BUS ORG Case Digest Compilation

Commissioner of Internal Revenue vs Borroughs Ltd.
142 SCRA 324
Borroughs Limites is a foreign corporation which remitted in 1979, 7.64 mn pesos to its parent
company abroad. After paying 1.147 million pesos in a 15 percent remittance tax to the BIR, it
now seeks for a P172 thousand peso refund since the taxable amount should be that actually
remitted or 6 million. BIR refuses to pay on the basis of 1982 memorandum which calculates
taxable income based on amount paid to the BIR.
Issue: Is private respondent Borroughs entitled to the refund?
Held: Yes, In a BIR ruling in 1980, the aforequoted provision had been interpreted to mean that
"the tax base upon which the 15% branch profit remittance tax ... shall be imposed...(is) the
profit actually remitted abroad and not on the total branch profits out of which the remittance is
to be made. Furthermore as the tax was paid in 1979, the 1982 tax revision cannot apply as the
memo is not given retroactive effect because it is not covered with the exceptions such as fraud.
BUS ORG CASES 2017 | Error! No text of specified style in document. 1

CHARLES F. WOODHOUSE vs. FORTUNATO F. HALILI G.R. No. L-4811 July 31, 1953
FACTS
On November 29, 1947, plaintiff Woodhouse entered into a written agreement with defendant
Halili stating among others that: 1) that they shall organize a partnership for the bottling and
distribution of Missionsoft drinks, plaintiff to act as industrial partner or manager, and the
defendant as a capitalist, furnishing the capital necessary therefore; 2) that plaintiff was to
secure the Mission Soft Drinks franchise for and in behalf of the proposed partnership and 3)
that the plaintiff was to receive 30 per cent of the net profits of the business.
Prior to entering into this agreement, plaintiff had informed the Mission Dry Corporation of Los
Angeles, California, that he had interested a prominent financier (defendant herein) in the
business, who was willing to invest half a milliondollars in the bottling and distribution of the said
beverages, and requested, in order that he may close the deal with him, that the right to bottle
and distribute be granted him for a limited time under the condition that it will finally be
transferred to the corporation. Pursuant to this request, plaintiff was given a thirty days option
on exclusive bottling and distribution rights for the Philippines. The contract was finally signed
by plaintiff on December 3, 1947.
When the bottling plant was already in operation, plaintiff demanded of defendant that the
partnership papers be executed. Defendant Halili gave excuses and would not execute said
agreement, thus the complaint by the plaintiff.
Plaintiff prays for the : 1.execution of the contract of partnership; 2) accounting of profits and
3)share thereof of 30 percent with 4) damages in the amount of P200,000. The Defendant on
the other hand claims that: 1) the defendants consent to the agreement, was secured by the
representation of plaintiff that he was the owner, or was about to become owner of an exclusive
bottling franchise, which representation was false, and that plaintiff did not secure the franchise
but was given to defendant himself 2) that defendant did not fail to carry out his undertakings,
but that it was plaintiff who failed and 3)that plaintiff agreed to contribute to the exclusive
franchise to the partnership, but plaintiff failed to do so with a 4) counterclaim for P200,00 as
damages.
The CFI ruling: 1) accounting of profits and to pay plaintiff 15 % of the profits and that the 2)
execution of contract cannot be enforced upon parties. Lastly, the 3) fraud wasnt proved
ISSUES
1. WON plaintiff falsely represented that he had an exclusive franchise to bottle Mission
beverages
2. WON false representation, if it existed, annuls the agreement to form the partnership
HELD
1. Yes. Plaintiff did make false representations and this can be seen through his letters to
Mission Dry Corporation asking for the latter to grant him temporary franchise so that he could
settle the agreement with defendant. The trial court reasoned, and the plaintiff on this appeal
argues, that plaintiff only undertook in the agreement to secure the Mission Dry franchise for
and in behalf of the proposed partnership. The existence of this provision in the final agreement
does not militate against plaintiff having represented that he had the exclusive franchise; it

