all individuals deriving income from any source whatsoever are treated in almost invariably the same manner and under a common set of rules. Although the general professional partnership is exempt from the payment of taxes (but it still has an obligation to file an income tax return mainly for administration and data), the partners themselves are liable for the payment of income tax in their individual capacity computed on their respective and distributive shares of profits. Notes: Differences between general professional partnerships and ordinary business partnerships: a. A general professional partnership, unlike an ordinary business partnership (which is treated as a corporation for income tax purposes and so subject to the corporate income tax), is not itself an income taxpayer. The income tax is imposed not on the professional partnership, which is tax exempt, but on the partners themselves in their individual capacity computed on their distributive shares of partnership profits. b. Ordinary business partnerships, no matter how created or organized, are taxable partnerships. General professional partnerships are exempt partnerships. Under the Tax Code on income taxation, the general professional partnership is deemed to be no more than a mere mechanism or a flowthrough entity in the generation of income by, and the ultimate distribution of such income to, respectively, each of the individual partners. proposed to establish its representative office in the Philippines with the purpose of monitoring and coordinating the market activities for paper products. It also designated Mendiola as its resident agent in the Philippines, authorized to accept summons and processes in all legal proceedings, and all notices affecting the corporation. The Side Agreement was amended through a "Revised Operating and Profit Sharing Agreement for the Representative Office Known as Pacific Forest Resources Philippines," where the salary of Mendiola was increased to $78,000 per annum. Both agreements show that the operational expenses will be borne by the representative office and funded by all parties "as equal partners," while the profits and commissions will be shared among them. Mendiola wrote Kevin Daley, VP for Asia of Pacfor, seeking confirmation of his 50% equity of Pacfor Phils. Pacfor, through William Gleason, its President, replied that Mendiola is not a part-owner of Pacfor Phils. because the latter is merely Pacfor-USA's representative office and not an entity separate and distinct from Pacfor-USA. It's simply a 'theoretical company' with the purpose of dividing the income 50-50. Mendiola presumably knew of this arrangement from the start, having been the one to propose to Pacfor the setting up of a representative office, and "not a branch office" in the Philippines to save on taxes. Mendiola claimed that he was all along made to believe that he was in a joint venture with them. He alleged he would have been better off remaining as an independent agent or representative of Pacfor-USA as ATM Marketing Corp. Had he known that no joint venture existed, he would not have allowed Pacfor to take the profitable business of his own company, ATM Marketing Corp. Mendiola wrote Pacfor-USA demanding payment of unpaid commissions and office furniture and equipment rentals, amounting to more than $1M. Pacfor ordered Mendiola to turn over to it all papers, documents, files, records, and other materials in his or ATM Marketing Corporation's possession that belong to Pacfor or Pacfor Phils. Pacfor also required Mendiola to remit more than P300,000 Christmas giveaway fund for clients of Pacfor Phils. Pacfor withdrew all its offers of settlement and ordered Mendiola to transfer title and turn over to it possession of the service car. Pacfor likewise sent letters to its clients in the Philippines, advising them not to deal with Mendiola or ATM Marketing Corporation instead deal with them directly. Mendiola construed these directives as a severance of the "unregistered partnership" between him and Pacfor, and the termination of his employment as resident manager of Pacfor Phils. Mendiola insisted that he and Pacfor equally own Pacfor Phils. He also reiterated his demand for unpaid commissions, and proposed to offset these with the remaining Christmas giveaway fund in his possession. Furthermore, he did not renew the lease contract with Pulp and Paper, Inc., the lessor of the office premises of Pacfor Phils., wherein he was the signatory to the lease agreement. Pacfor placed Mendiola on preventive suspension and ordered him to show cause why no disciplinary action should be taken against him. Pacfor charged Mendiola with willful disobedience and serious misconduct for his refusal to turn over the service car and the Christmas giveaway fund which he applied to his alleged unpaid commissions. Pacfor also alleged loss of confidence and gross neglect of duty on the part of Mendiola.
Mendiola v. CA 497 SCRA 346

