PARTNERSHIP CASE DIGESTS
RAMIREZ 453 PHIL 999
JARANTILLA, JR. vs. JARANTILLA636 SCRA 299, G.R. No. 154486, December 1, 2010,
FACTS: The present case stems from the complaint filed by Antonieta Jarantilla against Buenaventura Remotigue, Cynthia
Remotigue, Federico Jarantilla, Jr., Doroteo Jarantilla and Tomas Jarantilla, for the accounting of the assets and income of the
co-ownership, for its partition and the delivery of her share corresponding to eight percent (8%), and for
damages. Antonieta claimed that in 1946, she had entered into an agreement with the defendants toengage in business
through the execution of a document denominated as "Acknowledgement of Participating Capital”. Antonieta also alleged that
she had helped in the management of the business they co-owned without receiving any salary. Antonieta further claimed co-
ownership of certain properties (the subject real properties) in the name of the defendants since the only way the defendants
could have purchased these properties were through the partnership as they had no other source of income. The respondents
did not deny the existence and validity of the "Acknowledgement of Participating Capital" and in fact used this as evidence to
support their claim that Antonieta’s 8% share was limited to the businesses enumerated therein. The respondents denied
using the partnership’s income to purchase the subject real properties. During the course of the trial at the RTC, petitioner
Federico Jarantilla, Jr., who was one of the original defendants, entered into a compromise agreement with Antonieta Jarantilla
wherein he supported Antonieta’s claims and asserted that he too was entitled to six percent (6%) of the supposed partnership
in the same manner as Antonieta was.
ISSUE: Whether or not the partnership subject of the Acknowledgement of Participating Capital funded the subject real
properties.
HELD: Under Article 1767 of the Civil Code, there are two essential elements in a contract of partnership:
(a) An agreement to contribute money, property or industry to a common fund; and (b) intent to divide the profits among the
contracting parties
. The first element is undoubtedly present in the case at bar, for, admittedly, all the parties in this case have agreed to, and did,
contribute money and property to a common fund.
Hence, the issue narrows down to their intent in acting as they did. It is not denied that all the parties in this case have agreed
to contribute capital to a common fund to be able to later on share its profits. They have admitted this fact, agreed to its
veracity, and even submitted one common documentary evidence to prove such partnership - the Acknowledgement of
Participating Capital. The petitioner himself claims his share to be 6%, as stated in the Acknowledgement of Participating
Capital. However, petitioner fails to realize that this document specifically enumerated the businesses covered by the
partnership: Manila Athletic Supply, Remotigue Trading in Iloilo City and Remotigue Trading in Cotabato City. Since there was a
clear agreement that the capital the partners contributed went to the three businesses, then there is no reason to deviate
from such agreement and go beyond the stipulations in the document. There is no evidence that the subject real properties
were assets of the partnership referred to in the Acknowledgement of Participating Capital. Petition denied.
VILLAREAL V.
FACTS: In 1984, Villareal, Carmelito Jose and Jesus Jose formed a partnership with a capital of P750,000 for the operation of
a restaurant and catering business. Respondent Ramirez joined as a partner in the business with the capital contribution of
P250, 000. In 1987, Jesus Jose withdrew from the partnership and within the same time, Villareal and Carmelito Jose,
petitioners closed the business without prior knowledge of respondents In March 1987, respondents wrote a letter to
petitioners stating that they were no longer interested in continuing the partnership and that they were accepting the latter’s
offer to return their capital contribution. This was left unheeded by the petitioners, and by reason of which respondents filed a
complaint in the RTC.RTC ruled that the parties had voluntarily entered into a partnership, which could be dissolved at any
time, and this dissolution was showed by the fact that petitioners stopped operating the restaurant. On appeal, CA upheld
RTC’s decision that the partnership was dissolved and it added that respondents had no right to demand the return of their
capital contribution. However since petitioners did not give the proper accounting for the liquidation of the partnership, the CA
took it upon itself to compute their liabilities and the amount that is proper to the respondent. The computation of which was
:( capital of the partnership – outstanding obligation) / remaining partners =amount due to private respondent
ISSUE: W/N petitioners are liable to respondents for the latter’s share in the partnership?
RULING: No. Respondents have no right to demand from petitioner the return of their equity share. As found by the court
petitioners did not personally hold its equity or assets. “The partnership has a juridical personality separate and distinct from
that of each of the partners.” Since the capital was contributed to the partnership, not to petitioners, it is the partnership that
must refund the equity of the retiring partners. However, before the partners can be paid their shares, the creditors of the
partnership must first be compensated. Therefore, the exact amount of refund equivalent to respondents’ one-third share in
the partnership cannot be determined until all the partnership assets will have been liquidated and all partnership creditors
have been paid. CA’s computation of the amount to be refunded to respondents as their share was thus erroneous.
ESTANISLAO, JR. VS. COURT OF APPEALS (1988)
FACTS: The petitioner and private respondents are brothers and sisters who are co-owners of certain lots at the in Quezon
City which were then being leased to SHELL. They agreed to open and operate a gas station thereat to be known
as Estanislao ShellService Station with an initial investment of PhP15, 000.00 to be taken from the advance rentals due to them
from SHELL for the occupancy of the said lots owned in common by them. A joint affidavit was executed by them on
April 11, 1966. The respondents agreed to help their brother, petitioner therein, by allowing him to operate and manage the
gasoline service station of the family. In order not Torun counter to the company’s policy of appointing only one dealer, it was
agreed that petitioner would apply for the dealership. Respondent Remedios helped in co-managing the business with
petitioner from May 1966 up to February 1967.On May 1966, the parties entered into an Additional Cash Pledge Agreement
with SHELL wherein it was reiterated that the P15, 000.00 advance rental shall be deposited with SHELL to cover advances of
fuel topetitioner as dealer with a proviso that saidagreement “cancels and supersedes the JointAffidavit.”
For sometime, the petitioner submitted financial statement regarding the operation of the business to
the private respondents, but thereafter petitioner failed to render subsequent accounting. Hence , the
private respondents filed a complaint against the petitioner praying among others that the latter be ordered:
(1)To execute a public document embodying all the provisions of the partnership agreement they entered into;
(2)To render a formal accounting of the business operation veering the period from May 6, 1966 up to December 21, 1968, and
from January 1, 1969 up to the time the order is issued and that the same be subject to proper audit;
(3)To pay the plaintiffs their lawful shares and participation in the net profits of the business; and
(4)To pay the plaintiffs attorney’s fees and costs of the suit.
ISSUE: Can a partnership exist between members of the same family arising from their joint ownership of certain
properties?
Trial Court: The complaint (of the respondents) was dismissed. But upon a motion for reconsideration of the decision, another
decision was rendered in favor of the respondents.
CA: Affirmed in toto
Petitioner: The CA erred in interpreting the legal import of the Joint Affidavit vis-à-vis the Additional Cash Pledge
Agreement. Because of the stipulation cancelling and superseding the Joint Affidavit, whatever partnership agreement there
was in said previous agreement had thereby been abrogated. Also, the CA erred in declaring that a partnership was established
by and among the petitioner and the private respondents as regards the ownership and /or operation of the gasoline service
station business.
HELD: There is no merit in the petitioner’s
contentionthat because of the stipulation cancelling andsuperseding the previous joint affidavit, whatever
partnership agreement there was in said previous agreement had thereby been abrogated. Said
cancelling provision was necessary for the Joint Affidavit speaks of P15, 000.00 advance rental starting May 25, 1966 while the
latter agreement also refers to advance rentals of the same amount starting May 24, 1966. There is therefore a duplication of
reference to the P15, 000.00 hence the need to provide in the subsequent document that it
“cancels and supersedes” the previous none. Indeed, it is true that the latter document is silent as to the statement in the Join
Affidavit that the value represents the “capital investment” of the parties in the business and it speaks of the petitioner as the
sole dealer, but this is as it should be for in the latter document, SHELL was a signatory and it would be against their policy if in
the agreement it should be stated that the business is a partnership with private
respondents and not a sole proprietorship of the petitioner.
Furthermore, there are other evidences in the record which show that there was in fact such
partnershipagreement between parties. The petitionersubmitted to the private respondents periodicaccounting of the busines
s and gave a writtenauthority to the private respondent RemediosEstanislao to examine and audit the books of their “common
business” (aming negosyo). The respondent Remedios, on the other hand, assisted in the running of the business. Indeed, the
parties hereto formed a partnership when they bound themselves to contribute money in a common fund
with the intention of dividing the profits among themselves.
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 accounting1.
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 business2.
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% inequity in their business including those
which will be subsequently acquired, whichever was greater3.
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 Eduardo4.
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
Aurelio and Eduardo are brothers. In 1973, Aurelio alleged that Eduardo entered into a contract of partnership with him.
Aurelio showed as evidence a letter sent to him by Eduardo that the latter is allowing Aurelio to manage their family business
(if Eduardo’s away) and in exchange thereof he will be giving Aurelio P1 million or 10% equity, whichever is higher. A
memorandum was subsequently made for the said partnership agreement. The memorandum this time stated that in
exchange of Aurelio, who just got married, retaining his share in the family business (movie theatres, shipping and land
development) and some other immovable properties, he will be given P1 Million or 10% equity in all these businesses and
those to be subsequently acquired by them whichever is greater.
In 1992 however, the relationship between the brothers went sour. And so Aurelio demanded an accounting and the
liquidation of his share in the partnership. Eduardo did not heed and so Aurelio sued Eduardo.
ISSUE: Whether or not there exists a partnership.
HELD: No. The partnership is void and legally nonexistent. The documentary evidence presented by Aurelio, i.e. the letter
from Eduardo and the Memorandum, did not prove partnership.
The 1973 letter from Eduardo on its face, contains typewritten entries, personal in tone, but is unsigned and undated. As an
unsigned document, there can be no quibbling that said letter does not meet the public instrumentation requirements exacted
under Article 1771 (how partnership is constituted) of the Civil Code. Moreover, being unsigned and doubtless referring to a
partnership involving more than P3,000.00 in money or property, said letter cannot be presented for notarization, let alone
registered with the Securities and Exchange Commission (SEC), as called for under the Article 1772 (capitalization of a
partnership) of the Code. And inasmuch as the inventory requirement under the succeeding Article 1773 goes into the matter
of validity when immovable property is contributed to the partnership, the next logical point of inquiry turns on the nature of
Aurelio’s contribution, if any, to the supposed partnership.
The Memorandum is also not a proof of the partnership for the same is not a public instrument and again, no inventory was
made of the immovable property and no inventory was attached to the Memorandum. Article 1773 of the Civil Code requires
that if immovable property is contributed to the partnership an inventory shall be had and attached to the contract.
PASCUAL v. Commissioner of Internal Revenue #10 BUSORG
G.R. No. 78133 October 18, 1988
FACTS: On June 22, 1965, petitioners bought two (2)parcels of land from Santiago Bernardino, et al. and on May 28, 1966,
they bought another three (3) parcels of land from Juan Roque. The first two parcels of land were sold by petitioners in 1968 to
Marenir Development Corporation, while the three parcels of land were sold by petitioners to Erlinda Reyes and Maria
Samsonon March 19,1970. Petitioner realized a net profit in the sale made in 1968 in the amount of P165, 224.70, while they
realized a net profit of P60,000 in the sale made in 1970. The corresponding capital gains taxes were paid by petitioners in
1973 and 1974 .Respondent Commissioner informed petitioners that in the years 1968 and 1970, petitioners as co-owners in
the real estate transactions formed an unregistered partnership or joint venture taxable as a corporation under Section
20(b)and its income was subject to the taxes prescribed under Section 24, both of the National Internal Revenue Code; that the
unregistered partnership was subject to corporate income tax as distinguished from profits derived from the partnership by
them which is subject to individual income tax.
ISSUE: Whether petitioners formed an unregistered partnership subject to corporate income tax(partnership vs. co-
ownership)
RULING: Article 1769 of the new Civil Code lays down the rule for determining when a transaction should be deemed a
partnership or a co-ownership. Said article paragraphs 2 and 3, provides:
(2) Co-ownership or co-possession does not itself establish a partnership, whether such co-owners or co-possessors do or do
not share any profits made by the use of the property;
(3) The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint
or common right or interest in any property from which the returns are derived; 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 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.
G.R. No. 159333 July 31, 2006
ARSENIO T. MENDIOLA, petitioner, vs. COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION, PACIFIC
FORESTRESOURCES, PHILS., INC. and/or CELLMARK AB, respondents. PUNO, J .:
FACTS: Petitioner Mendiola (ATM) entered into a Side Agreement with Pacfor (USA) who will set up a representative office
in the Philippines. They named said office as Pacfor Phils in which petitioner is president. In the agreement, petitioner’s base
salary and the company’s overhead expenditures shall be borne by the representative office and shall be funded by
Pacfor/ATM being equally owned on 50-50 equity by ATM and Pacfor-USA. The Side Agreement was later amended through a
Revised Operating and Profit Sharing Agreement where petitioner’s salary was increased. However, 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.
Years later, petitioner wrote Pacfor’s VP for Asia seeking confirmation of his 50% equity of Pacfor Phils to which Pacfor’s
President replied that petitioner is not a part
- owner, his office being just a representative office, a “theoretical company with the purpose of dividing the income
50-50.” He even stressed that the petitioner knew of this arrangement from beginning, having been the one to
propose to them the setting up of a representative office, instead of a branch office, to save on taxes.
ISSUE: Whether or not a partnership or co-ownership exists between the parties.
HELD: Petitioner is an employee of Pacfor and no partnership or co-ownership exists between the parties. 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. In fact, 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 petitioner and private respondent
Pacfor. Petitioner 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 income50-50.
He stressed that petitioner knew of this arrangement from the very start, having been the one to propose to private
respondent 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. 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.
TUASON VS. BOLANOS GR. No. L-4935. May 28, 195495 Phil. 106CASE DIGEST
FACTS: Plaintiff’s complaint against defendant was to recover possession of a registered land. In the complaint, the plaintiff
is represented by its Managing Partner, Gregorio Araneta, Inc., another corporation. Defendant, in his answer, sets up
prescription and title in himself thru “open, continuous, exclusive and public and notorious possession under claim of
ownership, adverse to the entire world by defendant and his predecessors in interest" from "time immemorial". After trial, the
lower court rendered judgment for plaintiff, declaring defendant to be without any right to the land in question and ordering
him to restore possession thereof to plaintiff and to pay the latter a monthly rent. Defendant appealed directly to the Supreme
Court and contended, among others, that Gregorio Araneta, Inc. cannot act as managing partner for plaintiff on the theory that
it is illegal for two corporations to enter into a partnership
ISSUE: Whether or not a corporation may enter into a joint venture with another corporation.
RULING: It is true that the complaint states that the plaintiff is "represented herein by its Managing Partner Gregorio
Araneta, Inc.", another corporation, but 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 plaintiff 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, 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."
(Wyoming-Indiana Oil Gas Co. vs. Weston, 80 A. L. R., 1043, citing 2.Fletcher Cyc. of Corp., 1082.). There is nothing in the record
to indicate that the venture in which plaintiff is represented by Gregorio Araneta, Inc. as "its managing partner" is not in line
with the corporate business of either of them.
PRIMELINK PROPERTIES AND DEVELOPMENT CORPORATION VS MA. CLARITA LAZATIN-MAGAT
Business Organization – Partnership, Agency, Trust – Dissolution and Winding Up – Joint Venture Agreement – Rights of
Innocent Party
FACTS: In 1994, Primelink Properties and the Lazatin siblings entered into a joint venture agreement whereby the
Lazatins shall contribute a huge parcel of land and Primelink shall develop the same into a subdivision. For 4 years however,
Primelink failed to develop the said land. So in 1998, the Lazatins filed a complaint to rescind the joint venture agreement with
prayer for preliminary injunction. In said case, Primelink was declared in default or failing to file an answer and for asking
multiple motions for extension. The trial court eventually ruled in favor of the Lazatins and it ordered Primelink to return the
possession of said land to the Lazatins as well as some improvements which Primelink had so far over the property without the
Lazatins paying for said improvements. This decision was affirmed by the Court of Appeals. Primelink is now assailing the order;
that turning over improvements to the Lazatins without reimbursement is unjust; that the Lazatins did not ask the properties
to be placed under their possession but they merely asked for rescission.
ISSUE: Whether or not the improvements made by Primelink should also be turned over under the possession of the
Lazatins.
HELD: Yes. In the first place, even though the Lazatins did specifically pray for possession the same (placing of
improvements under their possession) is incidental in the relief they prayed for. They are therefore entitled possession over
the parcel of land plus the improvements made thereon made by Primelink.
In this jurisdiction, joint ventures are governed by the laws of partnership. Under the laws of partnership, when a partnership is
dissolved, as in this case when the trial court rescinded the joint venture agreement, the innocent party has the right to wind
up the partnership affairs.
With the rescission of the JVA on account of petitioners’ fraudulent acts, all authority of any partner to act for the partnership
is terminated except so far as may be necessary to wind up the partnership affairs or to complete transactions begun but not
yet finished. On dissolution, the partnership is not terminated but continues until the winding up of partnership affairs is
