LITONJUA V. LITONJUA, G.R.

NO 166299-300 (2005)
FACTS: Petitioner Aurelio Litonjua and respondent Eduardo Litonjua are brothers. Aurelio filed an
action against Eduardo and Robert Yang and several corporations for specific performance
and accounting
1. Aurelio alleged that since 1973, he and Eduardo had been in a joint venture/partnership
arrangement in the Odeon Theater business which had expanded through several other
business
2. To bolster his claim, Aurelio presented a memorandum between Aurelio and Eduardo
allowing petitioner to manage the family business and in consideration therefor, Aurelio
was to receive P1 million or 10% in equity in their business including those which will be
subsequently acquired, whichever was greater
3. Sometime in 1992, the relations between the brothers Litonjua became sour and Aurelio
demanded for an accounting and liquidation of his share in the joint venture/partnership
which was not heeded by Eduardo
4. Respondent contended that the actionable document presented by Aurelio is void
under Art 1767 in relation to Art 1773. He further alleged that whatever undertaking
Eduardo agreed to do under the memorandum, are unenforceable under the Statute of
Frauds

ISSUE: WON a partnership exists between Aurelio and Eduardo

HELD: No. A partnership exists when two or more persons agree to place their money, effects,
labor and skill in lawful commerce of business, with the understanding that there shall be a
proportionate sharing of the profits and losses between them. A contract of partnership is
defined as one where two or more persons bound themselves to contribute money, property or
industry to a common fund with the intention of dividing the profits among themselves. A joint
venture, on the other hand, is hardly distinguishable form, and may be likened to, a partnership
since their elements are similar, i.e. community of interests in the business and sharing of profits
and losses. Being a form of partnership, a joint venture is governed by the law on partnership.

A partnership may be constituted in any form, save when immovable property or real rights are
contributed thereto or when the partnership has a capital of at least P3,000 in which case a
public instrument shall be necessary. An inventory to be signed by the parties and attached to
the public instrument is also indispensable to the validity of the partnership whenever immovable
property is contributed to it.

CAB: The document in question contained typewritten entries, personal in tone, but is unsigned
and undated. As an unsigned document, it does not meet the public instrumentation
requirements under Art 1771 NCC. Moreover, being unsigned and referring to a partnership
involving more than P3,000 in money or property, cannot be presented for notarization, let alone
registered with SEC, as called for under Art 1772.

Because of the failure to comply with the essential formalities of a valid contract, the purported
partnership/joint venture is legally inexistent and it produces no effect whatsoever. Necessarily, a
void or legally inexistent contract cannot be the source of any contractual or legal right.








AFISCO V. CA, G.R. NO 112675 (1999)
FACTS: 41 non-life insurance companies entered into a reinsurance treaty with MUNICH, a non-
resident foreign insurance corporation. Since the reinsurance treaty required that the petitioners
form a pool, an insurance pool was formed
1. In April 1976, the insurance pool submitted its income tax return. BIR assessed (assessment
was made beyond the allowable period of assessment) a deficiency corporate income
tax.
2. Petitioners protested the assessment and argued that:
a. They were not an unregistered partnership
b. They have tax exemption
c. There is double taxation in this case
d. The assessment was made beyond the period allowed by law
3. BIR denied the protest. On appeal, CA held that the pool of machinery insurers was a
partnership taxable as a corporation, and that the latters collection of premiums on
behalf of its members, the ceding companies, was taxable income

ISSUES: WON the insurance pool was a taxable partnership

HELD: Yes. The Philippine legislature included in the concept of corporations those entities that
resembled them such as unregistered partnerships and associations. Sec 24 NIRC covered
unregistered partnerships and even associations and joint accounts, which had no legal
personalities apart from their individual members.

The term partnership includes a syndicate group, pool, joint venture or other unincorporated
organization, through or by means of which any business financial operation or venture is carried
on.

