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L-45425
JOSE
GATCHALIAN,
ET
AL., plaintiffsappellants,
vs.
THE
COLLECTOR
OF
INTERNAL
REVENUE, defendant-appellee.
Guillermo
B.
Reyes
for
appellants.
Office of the Solicitor-General Tuason for
appellee.
IMPERIAL, J.:
The plaintiff brought this action to recover
from the defendant Collector of Internal
Revenue the sum of P1,863.44, with legal
interest thereon, which they paid under
protest by way of income tax. They appealed
from the decision rendered in the case on
October 23, 1936 by the Court of First
Instance of the City of Manila, which
dismissed the action with the costs against
them.
The case was submitted for decision upon the
following stipulation of facts:
5.
Jesus
Legaspi ..........................................
.15
.......................................................
.....
6.
Jose
Silva ...............................................
.07
.......................................................
.......
7.
Tomasa
Mercado ......................................... .08
.......................................................
8.
Julio
Gatchalian .....................................
.13
.......................................................
.......
9.
Emiliana
Santiago ........................................
.13
.......................................................
.
10.
Maria
C.
Legaspi .......................................... .16
.....................................................
11.
Francisco
Cabral ............................................ .13
...................................................
13.
Maria
Santiago ........................................
.17
.......................................................
....
Tapia ..............................................
.....................................................
Guillermo .13
12.
Gonzalo
Javier .............................................. .14
......................................................
14.
Buenaventura
Guzman ......................................... .13
.............................................
15.
Mariano
Santos ............................................ .14
.....................................................
Total ...............................................
....................................................... 2.0
..
0
3. That immediately thereafter but
prior to December 15, 1934, plaintiffs
purchased, in the ordinary course of
business, from one of the duly
authorized agents of the National
Charity Sweepstakes Office one ticket
bearing No. 178637 for the sum of two
pesos (P2) and that the said ticket was
registered in the name of Jose
Gatchalian and Company;
Amou Addre
nt
ss
Pulila
1.
Mariano
n,
Santos ........................... P0.14
Bulac
................
an.
2.
Buenaventura
Guzman ........................ .13
.......
- Do -
3.
Maria
Santiago ....................... .17
.....................
- Do -
4.
Gonzalo
Javier ............................. .14
.................
- Do -
5.
Francisco
Cabral ........................... .13
...............
- Do -
6.
Maria
C.
Legaspi ......................... .16
.................
- Do -
7.
Emiliana
Santiago ....................... .13
..................
- Do -
8.
Julio
Gatchalian .................... .13
........................
- Do -
9.
Jose
Silva .............................. .07
........................
- Do -
10.
Tomasa
Mercado ........................ .08
...............
- Do -
11.
Jesus
Legaspi ......................... .15
....................
- Do -
12.
Guillermo
Tapia ............................. .13
..............
- Do -
13.
Saturnina
Silva .............................. .08
..............
- Do -
14.
Gregoria
Cristobal ....................... .18
................
- Do -
15.
Jose
Gatchalian .................... .18
........................
- Do -
Maria
Cristobal .......
..
6.
Jose
Silva .............. D...................... 6
................
.08
1,
1,8
360 51
75
5
7.
Tomasa
Mercado ........ D...................... 7
.........
.07
1,
1,8
360 51
75
5
8.
Julio
Gatchalian by DBeatriz
8
Guzman .......
.13
2,
3,1
240 91
50
0
9.
Emiliana
Santiago ....... D...................... 9
.........
.13
2,
3,3
360 96
25
5
10. Maria C.
Legaspi ......... D...................... 10
.......
.16
3,
4,1
960 14
00
0
11. Francisco
Cabral ........... D...................... 11
.....
.13
2,
3,3
360 96
25
5
12.
Gonzalo
Javier ............ D...................... 12
........
.14
2,
3,3
360 96
25
5
N
et
pri
ze
13.
Maria
Santiago ....... D...................... 13
.............
.17
3,
4,3
360 99
50
0
1.
Jose
Gatchalian .... D...................... 1
................
P4,
3,
P0.1
P
42
94
8
480
5
5
14.
Buenaventura DGuzman ........ 14
...................
.13
2,
3,3
360 96
25
5
2.
Gregoria
Cristobal ....... D...................... 2
.........
.18
4,5 2,0
75 00
2,
57
5
15.
Mariano
Santos ........... D...................... 15
.......
.14
2,
3,3
360 96
25
5
3. Saturnina
Silva .............. D...................... 3
.........
.08
1,
1,8
360 51
75
5
4. Guillermo
Tapia ............. D...................... 4
.......
.13
2,
3,3
360 96
25
5
2.00
Total
cost
of
said
Name
Ex
hib
it
No
.
5.
Jesus DLegaspi
by 5
Pur
cha
se
Pric
e
.15
Pri
ce
W
on
Exp
ens
es
3,8 720 3,
25
10
50,
2.00 00
0
The legal questions raised in plaintiffsappellants' five assigned errors may properly
be reduced to the two following: (1) Whether
the plaintiffs formed a partnership, or merely
a community of property without a personality
of its own; in the first case it is admitted that
the partnership thus formed is liable for the
taxable
corporation,
joint-stock
company, partnership, joint account
(cuenta en participacion), association,
or insurance company in the calendar
year nineteen hundred and twenty and
in each year thereafter.
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 under the aforesaid
section 10 (a) of Act No. 2833, as amended by
section 2 of Act No. 3761. There is no merit in
plaintiff's contention that the tax should be
prorated among them and paid individually,
resulting in their exemption from the tax.
In view of the foregoing, the appealed
decision is affirmed, with the costs of this
instance to the plaintiffs appellants. So
ordered.
G.R. No. L-68118 October 29, 1985
JOSE P. OBILLOS, JR., SARAH P. OBILLOS,
ROMEO P. OBILLOS and REMEDIOS P.
OBILLOS, brothers and sisters, petitioners
vs.
COMMISSIONER OF INTERNAL REVENUE
and COURT OF TAX APPEALS, respondents.
AQUINO, J.:
This case is about the income tax liability of
four brothers and sisters who sold two parcels
of land which they had acquired from their
father.
contrato
de
sociedad,
la
moderna orientacion de la
doctrina cientifica seala como
nota
fundamental
de
diferenciacion aparte del origen
de fuente de que surgen, no
siempre uniforme, la finalidad
perseguida
por
los
interesados: lucro
comun
partible en la sociedad, y mera
conservacion y
aprovechamiento
en
la
comunidad.
(Derecho
Civil
Espanol, Vol. 2, Part 1, 10 Ed.,
1971, 328- 329).
Article 1769(3) of the Civil Code provides that
"the sharing of gross returns does not of itself
establish a partnership, whether or not the
persons sharing them have a joint or common
right or interest in any property from which
the returns are derived". There must be an
unmistakable intention to form a partnership
or joint venture.*
Such intent was present in Gatchalian vs.
Collector of Internal Revenue, 67 Phil. 666,
where 15 persons contributed small amounts
to purchase a two-peso sweepstakes ticket
with the agreement that they would divide the
prize The ticket won the third prize of
P50,000. The 15 persons were held liable for
income tax as an unregistered partnership.
The instant case is distinguishable from the
cases where the parties engaged in joint
ventures for profit. Thus, in Oa vs.
** This view is supported by the following
rulings of respondent Commissioner:
Co-owership distinguished from
partnership.We find that the
case at bar is fundamentally
similar to the De Leon case.
Thus, like the De Leon heirs, the
Longa
heirs
inherited
the
'hacienda'
in
questionproindiviso from their deceased
parents; they did not contribute
or invest additional ' capital to
increase
or
expand
the
inherited
properties;
they
merely continued dedicating
the property to the use to which
it had been put by their
forebears;
they
individually
reported in their tax returns
their corresponding shares in
the income and expenses of the
'hacienda', and they continued
GANCAYCO, J.:
The distinction between co-ownership and an
unregistered partnership or joint venture for
income tax purposes is the issue in this
petition.
On June 22, 1965, petitioners bought two (2)
parcels of land from Santiago Bernardino, et
al. and on May 28, 1966, they bought another
three (3) parcels of land from Juan Roque. The
first two parcels of land were sold by
petitioners in 1968 toMarenir Development
Corporation, while the three parcels of land
were sold by petitioners to Erlinda Reyes and
Maria Samson on March 19,1970. Petitioners
realized a net profit in the sale made in 1968
in the amount of P165,224.70, while they
realized a net profit of P60,000.00 in the sale
made in 1970. The corresponding capital
gains taxes were paid by petitioners in 1973
and 1974 by availing of the tax amnesties
granted in the said years.
However, in a letter dated March 31, 1979 of
then Acting BIR Commissioner Efren I. Plana,
petitioners were assessed and required to pay
a total amount of P107,101.70 as alleged
deficiency corporate income taxes for the
years 1968 and 1970.
Petitioners protested the said assessment in a
letter of June 26, 1979 asserting that they had
availed of tax amnesties way back in 1974.
THERETO RESTS
PETITIONERS.
UPON
THE
B. IN MAKING A FINDING,
SOLELY ON THE BASIS OF
ISOLATED SALE TRANSACTIONS,
THAT
AN
UNREGISTERED
PARTNERSHIP EXISTED THUS
IGNORING THE REQUIREMENTS
LAID DOWN BY LAW THAT
WOULD
WARRANT
THE
PRESUMPTION/CONCLUSION
THAT A PARTNERSHIP EXISTS.
C. IN FINDING THAT THE
INSTANT CASE IS SIMILAR TO
THE EVANGELISTA CASE AND
THEREFORE
SHOULD
BE
DECIDED
ALONGSIDE
THE
EVANGELISTA CASE.
D. IN RULING THAT THE TAX
AMNESTY DID NOT RELIEVE THE
PETITIONERS FROM PAYMENT
OF OTHER TAXES FOR THE
PERIOD COVERED BY SUCH
AMNESTY. (pp. 12-13, Rollo.)