completed. Winding up means the administration of the assets of the partnership for the purpose of terminating the business
and discharging the obligations of the partnership.
It must be stressed, too, that although the Lazatins acquired possession of the lands and the improvements thereon, the said
lands and improvements remained partnership property, subject to the rights and obligations of the parties, inter se, of the
creditors and of third parties and subject to the outcome of the settlement of the accounts between the parties, absent any
agreement of the parties in their JVA to the contrary (here no agreement in the JVA as to winding up). Until the partnership
accounts are determined, it cannot be ascertained how much any of the parties is entitled to, if at all.
HEIRS OF TAN ENG KEE vs.CA 341 SCRA 740, G.R. No. 126881, October 3, 2000
FACTS: After the Second World War, Tan EngKee and Tan Eng Lay, pooling their resources and industry together, entered
into a partnership engaged in the business of selling lumber and hardware and construction supplies. They named their
enterprise "Benguet Lumber" which they jointly managed until Tan EngKee's death. Petitioners herein averred that the
business prospered due to the hard work and thrift of the alleged partners. However, they claimed that in 1981, Tan Eng Lay
and his children caused the conversion of the partnership "Benguet Lumber" into a corporation called "Benguet Lumber
Company." The incorporation was purportedly a ruse to deprive Tan EngKee and his heirs of their rightful participation in the
profits of the business. Petitioners prayed for accounting of the partnership assets, and the dissolution, winding up and
liquidation thereof, and the equal division of the net assets of Benguet Lumber. The RTC ruled in favor of petitioners, declaring
that Benguet Lumber is a joint venture which is akin to a particular partnership. The Court of Appeals rendered the assailed
decision reversing the judgment of the trial court.
ISSUE: Whether the deceased Tan EngKee and Tan Eng Lay are joint adventurers and/or partners in a business venture
and/or particular partnership called Benguet Lumber and as such should share in the profits and/or losses of the business
venture or particular partnership
RULING: There was no partnership whatsoever. Except for a firm name, there was no firm account, no firm letterheads
submitted as evidence, no certificate of partnership, no agreement as to profits and losses, and no time fixed for the duration
of the partnership. There was even no attempt to submit an accounting corresponding to the period after the war until Kee's
death in 1984. It had no business book, no written account nor any memorandum for that matter and no license mentioning
the existence of a partnership. Also, the trial court determined that Tan EngKee and Tan Eng Lay had entered into a joint
venture, which it said is akin to a particular partnership. A particular partnership is distinguished from a joint adventure, to wit:
(a) A joint adventure (an American concept similar to our joint accounts) is a sort of informal partnership, with no firm name
and no legal personality. In a joint account, the participating merchants can transact business under their own name, and can
be individually liable therefor.
(b) Usually, but not necessarily a joint adventure is limited to a SINGLE TRANSACTION, although the business of pursuing to a
successful termination may continue for a number of years; a partnership generally relates to a continuing business of various
transactions of a certain kind. A joint venture "presupposes generally a parity of standing between the joint co-ventures or
partners, in which each party has an equal proprietary interest in the capital or property contributed, and where each party
exercises equal rights in the conduct of the business. The evidence presented by petitioners falls short of the quantum of proof
required to establish a partnership. In the absence of evidence, we cannot accept as an established fact that Tan EngKee
allegedly contributed his resources to a common fund for the purpose of establishing a partnership. Besides, it is indeed odd, if
not unnatural, that despite the forty years the partnership was allegedly in existence, Tan EngKee never asked for an
accounting.
The essence of a partnership is that the partners share in the profits and losses .Each has the right to demand an accounting as
long as the partnership exists. A demand for periodic accounting is evidence of a partnership. During his lifetime, Tan EngKee
appeared never to have made any such demand for accounting from his brother, Tang Eng Lay. We conclude that Tan EngKee
was only an employee, not a partner since they did not present and offer evidence that would show that Tan EngKee received
amounts of money allegedly representing his share in the profits of the enterprise. There being no partnership, it follows that
there is no dissolution, winding up or liquidation to speak of.
VICENTE SY v. CA, GR No. 142293, 2003-02-27
FACTS: Sometime in 1958, private respondent Jaime Sahot[5] started working as a truck helper for petitioners' family-
owned trucking business named Vicente Sy Trucking. In 1965, he became a truck driver of the same family business, renamed
T. Paulino Trucking Service, later 6B's Trucking Corporation in 1985, and thereafter known as SBT Trucking Corporation since
1994. Throughout all these changes in names and for 36 years, private respondent continuously served the trucking business of
petitioners.
In April 1994, Sahot was already 59 years old. He had been incurring absences as he was suffering from various ailments.
He inquired about his medical and retirement... benefits with the Social Security System (SSS)... but discovered that his
premium payments had not been remitted by his employer.
Sahot had filed a week-long leave sometime in May 1994. He was medically examined and treated for EOR, presleyopia,
hypertensive retinopathy
HPM, UTI,... Osteoarthritis... and heart enlargement... and On said grounds SBT Trucking Service management told him to file a
formal request for extension of his leave.
Sahot applied for extension of his leave for the whole month of June, 1994. It was at this time when petitioners allegedly
threatened to terminate his employment should he refuse to go back to work.
Sahot found himself in a dilemma. He was facing dismissal if he refused to work, but he could not retire on pension because
petitioners never paid his correct SSS premiums.
They carried out their threat and dismissed him from work, effective June 30, 1994. He ended up sick, jobless and penniless.
On September 13, 1994, Sahot filed with the NLRC NCR Arbitration Branch, a complaint for illegal dismissal,... He prayed for the
recovery of separation pay and attorney’s fees... against... herein petitioners. Or their part, petitioners admitted they had a
trucking business in the 1950s but denied employing helpers and drivers. They contend that private respondent was not
illegally dismissed as a driver because he was in fact petitioner's industrial partner.
The NLRC NCR Arbitration Branch, through Labor Arbiter Ariel Cadiente Santos, ruled that there was no illegal dismissal in
Sahot's case.
On appeal, the National Labor Relations Commission modified the judgment of the Labor Arbiter. It declared that private
respondent was an employee, not an industrial partner, since the start.
Private respondent Sahot did not abandon his job but his employment was terminated on... account of his illness, pursuant to
Article 284
Petitioners assailed the decision of the NLRC before the Court of Appeals. The appellate court affirmed with modification the
judgment of the NLRC. It held that private respondent was indeed an employee of petitioners since 1958.
Hence, the instant petition
ISSUE: Whether or not an employer-employee relationship existed between petitioners and respondent Sahot;
RULING: Article 1767[21] of the Civil Code states that in 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 the profits among themselves
Not one of these circumstances is present in this case. No written agreement exists to prove the partnership between the
parties. Private respondent did not contribute money, property or industry for the purpose of engaging in the supposed
business. There is no... Proof that he was receiving a share in the profits as a matter of course, during the period when the
trucking business was under operation. Neither is there any proof that he had actively participated in the management,
administration and adoption of policies of the business.
Thus, the NLRC and the CA did not err in reversing the finding of the Labor Arbiter that private respondent was an industrial
partner from 1958 to 1994.
G.R. No. 169757 November 23, 2011
CESAR C. LIRIO, doing business under the name and style of CELKOR AD SONICMIX, Petitioner, v. WILMER D. GENOVIA,
Respondent.
FACTS: Respondent was allegedly hired on August 15, 2001 as studio manager by petitioner Lirio, owner of Celkor Ad
Sonicmix Recording Studio (Celkor). A few days after he started working as a studio manager, petitioner approached him and
told him about his project to produce an album for his 15-year-old daughter. Petitioner asked respondent to compose and
arrange songs for Celine and promised that he (Lirio) would draft a contract to assure respondent of his compensation for such
services. As agreed upon, the additional services that respondent would render included composing and arranging musical
scores only, while the technical aspect in producing the album, such as digital editing, mixing and sound engineering would be
performed by respondent in his capacity as studio manager for which he was paid on a monthly basis.
Respondent reminded petitioner about his compensation as composer and arranger of the album. Petitioner verbally assured
him that he would be duly compensated. By mid-November 2001, respondent finally finished the compositions and musical
arrangements of the songs to be included in the album.
Thereafter, respondent was tasked by petitioner to prepare official correspondence, establish contacts and negotiate with
various radio stations, malls, publishers, record companies and manufacturers, record bars and other outlets in preparation for
the promotion of the said album. By early February 2002, the album was in its manufacturing stage.
On February 26, 2002, respondent again reminded petitioner about the contract on his compensation as composer and
arranger of the album. Petitioner told respondent that since he was practically a nobody and had proven nothing yet in the
music industry, respondent did not deserve a high compensation, and he should be thankful that he was given a job to feed his
family. Petitioner informed respondent that he was entitled only to 20% of the net profit, and not of the gross sales of the
album, and that the salaries he received and would continue to receive as studio manager of Celkor would be deducted from
the said 20% net profit share.
Respondent objected and insisted that he be properly compensated. On March 14, 2002, petitioner verbally terminated
respondent's services, and he was instructed not to report for work. On July 9, 2002, respondent Wilmer D. Genovia filed a
complaint against petitioner for illegal dismissal, non-payment of commission and award of moral and exemplary damages.
Petitioner asserted that from the aforesaid terms and conditions, his relationship with respondent is one of an informal
partnership under Article 1767 of the New Civil Code, since they agreed to contribute money, property or industry to a
common fund with the intention of dividing the profits among themselves. Petitioner had no control over the time and manner
by which respondent composed or arranged the songs, except on the result thereof.
ISSUE: Whether or not an employer-employee relationship existed between petitioner and respondent
HELD: 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.
It is settled that no particular form of evidence is required to prove the existence of an employer-employee relationship. Any
competent and relevant evidence to prove the relationship may be admitted.
In this case, the documentary evidence presented by respondent to prove that he was an employee of petitioner are as
follows:
(a) a document denominated as "payroll" certified correct by petitioner, which showed that respondent received a monthly
salary of P7,000.00 (P3,500.00 every 15th of the month and another P3,500.00 every 30th of the month) with the
corresponding deductions due to absences incurred by respondent; and (2) copies of petty cash vouchers, showing the
amounts he received and signed for in the payrolls.
The said documents showed that petitioner hired respondent as an employee and he was paid monthly wages of P7,000.00.
Petitioner wielded the power to dismiss as respondent stated that he was verbally dismissed by petitioner, and respondent,
thereafter, filed an action for illegal dismissal against petitioner. The power of control refers merely to the existence of the
power. It is not essential for the employer to actually supervise the performance of duties of the employee, as it is sufficient
that the former has a right to wield the power. Nevertheless, petitioner stated in his Position Paper that it was agreed that he
would help and teach respondent how to use the studio equipment. In such case, petitioner certainly had the power to check
on the progress and work of respondent.
On the other hand, petitioner failed to prove that his relationship with respondent was one of partnership. Such claim was not
supported by any written agreement. It is a well-settled doctrine, that if doubts exist between the evidence presented by the
employer and the employee, the scales of justice must be tilted in favor of the latter.
Based on the foregoing, it is clear that an employer-employee relationship existed between petitioner and respondent.
JOSEFINA P. REALUBIT vs. PROSENCIO D. JASO and EDENG JASO
G.R. No. 178782 September 21, 2011
FACTS: Petitioner Josefina Realubit entered into a Joint Venture Agreement with Francis Eric Amaury Biondo, a French
national, for the operation of an ice manufacturing business. With Josefina as the industrial partner and Biondo as the capitalist
partner, the parties agreed that they would each receive 40% of the net profit, with the remaining 20% to be used for the
payment of the ice making machine which was purchased for the business. For and in consideration of the sum of P500,000.00,
however, Biondo subsequently executed a Deed of Assignment transferring all his rights and interests in the business in favor
of respondent Eden Jaso, the wife of respondent Prosencio Jaso. With Biondo’s eventual departure from the country, the
Spouses Jaso caused their lawyer to send Josefina a letter apprising her of their acquisition of said Frenchmans share in the
business and formally demanding an accounting and inventory thereof as well as the remittance of their portion of its profits.
Faulting Josefina with unjustified failure to heed their demand, the Spouses Jaso commenced the instant suit for specific
performance, accounting, examination, audit and inventory of assets and properties, dissolution of the joint venture,
appointment of a receiver and damages. The said complaint alleged that the Spouses Realubit had no gainful occupation or
business prior to their joint venture with Biondo and that aside from appropriating for themselves the income of the business,
they have fraudulently concealed the funds and assets thereof thru their relatives, associates or dummies. The Spouses
Realubit claimed that they have been engaged in the tube ice trading business under a single proprietorship even before their
dealings with Biondo.
The RTC rendered its Decision discounting the existence of sufficient evidence from which the income, assets and the supposed
dissolution of the joint venture can be adequately reckoned. Upon the finding, however, that the Spouses Jaso had been
nevertheless subrogated to Biondos rights in the business in view of their valid acquisition of the latter’s share as capitalist
partner. On appeal before the CA, the foregoing decision was set aside.
Upon the following findings that the Spouses Jaso validly acquired Biondos share in the business which had been transferred to
and continued its operations and not dissolved as claimed by the Spouses Realubit.
ISSUES:
1. Whether there was a valid assignment or rights to the joint venture
2. Whether the joint venture is a contract of partnership
3. Whether Jaso acquired the title of being a partner based on the Deed of Assignment
RULING:
1. Yes. As a public document, the Deed of Assignment Biondo executed in favor of Eden not only enjoys a presumption of
regularity but is also considered prima facie evidence of the facts therein stated. A party assailing the authenticity and due
execution of a notarized document is, consequently, required to present evidence that is clear, convincing and more than
merely preponderant. In view of the Spouses Realubits failure to discharge this onus, we find that both the RTC and the CA
correctly upheld the authenticity and validity of said Deed of Assignment upon the combined strength of the above-discussed
disputable presumptions and the testimonies elicited from Eden and Notary Public Rolando Diaz.
2. Yes. Generally understood to mean an organization formed for some temporary purpose, a joint venture is likened to a
particular partnership or one which has for its object determinate things, their use or fruits, or a specific undertaking, or the
exercise of a profession or vocation. The rule is settled that joint ventures are governed by the law on partnerships which are,
in turn, based on mutual agency or delectus personae.
3. No. It is evident that the transfer by a partner of his partnership interest does not make the assignee of such interest a
partner of the firm, nor entitle the assignee to interfere in the management of the partnership business or to receive anything
except the assignees profits. The assignment does not purport to transfer an interest in the partnership, but only a future
contingent right to a portion of the ultimate residue as the assignor may become entitled to receive by virtue of his
proportionate interest in the capital. Since a partner’s interest in the partnership includes his share in the profits, we find that
the CA committed no reversible error in ruling that the Spouses Jaso are entitled to Biondos share in the profits, despite
Juanitas lack of consent to the assignment of said Frenchmans interest in the joint venture. Although Eden did not, moreover,
become a partner as a consequence of the assignment and/or acquire the right to require an accounting of the partnership
business, the CA correctly granted her prayer for dissolution of the joint venture conformably with the right granted to the
purchaser of a partner’s interest under Article 1831 of the Civil Code.
G.R. No. L-35469 March 17, 1932
E. S. LYONS vs. C. W. ROSENSTOCK, Executor of the Estate of Henry W. Elser, deceased
FACTS: Henry W. Elser was engaged in buying, selling, and administering real estate. E. S. Lyons joined with him, the profits
being shared by the two in equal parts. Lyons, whose regular vocation was that of a missionary or missionary agent, of the
Methodist Episcopal Church, went on leave to the United States and was gone for nearly a year and a half. Elser made written
statements showing that Lyons was, at that time, half owner with Elser of three particular pieces of real property. Concurrently
with this act Lyons execute in favor of Elser a general power of attorney empowering him to manage and dispose of said
properties at will and to represent Lyons fully and amply, to the mutual advantage of both. The attention of Elser was drawn to
a piece of land, referred to as the San JuanEstate. He obtained the loan of P50,000 to complete the amount needed for the first
payment on the San Juan Estate. The lender insisted that he should procure the signature of the Fidelity & Surety Co. on the
note to be given for said loan. Elser mortgaged to the Fidelity & Surety Co. the equity of redemption in the property owned by
himself and Lyons on Carriedo Street to secure the liability thus assumed by it. The case for the plaintiff supposes that, when
Elser placed a mortgage for P50,000upon the equity of redemption in the Carriedo property, Lyons, as half owner of said
property, became, as it were, involuntarily the owner of an undivided interest in the property acquired partly by that money;
and it is insisted for him that, in consideration of this fact, he is entitled to the four hundred forty-six and two-thirds shares of J.
K.Pickering & Company, with the earnings thereon, as claimed in his complaint.
ISSUE: Whether there was a general relation of partnership.
RULING: NO, The position of the appellant is, in our opinion, untenable. If Elser had used any money actually belonging to
Lyons in this deal, he would under article 1724of the Civil Code and article 264 of the Code of Commerce, be obligated to pay
interest upon the money so applied to his own use. Under the law prevailing in this jurisdiction a trust does not ordinarily
attach with respect to property acquired by person who uses money belonging to another (Martinez vs. Martinez, 1 Phil.,
647;Enriquez vs. Olaguer, 25 Phil., 641.). Of course, if an actual relation of partnership had existed in the money used, the case
