Fernando Santos vs Spouses Reyes

Facts: In June 1986, Fernando Santos (70%), Nieves Reyes (15%), and Melton Zabat (15%) orally
instituted a partnership with them as partners. Their venture is to set up a lending business where it was
agreed that Santos shall be financier and that Nieves and Zabat shall contribute their industry. **The
percentages after their names denote their share in the profit.

Later, Nieves introduced Cesar Gragera to Santos. Gragera was the chairman of Monte Maria
corporation. It was agreed that the partnership shall provide loans to the employees of Grageras
corporation and Gragera shall earn commission from loan payments.

In August 1986, the three partners put into writing their verbal agreement to form the partnership.

As earlier agreed, Santos shall finance and Nieves shall do the daily cash flow more particularly from their
dealings with Gragera, Zabat on the other hand shall be a loan investigator. But then later, Nieves and
Santos found out that Zabat was engaged in another lending business which competes with their
partnership hence Zabat was expelled.

The two continued with the partnership and they took with them Nieves husband, Arsenio, who became
their credit investigator.

Later, Santos accused the spouses of not remitting Grageras commissions to the latter. He sued them for
collection of sum of money. The spouses countered that Santos merely filed the complaint because he
did not want the spouses to get their shares in the profits. Santos argued that the spouses, insofar as the
dealing with Gragera is concerned, are merely his employees. Santos alleged that there is a distinct
partnership between him and Gragera which is separate from the partnership formed between him, Zabat
and Nieves.

The trial court as well as the Court of Appeals ruled against Santos and ordered the latter to pay the
shares of the spouses.

ISSUE: Whether or not the spouses are partners.

HELD: Yes. Though it is true that the original partnership between Zabat, Santos and Nieves was
terminated when Zabat was expelled, the said partnership was however considered continued when
Nieves and Santos continued engaging as usual in the lending business even getting Nieves husband,
who resigned from the Asian Development Bank, to be their loan investigator who, in effect, substituted
Zabat.

There is no separate partnership between Santos and Gragera. The latter being merely a commission
agent of the partnership. This is even though the partnership was formalized shortly after Gragera met
with Santos (Note that Nieves was even the one who introduced Gragera to Santos exactly for the
purpose of setting up a lending agreement between the corporation and the partnership).

By the contract of partnership, two or more persons bind themselves to contribute money,
property or industry to a common fund, with the intention of dividing the profits among
themselves.
[12]
The Articles of Agreement stipulated that the signatories shall share the profits
of the business in a 70-15-15 manner, with petitioner getting the lions share.
[13]
This stipulation
clearly proved the establishment of a partnership.
Heirs of Tan Eng Kee vs CA


Facts: Benguet Lumber has been around even before World War II but during the war, its stocks were
confiscated by the Japanese. After the war, the brothers Tan Eng Lay and Tan Eng Kee pooled their
resources in order to revive the business. In 1981, Tan Eng Lay caused the conversion of Benguet
Lumber into a corporation called Benguet Lumber and Hardware Company, with him and his family as the
incorporators. In 1983, Tan Eng Kee died. Thereafter, the heirs of Tan Eng Kee demanded for an
accounting and the liquidation of the partnership.

Tan Eng Lay denied that there was a partnership between him and his brother. He said that Tan Eng Kee
was merely an employee of Benguet Lumber. He showed evidence consisting of Tan Eng Kees payroll;
his SSS as an employee and Benguet Lumber being the employee. As a result of the presentation of said
evidence, the heirs of Tan Eng Kee filed a criminal case against Tan Eng Lay for allegedly fabricating
those evidence. Said criminal case was however dismissed for lack of evidence.

ISSUE: Whether or not Tan Eng Kee is a partner.

HELD: No. There was no certificate of partnership between the brothers. The heirs were not able to
show what was the agreement between the brothers as to the sharing of profits. All they presented were
circumstantial evidence which in no way proved partnership.

It is obvious that there was no partnership whatsoever. Except for a firm name, there was no firm
account, no firm letterheads submitted as evidence, no certificate of partnership, no agreement as to
profits and losses, and no time fixed for the duration of the partnership. There was even no attempt to
submit an accounting corresponding to the period after the war until Kees death in 1984. It had no
business book, no written account nor any memorandum for that matter and no license mentioning the
existence of a partnership.

In fact, Tan Eng Lay was able to show evidence that Benguet Lumber is a sole proprietorship. He
registered the same as such in 1954; that Kee was just an employee based on the latters payroll and
SSS coverage, and other records indicating Tan Eng Lay as the proprietor. Also, the business definitely
amounted to more P3,000.00 hence if there was a partnership, it should have been made in a public
instrument.

Also, the Supreme Court emphasized that for 40 years, Tan Eng Kee never asked for an accounting. The
essence of a partnership is that the partners share in the profits and losses. Each has the right to demand
an accounting as long as the partnership exists. Even if it can be speculated that a scenario wherein if
excellent relations exist among the partners at the start of the business and all the partners are more
interested in seeing the firm grow rather than get immediate returns, a deferment of sharing in the profits
is perfectly plausible. But in the situation in the case at bar, the deferment, if any, had gone on too long
to be plausible. A person is presumed to take ordinary care of his concerns. A demand for periodic
accounting is evidence of a partnership which Kee never did.