FACTS: Pacific Forest Resources, Phils., Inc. (Pacfor) is a corporation organized and existing under the laws of California, USA. It is a subsidiary of Cellulose Marketing International, a corporation duly organized under the laws of Sweden, with principal office in Gothenburg, Sweden. Pacfor entered into a Side Agreement on Representative Office known as Pacific Forest Resources Phils., Inc. with Arsenio T. Mendiola assuming that Pacfor-Phils. is already approved by the Securities and Exchange Commission. The Side Agreement outlines the business relationship of the parties with regard to the Philippine operations of Pacfor. Pacfor will establish a Pacfor representative office in the Philippines, to be known as Pacfor Phils, and Mendiola will be its President. Mendiola's base salary and the overhead expenditures of the company shall be borne by the representative office and funded by Pacfor/Mendila, since Pacfor Phils. is equally owned on a 50-50 equity by Mendiola and Pacfor-usa. SEC granted the application of Pacfor for a license to transact business in the Philippines under the name of Pacfor or Pacfor Phils. In its application, Pacfor
Mendiola denied the charges. He reiterated that he considered the import of Pacfor President William Gleason's letters as a cessation of his position and of the existence of Pacfor Phils. He likewise informed Pacfor that ATM Marketing Corp. now occupies Pacfor Phils.' office premises, and demanded payment of his separation pay. Mendiola filed his complaint for illegal dismissal, recovery of separation pay, and payment of attorney's fees with the NLRC. Pacfor lodged fresh charges against Mendiola. Pacfor directed Mendiola to explain why he should not be disciplined for serious misconduct and conflict of interest. Pacfor charged Mendiola anew with serious misconduct for the latter's alleged act of fraud and misrepresentation in authorizing the release of an additional peso salary for himself, besides the dollar salary agreed upon by the parties. Pacfor also accused petitioner of disloyalty and representation of conflicting interests for having continued using the Pacfor Phils.' office for operations of HEPI. In addition, Pacfor allegedly solicited business for HEPI from a competitor company of Pacfor. Labor Arbiter ruled in favor of Mendiola, finding there was constructive dismissal. Pacfor appealed to the NLRC which ruled in its favor. NLRC set aside decision of the labor arbiter, for lack of jurisdiction and lack of merit. It held there was no employer-employee relationship between the parties. Based on the two agreements between the parties, it concluded that petitioner is not an employee of Pacfor, but a full co-owner (50/50 equity). CA affirmed. The legal basis of the complaint is not employment but perhaps partnership, co-ownership, or independent contractorship." Besides, a corporation cannot become a member of a partnership in the absence of express authorization by statute or charter. This doctrine is based on the following considerations: (1) that the mutual agency between the partners, whereby the corporation would be bound by the acts of persons who are not its duly appointed and authorized agents and officers, would be inconsistent with the policy of the law that the corporation shall manage its own affairs separately and exclusively; and, (2) that such an arrangement would improperly allow corporate property to become subject to risks not contemplated by the stockholders when they originally invested in the corporation. No such authorization has been proved in the case at bar. An employer-employee relationship is present in the case at bar. The elements to determine the existence of an employment relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the employee's conduct. The most important element is the employer's control of the employee's conduct, not only as to the result of the work to be done, but also as to the means and methods to accomplish it. All the foregoing elements are present. (1) it was Pacfor which selected and engaged the services of Mendiola as its resident agent in the Philippines. (2), as stipulated in their Side Agreement, Pacfor pays Mendiola his salary amounting to $65,000 per annum which was later increased to $78,000. (3) Pacfor holds the power of dismissal, as may be gleaned through the various memoranda it issued against Mendiola, placing the latter on preventive suspension while charging him with various offenses, including willful disobedience, serious misconduct, and gross neglect of duty, and ordering him to show cause why no disciplinary action should be taken against him. Lastly and most important, Pacfor has the power of control over the means and method of Mendiola in accomplishing his work. The principal consideration is whether the employer has the right to control the manner of doing the work, and it is not the actual exercise of the right by interfering with the work, but the right to control, which constitutes the test of the existence of an employer-employee relationship. Pacfor clearly possesses such right of control. Mendiola, as Pacfor's resident agent in the Philippines, is, exactly so, only an agent of the corporation, a representative of Pacfor, who transacts business, and accepts service on its behalf. This right of control was exercised by Pacfor when it directed petitioner to turn over to it all records of Pacfor Phils.; when it ordered Mendiola to remit the Christmas giveaway fund intended for clients of Pacfor Phils.; and, when it withdrew all its offers of settlement and ordered petitioner to transfer title and turn over to it the possession of the service car. It was also during this period when Pacfor sent letters to its clients in the Philippines, advising them not to deal with Mendiola and/or Pacfor Phils.
ISSUES/HELD: Whether an employer-employee relationship exists between Mendiola and Pacfor. YES Mendiola - he is an industrial partner of the partnership he formed with Pacfor, and also an employee of the partnership. An industrial partner may at the same time be an employee of the partnership, provided there is such an agreement, which, in this case, is the "Side Agreement" and the "Revised Operating and Profit Sharing Agreement." In a partnership, the members become co-owners of what is contributed to the firm capital and of all property that may be acquired thereby and through the efforts of the members. The property or stock of the partnership forms a community of goods, a common fund, in which each party has a proprietary interest. The New Civil Code regards a partner as a co-owner of specific partnership property. Each partner possesses a joint interest in the whole of partnership property. If the relation does not have this feature, it is not one of partnership. This essential element, the community of interest, or co-ownership of, or joint interest in partnership property is absent in the relations between Mendiola and Pacfor. Mendiola is not a part-owner of Pacfor Phils. Pacfor's President established this fact when he said that Pacfor Phils. is simply a "theoretical company" for the purpose of dividing the income 50-50. He stressed that Mendiola knew of this arrangement from the very start, having been the one to propose to Pacfor the setting up of a representative office, and "not a branch office" in the Philippines to save on taxes. Thus, the parties in this case, merely shared profits. This alone does not make a partnership.
Was constructively dismissed from employment. YES When Mendiola insisted on his 50% equity in Pacfor Phils., and would not quit however, Pacfor began to systematically deprive petitioner of his duties and benefits to make him feel that his presence in the company was no longer wanted. (1) Pacfor directed Mendiola to turn over to it all records of Pacfor Phils. This would certainly make the work of petitioner very difficult, if not impossible. (2) Pacfor ordered Mendiola to remit the Christmas giveaway fund intended for
clients of Pacfor Phils. Then it ordered Mendiola to transfer title and turn over to it the possession of the service car. It also advised its clients in the Philippines, particularly Intercontinental Paper Industries, Inc. and DAVCOR, not to deal with petitioner and/or Pacfor Phils. (3) Pacfor appointed a new resident agent for Pacfor Phils. indicating the same and a lack of registration with the Securities and Exchange Commission (SEC) Held: Yes. The argument of the Angeles spouses holds no water. Ratio: 1. 2. The Angeles spouses contributed money to the partnership and not immovable property. Mere failure to register the contract of partnership with the SEC does not invalidate a contract that has the essential requisites of a partnership. The purpose of registration of the contract of partnership is to give notice to third parties. Failure to register the contract of partnership does not affect the liability of the partnership and of the partners to third persons. Neither does such failure to register affect the partnerships juridical personality. A partnership may exist even if the partners do not use the words partner or partnership. Indeed, the Angeles spouses admit to facts that prove the existence of a partnership: a contract showing a sosyo industrial or industrial partnership, contribution of money and industry to a common fund, and division of profits between the Angeles spouses and Mercado.
Angeles v. Sec. of Justice 465 SCRA 106

Facts: the Angeles spouses filed a criminal complaint for estafa under Article 315 of the Revised Penal Code against Mercado before the Provincial Prosecution Office. Mercado is the brother-in-law of the Angeles spouses, being married to Emerita Angeles sister Laura. Angeles spouses claimed that Mercado convinced them to enter into a contract of antichresis colloquially known as sanglaang-perde, covering eight parcels of land (subject land) planted with fruit-bearing lanzones trees The contract of antichresis was to last for five years with P210,000 as consideration. As the Angeles spouses stay in Manila during weekdays and go to Laguna only on weekends, the parties agreed that Mercado would administer the lands and complete the necessary paperworks After three years, the Angeles spouses asked for an accounting from Mercado. Mercado explained that the subject land earned P46,210 in 1993, which he used to buy more lanzones trees. Mercado also reported that the trees bore no fruit in 1994. Mercado gave no accounting for 1995. The Angeles spouses claim that only after this demand for an accounting did they discover that Mercado had put the contract of sanglaang-perde over the subject land under Mercado and his spouses names. The relevant portions of the contract of sanglaang-perde, signed by Juana Suazo alone, read:
Gatchalian v. CIR 67 Phil. 666

April 29 1939 | No 45425 | Appeal | Imperial, J.: Plaintiffs-appellants: Jose Gatchalian, et al Defendant-appellee: Collector of Internal Revenue QUICKIE: Facts: Jose Gatchalian and 14 others, put up money totaling Php 2.00 in order to buy a sweepstakes ticket for the same amount. They won, and were assessed an income tax of Php 1,499.94, equal to 3 percent of the Php 50,000 prize. They paid under protest. In requesting for a refund, they admit that a partnership would be liable for the income tax, but contend that what they formed was a community of property, instead of a partnership. Upon this contention, it was Held: 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 Php 50,000. Upon their winning, Gatchallian appeared in the PCSO, in his capacity as co-partner, and collected the prize. The PCSO issued the check in favor of Jose Gatchalian and company, which check was collected by Gatchalian. All these repel the idea that they organized and formed a community of property only. The partnership they formed is the one bound to pay the income tax. FACTS:
Arguments of Mercado: Mercado claimed that there exists an industrial partnership, colloquially known as sosyo industrial, between him and his spouse as industrial partners and the Angeles spouses as the financiers. As the years passed, Mercado used his and his spouses earnings as part of the capital in the business transactions which he entered into in behalf of the Angeles spouses. It was their practice to enter into business transactions with other people under the name of Mercado because the Angeles spouses did not want to be identified as the financiers.
Issue: Whether a Partnership Existed Between Mercado and the Angeles Spouses Argument of the Angeles spouses: they had no partnership with Mercado because of the lack of a public instrument
Jose Gatchalian, with 14 others, residents of Pulilan, Bulacan, in order to enable them to purchase one sweepstakes ticket valued at Php 2.00, subscribed and paid therefor varying amounts totalling Php 2.00. They purchased the ticket and the same was registered in the name of Jose Gatchalian and Company. The ticket won the third prize in the draw, in the amount of Php 50,000. Gatchalian was required by income tax examiner Alfredo David to file the corresponding income tax return, and made an assessment against Jose Gatchalian & Company requesting the sum of Php 1,499.94 to the deputy provincial treasurer of Pulilan, Bulacan. They requested an exemption, but the Collector denied plaintiffs request, and also reiterated his demand. After their failure to pay, a warrant of distraint and levy against their properties was issued by the Collector. They paid under protest Php 601.51 as part of the tax and penalties to the municipal treasurer. They also requested to be allowed to pay the rest by monthly installments. This request was granted after filing of a bond to secure performance of each installment (each at Php 118.70 a month). They formally protested and requested a refund, but the same was denied and overruled by the Collector. When they failed to pay the monthly installments according to the terms and conditions of the bond filed by them, the Collector ordered the municipal treasurer of Pulilan to execute within five days the warrant of distraint and levy previously issued. In order to avoid any more annoyance and embarrassment, they paid under protest to the municipal treasurer of Pulilan the sum of Php 1,260.93 representing the unpaid balance. They formally protested and requested for refund once more, and were again overruled and denied by the Collector. On appeal, the CFI affirmed. Sweepstakes, in his capacity as co-partner, as such collected the prize, the office issued the check for Php 50,000 in favor of Jose Gatchalian and company, and the said partner, in the same capacity, collected the same check. All these circumstances repel the idea that the plaintiffs organized and formed a community of property only. Having organized and constituted a partnership of a civil nature, the said entity is the one bound to pay the income tax which the defendant collected. There is no merit in plaintiffs contention that the tax should be prorated among them and paid individually, resulting in their exemption from the tax.
JUDGMENT: Affirmed. NOTES: Characteristics of Partnership not necessarily present in Coownership (my observation only): The parties contribute to a common fund with the intention of dividing the profits among themselves Co-partners act in their capacity as such and in the name of the partnership Income tax is to be paid by the partnership created
Pascual v. CIR 166 SCRA 560