The petition is meritorious.
The basis of the subject decision of the
respondent court is the ruling of this Court
in Evangelista. 4
In the said case, petitioners borrowed a sum
of money from their father which together
with their own personal funds they used in
buying several real properties. They appointed
their brother to manage their properties with
full power to lease, collect, rent, issue
receipts, etc. They had the real properties
rented or leased to various tenants for several
years and they gained net profits from the
rental income. Thus, the Collector of Internal
Revenue demanded the payment of income
tax on a corporation, among others, from
them.
In resolving the issue, this Court held as
follows:
The issue in this case is
whether petitioners 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. With
respect
to
the
tax
on
corporations, the issue hinges
on the meaning of the terms
corporation and partnership as
used in sections 24 and 84 of
said Code, the pertinent parts
of which read:
Sec. 24. Rate of the tax on
corporations.There shall be
levied, assessed, collected, and
paid annually upon the total net
income
received
in
the
preceding taxable year from all
sources by every corporation
organized in, or existing under
the laws of the Philippines, no
matter
how
created
or
organized but not including duly
registered
general
copartnerships
(companies
collectives), a tax upon such
income equal to the sum of the
following: ...
Sec.
84(b).
The
term
"corporation"
includes
partnerships, no matter how
created or organized, joint-stock
companies,
joint
accounts
(cuentas
en
participation),
associations
or
insurance
companies,
but
does
not
include duly registered general
co-partnerships
(companies
colectivas).
Article 1767 of the Civil Code of
the Philippines provides:
By the contract of partnership
two or more persons bind
themselves
to
contribute
money, property, or industry to
a common fund, with the
intention of dividing the profits
among themselves.
Pursuant to this article, the
essential
elements
of
a
partnership are two, namely:
(a) an agreement to contribute
money, property or industry to
a common fund; and (b) intent
to divide the profits among the
contracting parties. 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
10
11
12
SANITARY
WARES
MANUFACTURING
CORPORATION, ERNESTO R. LAGDAMEO,
ENRIQUE B. LAGDAMEO, GEORGE FL .EE
RAUL A. BONCAN, BALDWIN YOUNG and
AVELINO
V.
CRUX, petitioners,
vs.
THE COURT OF APPEALS, WOLFGANG
AURBACH, JOHN GRIFFIN, DAVID P.
WHITTINGHAM, CHARLES CHAMSAY and
LUCIANO SALAZAR, respondents.
G.R. Nos. 75975-76 December 15, 1989
LUCIANO
E.
SALAZAR, petitioner,
vs.
SANITARY
WARES
MANUFACTURING
CORPORATION, ERNESTO V. LAGDAMEO,
ERNESTO R. LAGDAMEO, JR., ENRIQUE R.
LAGDAMEO, GEORGE F. LEE, RAUL A.
BONCAN, BALDWIN YOUNG, AVELINO V.
CRUZ
and
the
COURT
OF
APPEALS, respondents.
Belo, Abiera & Associates for petitioners in
75875.
Sycip, Salazar, Hernandez & Gatmaitan for
Luciano E. Salazar.
(1)
Cumulative
voting
for
directors:
xxx xxx xxx
5. Management
(a) The management of the
Corporation shall be vested in a
Board of Directors, which shall
consist of nine individuals. As
long as American-Standard shall
own at least 30% of the
outstanding
stock
of
the
Corporation, three of the nine
directors shall be designated by
American-Standard, and the
other six shall be designated by
the other stockholders of the
Corporation. (pp. 51 & 53, Rollo
of 75875)
At the request of ASI, the agreement
contained provisions designed to protect it as
a minority group, including the grant of veto
powers over a number of corporate acts and
the right to designate certain officers, such as
a member of the Executive Committee whose
13
the
votes
present
and
represented by proxy equally
for the 6 nominees of the
Philippine Investors and the 3
nominees
of
ASI,
thus
effectively excluding the 2
additional persons nominated,
namely, Luciano E. Salazar and
Charles Chamsay. The ASI
representative,
Mr.
Jaqua
protested the decision of the
Chairman and announced that
all votes accruing to ASI shares,
a total of 1,329,695 (p. 27,
Rollo, AC-G.R. SP No. 05617)
were being cumulatively voted
for the three ASI nominees and
Charles
Chamsay,
and
instructed the Secretary to so
vote. Luciano E. Salazar and
other proxy holders announced
that all the votes owned by and
or
represented
by
them
467,197 shares (p. 27, Rollo,
AC-G.R. SP No. 05617) were
being voted cumulatively in
favor of Luciano E. Salazar. The
Chairman,
Baldwin
Young,
nevertheless
instructed
the
Secretary to cast all votes
equally in favor of the three ASI
nominees, namely, Wolfgang
Aurbach, John Griffin and David
Whittingham
and
the
six
originally nominated by Rogelio
Vinluan,
namely,
Ernesto
Lagdameo, Sr., Raul Boncan,
Ernesto Lagdameo, Jr., Enrique
Lagdameo, George F. Lee, and
Baldwin Young. The Secretary
then certified for the election of
the following Wolfgang Aurbach,
John Griffin, David Whittingham
Ernesto Lagdameo, Sr., Ernesto
Lagdameo,
Jr.,
Enrique
Lagdameo, George F. Lee, Raul
A. Boncan, Baldwin Young. The
representative of ASI then
moved to recess the meeting
which was duly seconded.
There was also a motion to
adjourn (p. 28, Rollo, AC-G.R. SP
No. 05617). This motion to
adjourn was accepted by the
Chairman, Baldwin Young, who
announced that the motion was
carried
and
declared
the
meeting adjourned. Protests
against the adjournment were
registered and having been
ignored, Mr. Jaqua the ASI
representative, stated that the
14
15
11.1.
ThatAmendedDecisionwouldsan
ctiontheCA'sdisregard
of
binding contractual agreements
entered into by stockholders
and the replacement of the
conditions of such agreements
with terms never contemplated
by the stockholders but merely
dictated by the CA .
11.2. The Amended decision
would likewise sanction the
deprivation of the property
rights of stockholders without
due process of law in order that
a favored group of stockholders
may be illegally benefitted and
guaranteed
a
continuing
monopoly of the control of a
corporation. (pp. 14-15, Rollo75975-76)
On the other hand, the petitioners in G.R. No.
75951 contend that:
II
THE AMENDED DECISION DOES
NOT
CATEGORICALLY
RULE
THAT
PRIVATE
PETITIONERS
HEREIN
WERE
THE
DULY
ELECTED DIRECTORS DURING
THE 8 MARCH 1983 ANNUAL
STOCKHOLDERS MEETING OF
SANTWARES. (P. 24, Rollo75951)
The issues raised in the petitions are
interrelated, hence, they are discussed jointly.
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 and (2) whether
or not the ASI Group may vote their additional
16
17
their
In
fact,
the
Philippine
Corporation
Code
itself
recognizes
the
right
of
stockholders to enter into
agreements
regarding
the
exercise of their voting rights.
18
Sec.
100.
Agreements
stockholders.-
by
appellants
cannot
honestly
claim that Saniwares is a public
issue
or
a
widely
held
corporation.
19
corporations,
shareholders'
agreements in joint venture
corporations
often
contain
provisions which do one or
more of the following: (1)
require greater than majority
vote
for
shareholder
and
director action; (2) give certain
shareholders or groups of
shareholders power to select a
specified number of directors;
(3) give to the shareholders
control over the selection and
retention of employees; and (4)
set up a procedure for the
settlement of disputes by
arbitration (See I O' Neal, Close
Corporations, 1971 ed., Section
1.06a, pp. 15-16) (Decision of
SEC Hearing Officer, P. 16)
Thirdly paragraph 2 of Sec. 100
of the Corporation Code does
not necessarily imply that
agreements
regarding
the
exercise of voting rights are
allowed
only
in
close
corporations. As Campos and
Lopez-Campos explain:
Paragraph 2 refers to pooling
and voting agreements in
particular. Does this provision
necessarily imply that these
agreements can be valid only in
close corporations as defined by
the Code? Suppose that a
corporation has twenty five
stockholders,
and
therefore
cannot qualify as a close
corporation under section 96,
can some of them enter into an
agreement to vote as a unit in
the election of directors? It is
submitted that there is no
reason for denying stockholders
of corporations other than close
ones the right to enter into not
voting or pooling agreements to
protect their interests, as long
as they do not intend to commit
any wrong, or fraud on the
other stockholders not parties
to the agreement. Of course,
voting or pooling agreements
are perhaps more useful and
more often resorted to in close
corporations. But they may also
be found necessary even in
widely
held
corporations.
Moreover, since the Code limits
the legal meaning of close
20
21
recognized
a
distinction
between these two business
forms, and has held that
although a corporation cannot
enter
into
a
partnership
contract,
it
may
however
engage in a joint venture with
others. (At p. 12, Tuazon v.
Bolanos, 95 Phil. 906 [1954])
(Campos and Lopez-Campos
Comments, Notes and Selected
Cases, Corporation Code 1981)
Moreover, the usual rules as regards the
construction and operations of contracts
generally apply to a contract of joint venture.
(O' Hara v. Harman 14 App. Dev. (167) 43 NYS
556).
Bearing these principles in mind, the correct
view would be that the resolution of the
question of whether or not the ASI Group may
vote their additional equity lies in the
agreement of the parties.
Necessarily, the appellate court was correct in
upholding the agreement of the parties as
regards the allocation of director seats under
Section 5 (a) of the "Agreement," and the
right of each group of stockholders to
cumulative voting in the process of
determining who the group's nominees would
be under Section 3 (a) (1) of the "Agreement."
As pointed out by SEC, Section 5 (a) of the
Agreement relates to the manner of
nominating the members of the board of
directors while Section 3 (a) (1) relates to the
manner of voting for these nominees.