Article 1769 of the Civil Code provides:

In determining whether a partnership exists, these rules shall apply:

(1) Except as provided by Article 1825, persons who are not partners as to each other are not partners as
to third persons;

(2) Co-ownership or co-possession does not of 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 which the returns are derived;

(4) The receipt by a person of a share of the profits of a business is prima facie evidence that he is a
partner in the business, but no such inference shall be drawn if such profits were received in payment:

(a) As a debt by installment 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

Filomeno Negado, Narciso Rocha, and Juan Guirindola vs GonzaloMakabenta
Facts: Plaintiffs filed a suit against the defendant for the recovery of possession and management of
Liberty Theater located in Leyte and for an accounting of all money and property pertaining thereto. The
plaintiffs allege that the theater is owned and operated by a partnership known as Hemarogui Company
composed of the plaintiffs and defendant. Conversely, the defendant alleges that he is the sole and
exclusive owner of the theater while the plaintiffs are merely creditor. The trial court held that no
partnership exists and the oral and material evidence (books, accounts, and papers) presented by the
plaintiffs are incompetent to establish existence of the partnership.
Issue: Whether or not a partnership exists among Negado, Rocha, Guirindola and Makabenta
Decision: There exists a partnership. In determining whether or not a particular transaction constitutes
partnership, the intention as disclosed by the entire transaction, and as gathered from the facts and from
the language employed by the parties as well as their conduct. A partnership may be created without any
definite intention to create it, the intention of the parties being inferred from their conduct and dealings
with each other. For the purpose of showing the existence of a partnership, books, papers, accounts and
similar writings are admissible as evidence provided that the party against whom they are offered is
shown to have authorized or ratified them.

YULO V. YANG CHIAO SENG
Facts: Yang Chiao Seng proposed to form a partnership with Rosario Yulo to run and operate a theatre
on the premises occupied by Cine Oro, Plaza Sta. Cruz, Manila, the principal conditions of the offer being
(1) Yang guarantees Yulo a monthly participation of P3,000 (2) partnership shall be for a period of 2 years
and 6 months with the condition that if the land is expropriated, rendered impracticable for business,
owner constructs a permanent building, then Yulos right to lease and partnership even if period agreed
upon has not yet expired; (3) Yulo is authorized to personally conduct business in the lobby of the
building; and (4) after Dec 31, 1947, all improvements placed by partnership shall belong to Yulo but if
partnership is terminated before lapse of 1 and years, Yang shall have right to remove improvements.
Parties established, Yang and Co. Ltd., to exist from July 1,1945 Dec 31, 1947.In June 1946, they
executed a supplementary agreement extending the partnership for 3 years beginning Jan 1, 1948 to Dec
31, 1950. The land on which the theater was constructed was leased by Yulo from owners, Emilia Carrion
and Maria Carrion Santa Marina for an indefinite period but that after 1 year, such lease may be cancelled
by either party upon 90-day notice. In Apr 1949, the owners notified Yulo of their desire to cancel the
lease contract come July. Yulo and husband brought a civil action to declare the lease for a indefinite
period. Owners brought their own civil action for ejectment upon Yulo and Yang.
CFI: Two cases were heard jointly; Complaint of Yuloand Yang dismissed declaring contract of
leaseterminated.
CA: Affirmed the judgment.In 1950, Yulo demanded from Yang her share in theprofits of the business.
Yang answered saying he hadto suspend payment because of pending ejectmentsuit. Yulo filed present
action in 1954, alleging theexistence of a partnership between them and that Yang has refused to pay her
shares
Defendants Position
: The real agreement between plaintiff and defendant was one of lease and not of partnership; that the
partnership was adopted as a subterfuge to get around the prohibition contained in the contract of lease
between the owners and the plaintiff against the sublease of theproperty.
Trial Court: Dismissal. It is not true that a partnership was created between them because defendant has
not actually contributed the sum mentioned in the Articles of Partnership or any otheramount. The
agreement is a lease because plaintiff didnt share either in the profits or in the losses of the business as
required by Art 1769 (CC) and because plaintiff was granted a guaranteed participation in the profits
belies the supposed existence of a partnership.
Issue: Was the agreement a contract a lease or a partnership?
Ruling: Dismissal. The agreement was a sublease not a partnership. The following are the requisites of
partnership:
(1) two or more persons who bind themselves to contribute money, property or industry to a common
fund;
(2) the intention on the part of the partners to divide the profits among themselves (Article 1761,
CC)Plaintiff did not furnish the supposed P20,000 capital nor did she furnish any help or intervention in
the management of the theatre. Neither has she demanded from defendant any accounting of the
expenses and earnings of the business. She was absolutely silent with respect to any of the acts that a
partner should have done; all she did was to receive her share of P3,000 a month which cannot be
interpreted in any manner than a payment for these of premises which she had leased from the owners.