October 18, 1988, GANCAYCO, J.: Petitioners bought two (2) parcels of land from Santiago Bernardino, et al. and on they bought another three (3) parcels of land from Juan Roque. The first two parcels of land were sold by petitioners in 1968 to Marenir Development Corporation, while the three parcels of land were sold by petitioners to Erlinda Reyes and Maria Samson. Petitioners realized a net profit in the sales and they paid the corresponding capital gains taxes by availing of the tax amnesties granted at the time. 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 (the years of sales). Petitioners protested the said assessment in a letter asserting that they had availed of tax amnesties way back in 1974. COMMISSIONER: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. Petitioners filed a petition for review with the respondent Court of Tax Appeals.
ISSUES/ HELD: WON what they formed was a partnership or a coownership. PARTNERSHIP! Whether they should pay the tax collectively or whether the latter should be prorated among them and paid individually. COLLECTIVELY! RATIO: There is no doubt that if the plaintiffs merely formed a community of property the latter is exempt from the payment of income tax under the law1. But according to the stipulated 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 Php 50,000 (article 1665, Civil Code2). 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 Philippine Charity
Section 10 of Act No. 2833, last amended by section 2 of Act No. 3761 2 Now Art 1767 of the New Civil Code, which states: 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. Xxx
1
CTA: affirmed the decision and action taken by respondent commissioner with costs against petitioners. In a separate dissenting opinion, Associate Judge Constante Roaquin stated that considering the circumstances of this case, although there might in fact be a co-ownership between the petitioners, there was no adequate basis for the conclusion that they thereby formed an unregistered partnership which made "hem liable for corporate income tax under the Tax Code. ISSUE: WON PETITIONERS FORMED AN UNREGISTERED PARTNERSHIP SUBJECT TO CORPORATE INCOME TAX. - NO The basis of the subject decision of the respondent court is the ruling of this Court in Evangelista. EVANGELISTA CASE Petitioners borrowed a sum of money from their father which together with their own personal funds they used in buying several real properties. They appointed their brother to manage their properties with full power to lease, collect, rent, issue receipts, etc. They had the real properties rented or leased to various tenants for several years and they gained net profits from the rental income. Thus, the Collector of Internal Revenue demanded the payment of income tax on a corporation, among others, from them The essential elements of a partnership are 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 are present CASE AT BAR See facts 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. No properties were leased
There was a series of transactions where petitioners purchased twentyfour (24) lots showing that the purpose was not limited to the conservation or preservation of the common fund or even the properties acquired by them. The character of habituality peculiar to business transactions engaged in for the purpose of gain was present.
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. 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
Properties were leased out to tenants for several years. The business was under the management of one of the partners. Such condition existed for over fifteen (15) years Table shows that the Evangelista case relied upon by the CA is not similar to the case at bar and was incorrectly used. Concurring opinion of Mr. Justice Angelo Bautista in Evangelista he said: I wish however to make the following observation Article 1769 of the new Civil Code lays down the rule for determining when a transaction should be deemed a partnership or a coownership. Said article paragraphs 2 and 3, provides; (2) Coownership or co-possession does not itself establish a partnership, whether such co-owners or co-possessors do or do not share any profits made by the use of the property; (3) The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived;From the above it appears that the fact that those who agree to form a co- ownership share or do not share any profits made by the use of the property held in common does not convert their venture into a partnership. Or the sharing of the gross returns does not of itself establish a partnership whether or not the persons sharing therein have a joint or common right or interest in the property. This only means that, aside from the circumstance of profit, the presence of other elements constituting partnership is necessary, such as the clear intent to form a partnership, the existence of a juridical personality different from that of the individual partners, and the freedom to transfer or assign any interest in the property by one with the consent of the others It is evident that an isolated transaction whereby two or more persons contribute funds to buy certain real estate for profit in the absence of other circumstances showing a contrary intention cannot be considered a partnership. 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. taxation and confirm the dictum that the power to tax involves the power to destroy. That eventuality should be obviated. As testified by Jose Obillos, Jr., they had no such intention. They were co-owners pure and simple. To consider them as partners would obliterate the distinction between a coownership and a partnership. The petitioners were not engaged in any joint venture by reason of that isolated transaction. Their original purpose was to divide the lots for residential purposes. If later on they found it not feasible to build their residences on the lots because of the high cost of construction, then they had no choice but to resell the same to dissolve the co-ownership. The division of the profit was merely incidental to the dissolution of the co-ownership which was in the nature of things a temporary state. It had to be terminated sooner or later. 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. The Court went on to compare the instant case to other cases like Reyes vs. Commissioner of Internal Revenue, 24 SCRA 198, where father and son purchased a lot and building, entrusted the administration of the building to an administrator and divided equally the net income, and from Evangelista vs. Collector of Internal Revenue, 102 Phil. 140, where the three Evangelista sisters bought four pieces of real property which they leased to various tenants and derived rentals therefrom. Clearly, the petitioners in these two cases had formed an unregistered partnership. These cases are different from the case at bar. 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 (See Art. 1448, Civil Code).
Obillos v. CIR 139 SCRA 436

Facts: On March 2, 1973, Jose Obillos, Sr. completed payment to Ortigas & Co., Ltd. On two lots located at Greenhills. The next day he transferred his rights to his four children, the petitioners, to enable them to build their residences. The company sold the two lots to petitioners for around P178K on March 13. Seemingly, 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 to the Walled City Securities Corporation and Olga Cruz Canda for around 313K. They derived from the sale a total profit of about 134K or 33K for each of them. They treated the profit as a capital gain and paid an income tax on thereof or about 16K. In April, 1980, or one day before the expiration of the 5-year prescriptive period, the CIR required the four petitioners to pay corporate income tax on the total profit of 134K in addition to individual income tax on their shares thereof. He assessed around 37K as corporate income tax, around 18K as 50% fraud surcharge and around 15K as 42% accumulated interest, or a total of 71K. Moreover, he also considered the share of the profits of each petitioner in the sum of about 33K as a " taxable in full (not a mere capital gain of which is taxable) and required them to pay deficiency income taxes aggregating P56,707.20 including the 50% fraud surcharge and the accumulated interest. Thus, the petitioners are being held liable for deficiency income taxes and penalties totaling about 127K on their profit of 134K, in addition to the tax on capital gains already paid by the,. The 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. The petitioners contested the assessments. Two judges of the Tax Court sustained the same. Hence, the instant appeal. Issue: WON the petitioners have formed a partnership. Held. No. The judgment of the Tax Court is reversed and set aside. The assessments are cancelled. The court held that it is error to consider the petitioners as having formed a partnership under Art. 1767 of the Civil Code simply because they allegedly contributed 178K to buy the two lots, resold the same and divided the profit among themselves. To regard the petitioners as having formed a taxable unregistered partnership would result in oppressive
Rivera v. Peoples Bank 73 Phil. 546