This is the proper interpretation of the
Agreement of the parties as regards the
election of members of the board of directors.
To allow the ASI Group to vote their additional
equity to help elect even a Filipino director
who would be beholden to them would
obliterate their minority status as agreed
upon by the parties. As aptly stated by the
appellate court:
... ASI, however, should not be
allowed to interfere in the
voting within the Filipino group.
Otherwise, ASI would be able to
designate more than the three
directors it is allowed to
designate
under
the
Agreement, and may even be
able to get a majority of the
board seats, a result which is
clearly
contrary
to
the
22
contractual
parties.
intent
of
the
23
complete with
collection.
the
costs
of
24
IN THE PARTNERSHIP
PECSON'S INVESTMENT.
ARISING
OUT
OF
III
From this decision, both parties appealed to
the respondent Court of Appeals. The latter
likewise rendered a decision against the
petitioner. The dispositive portion of the
decision reads: t.hqw
PREMISES CONSIDERED, the
decision appealed from is
hereby SET ASIDE, and a new
one
is
hereby
rendered,
ordering
defendant-appellant
Isabelo C. Moran, Jr. to pay
plaintiff- appellant Mariano E.
Pecson:
(a) Forty-seven thousand five
hundred (P47,500) (the amount
that could have accrued to
Pecson under their agreement);
(b) Eight thousand (P8,000),
(the commission for eight
months);
(c) Seven thousand (P7,000) (as
a return of Pecson's investment
for the Veteran's Project);
(d) Legal interest on (a), (b) and
(c) from the date the complaint
was filed (up to the time
payment is made)
The petitioner contends that the respondent
Court of Appeals decided questions of
substance in a way not in accord with law and
with Supreme Court decisions when it
committed the following errors:
I
THE HONORABLE COURT OF APPEALS
GRIEVOUSLY ERRED IN HOLDING PETITIONER
ISABELO
C.
MORAN,
JR.
LIABLE
TO
RESPONDENT MARIANO E. PECSON IN THE
SUM OF P47,500 AS THE SUPPOSED
EXPECTED PROFITS DUE HIM.
II
THE HONORABLE COURT OF APPEALS
GRIEVOUSLY ERRED IN HOLDING PETITIONER
ISABELO
C.
MORAN,
JR.
LIABLE
TO
RESPONDENT MARIANO E. PECSON IN THE
SUM OF P8,000, AS SUPPOSED COMMISSION
THE HONORABLE
COURT
OF APPEALS
GRIEVOUSLY ERRED IN HOLDING PETITIONER
ISABELO
C.
MORAN,
JR.
LIABLE
TO
RESPONDENT MARIANO E. PECSON IN THE
SUM OF P7,000 AS A SUPPOSED RETURN OF
INVESTMENT IN A MAGAZINE VENTURE.
IV
ASSUMING
WITHOUT
ADMITTING
THAT
PETITIONER IS AT ALL LIABLE FOR ANY
AMOUNT, THE HONORABLE COURT OF
APPEALS DID NOT EVEN OFFSET PAYMENTS
ADMITTEDLY RECEIVED BY PECSON FROM
MORAN.
V
THE HONORABLE
COURT
OF APPEALS
GRIEVOUSLY ERRED IN NOT GRANTING THE
PETITIONER'S COMPULSORY COUNTERCLAIM
FOR DAMAGES.
The first question raised in this petition refers
to the award of P47,500.00 as the private
respondent's share in the unrealized profits of
the partnership. The petitioner contends that
the award is highly speculative. The petitioner
maintains that the respondent court did not
take into account the great risks involved in
the business undertaking.
We agree with the petitioner that the award of
speculative damages has no basis in fact and
law.
There is no dispute over the nature of the
agreement between the petitioner and the
private respondent. It is a contract of
partnership. The latter in his complaint
alleged that he was induced by the petitioner
to enter into a partnership with him under the
following terms and conditions: t.hqw
1. That the partnership will print
colored posters of the delegates
to
the
Constitutional
Convention;
2. That they will invest the
amount of Fifteen Thousand
Pesos (P15,000.00) each;
25
26
representing
Pecson's
commission for three months (April, May,
June, 1971). Of said P20,000 Moran has to pay
P7,000 (as a return of Pecson's investment for
the Veterans' project, for this project never
left the ground) ...
As a rule, the findings of facts of the Court of
Appeals are final and conclusive and cannot
be reviewed on appeal to this Court (Amigo v.
Teves, 96 Phil. 252), provided they are borne
out by the record or are based on substantial
evidence (Alsua-Betts v. Court of Appeals, 92
SCRA 332). However, this rule admits of
certain exceptions. Thus, inCarolina Industries
Inc. v. CMS Stock Brokerage, Inc., et al., (97
SCRA 734), we held that this Court retains the
power to review and rectify the findings of fact
of the Court of Appeals when (1) the
conclusion is a finding grounded entirely on
speculation, surmises and conjectures; (2)
when the inference made is manifestly
mistaken absurd and impossible; (3) where
there is grave abuse of discretion; (4) when
the judgment is based on a misapprehension
of facts; and (5) when the court, in making its
findings, went beyond the issues of the case
and the same are contrary to the admissions
of both the appellant and the appellee.
In this case, there is misapprehension of facts.
The evidence of the private respondent
himself shows that his investment in the
"Voice of Veterans" project amounted to only
P3,000.00. The remaining P4,000.00 was the
amount of profit that the private respondent
expected to receive.
The records show the following exhibits- t.
hqw
E Xerox copy of PNB
Manager's Check No. 234265
dated March 22, 1971 in favor
of
defendant.
Defendant
admitted the authenticity of this
check and of his receipt of the
proceeds thereof (t.s.n., pp. 3-4,
Nov. 29, 1972). This exhibit is
being offered for the purpose of
showing
plaintiff's
capital
investment in the printing of
the "Voice of the Veterans" for
which he was promised a fixed
profit
of
P8,000.
This
investment of P6,000.00 and
the promised profit of P8,000
are covered by defendant's
27
P-Promissory
note
for
P14,000.00.
This
is
also
defendant's Exhibit 2. It is being
offered for the purpose of
showing the transaction as
explained in connection with
Exhibits E, L, M, and N above.
Explaining
the
above-quoted
exhibits,
respondent Pecson testified that: t.hqw
Q During the pre-trial of this case, Mr. Pecson,
the defendant presented a promissory note in
the amount of P14,000.00 which has been
marked as Exhibit 2. Do you know this
promissory note?
A Yes, sir.
28
29
MARJORIE
TOCAO
and
WILLIAM
T.
BELO, petitioners, vs. COURT OF
APPEALS
and
NENITA
A.
ANAY, respondents.
RESOLUTION
A Yes, sir.[2]
YNARES-SANTIAGO, J.:
The inherent powers of a Court to amend
and control its processes and orders so as to
make them conformable to law and justice
includes the right to reverse itself, especially
when in its honest opinion it has committed
an error or mistake in judgment, and that to
adhere to its decision will cause injustice to a
party litigant.[1]
On November 14, 2001, petitioners
Marjorie Tocao and William T. Belo filed a
Motion for Reconsideration of our Decision
dated October 4, 2000. They maintain that
there was no partnership bettween petitioner
Belo, on the one hand, and respondent Nenita
A. Anay, on the other hand; and that the latter
being merely an employee of petitioner Tocao.
After a careful review of the evidence
presented, we are convinced that, indeed,
petitioner Belo acted merely as guarantor of
Geminesse Enterprise. This was categorically
affirmed by respondents own witness,
Elizabeth
Bantilan,
during
her
crossexamination. Furthermore, Bantilan testified
that it was Peter Lo who was the companys
financier. Thus:
Q You mentioned a while ago the name
William Belo. Now, what is the role of
William
Belo
with
Geminesse
Enterprise?
A William Belo is the friend of Marjorie
Tocao and he was the guarantor of the
company.
Q What do you mean by guarantor?
A He guarantees the stocks that she owes
somebody who is Peter Lo and he acts
30
The Case
Before us is a Petition for Review on
Certiorari assailing the November 28, 1997
Decision,[1] as well as the August 17, 1998 and
the October 9, 1998 Resolutions, [2] issued by
the Court of Appeals (CA) in CA-GR CV No.
34742. The Assailed Decision disposed as
follows:
The Facts
The events that led to this case are
summarized by the CA as follows:
Sometime in June, 1986, [Petitioner] Fernando
Santos and [Respondent] Nieves Reyes were
introduced to each other by one Meliton Zabat
regarding
a
lending
business
venture
proposed by Nieves. It was verbally agreed
that [petitioner would] act as financier while
[Nieves] and Zabat [would] take charge of
solicitation of members and collection of loan
payments. The venture was launched on June
13, 1986, with the understanding that
[petitioner] would receive 70% of the profits
while x x x Nieves and Zabat would earn 15%
each.
In July, 1986, x x x Nieves introduced Cesar
Gragera to [petitioner]. Gragera, as chairman
of
the
Monte
Maria
Development
Corporation[6] (Monte Maria, for brevity),
sought short-term loans for members of the
corporation. [Petitioner]
and
Gragera
executed an agreement providing funds for
Monte
Marias
members. Under
the
agreement, Monte Maria, represented by
Gragera, was entitled to P1.31 commission
per thousand paid daily to [petitioner] (Exh.
A). x x x Nieves kept the books as
representative
of
[petitioner]
while
[Respondent] Arsenio, husband of Nieves,
acted as credit investigator.