might be different; and much emphasis is laid in the appellant's brief upon the relation of partnership which, it is claimed,
existed. But there was clearly no general relation of partnership, under article 1678 of the Civil Code. It is clear that Elser, in
buying the San Juan Estate, was not acting for any partnership composed of himself and Lyons, and the law cannot be distorted
into a proposition which would make Lyons a participant in this deal contrary to his express determination. It seems to be
supposed that the doctrines of equity worked out in the jurisprudence of England and the United States with reference to trust
supply a basis for this action. The doctrines referred to operate, however, only where money belonging to one person is used
by another for the acquisition of property which should belong to both; and it takes but little discernment to see that the
situation here involved is not one for the application of that doctrine, for no money belonging to Lyons or any partnership
composed of Elser and Lyons was in fact used by Elser in the purchase of the SanJuan Estate. Of course, if any damage had
been caused to Lyons by the placing of the mortgage upon the equity of redemption in the Carriedo property, Elser's estate
would be liable for such damage. But it is evident that Lyons was not prejudice by that act.
EUFEMIA EVANGELISTA, MANUELA EVANGELISTA, and FRANCISCA EVANGELISTA, petitioners,
vs. THE COLLECTOR OF INTERNAL REVENUE and THE COURT OFTAX APPEALS, respondents.
G.R. No. L-9996, October 15, 1957
FACTS: Petitioners borrowed sum of money from their father and together with their own personal funds they used said
money to buy several real properties. They then appointed their brother (Simeon) as manager of the said real properties with
powers and authority to sell, lease or rent out said properties to third persons. They realized rental income from the said
properties for the period 1945-1949.On September 24, 1954 respondent Collector of Internal Revenue demanded the payment
of income tax on corporations, real estate dealer's fixed tax and corporation residence tax for the years 1945-1949. The letter
of demand and corresponding assessments were delivered to petitioners on December 3, 1954, whereupon they instituted the
present case in the Court of Tax Appeals, with a prayer that "the decision of the respondent contained in his letter of demand
dated September 24, 1954" be reversed, and that they be absolved from the payment of the taxes in question. CTA denied
their petition and subsequent MR and New Trials were denied. Hence this petition.
ISSUE: Whether or not petitioners have formed a partnership and consequently, are subject to the tax on corporations
provided for in section 24 of Commonwealth Act. No. 466, otherwise known as the National Internal Revenue Code, as well
as to the residence tax for corporations and the real estate dealers fixed tax.
HELD: YES.
The essential elements of a partnership are two, namely:
(a) an agreement to contribute money, property or industry to a common fund; and
(b) intent to divide the profits among the contracting parties.
The first element is undoubtedly present in the case at bar, for, admittedly, petitioners have agreed to, and did, contribute
money and property to a common fund. Upon consideration of all the facts and circumstances surrounding the case, we are
fully satisfied that their purpose was to engage in real estate transactions for monetary gain and then divide the same among
themselves, because of the following observations, among others:
(1) Said common fund was not something they found already in existence;
(2)They invested the same, not merely in one transaction, but in a series of transactions;
(3) The aforesaid lots were not devoted to residential purposes, or to other personal uses, of petitioners herein. Although,
taken singly, they might not suffice to establish the intent necessary to constitute a partnership, the collective effect of these
circumstances is such as to leave no room for doubt on the existence of said intent in petitioners herein. For purposes of the
tax on corporations, our National Internal Revenue Code, includes these partnerships:
- with the exception only of duly registered general co-partnerships
- within the purview of the term “corporation." It is, therefore, clear to our mind that petitioners herein constitute a
partnership, insofar as said Code is concerned and are subject to the income tax for corporations.
Evangelista, et al. v. CIR, GR No. L-9996, October 15, 1957
FACTS: Herein petitioners seek a review of CTA’s decision holding them liable for income tax, real estate dealer’s tax and
residence tax. As stipulated, petitioners borrowed from their father a certain sum for the purpose of buying real properties.
Within February 1943 to April 1994, they have bought parcels of land from different persons, the management of said
properties was charged to their brother Simeon evidenced by a document. These properties were then leased or rented to
various tenants.
On September 1954, CIR demanded the payment of income tax on corporations, real estate dealer’s fixed tax, and
corporation residence tax to which the petitioners seek to be absolved from such payment.
ISSUE: Whether petitioners are subject to the tax on corporations.
RULING: The Court ruled that with respect to the tax on corporations, the issue hinges on the meaning of the terms
“corporation” and “partnership” as used in Section 24 (provides that a tax shall be levied on every corporation no matter how
created or organized except general co-partnerships) and 84 (provides that the term corporation includes among others,
partnership) of the NIRC. Pursuant to Article 1767, NCC (provides for the concept of partnership), its essential elements 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.
It is of the opinion of the Court that the first element is undoubtedly present for petitioners have agreed to, and did, contribute
money and property to a common fund. As to the second element, the Court fully satisfied that their purpose was to engage in
real estate transactions for monetary gain and then divide the same among themselves as indicated by the following
circumstances:
1. The common fund was not something they found already in existence nor a property inherited by them pro indiviso. It
was created purposely, 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. The number of lots acquired and
transactions undertake is strongly indicative of a pattern or common design that was not limited to the conservation and
preservation of the aforementioned common fund or even of the property acquired. In other words, one cannot but perceive a
character of habitually peculiar to business transactions engaged in the purpose of gain;
3. Said properties were not devoted to residential purposes, or to other personal uses, of petitioners but were leased
separately to several persons;
4. They were under the management of one person where the affairs relative to said properties have been handled as if the
same belonged to a corporation or business and enterprise operated for profit;
5. Existed for more than ten years, or, to be exact, over fifteen years, since the first property was acquired, and over twelve
years, since Simeon Evangelista became the manager;
6. Petitioners have not testified or introduced any evidence, either on their purpose in creating the set up already adverted
to, or on the causes for its continued existence.
The collective effect of these circumstances is such as to leave no room for doubt on the existence of said intent in petitioners
herein.
Also, petitioners’ argument that their being mere co-owners did not create a separate legal entity was rejected because,
according to the Court, the tax in question is one imposed upon "corporations", which, strictly speaking, are distinct and
different from "partnerships". When the NIRC includes "partnerships" among the entities subject to the tax on "corporations",
said Code must allude, therefore, to organizations which are not necessarily "partnerships", in the technical sense of the term.
The qualifying expression found in Section 24 and 84(b) 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. Accordingly, the lawmaker could not have regarded that
personality as a condition essential to the existence of the partnerships therein referred to. For purposes of the tax on
corporations, NIRC includes these partnerships - with the exception only of duly registered general co partnerships - within the
purview of the term "corporation." It is, therefore, clear that petitioners herein constitute a partnership, insofar as said Code is
concerned and are subject to the income tax for corporations.
As regards the residence of tax for corporations (Section 2 of CA No. 465), it is analogous to that of section 24 and 84 (b) of the
NIRC. It is apparent that the terms "corporation" and "partnership" are used in both statutes with substantially the same
meaning. Consequently, petitioners are subject, also, to the residence tax for corporations.
Finally, on the issues of being liable for real estate dealer’s tax, they are also liable for the same because the records show that
they have habitually engaged in leasing said properties whose yearly gross rentals exceeds P3,000.00 a year.
FERNANDEZ vs. DE LA ROSA G.R. No. 413 February 2, 1903
FACTS: Fernandez alleges that in January, 1900, he entered into a verbal agreement with Dela Rosa to form a partnership
for the purchase of cascoes and the carrying on of the business of letting the same for hire in Manila, and Dela Rosa is to buy
the cascoes and each partner to furnish for that purpose such amount of money as he could, the profits to be divided
proportionately; Fernandez furnished Dela Rosa sums to purchase and repair cascoes, the latter taking the titles in his own
name; that in April the parties undertook to draw up articles of partnership for the purpose of embodying the same in an
authentic document, but that the defendant having proposed a draft of such articles which differed materially from the terms
of the earlier verbal agreement, and being unwillingly to include the 2nd casco in the partnership, they were unable to come to
any understanding and no written agreement was executed; that the defendant having in the meantime had the control and
management of the two cascoes, the plaintiff made a demand for an accounting upon him, which the defendant refused to
render, denying the existence of the partnership altogether.
Dela Rosa admits that the project of forming a partnership in the casco business in which he was already engaged to some
extent individually was discussed between himself and the plaintiff in January, 1900, but he denies that any agreement was
ever consummated. He denies that the plaintiff furnished any money in January, 1900, for the purchase of the first casco, or
for repairs on the same, but claims that he borrowed 300 pesos on his individual account in January from the bakery firm,
consisting of the plaintiff, Marcos Angulo, and Antonio Angulo. The 825 pesos, which he admits he received from the
Fernandez March 5, he claims was for the purchase of the first casco, which he alleged was bought March 12, and he alleges
that he never received anything from the defendant toward the purchase of the 2nd casco. He claims to have paid, exclusive of
repairs, 1,200 pesos for the first casco and 2,000 pesos for the second one.
ISSUE:
(1) Did a partnership exist between the parties?
(2) If such partnership existed, was it terminated as a result of the act of the defendant in receiving back the 1,125 pesos?
HELD:
(1) “Partnership is a contract by which two or more persons bind themselves to contribute money, property, or industry to a
common fund, with the intention of dividing the profits among themselves.” (Civil Code, art. 1665.)
The essential points upon which the minds of the parties must meet in a contract of partnership are, therefore, (1) mutual
contribution to a common stock, and (2) a joint interest in the profits. If the contract contains these two elements the
partnership relation results, and the law itself fixes the incidents of this relation if the parties fail to do so. (Civil Code, secs.
1689, 1695.)
We have found as a fact that money was furnished by the plaintiff and received by the defendant with the understanding that
it was to be used for the purchase of the cascoes in question. This establishes the first element of the contract, namely, mutual
contribution to a common stock. The second element, namely, the intention to share profits, appears to be an unavoidable
deduction from the fact of the purchase of the cascoes in common, in the absence of any other explanation of the object of the
parties in making the purchase in that form, and, it may be added, in view of the admitted fact that prior to the purchase of the
first casco the formation of a partnership had been a subject of negotiation between them.
It is thus apparent that a complete and perfect contract of partnership was entered into by the parties. This contract, it is true,
might have been subject to a suspensive condition, postponing its operation until an agreement was reached as to the
respective participation of the partners in the profits, the character of the partnership as collective or en comandita, and other
details, but although it is asserted by counsel for the defendant that such was the case, there is little or nothing in the record to
support this claim, and that fact that the defendant did actually go on and purchase the boat, as it would seem, before any
attempt had been made to formulate partnership articles, strongly discountenances the theory.
The execution of a written agreement was not necessary in order to give efficacy to the verbal contract of partnership as a civil
contract, the contributions of the partners not having been in the form of immovables or rights in immovables. (Civil Code, art.
1667.) the special provision cited, requiring the execution of a public writing in the single case mentioned and dispensing with
all formal requirements in other cases, renders inapplicable to this species of contract the general provisions of article 1280 of
the Civil Code.
2) The remaining question is as to the legal effect of the acceptance by the plaintiff of the money returned to him by the
defendant after the definitive failure of the attempt to agree upon partnership articles. The amount returned fell short, in our
view of the facts, of that which the plaintiff had contributed to the capital of the partnership, since it did not include the sum
which he had furnished for the repairs of casco No. 1515. Moreover, it is quite possible, as claimed by the plaintiff, that a profit
may have been realized from the business during the period in which the defendant have been administering it prior to the
return of the money, and if so he still retained that sum in his hands. For these reasons the acceptance of the money by the
plaintiff did not have the effect of terminating the legal existence of the partnership by converting it into a societas leonina, as
claimed by counsel for the defendant.
The result is that we hold and declare that a partnership was formed between the parties in January, 1900, the existence of
which the defendant is bound to recognize; that cascoes No. 1515 and 2089 constitute partnership property, and that the
plaintiff is entitled to an accounting of the defendant’s administration of such property, and of the profits derived therefrom.
This declaration does not involve an adjudication as to any disputed items of the partnership account.
G.R. No. 5837 September 15, 1911
CATALINO GALLEMIT, plaintiff-appellant, vs. CEFERINO TABILIRAN, defendant-appellee.
FACTS: Plaintiff he alleged that the plaintiff and the defendant, while residents of the municipality of Dapitan, had
acquired, in joint tenancy, in or about the month of January, 1904, a parcel of land from its srcinal owner, LuiGanong, under a
verbal, civil contract of partnership, for the price of P44; that it was stipulated that each of the said purchasers should pay one-
half of the price, or P22, and that an equal division should be made between them of the land thus purchased, situate in the
place called Tangian, of the barrio of Dohinob, municipality of Dapitan,sub-district of the same name, Moro Province, and
bounded on the north and east by the Tangian river, on the south and west by government forests, and containing 19.968
square meters, approximately, planted with 200abaca plants; that,
 - notwithstanding the demands he had repeatedly made upon the defendant to divide the said land, the latter, after
having promised him on several occasions that he would make such partition, finally refused, without good reason,
and still continued to refuse to divide the land and, moreover,
- without the knowledge and consent of the plaintiff, defendant gathered the abaca crops of the years 1904, 1905
and1906, produced on the land in question, and extracted the hemp therefrom in the amount of about 12
arrobas to each crop, he being the sole beneficiary of the fiber obtained,
- And, that since the year 1904, up to the time of the complaint, he alone had been paying the taxes on the land,
without the defendant's having contributed to their payment.
- The court rendered judgment by absolving the defendant from the complaint.
ISSUE: was there a contract of partnership?
HELD: Considering the terms of the claim made by the plaintiff and those of the defendant's answer, and the relation off
acts contained in the judgment appealed from, it does not appear that any contract of partnership whatever was made
between them for the purposes expressed in article 1665 of the Civil Code, for the sole transaction performed by them was the
acquisition jointly by mutual agreement of the land in question, since it was undivided, under the condition that they each
should pay one-half of the price thereof and that the property so acquired should be divided between the two purchasers; and
as, under this title, the plaintiff and the defendant are the co-owners of the said land, the partition or division of such property
held in joint tenancy must of course be allowed, and the present possessor of the land has no right to deny the plaintiff's claim
on grounds or reasons unsupported by proof.
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
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:
- 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 plaintiff’s 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.
ISSUES/ HELD: WON what they formed was a partnership or a co-ownership. 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 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.
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 Yulo’s 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 ½ 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 an indefinite period.
Owners brought their own civil action for ejectment upon Yulo and Yang. CFI: Two cases were heard jointly; Complaint of Yulo
and Yang dismissed declaring contract of lease terminated. CA: Affirmed the judgment. In 1950, Yulo demanded from Yang her
share in the profits of the business. Yang answered saying he had to suspend payment because of pending ejectment suit. Yulo
filed present action in 1954, alleging the existence of a partnership between them and that Yang has refused to pay her shares.
Defendant’s 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 the property.
Trial Court: Dismissal. It is not true that a partnership was created between them because defendant has not actually
contributed the sum mentioned in the Articles of Partnership or any other amount. The agreement is a lease because plaintiff
didn’t 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 the use of premises which she had leased from the owners
Fue Leung v. IAC
G. R. No. 70926 Jan. 31, 1989Justice Gutierrez, Jr.
FACTS:
- Leung Yiu (private respondent) alleged that he and Fue Leung (petitioner) were partners in a restaurant called Sun
Wah Panciteria located in Sta. Cruz, Manila
- That he contributed P4k financial assistance to said business, as evidenced by a receipt signed by petitioner (he
presented 2 witnesses to corroborate his claim), that he would be entitled to receive 22% of the business’ annual
profit in return
- That he received a check worth P12k from petitioner from the profits of the restaurant
- That he is now entitled to receive 22% of the net profits of the restaurant
- Petitioner denied being partners with private respondent
- That he did not receive anything from private respondent and that it was his own money that used as capital of the
restaurant
- That the receipts presented by private respondent were not genuine
- That based on various government licenses and permits, the restaurant was and still is a single proprietorship solely
owned and operated by him
TC and CA: private respondent
Petitioner: private responded said that he only gave petitioner financial assistance… he did not claim that he is a partner
ISSUE: WON petitioner and private respondents are partners.
HELD: 1. Yes, they are.
- Art. 1767: By the contract of partnership, 2 or more persons bind themselves to contribute money, property or
industry to a common fund with the intention of dividing the profits among themselves.
- While “financial assistance” ordinarily means ‘giving money to another without expecting any return,’ its use in the