FACTS: Rivera was the Stephensons housekeeper and they executed a survivorship agreement. Upon Stephensons death, Rivera tried to claim the amount pursuant to the agreement, but the bank refused. HOLDING: Rivera and Stephenson were joint owners. As such, either of them could withdraw any part of the whole of said account during their lifetime, and the balance, if any, upon the death of either, belonged to the survivor Full text: The question raised in this appeal is the validity of the survivorship agreement made by and between Edgar Stephenson, now deceased, and Ana Rivera3
SURVIVORSHIP AGREEMENT
Know All Men by These Presents:
Ana Rivera was employed by Edgar Stephenson as housekeeper from the year 1920 until his death on June 8, 1939. On December 24, Stephenson opened an account in his name with the defendant Peoples Bank by depositing therein the sum of P1,000. On October 17, 1931, when there was a balance of P2,072 in said account, the survivorship agreement in question was executed and the said account was transferred to the name of "Edgar Stephenson and/or Ana Rivera." At the time of Stephenson's death Ana Rivera held the deposit book, and there was a balance in said account of P701. 43, which Ana Rivera claimed but which the bank refused to pay to her upon advice of its attorneys who gave the opinion that the survivorship agreement was of doubtful validity. hereupon Ana Rivera instituted the present action against the bank, and Minnie Stephenson, administratix of the estate of the deceased, intervened and claimed the amount for the estate, alleging that the money deposited in said account was and is the exclusive property of the deceased. The trial court held that the agreement in question, viewed from its effect during the lives of the parties, was a mere power of attorney authorizing Ana Rivera to withdraw the deposit, which power terminated upon the death of the principal, Edgar Stephenson; but that, viewed from its effect after the death of either of the parties, the agreement was a donation mortis causa with
That we hereby agree with each other and with the PEOPLES BANK AND TRUST COMPANY, Manila, Philippine Islands (hereinafter called the Bank), that all moneys now or hereafter deposited by us or either of us with the Bank in our savings account shall be deposited in and received by the Bank with the understanding and upon the condition that said money be deposited without consideration of its previous ownership, and that said money and all interest thereon, if any there be, shall be the property of both of us joint tenants, and shall be payable to and collectible by either of us during our joint lives, and after the death of one of us shall belong to and be the sole property of the survivor, and shall be payable to and collectible by such survivor. And we further covenant and agree with each other and the Bank, its successors or assigns, that the receipt or check of either of us during our joint lives, or the receipt or check of the survivor, for any payment made from this account, and shall be valid and sufficient and discharge to the Bank for such payment. The Bank is hereby authorized to accept and deposit to this account all checks made payable to either or both of us, when endorsed by either or both of us or one for the other. This is a joint and several agreement and is binding upon each of us, our heirs, executors, administrators, and assigns. In witness whereof we have signed our names here to this 17th day of October, 1931. (Sgd.) EDGAR STEPHENSON (Sgd.) Ana Rivera Address: 799 Sta. Mesa, Manila Witness: (Sgd.) FRED W. BOHLER (Sgd.) Y. E. Cox S. A. #4146
reference to the balance remaining at the death of one of them, which, not having been executed with the formalities of a testamentary disposition as required by article 620 of the Civil Code, was of no legal effect. The defendant bank did not appear in this Court. Counsel for the intervenor-appellee in his brief contends that the survivorship agreement was a donation mortis causa from Stephenson to Ana Rivera of the bank account in question and that, since it was not executed with the formalities of a will, it can have no legal effect. We find no basis for the conclusion that the survivorship agreement was a mere power of attorney from Stephenson to Ana Rivera, or that it is a gift mortis causa of the bank account in question from him to her. Such conclusion is evidently predicated on the assumption that Stephenson was the exclusive owner of the funds deposited in the bank, which assumption was in turn based on the facts (1) that the account was originally opened in the name of Stephenson alone and (2) that Ana Rivera "served only as housemaid of the deceased." But it not infrequently happens that a person deposits money in the bank in the name of another; and in the instant case it also appears that Ana Rivera served her master for about nineteen years without actually receiving her salary from him. The fact that subsequently Stephenson transferred the account to the name of himself and/or Ana Rivera and executed with the latter the survivorship agreement in question although there was no relation of kinship between them but only that of master and servant, nullifies the assumption that Stephenson was the exclusive owner of the bank account. In the absence, then, of clear proof of the contrary, we must give full faith and credit to the certificate of deposit, which recites in effect that the funds in question belonged to Edgar Stephenson and Ana Rivera; that they were joint owners thereof; and that either of them could withdraw any part or the whole of said account during the lifetime of both, and the balance, if any, upon the death of either, belonged to the survivor.
Is the survivorship agreement valid? Prima facie, we think it is valid. It is an aleatory contract supported by law a lawful consideration the mutual agreement of the joint depositors permitting either of them to withdraw the whole deposit during their lifetime, and transferring the balance to the survivor upon the death of one of them. The trial court said that the Civil Code "contains no provisions sanctioning such an agreement" We think it is covered by article 1790 of the Civil Code, which provides as follows: ART. 1790. By an aleatory contract one of the parties binds himself, or both reciprocally bind themselves, to give or to do something as an equivalent for that which the other party is to give or do in case of the occurrence of an event which is uncertain or will happen at an indeterminate time. (See also article 1255.) The case of Macam vs. Gatmaitan (decided March 11, 1937), 36 Off. Gaz., 2175, is in point. Two friends Juana Gatmaitan and Leonarda Macam, who had lived together for some time, agreed in writing that the house of strong materials which they bought with the money belonging to Leonarda Macam and the Buick automobile and certain furniture which belonged to Juana Gatmaitan shall belong to the survivor
upon the death of one of them and that "this agreement shall be equivalent to a transfer of the rights of the one who dies first and shall be kept by the survivor." After the death of Leonarda Macam, her executrix assailed that document on the ground that with respect to the house the same constituted a donation mortis causa by Leonarda Macam in favor of Juana Gatmaitan. In affirming the judgment of the trial court absolving the defendants from the complaint this Court, speaking through Chief Justice Avacea, said: This court is of the opinion that Exhibit C is an aleatory contract whereby, according to article 1790 of the civil Code, one of the parties or both reciprocally bind themselves to give or do something as an equivalent for that which the other party is to give or do in case of the occurrence of an event which is uncertain or will happen at an indeterminate time. As already stated, Leonarda was the owner of the house and Juana of the Buick automobile and most of the furniture. By virtue of Exhibit C, Juana would become the owner of the house in case Leonarda died first, and Leonarda would become the owner of the automobile and the furniture if Juana were to die first. In this manner Leonarda and Juana reciprocally assigned their respective property to one another conditioned upon who might die first, the time of death determining the event upon which the acquisition of such right by the one or the other depended. This contract, as any other contract, is binding upon the parties thereto. Inasmuch as Leonarda had died before Juana, the latter thereupon acquired the ownership of the house, in the same manner as Leonarda would have acquired the ownership of the automobile of the furniture if Juana had died first. (36 Off. Gaz., 2176.) Furthermore, "it is well established that a bank account may be so created that two persons shall be joint owners thereof during their mutual lives, and the survivor take the whole on the death of the other. The right to make such joint deposits has generally been held not to be done with by statutes abolishing joint tenancy and survivorship generally as they existed at common law." (7 Am. Jur., 299.) But although the survivorship agreement is per se not contrary to law, its operation or effect may be violative of the law. For instance, if it be shown in a given case that such agreement is a mere cloak to hide an inofficious donation, to transfer property in fraud of creditors, or to defeat the legitime of a forced heir, it may be assailed and annulled upon such grounds. No such vice has been imputed and established against the agreement involved in the case. The agreement appealed from is reversed and another judgment will be entered in favor of the plaintiff ordering the defendant bank to pay to her the sum of P701.43, with legal interest thereon from the date of the complaint, and the costs in both instances. So ordered. Yulo, C.J., Moran, Paras, and Bocobo, JJ., concur. Plaintiff-appellee JM Tuason & Co., Inc. is a partnership. Thru its managing partner, Gregorio Araneta, Inc., it originally brought this suit with QC CFI to recover possession of registered land situated in Tatalon, QC Defendant-appellant Quirino BOLAOS, on the other hand, is an adverse owner of the same land by alleged acquisitive prescription thru open, continuous, exclusive, public and notorious possession of land in dispute under claim of ownership, adverse to the entire world time immemorial The complaint was amended three times with respect to the description of the land sought to be recovered. Originally, it was 13 hectares reduced to 6 hectares and then back to 13 Meanwhile, BOLAOS had prayed for the dismissal of the case against him by alleging his prior, adverse possession of the disputed land and alleging that TUASONs registration of the land in dispute was obtained thru fraud or error and without knowledge of his and/or predecessors interest therein CFI rendered judgment in favor of TUASON, declaring BOLAOS to be without any right to the land in question and ordering him to restore possession thereof to TUASON and to pay the latter a monthly rent and also to pay the costs BOLAOS appealed directly to the SC because of the value of the property involved raising the following issues ISSUES: (1) WON the case was brought by the real party in interest (only relevant issue) side-issue: Can Gregorio Araneta, Inc. (a corporation) be a partner of another corporation? (2) WON the CFI correctly admitted TUASONs amendment of the complaint YES. (3) WON the CFI correctly ruled that TUASON is the true and lawful owner of the land YES. HELD: BOLAOS petition is without merit. The CFI decision is AFFIRMED. RATIO: (1) It is beyond question that the present action was brought by the real party in interest, that is, by J. M. Tuason and Co., Inc. What the Rules of Court require is that an action be brought in the name of, but not necessarily by, the real party in interest. (Section 2, Rule 2) The practice is for an attorney-at-law to bring the action, that is to file the complaint, in the name of the plaintiff. That practice appears to have been followed in this case, since the complaint is signed by the law firm of Araneta and Araneta, "counsel for plaintiff" Side-Issue: WON a corporation can be a partner of another corporation It is true that the complaint also states that the TUASON is being represented by its Managing Partner Gregorio Araneta, Inc., another corporation There is nothing against one corporation being represented by another person, natural or juridical, in a suit in court The contention that Gregorio Araneta, Inc. cannot act as managing partner for TUASON on the theory that it is illegal for two corporations to enter into a partnership is without merit for the true rule is that "though a corporation has no power to enter into a partnership,
Tuason v. Bolanos 95 Phil. 106
it may nevertheless enter into a joint venture with another where the nature of that venture is in line with the business authorized by its charter. (citing Wyoming-Indiana Oil Gas Co. vs. Weston, 80 A. L. R., 1043) There is nothing in the record to indicate that the venture in which TUASON is represented by Gregorio Araneta, Inc. as "its managing partner" is not in line with the corporate business of either of them (2) As to the admission of TUASONs amendments, suffice it to say that Section 4 of Rule 17, Rules of Court sanctions such amendment. In fact, under the same Rule, amendment is not even necessary for the purpose of rendering judgment on issues proved though not alleged (3) Considering the ruling in issues #1 and 2 (plus the evidence on record and the admissions of both plaintiff and defendants on trial), and it having been proven that TUASONs Torrens title is valid and regularly registered as early as 1914, the decree of registration can no longer be impugned on the ground of fraud, error or lack of notice to defendant, as more than one year has already elapsed from the issuance and entry of the decree Neither can the decree be collaterally attacked by any person claiming title to, or interest in, the land prior to the registration proceedings Nor could title to that land in derogation of that of TUASON, the registered owner, be acquired by prescription or adverse possession Adverse, notorious and continuous possession under claim of ownership for the period fixed by law is ineffective against a Torrens title Issue: Whether the two brothers were partners in Benguet Lumber Co. Held: NO. They were never partners. Ratio: Tan Eng Kee, in his lifetime never executed any acts which would indicate that he was a partner. 1. He never demanded for periodic accountings of the common fund, which would be expected of a real partner; 2. He never received any shares in the profits of Benguet Lumber, he only received salary as evidenced by the payroll documents presented by Tan Eng Lay; 3. The Heirs were unable to prove that the brothers intended to divide the profits of the business between themselves. Even if Tan Eng Kee was granted certain privileges not given to regular employees, (such as being allowed to live with his family on the grounds of the Lumber Compound, and having supervisory powers over the regular employees) the Court found that these privileges were a result of being related to the owner of the company and not because he was a partner. Tan Eng Kee never represented himself as a partner to any third person his actions, when he was alive, taken together with how his brother treated him, strongly indicate that he was NOT a partner. Article 1825 is meant to protect third persons who were misled by a personacting as a partner even if he really isnt. Since Tan Eng Kee never represented himself as a partner, and there is no evidence or documentation of him being a partner, then he is not a partner.
Heirs of Tan Eng Kee v. CA 341 SCRA 740