On August 6, 1986, [petitioner], x x x [Nieves]
and Zabat executed the Article of Agreement
31
which
formalized
arrangement.
their
earlier
verbal
32
39.3.3. P25,000.00 - As
damages
moral
39.3.4. P10,000.00 - As
damages
exemplary
attorneys
Issue
Petitioner asks this Court to rule on the
following issues:[10]
First Issue:
Business Relationship
Petitioner maintains that he employed the
services of respondent spouses in the moneylending venture with Gragera, with Nieves as
33
bookkeeper
and
Arsenio
as
credit
investigator. That Nieves introduced Gragera
to Santos did not make her a partner. She was
only a witness to the Agreement between the
two. Separate from the partnership between
petitioner and Gragera was that which existed
among petitioner, Nieves and Zabat, a
partnership that was dissolved when Zabat
was expelled.
On the other hand, both the CA and the
trial court rejected petitioners contentions and
ruled that the business relationship was one
of partnership. We quote from the CA
Decision, as follows:
[Respondents] were industrial partners of
[petitioner]. x x x Nieves herself provided the
initiative in the lending activities with Monte
Maria. In consonance with the agreement
between appellant, Nieves and Zabat (later
replaced
by
Arsenio),
[respondents]
contributed industry to the common fund with
the intention of sharing in the profits of the
partnership. [Respondents] provided services
without which the partnership would not have
[had] the wherewithal to carry on the purpose
for which it was organized and as such [were]
considered industrial partners (Evangelista v.
Abad Santos, 51 SCRA 416 [1973]).
While concededly, the partnership between
[petitioner,] Nieves and Zabat was technically
dissolved by the expulsion of Zabat therefrom,
the remaining partners simply continued the
business
of
the
partnership
without
undergoing
the
procedure
relative
to
dissolution. Instead, they invited Arsenio to
participate
as
a
partner
in
their
operations. There was therefore, no intent to
dissolve
the
earlier
partnership. The
partnership between [petitioner,] Nieves and
Arsenio simply took over and continued the
business of the former partnership with Zabat,
one of the incidents of which was the lending
operations with Monte Maria.
xxxxxxxxx
Gragera
and
[petitioner]
were
not
partners. The
money-lending
activities
undertaken with Monte Maria was done in
pursuit of the business for which the
partnership between [petitioner], Nieves and
Zabat (later Arsenio) was organized. Gragera
who represented Monte Maria was merely
paid commissions in exchange for the
collection of loans. The commissions were
fixed on gross returns, regardless of the
expenses incurred in the operation of the
business. The sharing of gross returns does
not in itself establish a partnership.[11]
34
Second Issue:
the
document
35
Petitioner
has
utterly
failed
to
demonstrate why a review of these factual
findings is warranted. Well-entrenched is the
basic rule that factual findings of the Court of
Appeals affirming those of the trial court are
binding and conclusive on the Supreme Court.
[19]
Although there are exceptions to this rule,
petitioner has not satisfactorily shown that
any of them is applicable to this issue.
Third Issue:
Accounting of Partnership
Petitioner
refuses
any
liability
for
respondents claims on the profits of the
partnership. He maintains that both business
propositions were flops, as his investments
were consumed and eaten up by the
commissions orchestrated to be due Gragera
a situation that could not have been rendered
possible without complicity between Nieves
and Gragera.
courts found it
Nieves
had
from
the
36
37
BARREDO, J.:p
Petition for review of the decision of the Court
of Tax Appeals in CTA Case No. 617, similarly
entitled as above, holding that petitioners
have constituted an unregistered partnership
and are, therefore, subject to the payment of
the deficiency corporate income taxes
assessed against them by respondent
Commissioner of Internal Revenue for the
years 1955 and 1956 in the total sum of
P21,891.00, plus 5% surcharge and 1%
monthly interest from December 15, 1958,
subject to the provisions of Section 51 (e) (2)
of the Internal Revenue Code, as amended by
Section 8 of Republic Act No. 2343 and the
costs of the suit, 1 as well as the resolution of
said court denying petitioners' motion for
reconsideration of said decision.
The facts are stated in the decision of the Tax
Court as follows:
Julia Buales died on March 23,
1944, leaving as heirs her
surviving spouse, Lorenzo T.
Oa and her five children. In
1948, Civil Case No. 4519 was
instituted in the Court of First
Instance of Manila for the
settlement of her estate. Later,
Lorenzo T. Oa the surviving
spouse
was
appointed
administrator of the estate of
said deceased (Exhibit 3, pp.
34-41, BIR rec.). On April 14,
1949,
the
administrator
submitted
the
project
of
partition, which was approved
by the Court on May 16, 1949
(See Exhibit K). Because three
of the heirs, namely Luz,
Virginia and Lorenzo, Jr., all
surnamed Oa, were still minors
when the project of partition
was approved, Lorenzo T. Oa,
their father and administrator of
the estate, filed a petition in
Civil Case No. 9637 of the Court
of First Instance of Manila for
appointment as guardian of said
minors. On November 14, 1949,
the
Court
appointed
him
guardian of the persons and
property of the aforenamed
minors (See p. 3, BIR rec.).
The project of partition (Exhibit
K; see also pp. 77-70, BIR rec.)
shows that the heirs have
undivided one-half (1/2) interest
in ten parcels of land with a
38
total
assessed
value
of
P87,860.00, six houses with a
total
assessed
value
of
P17,590.00
and
an
undetermined amount to be
collected from the War Damage
Commission.
Later,
they
received from said Commission
the amount of P50,000.00,
more or less. This amount was
not divided among them but
was used in the rehabilitation of
properties owned by them in
common (t.s.n., p. 46). Of the
ten
parcels
of
land
aforementioned,
two
were
acquired after the death of the
decedent with money borrowed
from
the
Philippine
Trust
Company in the amount of
P72,173.00 (t.s.n., p. 24; Exhibit
3, pp. 31-34 BIR rec.).
The project of partition also
shows that the estate shares
equally with Lorenzo T. Oa, the
administrator thereof, in the
obligation
of
P94,973.00,
consisting of loans contracted
by the latter with the approval
of the Court (see p. 3 of Exhibit
K; or see p. 74, BIR rec.).
Although the project of partition
was approved by the Court on
May 16, 1949, no attempt was
made to divide the properties
therein listed. Instead, the
properties remained under the
management of Lorenzo T. Oa
who used said properties in
business by leasing or selling
them and investing the income
derived therefrom and the
proceeds from the sales thereof
in real properties and securities.
As
a
result,
petitioners'
properties
and
investments
gradually
increased
from
P105,450.00
in
1949
to
P480,005.20 in 1956 as can be
gleaned from the following
year-end balances:
Investm
ent
Land
Buildi
ng
Account
Accou
nt
Accou
nt
P87,860.00
P17,590.00
128,566.72
96,076.26
120,349.28
110,605.11
87,065.28
152,674.39
84,925.68
161,463.83
99,001.20
167,962.04
120,249.78
169,262.52
135,714.68
169,262.52
(See Exhibits 3 & K t.s.n., pp.
22, 25-26, 40, 50, 102-104)
From said investments and
properties petitioners derived
such incomes as profits from
installment sales of subdivided
lots, profits from sales of stocks,
dividends, rentals and interests
(see p. 3 of Exhibit 3; p. 32, BIR
rec.; t.s.n., pp. 37-38). The said
incomes are recorded in the
books of account kept by
Lorenzo T. Oa where the
corresponding shares of the
petitioners in the net income for
the year are also known. Every
year, petitioners returned for
income tax purposes their
shares in the net income
derived from said properties
and securities and/or from
transactions involving them
(Exhibit 3,supra; t.s.n., pp. 2526). However, petitioners did
not actually receive their shares
in the yearly income. (t.s.n., pp.
25-26, 40, 98, 100). The income
was always left in the hands of
Lorenzo
T.
Oa who,
as
heretofore pointed out, invested
them in real properties and
securities. (See Exhibit 3, t.s.n.,
pp. 50, 102-104).
On the basis of the foregoing
facts,
respondent
(Commissioner
of
Internal
Revenue)
decided
that
petitioners
formed
an
unregistered partnership and
therefore,
subject
to
the
corporate income tax, pursuant
to Section 24, in relation to
Section 84(b), of the Tax Code.
Accordingly,
he
assessed
against the petitioners the
amounts of P8,092.00 and
39
P13,899.00
as
corporate
income taxes for 1955 and
1956, respectively. (See Exhibit
5, amended by Exhibit 17, pp.
50 and 86, BIR rec.). Petitioners
protested
against
the
assessment and asked for
reconsideration of the ruling of
respondent that they have
formed
an
unregistered
partnership. Finding no merit in
petitioners' request, respondent
denied it (See Exhibit 17, p. 86,
BIR
rec.).
(See
pp.
1-4,
Memorandum for Respondent,
June 12, 1961).
The original assessment was as
follows:
1955
Net income as per investigation
................ P40,209.89
Income
tax
due
thereon
...............................
8,042.00
25%
surcharge ..................................
............
2,010.50
Compromise
for
nonfiling
.......................... 50.00
Total ..........................................
..................... P10,102.50
1956
Net income as per investigation
................ P69,245.23
Income
tax
due
thereon
...............................
13,849.00
25%
surcharge ..................................
............
3,462.25
Compromise
for
nonfiling
.......................... 50.00
Total ..........................................
..................... P17,361.25
(See Exhibit 13, page 50, BIR
records)
Upon further consideration of
the case, the 25% surcharge
was eliminated in line with the
ruling of the Supreme Court
in Collector
v.
Batangas
Transportation Co., G.R. No. L-
40
V.
ON THE ASSUMPTION THAT
THERE WAS AN UNREGISTERED
PARTNERSHIP, THE COURT OF
TAX APPEALS ERRED IN NOT
DEDUCTING
THE
VARIOUS
AMOUNTS
PAID
BY
THE
PETITIONERS AS INDIVIDUAL
INCOME
TAX
ON
THEIR
RESPECTIVE SHARES OF THE
PROFITS ACCRUING FROM THE
PROPERTIES
OWNED
IN
COMMON,
FROM
THE
DEFICIENCY
TAX
OF
THE
UNREGISTERED PARTNERSHIP.