present case gave a different meaning
- Doctrine: ‘the nature of the action filed in court is determined by the facts alleged in the complaint as constituting
the cause of action.’
- The right to demand an accounting exists as long as the partnership exists (Arts. 1806-1809).
- Prescription begins to run only upon the dissolution of the partnership when the final accounting is done.
Art. 1831: The Court may order the dissolution of a partnership whenever its continuation has become inequitable.
G.R. No. 101847 May 27, 1993 LOURDES NAVARRO AND MENARDO NAVARRO, petitioners,
vs. COURT OF APPEALS, JUDGE BETHEL KATALBAS-MOSCARDON, Presiding Judge, Regional Trial Court of Bacolod City,
Branch 52, Sixth Judicial Region and Spouses OLIVIA V. YANSON AND RICARDO B. YANSON,respondents.
FACTS: Private respondent Olivia V. Yanson and Petitioner Lourdes Navarro were engaged in the business of Air Freight
Service Agency. Pursuant to the Agreement which they entered, they agreed to operate the said Agency; it is the Private
Respondent Olivia Yanson who supplies the necessary equipment and money used in the operation of the agency. Her brother
in the person of Atty. Rodolfo Villaflores was the manager thereof while petitioner Lourdes Navarro was the Cashier; In
compliance to her obligation as stated in their agreement, private respondent brought into their business certain chattels or
movables or personal properties. However, those personal properties remain to be registered in her name; Among the
provisions stipulated in their agreement is the equal sharing of whatever proceeds realized from their business; However,
sometime on July 23, 1976, private respondent Olivia V. Yanson, in order for her to recovery the above mentioned personal
properties which she brought into their business, filed a complaint against petitioner Lourdes Navarro for "Delivery of Personal
Properties With Damages and with an application for a writ of replevin.
Private respondents' application for a writ of replevin was later approved/granted by the trial court. For her defense, petitioner
Navarro argue that she and private respondent Yanson actually formed a verbal partnership which was engaged in the business
of Air Freight Service Agency. She contended that the decision sustaining the writ of replevin is void since the properties
belonging to the partnership do not actually belong to any of the parties until the final disposition and winding up of the
partnership.
ISSUE:
1. Whether or not there was a partnership that existed between the parties.
2. Whether the properties that were commonly used in the operation of Allied Air Freight belonged to the alleged partnership
business.
RULING: Article 1767 of the New Civil Code defines the contract of partnership: Art. 1767. By the contract of partnership two
or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing
the proceeds among themselves. A cursory examination of the evidences presented no proof that a partnership, whether oral
or written had been constituted. In fact, those movables brought by the plaintiff for the use in the operation of the business
remain registered in her name. While there may have been co-ownership or co-possession of some items and/or any sharing of
proceeds by way of advances received by both plaintiff and the defendant, these are not indicative and supportive of the
existence of any partnership between them. Art. 1769 par. 2 provides: 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” Besides, the alleged profit was a difference found after evaluating the assets and not arising from the real operation
of the business. In accounting procedures, strictly, this could not be profit but a net worth.
Collector of Internal Revenue v. Batangas Transport Company and Laguna-Tayabas Bus Company (1958)
Joint Emergency Operation; ruling based on an agency case: evangelista v. cir
Caveat: I’m not 100% sure if I got the right case, in the sense that this is an OG case … and I got mine off lawphil.net. Rest
assured nag-match naman ang title and doctrine involved, so most likely tama naman.
Doctrines:
•A joint venture need not be undertaken in any of the standard form, or in conformity with the usual requirements of the law
on partnerships, in order that one could be deemed constituted for the purposes of the tax on corporations.
• Although no legal personality may have been created
By the Joint Emergency Operation, nevertheless, said Joint Emergency Operation joint venture, or joint management operated
the business affairs of the two companies as though they constituted a single entity, company or partnership, thereby
obtaining substantial economy and profits in the operation.
FACTS: This case is an appeal of the CTA decision which reversed the assessment and decision of the Collector of Internal
Revenue (CIR) assessing and demanding from respondents Batangas Transpo and Laguna Busthe amount of Php54,143.54
which represent deficiency income tax and compromise for the year 1946-1949. Pending then appeal to the CTA, the
assessment was increased to P148,890.14Respondent bus companies are 2 distinct and separate corporations, engaged in the
business of land transportation by means of motor busses and operating distinct and separate
lines.Batangas Transpo Laguna BusIncorporation 1918 1928Paid up capital (each) Php1,000,000.00 Php1,000,000.00Pre –
war Head Office Batangas, Batangas San Pablo, LagunaManager Joseph Benedict Martin OlsenConnection & close relation:
President and owner of 30%stock of each corpoMax Blouse During the war, the two companies lost their respective
businesses.
Post-war, they were able to acquire56 auto busses from the US Army which they divided equally. Two years later, Martin Olsen
resigned as manager and Joseph Benedict was appointed as Manager of both companies by their respective Board of
Directors. According to Benedict, the purpose of the joint management called “Joint Emergency Operation” was to economize
in overhead expenses. At the end of each calendar year, all gross receipts and expenses of both companies are determined and
the net profit were divided 50-50 then transferred to the book of accounts of each company, and each company prepares its
own income tax return from their 50% share. The CIR theorizes that the 2 companies pooled their resources in the
establishment of the Joint Emergency Operation thereby forming a joint venture. He believes that a corporation exists, distinct
from the 2 respondent companies. The CTA held that the Joint Emergency Operation is not a corporation within the
contemplation of the NIRC, much less a partnership, association or insurance company, and therefore was not subject to
income tax separately and independently of respondent companies.
ISSUES: 1. W/N the 2 transportation companies involved are liable to the payment of income tax as a corporation on the
theory that the joint emergency operation organized and operated by them is a corporation within the meaning of Sec 84 of
the Revised Internal Revenue Code.
2. NOT RELATED: W/N the CIR, after the appeal from his decision has been perfected, and after the CTA has acquired
jurisdiction over the same, but before the CIR has filed an answer with the court, may still modify his assessment subject of the
appeal by increasing the same, on the ground that he committed error in good faith in making said appealed assessment.
HELD/RATIO:
1. YES, although no legal personality may have been created by the Joint Emergency Operation, nevertheless said joint
venture or joint management operated the business affairs of the 2 companies as though they constituted a single
entity, company or partnership, thereby obtaining substantial economy and profits in the operation.
The Court ruled on this issue by citing the case of Eufemia Evangelista, et. al v. CIR
– agencycase.
This involved the 3 sisters who borrowed from their father money which they invested inland and then improved upon and
later sold. The sisters also hired their brother to oversee the buy-and-sell of land. Contrary to their claim that said operation
was merely a co-ownership, the Court ruled that considering the facts and circumstances surrounding the said case, the 3
sisters had purpose to engage in real estate transactions for monetary gain and then divide the profits among themselves,
making them co-partners. When the Tax Code included “partnerships “among the entities subject to the tax on corporations, it
must refer to organizations which are not necessarily partnerships in the technical sense of the term, and that furthermore,
said law defined the term "corporation" as including partnerships no matter how created or organized.
Further, from the standpoint of income tax law, the procedure and practice of the 2 bus companies in determining the net
income of each was arbitrary and unwarranted. After all, the 2companies operates in 2 different lines, in different provinces or
territories, with different equipment and personnel it cannot possibly be true and correct to say that the end of each year, the
gross receipts and income in the gross expenses of two companies are exactly the same for purposes of the payment of
income tax. Thus, the Court held that the Joint Emergency Operation or sole management or joint venture in this case falls
under the provisions of section 84 (b) of the Internal Revenue Code, and consequently, it is liable to income tax provided for in
section 24 of the same code.* But they were exempted from paying 25% surcharge for failure to file a tax return, because
of their honest belief (based on advice of their attorneys and accountants) that they are not required to do so.
2. YES, pending appeal in the Court of Tax Appeals of an assessment made by the Collector of Internal Revenue, the
Collector, pending hearing before said court, may amend his appealed assessment and include the amendment in
his answer before the court, and the latter may on the basis of the evidence presented before it, redetermine the
assessment.
ABONG vs. THE WORKMEN'S COMPENSATION COMMISSION et al
FACTS:
 Aladino Dionson, Filomeno Umbria, Noel Lahao-lahao, Juanita Monteroyo and Wilfredo Monteroyo and Demetrio
Escoreal, all decent were members of a fishing outfit, the "IWAG" or more popularly called the "ALEX", owned by
petitioner herein, Dr. Agustino R. Abong.
 May 15, 1966, this fishing outfit set out to sea. The decedents were among the 70 crew members. While they were,
thus, fishing, typhoon "IRMA" passed along their way, scattering the boats and blowing them far out into the open
sea. The tragedy netted eight (8) dead while some sixty (60) men survived the disaster.
 As a consequence of the incident seven (7) notices and claims for death compensation were filed with the Bacolod
Sub-Regional Office of the Department of Labor by herein private respondents
 A copy of the notices and claims were sent to petitioner Dr. Agustino R. Abong by registered mail at his place of
business, but the envelopes containing said notices and claims were returned unclaimed, although petitioner was
personally notified thrice.
 After due hearing before Acting Referee, Bertito D. Dadivas, he rendered on August 1, 1966, a decision granting the
claims.
 Petitioner filed a (1) motion to set aside the order declaring him in default and a (2) separate motion to set aside
the Decision of the Acting Referee, to which seasonable oppositions were interposed by private respondents on
September 26, 1966.
ISSUE: Who is the statutory employer of the decedents and who should be liable for their death compensation.
RATIO:
 There is a faint attempt by petitioner Agustino R. Abong to evade liability by advancing the theory that he had
absolutely no voice or intervention in the choice, hiring, dismissing, control, supervision and compensation of the
fishermen-crew members, and that these matters, which are the essence of employer-employee relationship, are
the sole responsibility of the team leader, Simplicio Panganiban, and the team-members or crew pursuant to their
Agreement
 The contention of petitioner is devoid of merit. It should be pointed out that this case is an appeal from the decision
of the Workmen's Compensation Commission. And in this class of proceedings, only questions of law should be
raised, the findings of facts made by the Commission being conclusive and binding upon this Court.
 Court finds the findings of fact made by Associate (Medical) Commissioner Herminia Castelo-Sotto, M.D., and
concurred in by the Commission en banc to be fully supported by the evidence on record which clearly points out
that petitioner Agustino R. Abong is the statutory employer of the decedents.
 As pointed out by the Commission's findings, the fundamental bases showing that petitioner, Dr. Agustino R. Abong,
is the employer, are present, namely, the selection and engagement of the employee; the payment of wages; the
power of dismissal and the employer's power to control the employees' conduct.
 These powers were lodged in petitioner Abong, thru his agent, Simplicio Panganiban, whom he alleges to be his
"partner". On this score alone, the petitioner for review must fail. It is well-settled that employer-employee
relationship involves findings of fact which are conclusive and binding and not subject to review by this Court.
Aurbach vs. Sanitary Wares (Partnership; Joint Venture; Foreign and Domestic Corp)
FACTS: This consolidated petition assailed the decision of the CA directing a certain MANNER OF ELECTION OFOFFICERS IN
THE BOARD OF DIRECTORS*There are two groups in this case, the Lagdameo group composed of Filipino investors and the
American Standard Inc. (ASI) composed of foreign investors. The ASI Group and petitioner Salazar (G.R. Nos. 75975-76)
contend that the actual intention of the parties should be viewed strictly on the "Agreement" dated August 15,1962 wherein it
is clearly stated that the parties' intention was to form a corporation and not a joint venture.
ISSUE: The main issue hinges on who were the duly elected directors of Saniwares for the year 1983 during its annual
stockholders' meeting held on March 8, 1983. To answer this question the following factors should be determined:
*(1) the nature of the business established by the parties whether it was a joint venture or a corporation
HELD:
- 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 a joint venture enterprise
- An examination of the Agreement shows that certain provisions were incused to protect the interests of ASI as the
minority. For example, the vote of 7 out of 9 directors is required incertain enumerated corporate acts. ASI is
contractually entitled to designate a member of the Executive Committee and the vote of this member is required
for certain transactions
- The Agreement also requires a 75% super-majority vote for the amendment of the articles and by-laws of
Saniwares. ASI is also given the right to designate the president and plant manager. The Agreement further provides
that the sales policy of Saniwares shall be that which is normally followed by ASI and that Saniwares should not
export "Standard" products otherwise than through ASI's Export Marketing Services. Under the Agreement, ASI
agreed to provide technology and know-how to Saniwares and the latter paid royalties for the same.
- 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.
.
DELUAO v. CASTEEL G.R. No. L-21906; December 24, 1968
FACTS: In 1940 Nicanor Casteel unsuccessfully registered a fishpond in a big tract of swampy land, 178.76 hectares, in the
then sitio of Malalag, municipality of Padada, Davao for 3 consecutive times because the Bureau of Fisheries did not act upon
his previous applications.
Despite the said rejection, Casteel did not lose interest. Because of the threat poised upon his position by the other applicants
who entered upon and spread themselves within the area, Casteel realized the urgent necessity of expanding his occupation
thereof by constructing dikes and cultivating marketable fishes. But lacking financial resources at that time, he sought financial
aid from his uncle Felipe Deluao.
Moreover, upon learning that portions of the area applied for by him were already occupied by rival applicants, Casteel
immediately filed a protest. Consequently, two administrative cases ensued involving the area in question.
However, despite the finding made in the investigation of the above administrative cases, the Director of Fisheries
nevertheless rejected Casteel's application on October 25, 1949, required him to remove all the improvements which he had
introduced on the land, and ordered that the land be leased through public auction
On November 25, 1949 Inocencia Deluao (wife of Felipe Deluao) as party of the first part, and Nicanor Casteel as party of the
second part, executed a contract — denominated a "contract of service". On the same date the above contract was entered
into, Inocencia Deluao executed a special power of attorney in favor of Jesus Donesa
On November 29, 1949 the Director of Fisheries rejected the application filed by Felipe Deluao on November 17, 1948. Unfazed
by this rejection, Deluao reiterated his claim over the same area in the two administrative cases and asked for reinvestigation
of the application of Nicanor Casteel over the subject fishpond.
The Secretary of Agriculture and Natural Resources rendered a decision ordering Casteel to be reinstated in the area and that
he shall pay for the improvement made thereupon.
Sometime in January 1951 Nicanor Casteel forbade Inocencia Deluao from further administering the fishpond, and ejected the
latter's representative (encargado), Jesus Donesa, from the premises.
ISSUE: Whether the reinstatement of Casteel over the subject land constitute a dissolution of the partnership between
him and Deluao
HELD: Yes, the reinstatement of Casteel dissolved his partnership with Deluao.
The Supreme Court ruled that the arrangement under the so-called "contract of service" continued until the decision both
dated Sept. 15, 1950 were issued by the Secretary of Agriculture and Natural Resources in DANR Cases 353 and 353-B.
This development, by itself, brought about the dissolution of the partnership. Since the partnership had for its object the
division into two equal parts of the fishpond between the appellees and the appellant after it shall have been awarded to the
latter, and therefore it envisaged the unauthorized transfer of one half thereof to parties other than the applicant Casteel, it
was dissolved by the approval of his application and the award to him of the fishpond.
The approval was an event which made it unlawful for the members to carry it on in partnership. Moreover, subsequent events
likewise reveal the intent of both parties to terminate the partnership because each refused to share the fishpond with the
other.
G.R. No. 134559 December 9, 1999
ANTONIA TORRES, assisted by her husband, ANGELO TORRES; and EMETERIA BARING, petitioners,
vs. COURT OF APPEALS and MANUEL TORRES, respondents.
FACTS:
Petitioners Torres and Baring entered into a “joint venture agreement” with Respondent Torres for the development of a
parcel of land into a subdivision. They executed a Deed of Sale covering the said parcel of land in favor of respondent Manual
Torres, who then had it registered in his name. By mortgaging the property, respondent Manuel Torres obtained from
Equitable Bank a loan of P40,000, which was supposed to be used for the development of subdivision as per the JVA. However,
the project did not push through and the land was subsequently foreclosed by the bank.
Petitioners Antonia Torres alleged that it was due to respondent’s lack of funds/skills that caused the project to fail, and that
respondent use the loan in the furtherance of his own company. On the other hand, respondent Manuel Torres alleged that he
used the loan to implement the JVA – surveying and subdivision of lots, approval of the project, advertisement, and
construction of roads and the likes, and that he did all of these for a total of P85,000.
Petitioners filed a case for estafa against respondent but failed. They then instituted a civil case. CA held that the two parties
formed a partnership for the development of subdivision and as such, they must bear the loss suffered by the partnership in
the same proportion as their share in profits. Hence, the petition.
Issue #1: Whether or not the transaction between petitioner and respondent was that of joint venture/partnership.
Held: Yes. There formed a partnership between the two on the basis of joint-venture agreement and deed of sale. A
reading of the terms of agreement shows the existence of partnership pursuant to Art 1767 of 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.” In 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.
Issue #2: Whether or not the deed of sale between the two was valid.
Held: No. Petitioners were wrong in contending that the JVA is void under Article 1422[14] 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.
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. As explained by the trial court, the land was in effect
given to the partnership as petitioners participation therein. There was therefore a consideration for the sale, the petitioners
acting in the expectation that, should the venture come into fruition, they would get sixty percent of the net profits.
TOCAO V. CA This implies that since a contract of partnership is consensual, an oral contract of partnership is as good as a written one.