From: http://www.scribd.com/doc/41898793/Heirs-ofTan-Eng-Kee-Partnership Doctrine: Where circumstances taken singly may be inadequate to prove the intent to form a partnership, nevertheless, the collective effect of these circumstances may be such as to support a finding of existence of the parties intent. The Doctrine is the essence of 1825. Facts: After Tan Eng Kees Death, his common-law wife Matilde Abuho and their children filed an action against his brother, Tan Eng Lay for accounting, liquidation and winding up of the alleged partnership Tan Eng Kee had with Tan Eng Lay. The heirs claim that the two brothers were partners in Benguet Lumber Co. and had been partners since the company was operating after the end of World War 2. Tan Eng Lay, the president of the company claims that Tan Eng Kee was only an employee and presented documents showing that Tan Eng Kee was receiving salary from the company payroll. The RTC ruled in favor of the Heirs of Tan Eng Kee. The CA reversed the RTC and found that no such partnership existed between the brothers.
Aurbach v. Sanitary Wares 180 SCRA 130
QUICK SUMMARY: Foreign stockholders vs. Filipino stockholders at the annual stockholders meeting (election of directors). Foreign stockholders argument is correct within the context of Sec. 24 of the Corporation Code however the business established by the parties is a joint venture with clearly defined agreements. FACTS: Saniwares, a domestic corporation was incorporated for the primary purpose of manufacturing and marketing sanitary wares. One of the incorporators, Mr. Baldwin Young went abroad to look for foreign partners, European or American who could help in its expansion plans. ASI, a foreign corporation domiciled in Delaware, United States entered into an Agreement with Saniwares and some Filipino investors whereby ASI and the Filipino investors agreed to participate in the ownership of an enterprise which would engage primarily in the business of manufacturing in the Philippines and selling here and abroad vitreous china and sanitary wares. The parties agreed that the business operations in the Philippines shall be carried on by an incorporated enterprise and that the name of the corporation shall initially be "Sanitary Wares Manufacturing Corporation."
The Agreement has the following provisions relevant to the issues in these cases on the nomination and election of the directors of the corporation: 3. Articles of Incorporation (a) The Articles of Incorporation of the Corporation shall be substantially in the form annexed hereto as Exhibit A and, insofar as permitted under Philippine law, shall specifically provide for (1) Cumulative voting for directors: 5. Management (a) The management of the Corporation shall be vested in a Board of Directors, which shall consist of 9 individuals. As long as ASI shall own at least 30% of the outstanding stock of the Corporation, 3 of the 9 directors shall be designated by ASI, and the other 6 shall be designated by the other stockholders of the Corporation. At the request of ASI, the agreement contained provisions designed to protect it as a minority group, including the grant of veto powers over a number of corporate acts and the right to designate certain officers, such as a member of the Executive Committee whose vote was required for important corporate transactions. The 30% capital stock of ASI was increased to 40%. The corporation was also registered with the Board of Investments for availment of incentives with the condition that at least 60% of the capital stock of the corporation shall be owned by Philippine nationals. The joint enterprise thus entered into by the Filipino investors and the American corporation prospered. Unfortunately, with the business successes, there came a deterioration of the initially harmonious relations between the two groups. According to the Filipino group, a basic disagreement was due to their desire to expand the export operations of the company to which ASI objected as it apparently had other subsidiaries of joint venture groups in the countries where Philippine exports were contemplated. The annual stockholders' meeting was held. The meeting was presided by Young. The minutes were taken by the Secretary, Avelino Cruz. After disposing of the preliminary items in the agenda, the stockholders then proceeded to the election of the members of the board of directors. The ASI group nominated three persons namely; Wolfgang Aurbach, John Griffin and David P. Whittingham. The Philippine investors nominated six, namely; Ernesto Lagdameo, Sr., Raul A. Boncan, Ernesto R. Lagdameo, Jr., George F. Lee, and Baldwin Young. Eduardo R, Ceniza then nominated Mr. Luciano E. Salazar, who in turn nominated Mr. Charles Chamsay. The chairman, ruled the last two nominations out of order on the basis of section 5 (a) of the Agreement, the consistent practice of the parties during the past annual stockholders' meetings to nominate only 9 persons as nominees for the nine-member board of directors, and the legal advice of Saniwares' legal counsel. There were protests against the action of the Chairman and heated arguments ensued. An appeal was made by the ASI representative to the body of stockholders present that a vote be taken on the ruling of the Chairman. The Chairman declared the appeal out of order and no vote on the ruling was taken. The Chairman then instructed the Corporate Secretary to cast all the votes present and represented by proxy equally for the 6 nominees of the Philippine Investors and the 3 nominees of ASI, thus effectively excluding the 2 additional persons nominated. The ASI representative, Jaqua protested the decision of the Chairman and announced that all votes accruing to ASI shares, a total of 1,329,695 were being cumulatively voted for the 3 ASI nominees and Chamsay, and instructed the Secretary to so vote. Salazar and other proxy holders announced that all the votes owned by and or represented by them 467,197 shares were being voted cumulatively in favor of Salazar. The Chairman nevertheless instructed the Secretary to cast all votes equally in favor of the 3 ASI nominees: Aurbach, Griffin and Whittingham and the six originally nominated by Vinluan, namely, Lagdameo, Sr., Boncan, Lagdameo, Jr., Lagdameo, Lee, and Young. The representative of ASI then moved to recess the meeting which was duly seconded. There was also a motion to adjourn. This motion to adjourn was accepted by the Chairman who announced that the motion was carried and declared the meeting adjourned. Protests against the adjournment were registered and having been ignored, Mr. Jaqua the ASI representative, stated that the meeting was not adjourned but only recessed and that the meeting would be reconvened in the next room. The Chairman then threatened to have the stockholders who did not agree to the decision of the Chairman on the casting of votes bodily thrown out. The ASI Group, Salazar and other stockholders, allegedly representing 53 or 54% of the shares of Saniwares, decided to continue the meeting at the elevator lobby of the American Standard Building. The continued meeting was presided by E. Salazar. On the basis of the cumulative votes cast earlier in the meeting, the ASI Group nominated its 4 nominees; Aurbach, Griffin, Whittingham and Chamsay. Salazar voted for himself, thus the said 5 directors were certified as elected directors by the Acting Secretary with the explanation that there was a tie among the other 6 nominees for the 4 remaining positions of directors and that the body decided not to break the tie. These incidents triggered off the filing of separate petitions by the parties with the SEC. 1ST petition filed was for preliminary injunction by Saniwares, Emesto V. Lagdameo, Baldwin Young, Raul A. Bonean Ernesto R. Lagdameo, Jr., Enrique Lagdameo and George F. Lee against Luciano Salazar and Charles Chamsay. 2ND petition was for quo warranto and application for receivership by Wolfgang Aurbach, John Griffin, David Whittingham, Luciano E. Salazar and Charles Chamsay against the group of Young and Lagdameo and Avelino F. Cruz. Both sets of parties except for Avelino Cruz claimed to be the legitimate directors of the corporation. The two petitions were consolidated and tried jointly by a hearing officer who rendered a decision upholding the election of the Lagdameo Group and dismissing the quo warranto petition of Salazar and Chamsay. The ASI Group and Salazar appealed the decision to the SEC en banc which affirmed the hearing officer's decision. The SEC decision led to the filing of 2 separate appeals with the IAC by Aurbach, Griffin, Whittingham and Chamsay and by Salazar. The petitions were consolidated and the appellate court in its decision ordered the remand of the case to the Securities and Exchange Commission with the directive that a new stockholders' meeting of Saniwares be ordered convoked as soon as possible, under the supervision of the Commission. Upon a motion for reconsideration filed by the Lagdameo Group, Court of Appeals rendered the questioned decision directing that in all subsequent