In other words, petitioners pose for our
resolution the following questions: (1) Under
the facts found by the Court of Tax Appeals,
should petitioners be considered as co-owners
of the properties inherited by them from the
deceased Julia Buales and the profits derived
from transactions involving the same, or,
must they be deemed to have formed an
unregistered partnership subject to tax under
Sections 24 and 84(b) of the National Internal
Revenue Code? (2) Assuming they have
formed an unregistered partnership, should
this not be only in the sense that they
invested as a common fund the profits earned
by the properties owned by them in common
and the loans granted to them upon the
security of the said properties, with the result
that as far as their respective shares in the
inheritance are concerned, the total income
thereof should be considered as that of coowners and not of the unregistered
partnership? And (3) assuming again that they
are taxable as an unregistered partnership,
should not the various amounts already paid
by them for the same years 1955 and 1956 as
individual income taxes on their respective
shares of the profits accruing from the
properties they owned in common be
deducted from the deficiency corporate taxes,
herein involved, assessed against such
unregistered partnership by the respondent
Commissioner?
Pondering on these questions, the first thing
that has struck the Court is that whereas
petitioners' predecessor in interest died way
back on March 23, 1944 and the project of
partition of her estate was judicially approved
as early as May 16, 1949, and presumably
petitioners have been holding their respective
shares in their inheritance since those dates
admittedly under the administration or
management of the head of the family, the
widower and father Lorenzo T. Oa, the
assessment in question refers to the later
41
42
matter
how
created
or
organized."
This
qualifying
expression clearly indicates that
a joint venture need not be
undertaken in any of the
standard forms, or in confirmity
with the usual requirements of
the law on partnerships, in
order that one could be deemed
constituted for purposes of the
tax on corporation. Again,
pursuant
to
said
section
84(b),the term "corporation"
includes, among others, "joint
accounts,(cuentas
en
participacion)"
and
"associations", none of which
has a legal personality of its
own, independent of that of its
members.
Accordingly,
the
lawmaker
could
not
have
regarded that personality as a
condition
essential
to
the
existence of the partnerships
therein referred to. In fact, as
above stated, "duly registered
general
co-partnerships"
estate,
or
a
corporation. ... .
(7A Merten's Law
of Federal Income
Taxation, p. 789;
emphasis ours.)
The
term
"partnership"
includes
a
syndicate, group,
pool, joint
venture or other
unincorporated
organization,
through or by
means of which
any
business,
financial
operation,
or
venture is carried
on.
...
.
(8
Merten's Law of
Federal
Income
Taxation, p. 562
Note
63;
emphasis ours.)
For purposes of the tax on
corporations, our
National
Internal Revenue Code includes
these partnerships with the
exception
only
of
duly
registered
general
copartnerships 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.
We reiterated this view, thru Mr. Justice
Fernando, in Reyes vs. Commissioner of
Internal Revenue, G. R. Nos. L-24020-21, July
29, 1968, 24 SCRA 198, wherein the Court
ruled against a theory of co-ownership
pursued by appellants therein.
As regards the second question raised by
petitioners about the segregation, for the
purposes of the corporate taxes in question,
of their inherited properties from those
acquired by them subsequently, We consider
as justified the following ratiocination of the
Tax Court in denying their motion for
reconsideration:
43
therefore, have to
be taxed as such,
it
might
be
recalled that the
petitioners
in
their
individual
income
tax
returns reported
their shares of
the profits of the
unregistered
partnership. We
think it only fair
and
equitable
that the various
amounts paid by
the
individual
petitioners
as
income tax on
their
respective
shares
of
the
unregistered
partnership
should
be
deducted
from
the
deficiency
income tax found
by this Honorable
Court against the
unregistered
partnership.
(page
7,
Memorandum for
the Petitioner in
Support of Their
Motion
for
Reconsideration,
Oct. 28, 1961.)
In other words, it is the position
of petitioners that the taxable
income of the partnership must
be reduced by the amounts of
income tax paid by each
petitioner on his share of
partnership profits. This is not
correct; rather, it should be the
other
way
around.
The
partnership profits distributable
to the partners (petitioners
herein) should be reduced by
the amounts of income tax
assessed
against
the
partnership.
Consequently,
each of the petitioners in his
individual capacity overpaid his
income tax for the years in
question, but the income tax
due from the partnership has
been correctly assessed. Since
the
individual
income
tax
liabilities of petitioners are not
44
MELO, J.:
SO
ORDERED.
25, Rollo.)
The
instant
annulment
of
DISMISSED.
petition
decision
for
is
24-
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.
45
46
47
REGALADO, J.:
The extensive discussion and exhaustive
disquisition
in
the
decision 1 of
the
respondent
Court 2 should
have
written finis to this case without further
recourse to Us. The assignment of errors and
arguments raised in the respondent Court by
herein private respondent, as the petitioner
48
respondent
to
heed
the
demands extrajudicially made
by the petitioner, the latter was
constrained to bring an action
for collection of sum of money.
During the scheduled day for
trial, private respondent failed
to appear and to file an answer.
On motion by the petitioner, the
City Court of Dipolog issued an
order dated May 18, 1976
declaring
the
private
respondent in default and
allowed
the
petitioner
to
present his evidence ex-parte.
Based on petitioner's evidence,
the City Court of Dipolog
rendered judgment by default in
favor of the petitioner.
Private respondent filed a
motion to lift the order of
default which was granted by
the City Court in an order dated
May 24, 1976, taking into
consideration that the answer
was filed within two hours after
the hearing of the evidence
presented ex-parte by
the
petitioner.
After the trial on the merits, the
City Court of Dipolog rendered
its decision on September 14,
1976, the dispositive portion of
which reads:
IN VIEW OF THE FOREGOING,
judgment is hereby rendered in
favor of the plaintiff and against
the defendant as follows:
(a) Ordering the defendant to
pay unto the plaintiff the sum of
Five Thousand Two Hundred
Seventeen Pesos and Twentyfive centavos (P5,217.25) plus
legal interest to commence
from April 23, 1976 when this
case was filed in court; and
(b) Ordering the defendant to
pay the plaintiff the sum of
P200.00 as attorney's fee and
to pay the cost of this
proceeding. 3
Therein defendant Sardane appealed to the
Court of First Instance of Zamboanga del
Norte which reversed the decision of the lower
49
50
51
on
the
latter's
sur-rebuttal
testimony
constitute a waiver of the aforesaid implied
admission. As found by the respondent Court,
said sur-rebuttal testimony consisted solely of
the denial of the testimony of herein private
respondent and no new or additional matter
was introduced in that sur-rebuttal testimony
to exonerate herein petitioner from his
obligations under the aforesaid promissory
notes.
On the foregoing premises and considerations,
the respondent Court correctly reversed and
set aside the appealed decision of the Court of
First Instance of Zamboanga del Norte and
affirmed in full the decision of the City Court
of Dipolog City in Civil Case No. A-1838, dated
September 14, 1976.
Belatedly, in his motion for reconsideration of
said decision of the respondent Court, herein
petitioner, as the private respondent therein,
raised a third unresolved issue that the
petition for review therein should have been
dismissed for lack of jurisdiction since the
lower Court's decision did not affirm in full the
judgment of the City Court of Dipolog, and
which he claimed was a sine qua non for such
a petition under the law then in force. He
raises the same point in his present appeal
and
We
will
waive
the
procedural
technicalities in order to put this issue at rest.
Parenthetically, in that same motion for
reconsideration he had sought affirmative
relief from the respondent Court praying that
it sustain the decision of the trial Court,
thereby invoking and submitting to its
jurisdiction which he would now assail.
Furthermore, the objection that he raises is
actually not one of jurisdiction but of
procedure. 9
At any rate, it will be noted that petitioner
anchors his said objection on the provisions of
Section 29, Republic Act 296 as amended by
Republic Act 5433 effective September 9,
1968. Subsequently, the procedure for appeal
to the Court of Appeals from decisions of the
then courts of first instance in the exercise of
their appellate jurisdiction over cases
originating from the municipal courts was
provided for by Republic Act 6031, amending
Section 45 of the Judiciary Act effective
August 4, 1969. The requirement for
affirmance in full of the inferior court's
decision was not adopted or reproduced in
Republic Act 6031. Also, since Republic Act
6031 failed to provide for the procedure or
mode of appeal in the cases therein
contemplated, the Court of Appeals en
banc provided thereof in its Resolution of
52
FLORENCIO
REYES
and
ANGEL
REYES, petitioners,
vs.
COMMISSIONER OF INTERNAL REVENUE
and
HON.
COURT
OF
TAX
APPEALS, respondents.
Jose W. Diokno and Domingo Sandoval for
petitioners.
Office of the Solicitor General for respondents.
FERNANDO, J.:
Petitioners in this case were assessed by
respondent Commissioner of Internal Revenue
the sum of P46,647.00 as income tax,
surcharge and compromise for the years 1951
to 1954, an assessment subsequently reduced
to P37,528.00. This assessment sought to be
reconsidered unsuccessfully was the subject
of an appeal to respondent Court of Tax
Appeals. Thereafter, another assessment was
made against petitioners, this time for back
income taxes plus surcharge and compromise
in the total sum of P25,973.75, covering the
years 1955 and 1956. There being a failure on
their part to have such assessments
reconsidered, the matter was likewise taken to
the respondent Court of Tax Appeals. The two
cases1 involving as they did identical issues
and ultimately traceable to facts similar in
character were heard jointly with only one
decision being rendered.
In that joint decision of respondent Court of
Tax Appeals, the tax liability for the years
1951 to 1954 was reduced to P37,128.00 and
for the years 1955 and 1956, to P20,619.00 as
income tax due "from the partnership formed"
by petitioners.2 The reduction was due to the
elimination of surcharge, the failure to file the
income tax return being accepted as due to
53
54
EUFEMIA
EVANGELISTA,
MANUELA
EVANGELISTA, and FRANCISCA EVANGELISTA,
petitioners,
vs.