The ceding companies entered into a pool agreement or an association that would handle all
the insurance businesses covered under their quota-share reinsurance treaty and surplus
reinsurance treaty with Munich. This clearly indicates a partnership or association covered by
Sec 24 NIRC since:
a. The pool has a common fund, consisting of money and other valuables that are
deposited in the name and credit of the pool. This common fund pays for the
administration and operation expenses of the pool
b. The pool functions through an executive board, which resembles the board of directors
of a corporation, composed of one representative for each of the ceding companies
c. While the pool itself is not a reinsurer and does not issue any insurance policy, its work is
indispensable, beneficial and economically useful to the business of the ceding
companies and Munich. The ceding companies share in the business ceded to the
pool and in the expenses according to a Rules of Distribution annexed to the pool
agreement. Profit motive or business is, therefore, the primordial reason for the pools
formation.

ISSUE: WON the insurance pool was created for profit

HELD: Yes. While the pool itself is not a reinsurer and does not issue any insurance policy,
however, its work is indispensable, beneficial and economically useful to the business of the
ceding companies, and Munic, because without it they would not have received their
premiums. The ceding companies share in the business ceded to the pool and in the
expenses according to the rules of distribution annexed to the pool agreement. Profit motive or
business, therefore, is the primordial reason for the pools formation.

The fact that the pool does not retain any profit or income does not obliterate an antecedent
fact that of the pool being used in the transaction of business for profit. It is apparent that their
association or coaction was indispensable to the transaction of the business. If together they
have conducted business, profit must have been the object as, indeed, profit was earned.
Through the profit was apportioned among the members, this is only a matter of consequence,
as it implies that profit actually resulted.














































LIM TONG LIM V. PHILIPPINE FISHING GEAR, G.R. NO 136448 (1999)
FACTS: On behalf of Ocean Quest Fishing Corp, Chua and Yao entered into a contract with
Philippine Fishing Gear for the sale of fishing nets.
1. They claimed they were engaged in a business venture with petitioner Lim Tong Lim, who
was not a signatory to the agreement
2. The buyers, however, failed to pay for the fishing nets and floats.
3. As such, Philippine Fishing Gear filed a collection suit against Chua, Yao and Lim. The suit
was brought against the three in their capacities as general partners, on the allegation
that Ocean Quests Fishing Corpwas a non-existent corporation as shown by a
certification from SEC
4. Chua admitted his liability but asked for a reasonable time within which to pay. Yao, on
the other hand, waived his right to cross-examine the witnesses due to his failure to
appear in the subsequent hearings
5. Petitioner Lim Tong Lim denied his liability on the grounds that he was not aware that
Chua and Yao presented themselves as a corporation without his knowledge and
consent, and that he was only a lessor of Chua and Yao, that he had merely leased the
fishing boat of Chua and Yao

ISSUE: WON Chua, Yao and Lim could be deemed to have entered into a partnership

HELD: Yes. By a contract of partnership, two or more persons bind themselves to contribute
money, property or industry to a common fund, with the intention of dividing profits among
themselves. Both the lower courts ruled that a partnership existed based on the following:
(1) Petitioner Lim requested Yao, who was engaged in commercial fishing, to join him while
Chua was already Yaos partner
(2) All three agreed to purchase 2 fishing boats
(3) They borrowed P3.25 million from Jesus Lim to fund the venture
(4) They bought the boats from CMF Fishing Corp, which executed a Deed of Sale over the
2 boats in favor of petitioner only to serve as a security for the loan extended by Jesus
Lim
(5) Lim, Yao and Chua agreed that the refurbishing and repair shall be shouldered by Yao
ad Chua
(6) Pursuant to their agreement, Yao and Chua bought nets from respondent in behalf of
Ocean Quest Fishing Corp, their purported business name
(7) Subsequently, Yao and Chua filed an action against Lim for the declaration of the nullity
of commercial documents and ownership of the fishing boats

From the factual findings, it is clear that Chua, Yao and Lim decided to engage in a fishing
business, which they started by buying boats worth P3.5 million financed by a loan obtained
from Jesus Lim. In their compromise agreement, they subsequently revealed their intention to
pay the loan with the proceeds of the sale of the boats, and to divide equally among
themselves the excess or loss. These boats, the purchase and repair of which were financed with
borrowed money, fell under the term common fund under Art 1767. The contribution to such
fund need not be cash or fixed assets; it could be an intangible like credit or industry. That the
parties agreed that any loss or profit from the sale and operation of the boats would be equally
divided among them shows that they had indeed formed a partnership.