elections for directors of Saniwares, ASI cannot nominate more than 3 directors; that the Filipino stockholders shall not interfere in ASI's choice of its 3 nominees; that, on the other hand, the Filipino stockholders can nominate only 6 candidates and in the event they cannot agree on the 6 nominees, they shall vote only among themselves to determine who the 6 nominees will be, with cumulative voting to be allowed but without interference from ASI. 3 petitions were filed before the SC. the Agreement should contain provisions to protect ASI as the minority. o An examination of the Agreement shows that certain provisions were included to protect the interests of ASI as the minority. For example, the vote of 7 out of 9 directors is required in certain enumerated corporate acts [Sec. 3 (b) (ii) (a) of the Agreement]. ASI is contractually entitled to designate a member of the Executive Committee and the vote of this member is required for certain transactions [Sec. 3 (b) (i)]. o The Agreement also requires a 75% super-majority vote for the amendment of the articles and by-laws of Saniwares [Sec. 3 (a) (iv) and (b) (iii)]. ASI is also given the right to designate the president and plant manager [Sec. 5 (6)]. The Agreement further provides that the sales policy of Saniwares shall be that which is normally followed by ASI [Sec. 13 (a)] and that Saniwares should not export "Standard" products otherwise than through ASI's Export Marketing Services [Sec. 13 (6)]. Under the Agreement, ASI agreed to provide technology and know-how to Saniwares and the latter paid royalties for the same. o It is pertinent to note that the provisions of the Agreement requiring a 7 out of 9 votes of the board of directors for certain actions, in effect gave ASI (which designates 3 directors under the Agreement) an effective veto power. Furthermore, the grant to ASI of the right to designate certain officers of the corporation; the super-majority voting requirements for amendments of the articles and by-laws; and most significantly to the issues of tms case, the provision that ASI shall designate 3 out of the 9 directors and the other stockholders shall designate the other 6, clearly indicate that there are two distinct groups in Saniwares, namely ASI, which owns 40% of the capital stock and the Philippine National stockholders who own the balance of 60%, and that 2) ASI is given certain protections as the minority stockholder. o We believe that under the Agreement there are two groups of stockholders who established a corporation with provisions for a special contractual relationship between the parties, i.e., ASI and the other stockholders. Section 5 (a) of the agreement uses the word "designated" and not "nominated" or "elected" in the selection of the nine directors on a 6 to 3 ratio. Each group is assured of a fixed number of directors in the board. ASI in its communications referred to the enterprise as joint venture. Young also testified that Section 16(c) of the Agreement that "Nothing herein contained shall be construed to constitute any of the parties hereto partners or joint venturers in respect of any transaction hereunder" was merely to obviate the possibility of the enterprise being treated as partnership for tax purposes and liabilities to third parties. The Lagdameo Group stated in their brief in the Court of Appeal: In fact, the Philippine Corporation Code itself recognizes the right of stockholders to enter into agreements regarding the exercise of their voting rights. As correctly held by the SEC Hearing Officer: It is said that participants in a joint venture, in organizing the joint venture deviate from the traditional pattern of corporation management. A noted authority has pointed out that just as in close corporations, shareholders' agreements in joint venture corporations often contain provisions which do one or more of the following: (1)
ISSUES/HELD: Whether the business established by the parties is a joint venture or a corporation. JOINT VENTURE The rule is that whether the parties to a particular contract have thereby established among themselves a joint venture or some other relation depends upon their actual intention which is determined in accordance with the rules governing the interpretation and construction of contracts. The ASI Group and Salazar - the actual intention of the parties should be viewed strictly on the "Agreement" wherein it is clearly stated that the parties' intention was to form a corporation and not a joint venture. They specifically mention number 16 under Miscellaneous Provisions which states: c) nothing herein contained shall be construed to constitute any of the parties hereto partners or joint venturers in respect of any transaction hereunder. They object to the admission of other evidence which tends to show that the parties' agreement was to establish a joint venture presented by the Lagdameo and Young Group on the ground that it contravenes the parol evidence rule under section 7, Rule 130 of the Revised RoC. The Lagdameo and Young Group never pleaded in their pleading that the "Agreement" failed to express the true intent of the parties. The Lagdameo and Young Group pleaded in their Reply and Answer to Counterclaim in SEC Case that the Agreement failed to express the true intent of the parties, to wit: while certain provisions of the Agreement would make it appear that the parties thereto disclaim being partners or joint venturers such disclaimer is directed at third parties and is not inconsistent with, and does not preclude, the existence of two distinct groups of stockholders in Saniwares one of which (the Philippine Investors) shall constitute the majority, and the other ASI shall constitute the minority stockholder. In any event, the evident intention of the Philippine Investors and ASI in entering into the Agreement is to enter into ajoint venture enterprise, and if some words in the Agreement appear to be contrary to the evident intention of the parties, the latter shall prevail over the former. The examination of important provisions of the Agreement as well as the testimonial evidence presented by the Lagdameo and Young Group shows that the parties agreed to establish a joint venture and not a corporation. The history of the organization of Saniwares and the unusual arrangements which govern its policy making body are all consistent with a joint venture and not with an ordinary corporation. As stated by the SEC: o According to the unrebutted testimony of Young, he negotiated the Agreement with ASI in behalf of the Philippine nationals. He testified that ASI agreed to accept the role of minority vis-a-vis the Philippine National group of investors, on the condition that
require greater than majority vote for shareholder and director action; (2) give certain shareholders or groups of shareholders power to select a specified number of directors; (3) give to the shareholders control over the selection and retention of employees; and (4) set up a procedure for the settlement of disputes by arbitration. Paragraph 2 of Sec. 100 of the Corporation Code does not necessarily imply that agreements regarding the exercise of voting rights are allowed only in close corporations. In short, even assuming that sec. 5(a) of the Agreement relating to the designation or nomination of directors restricts the right of the Agreement's signatories to vote for directors, such contractual provision, as correctly held by the SEC, is valid and binding upon the signatories thereto. WON the ASI Group may vote their additional 10% equity during elections of Saniwares' board of directors. NO The ASI Group and Salazar - ASI Group has the right to vote their additional equity pursuant to Sec. 24 of the Corporation Code which gives the stockholders of a corporation the right to cumulate their votes in electing directors. Salazar adds that this right if granted to the ASI Group would not necessarily mean a violation of the Anti-Dummy Act (CA 108, as amended). He cites section 2-a thereof which provides: And provided finally that the election of aliens as members of the board of directors or governing body of corporations or associations engaging in partially nationalized activities shall be allowed in proportion to their allowable participation or share in the capital of such entities. The ASI Group's argument is correct within the context of Section 24 of the Corporation Code. The point of query, however, is whether or not that provision is applicable to a joint venture with clearly defined agreements: o The legal concept of a joint venture is of common law origin. It has no precise legal definition but it has been generally understood to mean an organization formed for some temporary purpose. It is in fact hardly distinguishable from the partnership, since their elements are similar community of interest in the business, sharing of profits and losses, and a mutual right of control. The main distinction cited by most opinions in common law jurisdictions is that the partnership contemplates a general business with some degree of continuity, while the joint venture is formed for the execution of a single transaction, and is thus of a temporary nature. This observation is not entirely accurate in this jurisdiction, since under the Civil Code, a partnership may be particular or universal, and a particular partnership may have for its object a specific undertaking. (Art. 1783, Civil Code). It would seem therefore that under Philippine law, a joint venture is a form of partnership and should thus be governed by the law of partnerships. The Supreme Court has however recognized a distinction between these two business forms, and has held that although a corporation cannot enter into a partnership contract, it may however engage in a joint venture with others. (Tuazon v. Bolanos) The usual rules as regards the construction and operations of contracts generally apply to a contract of joint venture. Bearing these principles in mind, the correct view would be that the resolution of the question of whether or not the ASI Group may vote their additional equity lies in the agreement of the parties. Sec. 3(a) (1) relates to the manner of voting for these nominees which is cumulative voting while section 5(a) relates to the manner of nominating the members of the board of directors. They agreed to this procedure, they cannot now impugn its legality. The insinuation that the ASI Group may be able to control the enterprise under the cumulative voting procedure cannot, however, be ignored. The validity of the cumulative voting procedure is dependent on the directors thus elected being genuine members of the Filipino group, not voters whose interest is to increase the ASI share in the management of Saniwares. The joint venture character of the enterprise must always be taken into account, so long as the company exists under its original agreement. Cumulative voting may not be used as a device to enable ASI to achieve stealthily or indirectly what they cannot accomplish openly. There are substantial safeguards in the Agreement which are intended to preserve the majority status of the Filipino investors as well as to maintain the minority status of the foreign investors group as earlier discussed. They should be maintained.
Litonjua v. Litonjua 477 SCRA 576