G.R. No. 127405; October 4, 2000
FACTS: Private respondent Nenita A. Anay met petitioner William T. Belo, then the vice-president for operations of Ultra
Clean Water Purifier, through her former employer in Bangkok. Belo introduced Anay to petitioner Marjorie Tocao, who
conveyed her desire to enter into a joint venture with her for the importation and local distribution of kitchen cookwares
In the case at hand, Belo acted as capitalist while Tocao as president and general manager, and Anay as head of the marketing
department and later, vice-president for sales. Furthermore, Anay was entitled to a percentage of the net profits of the
business.
Therefore, the parties formed a partnership.

Under the joint venture, Belo acted as capitalist, Tocao as president and general manager, and Anay as head of the marketing
department and later, vice-president for sales

The parties agreed that Belo's name should not appear in any documents relating to their transactions with West Bend
Company. Anay having secured the distributorship of cookware products from the West Bend Company and organized the Tocao and Belo vs Court of Appeals and Anay
administrative staff and the sales force, the cookware business took off successfully. They operated under the name of
Geminesse Enterprise, a sole proprietorship registered in Marjorie Tocao's name. FACTS: William Belo introduced Nenita Anay to his girlfriend, Marjorie Tocao. The three agreed to form a joint venture for
the sale of cooking wares. Belo was to contribute P2.5 million; Tocao also contributed some cash and she shall also act as
The parties agreed further that Anay would be entitled to: president and general manager; and Anay shall be in charge of marketing. Belo and Tocao specifically asked Anay because of
(1) ten percent (10%) of the annual net profits of the business; her experience and connections as a marketer. They agreed further that Anay shall receive the following:
(2) overriding commission of six percent (6%) of the overall weekly production;
(3) thirty percent (30%) of the sales she would make; and 10% share of annual net profits
(4) two percent (2%) for her demonstration services. The agreement was not reduced to writing on the strength of Belo's
6% overriding commission for weekly sales
assurances that he was sincere, dependable and honest when it came to financial commitments.