THE COLLECTOR OF INTERNAL REVENUE
and
THE
COURT
OF
TAX
APPEALS, respondents.
Santiago F. Alidio and Angel S. Dakila, Jr., for
petitioner.
Office of the Solicitor General Ambrosio
Padilla, Assistant Solicitor General Esmeraldo
Umali and Solicitor Felicisimo R. Rosete for
Respondents.
CONCEPCION, J.:
This is a petition filed by Eufemia Evangelista,
Manuela
Evangelista
and
Francisca
Evangelista, for review of a decision of the
Court of Tax Appeals, the dispositive part of
which reads:
FOR ALL THE FOREGOING, we hold that
the petitioners are liable for the
income tax, real estate dealer's tax
and the residence tax for the years
1945 to 1949, inclusive, in accordance
with the respondent's assessment for
the same in the total amount of
P6,878.34, which is hereby affirmed
and the petition for review filed by
petitioner is hereby dismissed with
costs against petitioners.
It appears from the stipulation submitted by
the parties:
1. That the petitioners borrowed from
their father the sum of P59,1400.00
which amount together with their
personal monies was used by them for
the purpose of buying real properties,.
55
14.84
1946
1,144.71
1947
10.34
1948
1,912.30
1949
1,575.90
Total including
compromise
surcharge
and
P6,157.09
P37.50
1947
150.00
1948
150.00
1949
150.00
P527.00
P38.75
1946
38.75
1947
38.75
1948
38.75
1949
38.75
P193.75
P6,878.34
.
56
Civil
Code
of
the
57
P70,068.30
by
way
of
rentals.
Seemingly, the lots are still being so
let, for petitioners do not even suggest
that there has been any change in the
utilization thereof.
4. Since August, 1945, the properties
have been under the management of
one
person,
namely
Simeon
Evangelista, with full power to lease, to
collect rents, to issue receipts, to bring
suits, to sign letters and contracts, and
to indorse and deposit notes and
checks. Thus, 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. The foregoing conditions have
existed for more than ten (10) years,
or, to be exact, over fifteen (15) years,
since the first property was acquired,
and over twelve (12) 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. They did
not even try to offer an explanation
therefor.
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. Only one or two of the
aforementioned circumstances were present
in the cases cited by petitioners herein, and,
hence, those cases are not in point.
Petitioners insist, however, that they are mere
co-owners,
not
copartners,
for,
in
consequence of the acts performed by them,
a legal entity, with a personality independent
of that of its members, did not come into
existence, and some of the characteristics of
partnerships are lacking in the case at bar.
This pretense was correctly rejected by the
Court of Tax Appeals.
To begin with, the tax in question is one
imposed upon "corporations", which, strictly
speaking, are distinct and different from
"partnerships". When our Internal Revenue
Code includes "partnerships" among the
entities subject to the tax on "corporations",
58
59
SARMIENTO , J.:
The petitioners invoke the provisions on
human relations of the Civil Code in this
appeal by certiorari. The facts are beyond
dispute:
xxx xxx xxx
On the strength of a contract
(Exhibit A for the appellant
Exhibit 2 for the appellees)
entered into on Oct. 19, 1960
by and between Mrs. Segundina
Noguera, party of the first part;
the Tourist World Service, Inc.,
represented
by
Mr.
Eliseo
Canilao as party of the second
part, and hereinafter referred to
as appellants, the Tourist World
Service,
Inc.
leased
the
premises belonging to the party
of the first part at Mabini St.,
Manila for the former-s use as a
branch office. In the said
contract the party of the third
part held herself solidarily liable
with the party of the part for
the prompt payment of the
monthly rental agreed on. When
the branch office was opened,
the same was run by the herein
appellant Una 0. Sevilla payable
to Tourist World Service Inc. by
any airline for any fare brought
in on the efforts of Mrs. Lina
Sevilla, 4% was to go to Lina
Sevilla and 3% was to be
withheld by the Tourist World
Service, Inc.
On or about November 24, 1961
(Exhibit 16) the Tourist World
Service, Inc. appears to have
been informed that Lina Sevilla
was connected with a rival firm,
the Philippine Travel Bureau,
and, since the branch office was
anyhow losing, the Tourist World
Service
considered
closing
down its office. This was firmed
60
61
February
16,1965).
2. Appellant Mrs.
Sevilla
was
signatory to a
lease agreement
dated 19 October
1960 (Exh. 'A')
covering
the
premises at A.
Mabini St., she
expressly
warranting
and
holding
[sic]
herself 'solidarily'
liable
with
appellee Tourist
World
Service,
Inc.
for
the
prompt payment
of the monthly
rentals thereof to
other
appellee
Mrs. Noguera (pp.
14-15, tsn. Jan.
18,1964).
3. Appellant Mrs.
Sevilla did not
receive
any
salary
from
appellee Tourist
World
Service,
Inc., which had its
own,
separate
office located at
the
Trade
&
Commerce
Building; nor was
she an employee
thereof,
having
no
participation
in nor connection
with
said
business at the
Trade
&
Commerce
Building (pp. 1618 tsn Id.).
4. Appellant Mrs.
Sevilla
earned
commissions for
her
own
passengers, her
own bookings her
own
business
(and not for any
of the business of
appellee Tourist
World
Service,
Inc.)
obtained
from the airline
companies. She
shared the 7%
commissions
given
by
the
airline companies
giving
appellee
Tourist
World
Service, Lic. 3%
thereof
aid
retaining 4% for
herself (pp. 18
tsn. Id.)
5. Appellant Mrs.
Sevilla
likewise
shared
in
the
expenses
of
maintaining the
A.
Mabini
St.
office, paying for
the salary of an
office secretary,
Miss Obieta, and
other
sundry
expenses, aside
from desicion the
office
furniture
and
supplying
some
of
fice
furnishings
(pp.
15,18 tsn. April
6,1965), appellee
Tourist
World
Service,
Inc.
shouldering
the
rental and other
expenses
in
consideration for
the 3% split in
the co procured
by appellant Mrs.
Sevilla (p. 35 tsn
Feb. 16,1965).
6. It was the
understanding
between
them
that
appellant
Mrs. Sevilla would
be given the title
of
branch
manager
for
appearance's
sake only (p. 31
tsn. Id.), appellee
Eliseo
Canilao
admit that it was
just a title for
dignity (p. 36 tsn.
June 18, 1965-
62
testimony
of
appellee
Eliseo
Canilao pp. 38-39
tsn April 61965testimony
of
corporate
secretary Gabino
Canilao (pp- 2-5,
Appellants' Reply
Brief)
II
III
63
64
65
DECISION
GONZAGA-REYES, J.:
Before us is a petition for review
on certiorari under Rule 45 of the Rules of
Court of the Decision[1] of the Court of Appeals
dated January 31, 2000 in the case entitled
Lamberto T. Chua vs.
Lilibeth Sunga Chan and Cecilia Sunga
and of the Resolution dated May 23, 2000
denying the motion for reconsideration of
herein petitioners Lilibeth Sunga Chan and
Cecilia Sunga (hereafter collectively referred
to as petitioners).
The pertinent facts of this case are as
follows:
On June 22, 1992, Lamberto T. Chua
(hereafter respondent) filed a complaint
against Lilibeth Sunga Chan (hereafter
petitioner
Lilibeth)
and
Cecilia
Sunga
(hereafter petitioner Cecilia), daughter and
wife, respectively of the deceased Jacinto L.
Sunga (hereafter Jacinto), for Winding Up of
Partnership Affairs, Accounting, Appraisal and
Recovery of Shares and Damages with Writ of
Preliminary Attachment with the Regional Trial
Court, Branch 11, Sindangan, Zamboanga del
Norte.
Respondent alleged that in 1977, he
verbally entered into a partnership with
Jacinto in the distribution of Shellane Liquefied
Petroleum Gas (LPG) in Manila. For business
convenience, respondent and Jacinto allegedly
agreed to register the business name of their
partnership,
SHELLITE
GAS
APPLIANCE
CENTER (hereafter Shellite), under the name
of Jacinto as a sole proprietorship. Respondent
allegedly
delivered
his
initial
capital
contribution of P100,000.00 to Jacinto while
the latter in turn produced P100,000.00 as his
counterpart contribution, with the intention
that the profits would be equally divided
between them. The partnership allegedly had
Jacinto as manager, assisted by Josephine Sy
(hereafter Josephine), a sister of the wife of
respondent, Erlinda Sy. As compensation,
Jacinto would receive a managers fee or
remuneration of 10% of the gross profit and
Josephine would receive 10% of the net
profits, in addition to her wages and other
remuneration from the business.
Allegedly, from the time that Shellite
opened for business on July 8, 1977, its
business operation went quite well and was
profitable. Respondent claimed that he could
attest to the success of their business
because of the volume of orders and
deliveries of filled Shellane cylinder tanks
supplied
by
Pilipinas
Shell
Petroleum
66
Corporation. While
Jacinto
furnished
respondent with the merchandise inventories,
balance sheets and net worth of Shellite from
1977 to 1989, respondent however suspected
that the amount indicated in these documents
were understated and undervalued by Jacinto
and Josephine for their own selfish reasons
and for tax avoidance.
Upon Jacintos death in the later part of
1989, his surviving wife, petitioner Cecilia and
particularly his daughter, petitioner Lilibeth,
took over the operations, control, custody,
disposition and management of Shellite
without respondents consent.
Despite respondents repeated demands
upon petitioners for accounting, inventory,
appraisal, winding up and restitution of his net
shares in the partnership, petitioners failed to
comply. Petitioner Lilibeth allegedly continued
the operations of Shellite, converting to her
own use and advantage its properties.