FACTS: This was a suit filed by Aurelio against his brother Eduardo for specific performance and accounting, contending that they had a partnership arrangement in the Odeon Theater business. This was premised on a letter written by Eduardo, addressed to Aurelio. HOLDING: Eduardo and Aurelio are not partners. The formalities required by law were not complied with, to wit: When immovable property or real rights are contributed, or when the partnership has a capital of at least Php3,000, a public instrument is necessary.
Effect if immovables are contributed into the partnership. In Litonjua, Jr. vs. Litonjua, Sr., et al., G.R. No. 166299-300, December 13, 2005, it was once again said that the contract validating inventory requirement under Article 1773 of the Civil Code applies as long as real property or real rights are initially brought into the partnership. In short, it is really of no moment which of the partners contributed immovables. In context, the more important consideration is that real property was contributed, in which case an inventory of the contributed property duly signed by the parties should be attached to the public instrument, else there is legally no partnership to speak of.
Bourns v. Carman 7 Phil 117

This is the full text, guys, maikli lang naman e. The plaintiff in this action seeks to recover the sum of $437.50, United Stated currency, balance due on a
contract for the sawing of lumber for the lumber yard of Lo-Chim-Lim. The contract relating to the said work was entered into by the said Lo-Chim-Lim, acting as in his own name with the plaintiff, and it appears that the said Lo-Chim-Lim personally agreed to pay for the work himself. The plaintiff, however, has brought this action against Lo-Chim-Lim and his codefendants jointly, alleging that, at the time the contract was made, they were the joint proprietors and operators of the said lumber yard engaged in the purchase and sale of lumber under the name and style of Lo-Chim-Lim. Apparently the plaintiff tries to show by the words above italicized that the other defendants were the partners of LoChim-Lim in the said lumber-yard business. The court below dismissed the action as to the defendants D. M. Carman and Fulgencio Tan-Tongco on the ground that they were not the partners of Lo-ChimLim, and rendered judgment against the other defendants for the amount claimed in the complaint with the costs of proceedings. Vicente Palanca and GoTauco only excepted to the said judgment, moved for a new trial, and have brought the case to this court by bill of exceptions. The question thus raised is, therefore, purely one of law and reduces itself to determining the real legal nature of the participation which the appellants had in LoChim-Lims lumber yard, and consequently their liability toward the plaintiff, in connection with the transaction which gave rise to the present suit. It seems that the alleged partnership between Lo-ChimLim and the appellants was formed by verbal agreement only. At least there is no evidence tending to show that the said agreement was reduced to writing, or that it was ever recorded in a public instrument. Moreover, that partnership had no corporate name. The plaintiff himself alleges in his complaint that the partnership was engaged in business under the name and style of Lo-Chim-Lim only, which according to the evidence was the name of one of the defendants. On the other hand, and this is very important, it does not appear that there was any mutual agreement, between the parties, and if there were any, it has not been shown what the agreement was. As far as the evidence shows it seems that the business was conducted by Lo-Chim-Lim in his own name, although he gave to the appellants a share was has been shown with certainty. The contracts made with the plaintiff were made by Lo-Chim-Lim individually in his own name, and there is no evidence that the partnership over contracted in any other form. Under such circumstances we find nothing upon which to consider this partnership other than as a partnership of cuentas en participacion. It may be that, as a matter of fact, it is something different, but a simple business and scant evidence introduced by the partnership We see nothing, according to the evidence, but a simple business conducted by Lo-Chim-Lim exclusively, in his own name, the names of other persons interested in the profits and losses of the business nowhere appearing. A partnership constituted in such a manner, the existence of which was only known to those who had an interest in the same, being no mutual agreements between the partners and without a corporate name indicating to the public in some way that there were other people besides the one who ostensibly managed and conducted the business, is exactly the accidental partnership of cuentas en participacion defined in article 239 of the Code of Commerce. Those who contract with the person under whose name the business of such partnership of cuentas en participacion is conducted, shall have only a right of action against such person and not against the other persons interested, and the latter, on the other hand, shall have no right of action against the third person who contracted with the manager unless such manager formally transfers his right to them. (Art 242 of the code Of Commerce.) It follows, therefore that the plaintiff has no right to demand from the appellants the payment of the amount claimed in the complaint, as Lo-Chim-Lim was the only one who contracted with him. the action of the plaintiff lacks, therefore, a legal foundation and should be accordingly dismissed. The judgment appealed from this hereby reversed and the appellants are absolved of the complaint without express provisions as to the costs of both instances. After the expiration of twenty days let judgment be entered in accordance herewith, and ten days thereafter the cause be remanded to the court below for execution. So ordered.
Sevilla v. CA 160 SCRA 171