30% of sales Anay will make herself

On October 9, 1987, Anay learned that Marjorie Tocao had signed a letter addressed to the Cubao sales office to the effect that
she was no longer the vice-president of Geminesse Enterprise.
2% share for her demo services

Anay attempted to contact Belo. She wrote him twice to demand her overriding commission for the period of January 8, 1988
They operated under the name Geminesse Enterprise, this name was however registered as a sole proprietorship with the
to February 5, 1988 and the audit of the company to determine her share in the net profits.
Bureau of Domestic Trade under Tocao. The joint venture agreement was not reduced to writing because Anay trusted Belo’s
Anay still received her five percent (5%) overriding commission up to December 1987. The following year, 1988, she did not
assurances.
receive the same commission although the company netted a gross sales of P 13,300,360.00.
The venture succeeded under Anay’s marketing prowess. But then the relationship between Anay and Tocao soured. One day,
On April 5, 1988, Nenita A. Anay filed Civil Case No. 88-509, a complaint for sum of money with damages against Marjorie D.
Tocao advised one of the branch managers that Anay was no longer a part of the company. Anay then demanded that the
Tocao and William Belo before the Regional Trial Court of Makati, Branch 140
company be audited and her shares be given to her.

The trial court held that there was indeed an "oral partnership agreement between the plaintiff and the defendants. The Court
ISSUE: Whether or not there is a partnership.
of Appeals affirmed the lower court’s decision.
HELD: Yes, even though it was not reduced to writing, for a partnership can be instituted in any form. The fact that it was
registered as a sole proprietorship is of no moment for such registration was only for the company’s trade name.
ISSUE: Whether the parties formed a partnership
Anay was not even an employee because when they ventured into the agreement, they explicitly agreed to profit sharing this is
even though Anay was receiving commissions because this is only incidental to her efforts as a head marketer.
HELD: Yes, the parties involved in this case formed a partnership