On March 31, 1991, respondent claimed
that after petitioner Lilibeth ran out of alibis
and reasons to evade respondents demands,
she disbursed out of the partnership funds the
amount of P200,000.00 and partially paid the
same
to
respondent. Petitioner
Lilibeth
allegedly informed respondent that the
P200,000.00 represented partial payment of
the latters share in the partnership, with a
promise that the former would make the
complete inventory and winding up of the
properties
of
the
business
establishment. Despite such commitment,
petitioners allegedly failed to comply with
their duty to account, and continued to
benefit from the assets and income of Shellite
to the damage and prejudice of respondent.
On December 19, 1992, petitioners filed a
Motion to Dismiss on the ground that the
Securities and Exchange Commission (SEC) in
Manila, not the Regional Trial Court in
Zambaonga del Norte had jurisdiction over
the action. Respondent opposed the motion to
dismiss.
On January 12, 1993, the trial court
finding the complaint sufficient in form and
substance denied the motion to dismiss.
On January 30, 1993, petitioners filed
their Answer with Compulsory Counterclaims,
contending that they are not liable for
partnership shares, unreceived income/profits,
interests, damages and attorneys fees, that
respondent does not have a cause of action
against them, and that the trial court has no
jurisdiction over the nature of the action, the
SEC being the agency that has original and
exclusive jurisdiction over the case. As
67
WHEREFORE,
the
instant
appeal
is
dismissed. The appealed decision is AFFIRMED
in all respects.[4]
On May 23, 2000, the Court of Appeals
denied the motion for reconsideration filed by
petitioner.
Hence, this petition wherein petitioner
relies upon the following grounds:
1. The Court of Appeals erred in
making a legal conclusion that
there
existed
a
partnership
between respondent Lamberto T.
Chua and the late Jacinto L. Sunga
upon the latters invitation and
offer and that upon his death the
partnership assets and business
were taken over by petitioners.
2. The Court of Appeals erred in
making the legal conclusion that
laches and/or prescription did not
apply in the instant case.
3. The Court of Appeals erred in
making the legal conclusion that
there was competent and credible
evidence to warrant the finding of
a
partnership,
and
assuming arguendo that indeed
there was a partnership, the
finding of highly exaggerated
amounts
or
values
in
the
partnership assets and profits.[5]
Petitioners question the correctness of the
finding of the trial court and the Court of
Appeals that a partnership existed between
respondent and Jacinto from 1977 until
Jacintos death. In the absence of any written
document to show such partnership between
respondent and Jacinto, petitioners argue that
these courts were proscribed from hearing the
testimonies of respondent and his witness,
Josephine, to prove the alleged partnership
three years after Jacintos death. To support
this argument, petitioners invoke the Dead
Mans Statute or Survivorship Rule under
Section 23, Rule 130 of the Rules of Court that
provides:
SEC. 23. Disqualification by reason of death
or insanity of adverse party.-- Parties or
assignors of parties to a case, or persons in
whose behalf a case is prosecuted, against an
executor
or
administrator
or
other
representative of a deceased person, or
against a person of unsound mind, upon a
claim or demand against the estate of such
deceased person, or against such person of
unsound mind, cannot testify as to any matter
of fact occurring before the death of such
68
such
person
69
AND
ELEANOR
x----------------------------- - - - - - - - - - - - -x
DECISION
PEREZ, J.:
in
CA-G.R.
SP
No.
93841
which,
70
the
motion
dismissal.
for
reconsideration
of
said
[2]
The Facts
for
ofP26,400.00
the
stipulated
square
of P313,500.00.
consideration
meters
or
total
[9]
Venture
Agreement (JVA)
with
9,502
square
along Samat
meter
property
St.,
Highway
petitioner
pertaining
to
them,[5] PPGI
further
undertook to use all proceeds from the preselling of its saleable units for the completion
of the Condominium Project.
[6]
be
available
for
turn-over
and
Contracts
to
Sell; and,
that
despite
already
paid
under
the
for
the
of P52,597.88 per
agreed
contract
square
meter
price
or
71
building
constitute force
respondents.[13]
materials
subsequently
[14]
submitted
by
the
of
the
non-completion
of
the
claim
for
refund
of
allegations
of
answer dated
the
separate
2002[12] which
No. 957.
the
individually
administrative
wit:
each
February
in
it
JVA,
complaint
party
was
[15]
bodys
Second
Division
in
the
condominium
project. In
72
dismissed. However,
the
decision of the Office below
dated July 30, 2003 is modified,
hence, its dispositive portion
shall read:
2. Ordering
respondents
to pay this
Office
administrative
fine
of P10,000.00
for violation of
Section 20 in
relation
to
Section 38 of
P.D. 957; and
3. Ordering
respondent
Primetown to
reimburse
the
entire
amount
which
the
respondent
Corporation
will
be
constrained
to pay the
complainants
.
1. Declaring the
contracts
to
sell,
both
dated
February
5,
1997,
as
cancelled and
rescinded,
and ordering
the
respondents
to
immediately
pay
the
complainants
the following:
a.
The
amoun
t
of P61
1,519.
52,
with
interes
t
at
the
legal
rate
reckon
ed
from
Februa
ry
5,
1997
until
fully
paid;
b.
Dam
ages
of P75,
000.00
;
c.
Atto
rneys
fees
equival
ent
to P30,
000.00
; and
d.
The
Cost of
suit;
So ordered.[18]
With
the
denial
of
its
motion
for
thereof.[21] Acting
on
the
motion
within
which
to
file
its
appeal
73
March
2005
motion
[33]
[25]
petitioner[26] which
of
eventually
for
review.[30]Accordingly,
non-
and
that
its
counsel
pressures
from
of
work
finalizing
its
74
appeal
Petitioner seeks the reversal of the
assailed resolutions on the following grounds,
to wit:
are
not
harmless
and
trivial
disregard
at
will.[40] Neither
being
exercised
only
in
the
manner
and
in
which
cannot
be
trifled
with
as
mere
failure
to
perfect
an
appeal
in
the
[39]
it
procedural
grounds
bears
is
concededly
emphasizing
requirements
of
the
frowned
that
rules
the
on
75
and
cannot,
for
discarded
with
the
claiming
substantial
said
mere
reason,
be
expediency
of
merit.[49] This
holds
15-day
extension sought
in its first
for
review,
on
the
ground
that
no
further
extensions
shall
be
considered
to
promptly
the 1997
[46]
absolutely
discharge
Corollary
to
the
indispensable
judicial
principle
business.
that
the
further
Rules
of
extensions
Civil
Procedure against
except
for
the
most
the court,
that
[47]
their
for
extension
[48]
or
as a matter
would
do
well
to
remember
unreasonably
required
to
stoop,
76
of
proceedings
and
expeditious
rules,
[50]
followed
they
are
required
to
be
rules,
the
Court
cannot
from
the
afford
inexcusable delay.[52]
Even
prescinding
foregoing
liable
respondents
administrative
claims
fine
alongside
and
PPGI
for
the P10,000.00
imposed
pursuant
77
JOHNSON, J.:
WHEREFORE, premises
considered,
the
FEDERICO
LOPEZ,
ET
AL, plaintiffsappellees,
vs.
YU
SEFAO
and
BEHN,
MEYER
&
CO., defendants.
YU SEFAO, defendant-appellant.
Alejandro
Zison
for
appellant.
Enage and Karagdag for appellees.
78
FRANCISCO
BASTIDA, plaintiff-appellee,
vs.
MENZI & Co., INC., J.M. MENZI and P.C.
SCHLOBOHM, defendants.
MENZI & CO., appellant.
Romualdez Brothers and Harvey and O'Brien
for
appellant.
Jose M. Casal, Alberto Barretto and Gibbs and
McDonough for appellee.
VICKERS, J.:
This is an appeal by Menzi & Co., Inc., one of
the defendants, from a decision of the Court
of First Instance of Manila. The case was tried
on the amended complaint dated May 26,
1928 and defendants' amended answer
thereto of September 1, 1928. For the sake of
clearness, we shall incorporate herein the
principal allegations of the parties.
FIRST CAUSE OF ACTION
Plaintiff alleged:
V
I
That the defendant J.M. Menzi, together with
his wife and daughter, owns ninety-nine per
cent (99%) of the capital stock of the
defendant Menzi & Co., Inc., that the plaintiff
has been informed and therefore believes that
the defendant J.M. Menzi, his wife and
daughter, together with the defendant P.C.
Schlobohm and one Juan Seiboth, constitute
the board of directors of the defendant, Menzi
& Co., Inc.;
II
That on April 27, 1922, the defendant Menzi &
Co., Inc. through its president and general
manager, J.M. Menzi, under the authority of
the board of directors, entered into a contract
with the plaintiff to engage in the business of
exploiting prepared fertilizers, as evidenced
by the contract marked Exhibit A, attached to
the original complaint as a part thereof, and
likewise made a part of the amended
complaint, as if it were here copied verbatim;
III
79
80
MENZI
&
Por
(Fdo.)
General
Primera Parte
(Fdo.)
Segunda Parte
CO.,
J.
F.
MENZI
&
CO.,
(Fdo.)
MAX
Acting Secretary
INC.
MENZI
Manager
BASTIDA
INC.
