Ang Pue & Co. vs.

Secretary of Commerce and Industry

G.R. No. L-17295, July 30, 1962

Facts:
Ang Pue and Tan Siong, both Chinese citizens, organized a partnership
Ang Pue & Co. for a term of five years from May 1, 1953. Its purpose was to
maintain the business of general merchandising, wholesale, retail, buying and
selling lumber. On June 19, 1954, R.A. No. 1180 was enacted to regulate the
retail business. It provided, inter alia, that after its enactment, a partnership
not wholly formed by Filipinos could continue to engage in the retail business
until the expiration of its term. On April 15, 1958 (prior to the expiration of the
5 year term of the partnership, but after the enactment of R.A. 1180), the
partners amended the original articles of partnership in order to extend the
term of the partnership for another five years.
When the amended Articles of Partnership were presented before the
Securities and Exchange Commission for registration, it was refused on the
ground that the extension was violative of R.A. 1180. Ang Pue & Co. then sued
the Secretary of Commerce and Industry for declaratory relief. The trial court
dismissed the action.
Issue:
Whether Ang Pue and Co. may extend its term.
Held:
NO. To organize a partnership is not a matter of absolute right but a
privilege which may be enjoyed only under such terms as the State may deem
necessary to impose. That the State, through Congress, had the right to enact
R.A. 1180 and to provide therein that only Filipinos may engage in the retail
business cannot be seriously disputed. This law was clearly intended to apply
to a partnership already existing at the time of the enactment of the law xxx is
clearly showing by its provision giving them the right to continue engaging in
their retail business until the expiration of their term. To argue that because
the original Articles of Partnership provided that partners could extend the
term of the partnership, the provisions of R.A. 1180 cannot adversely affect
Ang Pue and Co. is to erroneously assume that the aforesaid provision
constitute a property right of which the partners cannot be deprived without
due process. The agreement contain therein must be deemed subject to the law
existing at the time when the partners came to agree regarding the extension.

Heirs of Tan Eng Kee v. Court of Appeals

G.R. No. 126881, October 3, 2000

Facts:
After the Second World War, Tan Eng Kee and Tan Eng Lay allegedly
entered into a partnership engaged in the business of construction supplies.
They allegedly named their ebterprise as Benguet Lumber which they jointly
managed until Tan Eng Kees death. Petitioners heirs averred that the business
prospered due to the hardwork and thrift of the alleged partners. However, they
claimed that in 1981, Tan Eng Lay and his children caused the conversion of
the partnership Benguet Lumber into a corporation called Benguet Lumber
Company. The incorporation was purportedly a ruse to deprive Tan Eng Kee
and his heirs of their rightful participation in the profits of the business.
Petitioners then sued Benguet Lumber Company and Tan Eng Lay for
accounting, liquidation and winding up of the alleged partnership. The trial
court ruled in favor of the Petitioners. CA reversed.
Issue:
Whether there existed a partnership between brothers Tan Eng Kee and
Tan Eng Lay.
Held:
NO. Undoubtedly, the best evidence would have been the contract of
partnership itself, or the Articles of Partnership but there is none. The alleged
partnership, though, was never formally organized. A review of the record
persuades this Court that the CA correctly reversed the decision of the trial
court. Petitioners evidence falls short of the quantum of proof required to
establish a partnership. In the absence of evidence, we cannot accept as an
established fact that Tan Eng Kee allegedly contributed his resources to a
common fund for the purpose of establishing a partnership.
Tan Eng Lay consistently testified that he had his business and his
brother had his, that it was only later on that his brother, Tan Eng Kee, came
to work for him. Be that as it may, co-ownership or co-possession is not an
indicium of the existence of a partnership. It is indeed odd, if not unnatural,
that despite the 40 years that the partnership was allegedly in existence, Tan
Eng Kee never asked for an accounting. A demand for periodic accounting is

evidence of a partnership. During his lifetime, Tan Eng Kee appeared never to
havemade any such demand for accounting from his brother Tan Eng Lay.

Pascual vs CIR
G.R. No. L-78133, October 18, 1988

Facts:
Mariano and Renato Pascual bought 2 parcels of land from Bernardino
and sold them in 1969 to Marenir Development Corporation. They bought
another 3 parcels of land from Roque and sold them to Reyes and Samson in
1970. For the 2 transactions, they realized net profits of P165, 224 and P
60,000 respectively. Thereafter, the BIR Commissioner assessed the Petitioners
deficient corporate income taxes amounting to P 107,101. The Commissioner
said that the Petitioners had formed an unregistered partnership; hence,
taxable under sec. 20(b) in relation to Sec. 24 of the old Tax Code. The
Petitioners then filed a petition for review with the CTA, which affirmed the BIR
decision.
Issue:
Whether the Pascuals had formed an unregistered partnership.
Held:
NO. There is no evidence that petitioners entered into an agreement to
form a partnership. The Commissioner just assumed these conditions to be
present on the basis of the fact that the petitioners purchased certain parcels
of land and became co-owners thereof. In this case, the character of habituality
peculiar to business transactions for the purpose of gain was not present.
Herein, the petitioners bought 2 parcels of land in 1965. In 1966, they bought
another 3 parcels of land from one seller. It was only in 1968 when they sold
the 2 parcels of land after which they did not make any additional or new
purchase. The remaining 3 parcels were sold by them in 1970. These
transactions were isolated. The co-ownership started only in 1965 and ended in
1970. There is clear evidence of co-ownership between the petitioners.