The Supreme Court held that to be considered a juridical personality, a partnership must fulfill these requisites:
(1) two or more persons bind themselves to contribute money, property or industry to a common fund; and
(2) intention on the part of the partners to divide the profits among themselves. It may be constituted in any form; a public
instrument is necessary only where immovable property or real rights are contributed thereto.
The Supreme Court also noted that a partner who is excluded wrongfully from a partnership is an innocent partner. Hence, the
guilty partner must give him his due upon the dissolution of the partnership as well as damages or share in the profits “realized
from the appropriation of the partnership business and goodwill.” An innocent partner thus possesses “pecuniary interest in
every existing contract that was incomplete and in the trade name of the co-partnership and assets at the time he was
wrongfully expelled.”
An unjustified dissolution by a partner can subject him to action for damages because by the mutual agency that arises in a
partnership, the doctrine of delectus personae allows the partners to have the power, although not necessarily the right to
dissolve the partnership.
Tocao’s unilateral exclusion of Anay from the partnership is shown by her memo to the Cubao office plainly stating that Anay
was, as of October 9, 1987, no longer the vice-president for sales of Geminesse Enterprise. By that memo, petitioner Tocao
affected her own withdrawal from the partnership and considered herself as having ceased to be associated with the
partnership in the carrying on of the business. Nevertheless, the partnership was not terminated thereby; it continues until the
winding up of the business.
CIR VS. SUTER (1969)
FACTS: A limited partnership named William J. Suter 'Morcoin' Co., Ltd was formed 30September 1947 by William J. Suter
as the general partner, and Julia Spirig and Gustav Carlson. They contributed, respectively,
P20,000.00, P18,000.00 andP2,000.00. it was also duly registered with the SEC. On 1948 Suter and Spirig got married and in
effect Carlson sold his share to the couple, the same was also registered with the SEC. The limited partnership had been filing
its income tax returns as a corporation, without objection by the herein petitioner, Commissioner of Internal Revenue, until
in1959 when the latter, in an assessment, consolidated the income of the firm and the individual incomes of the partners-
spouses Suter and Spirig resulting in a determination of a deficiency income tax against respondent Suter in the amount of
P2,678.06 for 1954 and P4,567.00 for 1955.
ISSUE: Whether or not the limited partnership has been dissolved after the marriage of Suter and Spirig and buying the
interest of limited partner Carlson.
RULING: No, the limited partnership was not dissolved. “A husband and a wife may not enter into a contract of general co
partnership, because under the Civil Code, which applies in the absence of express provision in the Code of Commerce, persons
prohibited from making donations to each other are prohibited from entering into universal partnerships. (2Echaverri 196) It
follows that the marriage of partners necessarily brings about the dissolution of a pre-existing partnership. “What the law
prohibits was when the spouses enter ed into a generalpartnership. In the case at bar, the partnership waslimited
329 SCRA 246
Alfredo Aguila Jr vs Court of Appeals et al
In April 1991, the spouses Ruben and Felicidad Abrogar entered into a loan agreement with a lending firm called A.C. Aguila &
Sons, Co., a partnership. The loan was for P200k. To secure the loan, the spouses mortgaged their house and lot located in a
subdivision. The terms of the loan further stipulates that in case of non-payment, the property shall be automatically
appropriated to the partnership and a deed of sale be readily executed in favor of the partnership. She does have a 90 day
redemption period.
Ruben died, and Felicidad failed to make payment. She refused to turn over the property and so the firm filed an ejectment
case against her (wherein she lost). She also failed to redeem the property within the period stipulated. She then filed a civil
case against Alfredo Aguila, manager of the firm, seeking for the declaration of nullity of the deed of sale. The RTC retained the
validity of the deed of sale. The Court of Appeals reversed the RTC. The CA ruled that the sale is void for it is a pactum
commissorium sale which is prohibited under Art. 2088 of the Civil Code (note the disparity of the purchase price, which is the
loan amount, with the actual value of the property which is after all located in a subdivision).
ISSUE: Whether or not the case filed by Felicidad shall prosper.
HELD: No. Unfortunately, the civil case was filed not against the real party in interest. As pointed out by Aguila, he is not
the real party in interest but rather it was the partnership A.C. Aguila & Sons, Co. The Rules of Court provide that “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, as in the case at bar.
Under Art. 1768 of the Civil Code, a partnership “has a juridical personality separate and distinct from that of each of the
partners.” The partners cannot be held liable for the obligations of the partnership unless it is shown that the legal fiction of a
different juridical personality is being used for fraudulent, unfair, or illegal purposes. In this case, Felicidad 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. 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.
Heirs of Jose Lim vs Juliet Villa Lim
In 1980, the heirs of Jose Lim alleged that Jose Lim entered into a partnership agreement with Jimmy Yu and Norberto Uy. The
three contributed P50,000.00 each and used the funds to purchase a truck to start their trucking business. A year later
however, Jose Lim died. The eldest son of Jose Lim, Elfledo Lim, took over the trucking business and under his management,
the trucking business prospered. Elfledo was able to but real properties in his name. From one truck, he increased it to 9
trucks, all trucks were in his name however. He also acquired other motor vehicles in his name.
In 1993, Norberto Uy was killed. In 1995, Elfledo Lim died of a heart attack. Elfledo’s wife, Juliet Lim, took over the properties
but she intimated to Jimmy and the heirs of Norberto that she could not go on with the business. So the properties in the
partnership were divided among them.
Now the other heirs of Jose Lim, represented by Elenito Lim, required Juliet to do an accounting of all income, profits, and
properties from the estate of Elfledo Lim as they claimed that they are co-owners thereof. Juliet refused hence they sued her.
The heirs of Jose Lim argued that Elfledo Lim acquired his properties from the partnership that Jose Lim formed with Norberto
and Jimmy. In court, Jimmy Yu testified that Jose Lim was the partner and not Elfledo Lim. The heirs testified that Elfledo was
merely the driver of Jose Lim.
ISSUE: Who is the “partner” between Jose Lim and Elfledo Lim?
HELD: It is Elfledo Lim based on the evidence presented regardless of Jimmy Yu’s testimony in court that Jose Lim was the
partner. If Jose Lim was the partner, then the partnership would have been dissolved upon his death (in fact, though the SC did
not say so, I believe it should have been dissolved upon Norberto’s death in 1993). A partnership is dissolved upon the death of
the partner. Further, no evidence was presented as to the articles of partnership or contract of partnership between Jose,
Norberto and Jimmy. Unfortunately, there is none in this case, because the alleged partnership was never formally organized.
But at any rate, the Supreme Court noted that based on the functions performed by Elfledo, he is the actual partner.
The following circumstances tend to prove that Elfledo was himself the partner of Jimmy and Norberto:
1.) Cresencia testified that Jose gave Elfledo P50,000.00, as share in the partnership, on a date that coincided with the payment
of the initial capital in the partnership;
2.) Elfledo ran the affairs of the partnership, wielding absolute control, power and authority, without any intervention or
opposition whatsoever from any of petitioners herein;
3.) all of the properties, particularly the nine trucks of the partnership, were registered in the name of Elfledo;
4.) Jimmy testified that Elfledo did not receive wages or salaries from the partnership, indicating that what he actually received
were shares of the profits of the business; and
5.) none of the heirs of Jose, the alleged partner, demanded periodic accounting from Elfledo during his lifetime. As repeatedly
stressed in the case of Heirs of Tan Eng Kee, a demand for periodic accounting is evidence of a partnership.
Furthermore, petitioners failed to adduce any evidence to show that the real and personal properties acquired and registered
in the names of Elfledo and Juliet formed part of the estate of Jose, having been derived from Jose’s alleged partnership with
Jimmy and Norberto.
Elfledo was not just a hired help but one of the partners in the trucking business, active and visible in the running of its affairs
from day one until this ceased operations upon his demise. The extent of his control, administration and management of the
partnership and its business, the fact that its properties were placed in his name, and that he was not paid salary or other
compensation by the partners, are indicative of the fact that Elfledo was a partner and a controlling one at that. It is apparent
that the other partners only contributed in the initial capital but had no say thereafter on how the business was ran. Evidently
it was through Elfredo’s efforts and hard work that the partnership was able to acquire more trucks and otherwise prosper.
Even the appellant participated in the affairs of the partnership by acting as the bookkeeper sans salary.
Kilosbayan Inc vs Teofisto Guingona, Jr.
In 1993, the Philippine Charity Sweepstakes Office decided to put up an on-line lottery system which will establish a national
network system that will in turn expand PCSO’s source of income.
A bidding was made. Philippine Gaming Management Corporation (PGMC) won it. A contract of lease was awarded in favor of
PGMC.
Kilosbayan opposed the said agreement between PCSO and PGMC as it alleged that:
PGMC does not meet the nationality requirement because it is 75% foreign owned (owned by a Malaysian firm Berjaya Group
Berhad);
PCSO, under Section 1 of its charter (RA 1169), is prohibited from holding and conducting lotteries “in collaboration,
association or joint venture with any person, association, company or entity”;
The network system sought to be built by PGMC for PCSO is a telecommunications network. Under the law (Act No. 3846), a
franchise is needed to be granted by the Congress before any person may be allowed to set up such;
PGMC’s articles of incorporation, as well as the Foreign Investments Act (R.A. No. 7042) does not allow it to install, establish
and operate the on-line lotto and telecommunications systems.
PGMC and PCSO, through Teofisto Guingona, Jr. and Renato Corona, Executive Secretary and Asst. Executive Secretary
respectively, alleged that PGMC is not a collaborator but merely a contractor for a piece of work, i.e., the building of the
network; that PGMC is a mere lessor of the network it will build as evidenced by the nature of the contract agreed upon, i.e.,
Contract of Lease.
ISSUE: Whether or not Kilosbayan is correct.
HELD: Yes, but only on issues 2, 3, and 4.
On the issue of nationality, it seems that PGMC’s foreign ownership was reduced to 40% though.
On issues 2, 3, and 4, Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42, prohibits the PCSO from holding and conducting
lotteries “in collaboration, association or joint venture with any person, association, company or entity, whether domestic or
foreign.” There is undoubtedly a collaboration between PCSO and PGMC and not merely a contract of lease. The relations
between PCSO and PGMC cannot be defined simply by the designation they used, i.e., a contract of lease. Pursuant to the
wordings of their agreement, PGMC at its own expense shall build, operate, and manage the network system including its
facilities needed to operate a nationwide online lottery system. PCSO bears no risk and all it does is to provide its franchise – in
violation of its charter. Necessarily, the use of such franchise by PGMC is a violation of Act No. 3846.
Gregorio Ortega, Tomas del Castillo, Jr. and Benjamin Bacorro v. CA, SEC and Joaquin Misa
G.R. No. 109248 July 3, 1995
FACTS: On December 19, 1980, respondent Misa associated himself together, as senior partner with petitioners Ortega, del
Castillo, Jr., and Bacorro, as junior partners. On Feb. 17, 1988, respondent Misa wrote a letter stating that he is withdrawing
and retiring from the firm and asking for a meeting with the petitioners to discuss the mechanics of the liquidation. On June 30,
1988, petitioner filed a petition to the Commission’s Securities Investigation and Clearing Department for the formal
dissolution and liquidation of the partnership. On March 31, 1989, the hearing officer rendered a decision ruling that the
withdrawal of the petitioner has not dissolved the partnership. On appeal, the SEC en banc reversed the decision and was
affirmed by the Court of Appeals. Hence, this petition.
ISSUE: Whether or not the Court of Appeals has erred in holding that the partnership is a partnership at will and whether
or not the Court of Appeals has erred in holding that the withdrawal of private respondent dissolved the partnership regardless
of his good or bad faith
HELD: No. The SC upheld the ruling of the CA regarding the nature of the partnership. The SC further stated that a
partnership that does not fix its term is a partnership at will. The birth and life of a partnership at will is predicated on the
mutual desire and consent of the partners. The right to choose with whom a person wishes to associate himself is the very
foundation and essence of that partnership. Its continued existence is, in turn, dependent on the constancy of that mutual
resolve, along with each partner's capability to give it, and the absence of a cause for dissolution provided by the law itself.
Verily, any one of the partners may, at his sole pleasure, dictate a dissolution of the partnership at will. He must, however, act
in good faith, not that the attendance of bad faith can prevent the dissolution of the partnership but that it can result in a
liability for damages.
Reyes vs. CIR (24 SCRA 198)
FACTS:
1. Petitioners Florencio and Angel Reyes, father and son, purchased a lot and building for P 835,000.00.
2. The amount of P 375,000.00 was paid.
3. The balance of P 460,000.00 was left, which represents the mortgage obligation of the vendors with the China Banking
Corporation, which mortgage obligations were assumed by the vendees.
4. The initial payment of P 375,000.00 was shared equally by the petitioners.
5. At the time of the purchase, the building was leased to various tenants, whose rights under the lease contracts with the
original owners, the purchaser, petitioners herein, agreed to respect.
6. Petitioners divided equally the income of operation and maintenance.
7. The gross income from rentals of the building amounted to about P 90,000.00 annually.
8. An assessment was made against petitioners by the CIR.
9. The assessment sought to be reconsidered was futile.
10. On appeal to the Court of Tax Appeals, the CTA ruled that petitioners are liable for the income tax due from the partnership
formed by petitioners.
ISSUE: Are petitioners subject to the tax on corporations provided for in the National Internal Revenue Code?
HELD: After referring to another section of the NIRC, which explicitly provides that the term corporations includes
partnerships• and then to Article 1767 of the Civil Code of the Philippines, defining what a contract of partnership is, the
opinion goes on to state that the essential elements of a partnership are two, namely:
a) an agreement to contribute money, property or industry to a common fund; and
b) intent to divide the profits among the contracting parties. The first element is undoubtedly present in the case, for,
admittedly, petitioners have agreed to , and did, contribute money and property to a common fund. Hence, the issue narrows
down to their intent in acting as they did. Upon consideration of all the facts and circumstances surrounding the case, it was
determined that their purpose was to engage in real estate transaction for monetary gain and then divide the same among
themselves, hence taxable.
Lim vs. Philippine Fishing Gear Industries Inc. [GR 136448, 3 November 1999]
FACTS: Lim Tong Lim requested Peter Yao and Antonio Chuato engage in commercial fishing with him. The three agreed to
purchase two fishing boats but since they do not have the money they borrowed from one Jesus Lim the brother of Lim Tong
Lim. Subsequently, they again borrowed money for the purchase of fishing nets and other fishing equipments. Yao and Chua
represented themselves as acting in behalf of “Ocean Quest Fishing Corporation” (OQFC) and they contracted with Philippine
Fishing Gear Industries (PFGI) for the purchase of fishing nets amounting to more than P500k. However, they were unable to
pay PFGI and hence were sued in their own names as Ocean Quest Fishing Corporation is a non-existent corporation. Chua
admitted his liability while Lim Tong Lim refused such liability alleging that Chua and Yao acted without his knowledge and
consent in representing themselves as a corporation.
ISSUE: Whether Lim Tong Lim is liable as a partner
HELD: Yes. It is apparent from the factual milieu that the three decided to engage in a fishing business. Moreover, their
Compromise Agreement had revealed their intention to pay the loan with the proceeds of the sale and to divide equally among
them the excess or loss. The boats and equipment used for their business entails their common fund. The contribution to such
fund need not be cash or fixed assets; it could be an intangible like credit or industry. That the parties agreed that any loss or
profit from the sale and operation of the boats would be divided equally among them also shows that they had indeed formed
a partnership. The principle of corporation by estoppel cannot apply in the case as Lim Tong Lim also benefited from the use of
the nets in the boat, which was an asset of the partnership. Under the law on estoppel, those acting in behalf of a corporation
and those benefited by it, knowing it to be without valid existence are held liable as general partners. Hence, the question as to
whether such was legally formed for unknown reasons is immaterial to the case.
Sharuff and Co. v. Baloise Fire Insurance Co.- Proceeds of the Policy 64 SCRA 258
Facts:
> Sharuff and Eskenazi were doing business under the firm name Sharuff and Co.
> They insured their merchandise with Baloise. Later on, Sharuff and Eskenazi entered into a contract of partnership and
thereby changed the firm name to Sharuff and Eskenazi.
> The merchandise insured was subsequently destroyed by fire. Sharuff and Eskenazi filed their claim against the insurance
company.
> Baloise refused to pay on the ground that the policy was issued in the name of Sharuff and Co. and not Sharuff and Eskenazi.
Issue: Whether or not the partnership can claim the proceeds of the policy.
Held: Yes. The subsequent partnership did not alter the composition of the firm. The people involved are actually the
same. Furthermore, such change of firm name was not made to defraud the insurance company or some other person.
Idos v. CA G.R. NO. 110782, September 25, 1998, Quisumbing, J.
Facts: In 1985, Eddie Alarilla and Irma Idos formed a partnership which they decided to terminate after a year. To pay
Alarilla’s share of the asset, Idos issued 4 postdated checks. Alarilla was able to encash the first, second and fourth checks but
the third was dishonored for insufficiency of funds. He demanded payment but Idos failed to pay. She claimed that the checks
were issued as assurance of Alarilla’s share in the assets of the partnership and that it was supposed to be deposited until the
stocks were sold. He filed an information for violation of BP blg. 22 against Idos in which she was found guilty by the trial court.
Issue: Did the court confused and merged into one the legal concepts of dissolution, liquidation and termination of a
partnership?
Ruling: The partners agreement to terminate the partnership did not automatically dissolved the partnership. They were in
the process of winding-up when the check in question was issued. The best evidence of the existence of the partnership, which
was not yet terminated were the unsold goods and uncollected receivables which were presented to the trial court. Article
1829 of the Civil Code provides that “on dissolution the partnership is not terminated but continues until the winding-up of
partnership affairs is completed. Since the partnership has not been terminated, Idos and Alarilla remained co-partners. The
check was issued by petitioner to respondent as would a partner to another and not as a payment by debtor to creditor. Thus,
absent the first element of the complained offense, the act is not punishable by the statute.
Philex Mining Corp. v. Commissioner of Internal Revenue G.R. No. 148187 April 16, 2008
FACTS:
 Philex Mining Corp. entered into an agreement with Baguio Gold Mining Co. for the former to manage and operate
the latter’s mining claim, known as the Sto. Nino Mine. The parties’ agreement was denominated as “Power of
Attorney” which provides inter
alia:4. Within three (3) years from date thereof, the PRINCIPAL (Baguio Gold) shall make available tothe MANAGERS
(Philex Mining) up to ELEVEN MILLION PESOS (P11,000,000.00), in such amounts as from time to time may be
required by the MANAGERS within the said 3-year period, for use in the MANAGEMENT of the STO. NINO MINE. The
said ELEVEN MILLION PESOS (P11,000,000.00) shall be deemed, for internal audit purposes, as the owner’s account
in the Sto. Nino PROJECT. Any part of any income of the PRINCIPAL from the STO. NINO MINE, which is left with the
Sto. Nino PROJECT, shall be added to such owner’s
account.5. Whenever the MANAGERS shall deem it necessary and convenient in connection with theMANAGEMENT
of the STO. NINO MINE, they may transfer their own funds or property to the Sto. Niño PROJECT, in accordance
with the following arrangements:
(a) The properties shall be appraised and, together with the cash, shall be carried by the Sto.Nino
PROJECT as a special fund to be known as the MANAGERS’ account.
(b) The total of the MANAGERS’ account shall not exceed P11,000,000.00, except with priorapproval of
the PRINCIPAL; provided, however, that if the compensation of the MANAGERS as herein provided cannot be paid in
cash from the Sto. Nino PROJECT, the amount not so paid in cash shall be added to the MANAGERS’ account.
(c) The cash and property shall not thereafter be withdrawn from the Sto. Nino PROJECT until
termination of this Agency.
(d) The MANAGERS’ account shall not accrue interest. Since it is the desire of the PRINCIPAL toextend to
the MANAGERS the benefit of subsequent appreciation of property, upon a projected termination of this Agency,
the ratio which the MANAGERS’ account has to the owner’s account will be determined, and the
corresponding proportion of the entire assets of the STO. NINO MINE, excluding the claims, shall be transferred to
the MANAGERS, except that such transferred assets shall not include mine development, roads, buildings, and
similar property which will be valueless, or of slight value, to the MANAGERS. The MANAGERS can, on the other
hand, require at their option that property originally transferred by them to the Sto. Nino PROJECT be re-
transferred to them. Until such assets are transferred to the MANAGERS, this Agency shall remain subsisting.x x x
x12. The compensation of the MANAGER shall be fifty per cent (50%) of the net profit of the Sto.Nino PROJECT
before income tax. It is understood that the MANAGERS shall pay income tax on their compensation, while the
PRINCIPAL shall pay income tax on the net profit of the Sto. Nino PROJECT after deduction therefrom of the
MANAGERS’ compensation.
 Philex Mining made advances of cash and property in accordance with paragraph 5 of theagreement. However, the
mine suffered continuing losses over the years which resulted to Philex Mining’s withdrawal as manager of the mine
and in the eventual cessation of mine operations.
 The parties executed a “Compromise with Dation in Payment” wherein Baguio Gold admitted an indebtedness to
petitioner in the amount of P179,394,000.00 and agreed to pay the same in three segments by first assigning Baguio
Gold’s tangible assets to Philex Mining, transferring to the latter Baguio Gold’s equitable title in its Philodrill assets
and finally settling the remaining liability through properties that Baguio Gold may acquire in the future.
 The parties executed an “Amendment to Compromise with Dation in Payment” where the parties determined that
Baguio Gold’s indebtedness to petitioner actually amounted to P259,137,245.00,which sum included liabilities
of Baguio Gold to other creditors that petitioner had assumed as guarantor. These liabilities pertained to long-term
loans amounting to US$11,000,000.00 contracted by Baguio Gold from the Bank of America NT & SA and Citibank
N.A. This time, Baguio Gold
undertook to pay petitioner in two segments by first assigning its tangible assets forP127,838,051.00 and then
 transferring its equitable title in its Philo drill assets
forP16,302,426.00. The parties then ascertained that Baguio Gold had a remaining outstanding indebtedness topetit
ioner in the amount of P114,996,768.00.
 Philex Mining wrote off in its 1982 books of account the remaining outstanding indebtedness of Baguio Gold by
charging P112,136,000.00 to allowances and reserves that were set up in 1981 andP2,860,768.00 to the 1982
operations.
 In its 1982 annual income tax return, Philex Mining deducted from its gross income the amount
of P112,136,000.00 as “loss on settlement of receivables from Baguio Gold against reserves and allowances.”
However, the BIR disallowed the amount as deduction for bad debt and assessed petitioner a deficiency income
tax of P62,811,161.39. Philex Mining protested before the BIR arguing that the deduction must be allowed since all
requisites for a bad debt deduction were satisfied, to wit:
(a) there was a valid and existing debt;
(b) the debt was ascertained to be worthless; and
(c) it was charged off within the taxable year when it was determined to be worthless. BIR denied petitioner’s
protest. It held that the alleged debt was not ascertained to be worthless since Baguio Gold remained existing and
had not filed a petition for bankruptcy; and that the deduction did not consist of a valid and subsisting debt
considering that, under the management contract, petitioner was to be paid 50% of the project’s net profit.
ISSUE: WON the parties entered into a contract of agency coupled with an interest which is not revocable at will
HELD: No. An examination of the “Power of Attorney” reveals that a partnership or joint venture was indeed intended by
the parties.
 In an agency coupled with interest, it is the agency that cannot be revoked or withdrawn by the principal due to an
interest of a third party that depends upon it, or the mutual interest of both principal and agent. In this case,
the non-revocation or non-withdrawal under paragraph 5(c) applies to the advances made by petitioner who is
supposedly the agent and not the principal under
thecontract. Thus, it cannot be inferred from the stipulation that the parties’ relation under theagreement is one of
agency coupled with an interest and not a partnership.
 Neither can paragraph 16 of the agreement be taken as an indication that the relationship of the parties was one
of agency and not a partnership. Although the said provision states that “this Agency shall be irrevocable while any
obligation of the PRINCIPAL in favor of the MANAGERS is outstanding, inclusive of the MANAGERS’ account,” it does
not necessarily follow that the parties entered into an agency contract coupled with an interest that cannot
be withdrawn by Baguio Gold.
 The main object of the “Power of Attorney” was not to confer a power in favor of petitioner to contract with third
persons on behalf of Baguio Gold but to create a business relationship between petitioner and Baguio Gold, in
which the former was to manage and operate the latter’s mine through the parties’ mutual contribution of material
resources and industry. The essence of an agency, even one that is coupled with interest, is the agent’s ability to
represent his principal and bring about business relations between the latter and third persons.
 The strongest indication that petitioner was a partner in the Sto. Nino Mine is the fact that it would receive 50% of
the net profits as “compensation” under paragraph 12 of the
agreement. Theentirety of the parties’ contractual stipulations simply leads to no other conclusion than thatpetition
er’s “compensation” is actually its share in the income of the joint venture. Article 1769 (4) of the Civil Code
explicitly provides that the “receipt by a person of a share in the profits of a business is prima facie evidence that he
is a partner in the business.”
Benjamin Yu vs. National Labor Relations Commission (NLRC)
FACTS: Petitioner Yu was hired as the Assistant General Manager of Jade Mountain Products Company Limited primarily
responsible for the overall operations of marble quarrying and export business of said partnership. He was hired by a virtue of
a Partnership Resolution in 1985 with a monthly salary of P4,000.00. Initially he received only half of his stipulated monthly
salary and was promised by the partners that the balance would be paid upon securing additional operating funds from
abroad. However, in 1988 without his knowledge the general partners as well as one of the limited partners sold and
transferred their interest to Willy Co and Emmanuel Zapanta. Thus the new major partners decided to transfer the firm’s main
office but opted to continue the operation of the old partnership under its old firm name and with all its employees and
workers except for the petitioner. Upon knowing of the changes in the partnership, petitioner went to the new main office to
meet the new partners and demand the payment of his unpaid salaries, but the latter refused to pay him and instead informed
him that since he bought the business from the original partners, it was for him to decide whether or not he was responsible
for the obligations of the old partnership including petitioners unpaid salaries. Hence, petitioner was dismissed from said
partnership.
ISSUES:
1. Whether the partnership which had hired the petitioner as Asst. General Manager had been extinguished and replaced by
a new partnership composed of Willy Co and Emmanuel Zapanta.
2. Whether petitioner could assert his rights under his employment contract as against the new partnership
HELD:
1. Yes. The legal effect of the changes in the membership of the partnership was the dissolution of the old partnership which
had hired the petitioner in 1984 and the emergence of the new firm composed of Willy Co and Emmanuel Zapanta in 1988.
This is based on the following provisions:
Art. 1828. The dissolution of partnership is the change in the relation of the partners caused by any partner ceasing to be
associated in the carrying on as a distinguished from the winding up of the business.
Art. 1830. Dissolution is caused:
1. without violation of the agreement between the partners;
b. by the express will of any partner, who must act in good faith, when no definite term or particular undertaking is
specified.
2. in contravention of the agreement between the partners, where the circumstances do not permit a dissolution under
any other provision of this article, by the express will of any partner at any time;
However, the legal consequence of dissolution of a partnership do not automatically result in the termination of the legal
personality of the old partnership as according to Art. 1829, “ on dissolution of the partnership is not terminated, but
continues until the winding up of the partnership affairs is completed. The new partnership simply continued the operations of
the old partnership under its old firm name without winding up the business affairs of the old partnership.
2. Yes. Under Art. 1840, creditors of the old partnership are also creditors of the new partnership which continued the proofs, and brief, and file ten copies thereof in the clerk's office on or before that date, and that this case be placed on the
business of former without liquidation of the partnership affairs. Thus, creditor of the old Jade Mountain, such as the calendar of the January term, 1904, for hearing on its merits.
petitioner is entitled to enforce his claim for unpaid salaries, as well as other claims relating to his employment with the old
partnership against the new Jade Mountain.