Moreover, it is clear that the partnership extended not only to the purchase of the boat but also
to that of the nets and the floats. The fishing nets and floats, both essential to fishing, were
obviously acquired for the furtherance of their business.

ISSUE: WON Lim was only a lessor of Yao and Chua

HELD: No. As found by the courts, petitioner entered into a business agreement with Chua and
Yao, in which debts were undertaken in order to finance the acquisition and the upgrading of
the vessels which would be used in their fishing business. The sale of the boats, as well as the
division among the three of the balance remaining after payment of their loans, proves that the
vessels, although registered in Lims name, was not his own property but an asset of the
partnership. It is not uncommon to register the properties acquired from a loan in the name of
the person the lender trusts. After all, Lim was the brother of the creditor, Jesus.

It would be absurd for petitioner to sell his property to pay a debt he did not incur, if the
relationship among the three was merely that of a lessor-lessee instead of partners.










































EVANGELISTA V. CIR, G.R. NO L-9996 (1957)
FACTS: Petitioners borrowed a sum of money from their father and together with their personal
money, used them to purchase real properties
1. Petitioners then appointed Simeon Evangelista to manage their properties
2. CIR taxed petitioners income tax on corporation, real estate dealers fixed tax and
corporation residence tax for the years 1945-1948
3. Evangelista protested the same but it was denied by CIR
4. Petitioners argued that they are mere co-owners, not co-partners since some of the
characteristics of partnerships are lacking in the case at bar

ISSUE: WON petitioners are subject to tax on corporations

HELD: Yes. Pursuant to Art 1767 NCC, the essential elements of a partnership are: (a) an
agreement to contribute money, property, or industry to a common fund; and (b) intent to
divide the profits among the contracting parties. The first element is undoubtedly present in this
case, for admittedly, the petitioners agreed to and did contribute money and property to a
common fund. And upon consideration of all the facts and circumstances surrounding the case,
it appears that their purpose was to engage in real estate transactions for monetary gain and
then divide the same among themselves because:
(1) Said common fund was not something the found already in existence. They created it
purposely by jointly borrowing a substantial portion thereof in order to establish said
common fund
(2) They invested the same, not merely in one transaction, but in a series of transactions
(3) The lots were not devoted to residential purposes but were leased to third persons
(4) The affairs relative to said properties have been handled as if the same belonged to a
corporation or business and enterprise operated for profit

The term corporation as defined under NIRC includes partnerships no matter how created or
organized. This qualifying expression clearly indicates that a joint venture need not be
undertaken in any of the standard forms, or in conformity with the usual requirements of the law
on partnerships, in order that one could be deemed constituted for purposes of the tax on
corporations. It may not be amiss to add that petitioners allegation to the effect that their
liability in connection with the leasing of the lots referred to, under the management of one
person tends to increase similarity between the nature of their venture and that of corporations,
and is therefore, an additional argument in favor of the imposition of said tax on corporations.

















AGUILA V. CA, G.R. NO 127347 (1999)
FACTS: Petitioner is the manager of AC Aguila & Sons Co, a partnership engaged in lending
activities while private respondent Abrogar were the registered owners of a house and lot in
Marikina
1. In 1991, Aguila & Sons and spouses Abrogar executed a memorandum of agreement
(MOA) for the sale of the subject property with right to repurchase. Pursuant to the MOA,
the parties executed a Deed of Absolute Sale over the subject property for P200,000.
2. When the spouses failed to redeem property within the 90-day period, petitioner caused
the cancellation of the TCT and the issuance of a new TCT in the name of Aguila & Sons
Co
3. Subsequently, Aguila & Sons demanded that Abrogar vacate the premises. For failure to
do so, Aguila & Sons filed an ejectment suit against Abrogar. The trial court ruled in favor
of AC Aguila & Sons
4. Abrogar then filed a petition for the declaration of nullity of the Deed of Sale alleging
that the signature of her husband on the Deed of Sale was forged because he was
already dead when the deed was supposed to have been executed in June 1991. The
trial court dismissed the case.
5. On appeal, CA reversed the trial court decision citing that the transaction between the
two parties is actually an equitable mortgage
6. Petitioner now contends that he is not a real party in interest but AC Aguila & Sons

ISSUE: WON petitioner was liable with AC Aguila & Sons

HELD: No. Under Art 1768 NCC, 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.

