PARTNERSHIP WEEK 1- CASE DIGEST

1.

Acebedo Optical Company, Inc. VS The Honorable

Court of Appeals
Facts: Petitioner applied with the Office of the City Mayor of Iligan
for a business permit. After consideration of petitioner's application
and the opposition interposed thereto by local optometrists,
respondent City Mayor issued Business Permit No. 5342 subject to
the following conditions: (1) Since it is a corporation, Acebedo
cannot put up an optical clinic but only a commercial store; (2) It
cannot examine and/or prescribe reading and similar optical
glasses for patients, because these are functions of optical clinics;
(3) It cannot sell reading and similar eyeglasses without a
prescription having first been made by an independent optometrist
or independent optical clinic. Acebedo can only sell directly to the
public, without need of a prescription, Ray-Ban and similar
eyeglasses; (4) It cannot advertise optical lenses and eyeglasses,
but can advertise Ray-Ban and similar glasses and frames; (5) It is
allowed to grind lenses but only upon the prescription of an
independent optometrist.
On December 5, 1988, private respondent Samahan ng Optometrist
Sa Pilipinas (SOPI lodged a complaint against the petitioner alleging
that Acebedo had violated the conditions set forth in its business
permit and requesting the cancellation and/or revocation of such
permit. On July 19, 1989, the City Mayor sent petitioner a Notice of
Resolution and Cancellation of Business Permit effective as of said
date and giving petitioner three (3) months to wind up its affairs.
Issue: Whether the City Mayor has the authority to impose special
conditions, as a valid exercise of police power, in the grant of
business permits

Ruling: Police power as an inherent attribute of sovereignty is the

power to prescribe regulations to promote the health, morals,
peace, education, good order or safety and general welfare of the

people. It is essentially regulatory in nature and the power to issue

licenses or grant business permits, if exercised for a regulatory and
not revenue-raising purpose, is within the ambit of this power. The
authority of city mayors to issue or grant licenses and business
permits is beyond cavil. However, the power to grant or issue
licenses or business permits must always be exercised in
accordance with law, with utmost observance of the rights of all
concerned to due process and equal protection of the law.
In the case under consideration, the business permit granted by
respondent City Mayor to petitioner was burdened with several
conditions. Petitioner agrees with the holding by the Court of
Appeals that respondent City Mayor acted beyond his authority in
imposing such special conditions in its permit as the same have no
basis in the law or ordinance. Public respondents and private
respondent SOPI are one in saying that the imposition of said
special conditions is well within the authority of the City Mayor as a
valid exercise of police power.
The issuance of business licenses and permits by a municipality or
city is essentially regulatory in nature. The authority, which
devolved upon local government units to issue or grant such
licenses or permits, is essentially in the exercise of the police power
of the State within the contemplation of the general welfare clause
of the Local Government Code.
What is sought by petitioner from respondent City Mayor is a permit
to engage in the business of running an optical shop. It does not
purport to seek a license to engage in the practice of optometry.
The objective of the imposition of subject conditions on petitioner's
business permit could be attained by requiring the optometrists in
petitioner's employ to produce a valid certificate of registration as
optometrist, from the Board of Examiners in Optometry. A business
permit is issued primarily to regulate the conduct of business and
the City Mayor cannot, through the issuance of such permit,
regulate the practice of a profession. Such a function is within the
exclusive domain of the administrative agency specifically
empowered by law to supervise the profession, in this case the

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Professional Regulations Commission and the Board of Examiners in
Optometry.

2.

Lim vs. Philippine Fishing Gear Industries Inc.

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.

3.

Gatchalian vs CIR

Facts: Plaintiffs purchased, in the ordinary course of business,

from one of the duly authorized agents of the National Charity
Sweepstakes Office one ticket for the sum of two pesos (P2), said
ticket was registered in the name of Jose Gatchalian and Company.
The ticket won one of the third-prizes in the amount of P50,000.
Jose Gatchalian was required to file the corresponding income tax
return covering the prize won. Defendant-Collector made an
assessment against Jose Gatchalian and Co. requesting the
payment of the sum of P1,499.94 to the deputy provincial treasurer
of Pulilan, Bulacan. Plaintiffs, however through counsel made a
request for exemption. It was denied.
Plaintiffs failed to pay the amount due, hence a warrant of distraint
and levy was issued. Plaintiffs paid under protest a part of the tax
and penalties to avoid the effects of the warrant. A request that the
balance be paid by plaintiffs in installments was made. This was
granted on the condition that a bond be filed.
Plaintiffs failed in their installment payments. Hence a request for
execution of the warrant of distraint and levy was made. Plaintiffs
paid under protest to avoid the execution.
A claim for refund was made by the plaintiffs, which was dismissed,
hence the appeal.

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PARTNERSHIP WEEK 1- CASE DIGEST

Issue: Whether the plaintiffs formed a partnership hence liable for
income tax.
Held: Yes. According to the stipulation 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
P50,000. 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 Philippines Charity
Sweepstakes, in his capacity as co-partner, as such collection the
prize, the office issued the check for P50,000 in favor of Jose
Gatchalian and company, and the said partner, in the same
capacity, collected the said check. All these circumstances repel
the idea that the plaintiffs organized and formed a community of
property only.

4.

corresponding check covering the above-mentioned prize of

P50,000 was drawn by the National Charity Sweepstakes Office in
favor of Jose Gatchalian & Company against the Philippine National
Bank, which check was cashed during the latter part of December,
1934 by Jose Gatchalian & Company
Thereafter, Jose Gatchalian was required by income tax
examiner Alfredo David to file the corresponding income tax return
covering the prize won by Jose Gatchalian & Company and that on
December 29, 1934
The defendant made an assessment against Jose Gatchalian
& Company requesting the payment of the sum of P1,499.94 to the
deputy provincial treasurer of Pulilan, Bulacan. Tthe plaintiffs
requested exemption from the payment of the income tax but it
was rejected. The plaintiffs paid in protest the tax assessment
given to them.

Ona vs CIR

FACTS:
On December 15, 1934, the plaintiffs, all 15 of them, each
contributed in order to buy a sweepstakes ticket worth Php 2.00.

ISSUE:
Whether the plaintiffs formed a partnership, thus not exempted
from paying income tax
HELD:

That immediately thereafter but prior to December 16, 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.

The above-mentioned ticket bearing No. 178637 won one of

the third prizes in the amount of P50,000 and that the

Yes, the plaintiffs formed a partnership

The Supreme Court held that 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 P50,000.
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 P50,000 in favor of Jose

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PARTNERSHIP WEEK 1- CASE DIGEST

Gatchalian and company, and the said partner. in the same
capacity, collected the said check.

ISSUE:

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.

Whether or not partnership was formed by the siblings thus be

assessed of the corporate tax.

5.

RULING:

Obillos et al vs. CIR

FACTS: Petitioners sold the lots they inherited from their father and
derived a total profit of P33,584 for each of them. They treated the
profit as capital gain and paid an income tax thereof. The CIR
required petitioners to pay corporate income tax on their shares, .
20% tax fraud surcharge and 42% accumulated interest. Deficiency
tax was assessed on the theory that they had formed an
unregistered partnership or joint venture.

Petitioners were co-owners and to consider them partners would

obliterate the distinction between co-ownership and partnership.
The petitioners were not engaged in any joint venture by reason of
that isolated transaction.

Art 1769 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
partnership or joint venture.

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