Sardane vs CA
G.R. No. L-47045, November 22, 1988

Facts:
Acojedo sued Sardane for the collection of sum of money in the amount
of P 5,217 based on promissory notes executed by the latter in favor of the
former. The city court rules in favor of Acojedo. On appeal, CFI reversed. It held
that the amount taken by Sardane from Acojedo was not his personal debt but
expenses of the partnership between them. CFI accepted the oral testimony for
Sardane that a partnership exited between him and Acojedo due to the
ambiguity of the promissory notes; thus constituting an exception to the parole
evidence rule. CFI then concluded that the promissory notes involved were
merely receipts for the contributions to said partnership. CA reversed CFI.
Issue:
Whether there existed a partnership between Acojedo and Sardane.
Held:
NO. There is no ambiguity in the writings in question. Even if evidence
aliunde other than the promissory notes may be admitted to alter the meaning
conveyed thereby, still the evidence is insufficient to prove that a partnership
existed between the private parties hereto.

As manager of the basnig, Sardane, naturally some degree of control over

the operations and maintenance thereof had to be exercised by herein
petitioner. The fact that he had received 50% of the net profits does not
conclusively establish that he was a partner of the private respondent herein.
Article 1769(4) of the Civil Code is explicit that while the receipt by a person of
a share of the profits of a business is prima facie evidence that he is a partner
in the business, no such inference shall be drawn if such profits were received
in payment as wages of an employee. Furthermore, herein petitioner had no
voice in the management of the affairs of the basnig.

Afisco Insurance Corporation vs. CA

G.R. No. 112675, January 25, 1995

Facts:
The petitioners are 41 local non-life insurance corporations. Upon their
issuance of Erection, Machinery Breakdown, Boiler Explosion and Contractors
all risk insurance policies, the petitioners entered into a Quota Share
Reinsurance Treaty and a Surplus Reinsurance Treaty with the foreign
insurance corporation, Munich. The Reinsurance Treaties required petitioners
to form a pool which was created on the same day. Subsequently, the pool of
insurers submitted a financial statement and filed an Information Return of
Organization Exempt from Income Tax for the year ending in 1975, on the
basis of which, it was assessed by the BIR a deficiency income taxes among
others.
The Petitioners filed a protest which the BIR denied. The CTA affirmed
this decision. Concurrently, the CA ruled that the pool of insurers was

considered as a partnership taxable as a corporation, and that the latters

collection of premiums on behalf of its members was taxable income.
Issue:
Whether or not the pool is a partnership, whose dividends are subject to
tax.
Held:
YES. In Evanglista vs. CIR, the court held that Sec. 24 of the old Tax
Code covered in its definition these unregistered partnerships and even
associations or joint accounts, which had no legal personalities apart from
their individual members. The court said that the term partnership includes a
syndicate, group, pool, joint venture or other unincorporated organization,
through or by means of which any business, financial operation or venture is
carried on.
The following unmistakably indicates a partnership:
(1) The pool has a common fund;
(2) The pool functions through an executive board
(3) The pools work is indispensable, beneficial and economically useful to
the business of the insurance companies and Munich because without it
they would not have received their premiums.
The insurance companies share in the business ceded to the pool and in the
expenses according to the Rules of Distribution annexed to the Pool Agreement.
Profit motive or business is, therefore, the primordial reason for the pools
formation.

Deluao vs. Casteel

G.R. No. L-21906, December 24, 1968

Facts:
In 1940, Casteel unsuccessfully registered with the Agriculture
Department a fishpond in a big tract of swampy land, located at Padada Davao
(herein fishpond for brevity). Despite two more attempts, he was still unable to
register said fishpond. Notwithstanding, Casteel did not lose interest therein.
Being threatened by other applicants over said fishpond, Casteel needed to
expand his occupation thereof by constructing dikes and cultivating

marketable fishes. Lacking financial resources at that time, he asked help from
his uncle, Deluao. Parenthetically, Deluao also sought to register a portion of
the land also for a fishpond. By borrowing money from Deluao, Casteel was
compelled to enter into a partnership with the former with an agreement to
divide the fishpond after the award by the Agriculture Department. Eventually,
Casteel administered the fishpond and single-handedly opposed rival
applicants who occupied portions of the fishpond area. He relentlessly pursued
his claim to the area or fishpond until it was finally awarded to him. Casteel
then forbade Deluao from further administering the fishpond. Deluao sued
Casteel for specific performance to enforce the partnership agreement. The trial
court sided with Deluao. The CA certified the case to the High Court.
Issue:
Whether the award to Casteel of said fishpond constituted dissolution of
the partnership between him and Deluao.
Held:
YES. Article 1830(3) of the Civil Code enumerates as one of the causes
for the dissolution of a partnership, x x x any event which makes it unlawful
for the business of the partnership to be carried on x x x. The approval of
Casteels fishpond application brought to the fore several provisions of the law
which made the continuation of the partnership unlawful and therefore caused
its ipso facto dissolution.
The Fisheries Act (Act 4003) prohibits the holder of a fishpond permit
from transferring or subletting the fishpond granted to him without the
previous consent or approval of the Agricultural Secretary.
Since the partnership had for its object the division into two equal parts
of the fishpond between Casteel and Deluao after it shall have been awarded to
the latter, and therefore it envisaged the unauthorized transfer of one half
thereof to parties other than Casteel, it was dissolved by the approval of his
application. The approval was an event which made it unlawful for the business
of the partnership to be carried on.