KAEGI
81
82
83
84
Defendants alleged:
1. That they repeat and make a part of
this special defense paragraphs 1, 2, 3
and 4, of the special defense to the
first cause of action in this amended
answer;
2. That under the Income Tax Law
Menzi & Co., Inc., was obliged to and
did make return to the Government of
the Philippine Islands each year during
the period of the agreement, Exhibit A,
of the income of its whole business,
including its fertilizer department; that
the proportional share of such income
taxes found to be due on the business
of the fertilizer department was
charged as a proper and legitimate
expense of that department, in the
same manner as was done in the other
departments of its business; that
inasmuch as the agreement with the
plaintiff
was
an
employment
agreement, he was required to make
his own return under the Income Tax
Law and to pay his own income taxes,
instead of having them paid at the
source, as might be done under the
law, so that he would be entitled to the
personal exemptions allowed by the
law; that the income taxes paid by the
said Menzi & Co., Inc., pertaining to the
business, were duly entered on the
books of that department, and
included in the auditors' reports
hereinbefore referred to, which reports
were
examined,
accepted
and
approved by the plaintiff, with full
knowledge of their contents, and he is
now estopped from saying that such
taxes are not a legitimate expense of
said business.
FIFTH CAUSE OF ACTION
As fifth cause of action, plaintiff alleged:
I. That hereby reproduces paragraphs I,
II, III, IV, and V of the first cause of
action.
II. That the plaintiff has discovered that
the defendants Menzi & Co., Inc., had
been receiving, during the period of
the contract Exhibit A, from foreign
firms selling fertilizing material, a
secret commission equivalent to 5 per
cent of the total value of the purchases
of fertilizing material made by the
partnership constituted between the
85
86
only
be
ascertained
from
the
examination of the private books of the
defendant entity, which the latter has
refused to permit notwithstanding the
demand made for the purpose by the
auditors and the lawyers of the
plaintiff, and no basis of computation
can
be
established,
even
approximately, to ascertain the extent
of the fraud sustained by the plaintiff
in this respect, by merely examining
the partnership books.
Wherefore, the plaintiff prays the court to
order the defendants J.M. Menzi and P.C.
Schlobohm, to make a sworn statement as to
all the profits received from the sale to third
persons of the fertilizers pertaining to the
partnership, and the profits they have
appropriated, ordering them jointly and
severally to pay 35 per cent of the net
amount, with legal interest from the filing of
the original complaint until the payment
thereof.
Defendant alleged:
1. That they repeat and make a part of
this special defense paragraphs 1, 2, 3
and 4, of the special defense to the
first cause of action in this amended
answer:
2. That under the express terms of the
employment agreement, Exhibit A, the
defendant, Menzi & Co., Inc., had the
right to import into the Philippine
Islands in the course of its fertilizer
business and sell fro its exclusive
account and benefit simple fertilizer
ingredients; that the only materials
imported by it and sold during the
period of said agreement were simple
fertilizer
ingredients,
which
had
nothing whatever to do with the
business of mixed fertilizers, of which
the plaintiff was to receive a share of
the net profits as a part of his
compensation.
SEVENTH CAUSE OF ACTION
As seventh cause of action, plaintiff alleged:
I.
That
he
hereby
reproduces
paragraphs I, II, III, IV, and V of the first
cause of action.
87
88
89
Defendants alleged:
1. That they repeat and make a part of
this special defense paragraphs 1, 2, 3
and 4, of the special defense to the
first cause of action in this amended
answer;
2. That the good-will, if any, of said
fertilizer business of the defendant,
Menzi & Co., Inc., pertains exclusively
to it, and the plaintiff can have no
interest therein of any nature under his
said employment agreement; that the
trade-marks mentioned by the plaintiff
in his amended complaint, as a part of
such good-will, belonged to and have
been used by the said Menzi & Co.,
Inc., in its fertilizer business from and
since its organization, and the plaintiff
can have no rights to or interest
therein under his said employment
agreement; that the transportation
equipment pertains to the fertilizer
department of Menzi & Co., Inc., and
whenever it has been used by the said
Menzi & Co., Inc., in its own business,
due and reasonable compensation for
its use has been allowed to said
business;
that
the
machinery
pertaining to the said fertilizer
business was destroyed by fire in
October, 1926, and the value thereof in
the sum of P20,000 was collected from
the Insurance Company, and the
plaintiff has been given credit for 35
per cent of that amount; that the
present machinery used by Menzi &
Co., Inc., was constructed by it, and
the costs thereof was not charged to
the fertilizer department, and the
plaintiff has no right to have it taken
into consideration in arriving at the net
profits due to him under his said
employment agreement.
The dispositive part of the decision of the trial
court is as follows:
Wherefore, let judgment be entered:
(a) Holding that the contract entered
into by the parties, evidenced by
Exhibit A, as a contract of general
regular
commercial
partnership,
wherein Menzi & Co., Inc., was the
capitalist, and the plaintiff, the
industrial partner;
(b) Holding the plaintiff, by the mere
fact of having signed and approved the
the
third
cause
of
the
sixth
cause
of
90
91
FRANCISCO
BASTIDA
&
CO.,
92
P196,483.
92
93
94
95
September 7, 1929
ADRIANO
ARBES,
ET
AL., plaintiffsappellees,
vs.
VICENTE POLISTICO, ET AL., defendantsappellants.
Marcelino Lontok and Manuel dela Rosa for
appellants.
Sumulong & Lavides for appellees.
VILLAMOR, J.:
This is an action to bring about liquidation of
the funds and property of the association
called "Turnuhan Polistico & Co." The plaintiffs
were members or shareholders, and the
defendants were designated as presidenttreasurer, directors and secretary of said
association.
It is well to remember that this case is now
brought before the consideration of this court
for the second time. The first one was when
the same plaintiffs appeared from the order of
the court below sustaining the defendant's
demurrer, and requiring the former to amend
their complaint within a period, so as to
include all the members of "Turnuhan Polistico
& Co.," either as plaintiffs or as a defendants.
This court held then that in an action against
the officers of a voluntary association to wind
up its affairs and enforce an accounting for
money and property in their possessions, it is
not necessary that all members of the
association be made parties to the action.
(Borlasa vs. Polistico, 47 Phil., 345.) The case
having been remanded to the court of origin,
both parties amend, respectively, their
complaint and their answer, and by
agreement of the parties, the court appointed
Amadeo R. Quintos, of the Insular Auditor's
Office, commissioner to examine all the
books, documents, and accounts of "Turnuhan
96
Expenses:
Premiums to members.......................
Loans on real-estate.......................
Loans on promissory notes..............
Salaries....................................
Miscellaneous...............................
Cash on hand........................................
The
defendants
objected
to
the
commissioner's report, but the trial court,
having examined the reasons for the
objection, found the same sufficiently
explained in the report and the evidence, and
accepting it, rendered judgment, holding that
the association "Turnuhan Polistico & Co." is
unlawful, and sentencing the defendants
jointly and severally to return the amount of
P24,607.80, as well as the documents
showing the uncollected credits of the
association, to the plaintiffs in this case, and
to the rest of the members of the said
association represented by said plaintiffs, with
costs against the defendants.
The defendants assigned several errors as
grounds for their appeal, but we believe they
can all be reduced to two points, to wit: (1)
That not all persons having an interest in this
association are included as plaintiffs or
defendants; (2) that the objection to the
commissioner's report should have been
admitted by the court below.
97
default of
province.
such,
to
those
of
the
partnership
capital,
contribution?
each
one's
98
default of
province.
such,
to
those
of
the
ENCARNACION
MAGALONA,
AL., plaintiffs-appellees,
vs.
JUAN PESAYCO, defendant-appellant.
ET
February 6,
99
MAURICIO
AGAD, plaintiff-appellant,
vs.
SEVERINO MABATO and MABATO and
AGAD COMPANY, defendants-appellees.
Angeles, Maskarino and Associates for
plaintiff-appellant.
Victorio
S.
Advincula
for
defendantsappellees.
CONCEPCION, C.J.:
In this appeal, taken by plaintiff Mauricio
Agad, from an order of dismissal of the Court
of First Instance of Davao, we are called upon
to determine the applicability of Article 1773
of our Civil Code to the contract of partnership
on which the complaint herein is based.
100
xxx
xxx
E.J.
SMITH
AND
RAFAEL
REYES,
proprietors of the Philippine Gas Light
Company, plaintiffs-appellees,
vs.
101
appellants.
TORRES, J.:
On November 19, 1902, Messrs. Smith and
Reyes, as proprietors of the Philippine Gas
Light Company, brought this action against
the defendant sisters, Jacinta and Ignacia
Lopez de Pineda, to recover from them the
sum of 3,270 pesos, Mexican currency, with
interest due thereon and costs of proceedings,
for work performed in connection with the
installation of a water system, urinals, closets,
shower baths, and drain pipes in the house at
No. 142 Calle Dulumbayan, district of Santa
Cruz, the same being the property of the
defendants. The plaintiffs alleged that they
had complied with the agreement made with
the
father
of
the
defendants,
the
administrator of the property, and that the
labor performed and the material used were
reasonably worth the sum of 4,020 pesos,
Mexican currency, of which sum they
acknowledged having received 750 pesos,
and prayed that judgment be entered against
the defendants and in favor of the plaintiffs
for the sum of 3,270 pesos, together with
accrued interest and costs of proceedings,
defendants having refused to pay the same as
agreed.
Attorney Gregorio Pineda appeared in behalf
of the defendants, denied all the facts set out
in the complaint, and alleged that it did not
appear from the pleadings that plaintiffs had
ever entered into a mercantile partnership
under the aforesaid name and style, or that
any such partnership legally existed; that
Nicasio Lopez was not the administrator nor
was he empowered by the defendants to
make
any
contract
for
repairs
and
improvements to and in the said house; that
there was no allegation as to the extent and
importance of the work performed on the
premises nor as to the quality or quantity of
the materials used; that the work was not
reasonably worth 4,020 pesos; and that,
assuming that plaintiffs had performed work
in the said house pursuant to an agreement
with Nicasio Lopez, without defendants'
authority,
the
defendants
set
up
a
counterclaim for 600 pesos, Mexican currency,
for damages caused to the house as a result
of said work. Defendants finally prayed that
the complaint be dismissed and that plaintiffs
be ordered to pay the costs of proceedings
and the amount of the counterclaim.
102
103
104