Facts: Tourist World Services, Inc. (TWS) leased the premises belonging to Segundina Noguera to be used as a branch office. Sevilla held herself solidarily liable with TWS for the payment of the rent. When the branch office was opened, it was run by Sevilla payable to TWS by any airline for any fare brought in through the efforts of Sevilla, 4% would go to Sevilla and 3% was to be withheld by TWS.
When TWS was informed that Sevilla was connected with a rival firm, Philippine Travel Bureau, and since the branch was losing, TWS considered closing down its office. The contract of lease was terminated. Canilao, the corporate secretary of TWS, went over to the branch and padlocked the premises to protect the interests of TWS. Sevilla and her employees could not enter. Sevilla filed for mandatory preliminary injunction which the trial court dismissed without prejudice. Sevilla filed an appeal, and one of her claims was that the trial court erred in holding that Sevillas arrangement with TWS was a mere employer-employee relation and not a joint business venture. She supports this claim by declaring that she was signatory to the lease contract and was solidarily liable with TWS for the prompt payment of the rent, that she did not receive any salary from TWS and that she earned commissions for her own passengers, her own bookings and her own business obtained from airline companies (She shared the 7% commission she got from the airline companies with TWS). The CA affirmed the decision of the trial court. ISSUE relevant to our topic: What was the nature of the relation between Sevilla and TWS? Held: PRINCIPAL-AGENT relationship. It was not an employer-employee relation. Sevilla was not subject to control by TWS either as to the result or as to the means used. Her binding herself to be solidarily liable with TWS belies the claims of a
master-servant relationship. Furthermore, Sevilla was not in the companys payroll. It was not a joint venture. A joint venture, including a partnership, presupposes generally a of standing between the joint co-venturers 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. 16 furthermore, the parties did not hold themselves out as partners, and the building itself was embellished with the electric sign "Tourist World Service, Inc. in lieu of a distinct partnership name. It is a principal-agent relationship. Sevilla solicited airline fares, but she did so for and on behalf of her principal, Tourist World Service, Inc. As compensation, she received 4% of the proceeds in the concept of commissions. And as we said, Sevilla herself pre-assumed her principal's authority as owner of the business undertaking. But unlike simple grants of a power of attorney, the agency that in this case cannot be revoked at will because it is one coupled with an interest, the agency having been created for mutual interest of the agent and the principal. It appears that Lina Sevilla is a bona fide travel agent herself, and as such, she had acquired an interest in the business entrusted to her. Moreover, she had assumed a personal obligation for the operation thereof, holding herself solidarily liable for the payment of rentals. She continued the business, using her own name, after Tourist World had stopped further operations. Her interest, obviously, is not to the commissions she earned as a result of her business transactions, but one that extends to the very subject matter of the power of management delegated to her. It is an agency that cannot be revoked at the pleasure of the principal. Accordingly, the revocation complained of should entitle the petitioner, Lina Sevilla, to damages. EXTRA: The Court is convinced that there is some malevolent design to put Sevilla in a bad light. There was no proof that the branch was losing and the padlocking was done 6 months after (rebuttal to the interest of the company argument of TWS).
Philex Mining Corp. v. CIR 551 SCRA 428

Baguio Gold and Philex Mining entered into a contract whereby the latter would operate the formers mining claim. Philex, apart from transferring its own funds for the business, also shelled out money to cover for the losses incurred by the business. Philex then attempted to deduct what it purported to be bad loans payable to it from Baguio Gold. The CIR disallowed the deduction. HOLDING: The agreement between the parties created a partnership relationship between them. As such, the money contributed was not a loan and cannot be deducted from the partnerships taxable income. The strongest indication of the existence of the partnership relation was the fact that each of them would receive 50% of the profits. By pegging its compensation as profits, Philex stood not to be remunerated in case the mine had no income. This is definitely not the nature of a loan, instead, it partakes of the nature of a capital contribution.

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Agad v. Mabato 23 SCRA 1223

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Arbes v. Polistico 53 Phil. 489

Tocao v. CA 342 SCRA 20

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Tan v. del Rosario 237 SCRA 324

Mendiola v. CA 497 SCRA 346

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Gatchalian v. CIR 67 Phil. 666

Pascual v. CIR 166 SCRA 560

Obillos v. CIR 139 SCRA 436

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Know All Men by These Presents:

Tuason v. Bolanos 95 Phil. 106

Heirs of Tan Eng Kee v. CA 341 SCRA 740

Aurbach v. Sanitary Wares 180 SCRA 130

Litonjua v. Litonjua 477 SCRA 576

Bourns v. Carman 7 Phil 117

Sevilla v. CA 160 SCRA 171

Philex Mining Corp. v. CIR 551 SCRA 428

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