CAB: Private respondent has not shown that AC Aguila & Sons, 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 AC Aguila & Sons and the MOA was executed between Abrogar and AC Aguila
& Sons, represented by petitioner. Hence, it is the partnership, not its officers or agents, which
should be impleaded in any litigation involving property registered in its name. A violation of this
rule will result in the dismissal of the complaint.


















EVANGELISTA V. CIR, G.R. NO L-9996 (1957)
FACTS: Petitioners borrowed a sum of money from their father and together with their personal
money, used them to purchase real properties
5. Petitioners then appointed Simeon Evangelista to manage their properties
6. CIR taxed petitioners income tax on corporation, real estate dealers fixed tax and
corporation residence tax for the years 1945-1948
7. Evangelista protested the same but it was denied by CIR
8. Petitioners argued that they are mere co-owners, not co-partners since some of the
characteristics of partnerships are lacking in the case at bar

ISSUE: WON petitioners are subject to tax on corporations

HELD: Yes. Pursuant to Art 1767 NCC, the essential elements of a partnership are: (a) an
agreement to contribute money, property, or industry to a common fund; and (b) intent to
divide the profits among the contracting parties. The first element is undoubtedly present in this
case, for admittedly, the petitioners agreed to and did contribute money and property to a
common fund. And upon consideration of all the facts and circumstances surrounding the case,
it appears that their purpose was to engage in real estate transactions for monetary gain and
then divide the same among themselves because:
(5) Said common fund was not something the found already in existence. They created it
purposely by jointly borrowing a substantial portion thereof in order to establish said
common fund
(6) They invested the same, not merely in one transaction, but in a series of transactions
(7) The lots were not devoted to residential purposes but were leased to third persons
(8) The affairs relative to said properties have been handled as if the same belonged to a
corporation or business and enterprise operated for profit

The term corporation as defined under NIRC includes partnerships no matter how created or
organized. This qualifying expression clearly indicates that a joint venture need not be
undertaken in any of the standard forms, or in conformity with the usual requirements of the law
on partnerships, in order that one could be deemed constituted for purposes of the tax on
corporations. It may not be amiss to add that petitioners allegation to the effect that their
liability in connection with the leasing of the lots referred to, under the management of one
person tends to increase similarity between the nature of their venture and that of corporations,
and is therefore, an additional argument in favor of the imposition of said tax on corporations.

















OBILLOS V. CIT, G.R. NO L-68118 (1985)
FACTS: This case is about the income tax liability of 4 brothers and sisters who sold 2 parcels of
land which they had acquired from their father
1. In 1873, Jose Obillos Sr (father) purchased 2 parcels of land from Ortigas & Co Ltd. He
then transferred his rights to his 4 children (petitioners) to enable them to build their
residences. The Torrens titles issued to petitioners show that they were co-owners of the 2
lots
2. Subsequently, petitioners resold the subject property to Walled City Securities Corp and
Olga Cruz Canda for P313,050. Petitioners gained total profit of P134,341.88 or P33,584 for
each of them. They treated the property as a capital gain and paid an income tax on
thereof or P16,792
3. CIR assessed petitioners corporate income tax on the total profit in addition to the
individual income tax shares on their shares thereof. CIR also taxed in full the profits of
each petitioner on the theory that petitioners had formed an unregistered partnership or
joint venture within the meaning of Sec 24(a) and 84(b) Tax Code

ISSUE: WON petitioners had formed a partnership

HELD: No. It is an error to consider the petitioners as having formed a partnership under Art 1767
NCC simply because they allegedly contributed P178,708.12 to buy the 2 lots, resold the same
and divided the profit among themselves.

As testified by one of the petitioners, they had no intention to form a partnership. They were co-
owners pure and simple. To consider them as partners would obliterate the distinction between
co-ownership and partnership. They were not engaged in any joint venture by reason of that
one 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.

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

All co-ownerships are not deemed unregistered partnership, or a corporation within the purview
of income tax law.