[ GR No. 414, Nov 09, 1903 ] EVANGELISTA, ET. AL. V. CIR 102 PHIL 140

HONGKONG BANK v. JURADO 2 Phil. 671 The essential elements of a partnership are the following:

WILLARD, J.: 1. An agreement to contribute money, property, or industry to a common fund

By the order of April 16, 1895, Don Ricardo Regidor was expressly included in the bankruptcy as a general partner of Jurado &
Co. No order setting aside this order has been called to the court's attention, except the order of December 12, 1898,
dismissing the entire proceeding. The order of April 6, 1898, upon which Seiior Regidor relies, simply decided that his motion,
in which he claimed that he was not properly included in the bankruptcy, should come up for hearing in the ordinary way. It
expressly stated that the merits of said motion were not passed upon. We have seen nothing in the progress of this suit to
show that this order of April 16,1895, was not correct. On the contrary, it appears from the records of the court that, in the
hearing on October 15,1903, Seflor Regidor as one of such partners, in open court, appointed an attorney to argue for the firm
the motion then before this court.
As a partner of Jurado & Co. he is represented by the firm and has no right to appear as an individual separate from the firm. If
he has this right, then every partner would have the same right. We see. Nothing in the case to indicate that his rights will not
be protected by the lawyers whom the firm may see fit to employ. His motion to be made a codefendant is denied.
2. Intent to divide the profits among the contracting parties. The first element is admittedly present in this case. The
petitioners have agreed to and did contribute money and property to a common fund. On the second element, considering the
facts and circumstances of the case, it is shown that the purpose was to engage in real estate transactions for monetary gain
and then divide the same among themselves because:
1. They created the fund purposely
2. They invested the same not only in one transaction but in a series of transactions3. The properties were not used for
personal consumption or residential use but were leased separately to several persons4. The properties were under the
management of one person Although, taken singly, they might not suffice to establish the intent necessary to constitute a
partnership, the collective effect of these circumstances is such as to leave no room for doubt of the existence of said intent in
petitioners herein.

Torres, Cooper, Mapa, McDonough, and Johnson, JJ., concur. *For purposes of the tax on corporations, our NIRC includes these partnerships

Arellano, C. J., did not sit in this case. - with the exception only of general co-partnerships

ON SUGGESTION OF DEATH OF LIQUIDATOR OF DEFENDANT FIRM. - within the purview of the term corporation. It thus clear to our mind that petitioners herein constitute a partnership, insofar
as the Code is concerned, and are subject to the income tax for corporations.
WILLARD, J.:

In this case the plaintiff, in April, 1903, made a motion, that the court assign a day for the hearing of the case. This motion was
resubmitted on the 15th day of October, 1903, and is now before us for decision.

The firm of Jurado & Co. being in liquidation, Don Basilio Teodoro, said by the defendants to be the liquidator, died on July 12,
1903. This fact can not interfere with the progress of this suit. With the appointment of a new liquidator the court has nothing
to do. The defendants are Jurado & Co. and not the liquidator. If they do not see fit to appoint a new liquidator, or to select
attorneys in place of those who it is said were appointed only by the deceased liquidator, any notices required to be served
upon the defendants by the plaintiff, or usually given by the clerk, can be served upon and given to any partner of Jurado & Co.
who may be found in the Islands.

The court, on March 8, 1902, made an order providing the procedure to be pursued in the case. If this order had been followed
by the parties, it would have resulted in a trial of the case on its merits in August, 1902. It appears that the proofs, pleadings,
and brief of the plaintiffs have been filed, but no proofs nor brief of the defendant have been presented. It is ordered that the
defendants deliver to the plaintiffs on or before the 15th day of December, 1903, three copies of their printed pleadings,