HEIRS OF JOSE LIM V. JULIET LIM, G.R. NO 172690 (2010)
FACTS: Petitioners are the heirs of the late Jose Lim. They filed a complaint for partition,
accounting and damages against respondent Juliet Lim, widow of Elfredo Lim who was the
eldest son of Jose Lim
1. Petitioners alleged that Jose was a liaison officer of Interwood Sawmill. Sometime in 1980,
Jose together with Jimmy Yu and Norberto Uy, formed a partnership to engage in the
trucking business. Jose managed the operations of the business until his death in 1981.
Thereafter, Joses heirs, including Elfledo, agreed to continue the business under the
management of Elfledo.
2. Petitioners also alleged that Elfledo was never a partner in the business and merely
supervised the purchase of additional trucks using the income from the trucking business
of the partners. By the time the partnership ceased, it had 9 trucks which were all
registered in Elfledos name.
3. When Elfledo died in 1995, petitioners claimed that respondent Juliet took over the
administration of the subject properties, which belonged to the estate of the late Jose
Lim, without their consent and approval. Claiming that they are co-owners of the
properties, petitioners required respondent to submit an accounting of income, profits
and rentals received from the estate of Elfledo, and to surrender administration thereof
which respondent refused
4. Respondent Juliet, on the other hand, contended that Elfledo himself was a partner of
Norberto and Jimmy and that Jose gave Elfledo P50,000 as capital in an informal
partnership with Jimmy and Norberto. When Elfledo and respondent got married in 1981,
the partnership only had 1 truck but through the efforts of Elfledo, the business flourished
5. When Elfledo died in 1995, respondent talked to Jimmy and to the heirs of Norberto (who
died earlier in 1993) that she could no longer run the business. As such, the 6 trucks were
given to her and the 3 other trucks were given to the heirs of Norberto (which were
subsequently sold to respondent)
6. Respondent also alleged that when Jose died, he left no known assets and the
partnership with Jimmy and Norberto ceased upon his death
7. Petitioners argued that according to the testimony of Jimmy, the sole surviving partner,
Elfledo was not a partner and that he entered into a partnership with Norberto and Jose.

ISSUE: WON a partnership existed among Jimmy, Norberto and Elfledo

HELD: Yes. The best evidence would have been the contract of partnership or the articles of
partnership. However, there is none in this case because the alleged partnership was never
formally organized.

The evidence presented by petitioners fall short of the quantum of proof to establish that (1)
Jose was the partner and not Elfledo; and (2) all the properties acquired by Elfledo and
respondent formed part of the estate of Jose, having been derived from the partnership.

Art 1769 (4) provides: The receipt by a person of a share of the profits of a business is a prima
facie evidence that he is a partner in the business, but no such inference shall be drawn if such
profits were received in payment:
(a) As a debt by installments or otherwise;
(b) As wages of an employee or rent to a landlord;
(c) As an annuity to a widow or representative of a deceased partner;
(d) As interest on a loan, though the amount of payment vary with the profits of the
business;
(e) As the consideration for the sale of a goodwill of a business or other property by
installments or otherwise.
Applying the legal provision to the facts of this case, the following circumstances prove that
Elfledo himself was the partner of Jimmy and NOrtberto:
1) Cresencia (widow of Jose) testified that Jose gave Elfledo P50,000 as share in the
partnership on the date that coincided with the payment of the initial capital in the
partnership
2) Elfledo ran the affairs of the partnership, wielding absolute control, without any
intervention or opposition from any of the petitioners
3) All of the properties of the partnership were registered in the name of Elfledo
4) Jimmy testified that Elfledo did not receive wages or salaries from the partnership,
indicating that what he actually received were shares of the profits of the business
5) None of the petitioners, as heirs of Jose the alleged partner, demanded periodic
accounting from Elfledo during his lifetime

Furthermore, petitioners failed to adduce any evidence to show that the real and personal
properties acquired in the names of Elfledo and Juliet formed part of the estate of Jose, having
been derived from the alleged partnership with Jimmy and Norberto. They failed to refute
Juliets claim that Elfledo also sold Interwood lumber as a side line. Petitioners could not offer any
credible evidence except bare assertions.

It is also notable that Jose Lim died when the partnership was barely a year old and the
partnership and its business not only continued but also flourished. If it were true that Jose Lim
and not Elfledo who was the partner, then upon Joses death, the partnership should have been
dissolved and its assets liquidated. On the contrary, the operations of the business continued
under the helm of Elfledo and without any participation from the heirs of Jose Lim.