rather strengthens belief that he did actually make the representation. The defendant believed,
or was made to believe, that plaintiff was the grantee of an exclusive franchise. Thus it is that it
was also agreed upon that the franchise was to be transferred to the name of the partnership,
and that, upon its dissolution or termination, the same shall be reassigned to the plaintiff.
Again, the immediate reaction of defendant, when in California he learned that plaintiff did not
have the exclusive franchise, was to reduce, as he himself testified, plaintiffs participation in the
net profits to one half of that agreed upon. He could not have had such a feeling had not plaintiff
actually made him believe that he(plaintiff) was the exclusive grantee of the franchise.
2. No. In consequence, article 1270 of the Spanish Civil Code distinguishes two kinds of (civil)
fraud, the causal fraud, which may be ground for the annulment of a contract, and the incidental
deceit, which only renders the party who employs it liable for damages only. The Supreme Court
has held that in order that fraud may vitiate consent, it must be the causal (dolo causante), not
merely the incidental (dolo incidente) inducement to the making of the contract.
The record abounds with circumstances indicative of the fact that the principal consideration,
the main cause that induced defendant to enter into the partnership agreement with plaintiff,
was the ability of plaintiff to get the exclusive franchise to bottle and distribute for the defendant
or for the partnership. The original draft prepared by defendants counsel was to the effect that
plaintiff obligated himself to secure a franchise for the defendant. But if plaintiff was guilty of a
false representation, this was not the causal consideration, or the principal inducement, that led
plaintiff to enter into the partnership agreement. On the other hand, this supposed ownership of
an exclusive franchise was actually the consideration or price plaintiff gave in exchange for the
share of 30 per cent granted him in the net profits of the partnership business. Defendant
agreed to give plaintiff 30 per cent share in the net profits because he was transferring his
exclusive franchise to the partnership.
Having arrived at the conclusion that the contract cannot be declared null and void, may the
agreement be carried out or executed? The SC finds no merit in the claim of plaintiff that the
partnership was already a fait accompli from the time of the operation of the plant, as it is
evident from the very language of the agreement that the parties intended that the execution of
the agreement to form a partnership was to be carried out at a later date. , The defendant may
not be compelled against his will to carry out the agreement nor execute the partnership papers.
The law recognizes the individuals freedom or liberty to do an act he has promised to do, or not
to do it, as he pleases.

EVANGELISTA & CO. v. ABAD SANTOS
G.R. No. L-31684; June 28, 1973
FACTS:
On October 9, 1954 a co-partnership was formed under the name of "Evangelista & Co."
On June 7, 1955 the Articles of Co-partnership were amended so as to include herein
respondent, Estrella Abad Santos, as industrial partner, with herein petitioners Domingo C.
Evangelista, Jr., Leonarda Atienza Abad Santos and Conchita P. Navarro, the original capitalist
partners, remaining in that capacity, with a contribution of P17,500 each
On December 17, 1963 herein respondent filed suit against the three other partners,
alleging that the partnership, which was also made a party-defendant, had been paying
dividends to the partners except to her; and that notwithstanding her demands the defendants
had refused and continued to refuse to let her examine the partnership books or to give her
information regarding the partnership affairs or to pay her any share in the dividends declared
by the partnership
The defendants, in their answer, denied ever having declared dividends or distributed
profits of the partnership; denied likewise that the plaintiff ever demanded that she be allowed to
examine the partnership books; and by way of affirmative defense alleged that the amended
Articles of Co-partnership did not express the true agreement of the parties, which was that the
plaintiff was not an industrial partner; that she did not in fact contribute industry to the
partnership.
ISSUE:
Whether Abad Santos is entitled to see the partnership books because she is an
industrial partner in the partnership
HELD:
Yes, Abad Santos is entitled to see the partnership books.
The Supreme Court ruled that according to
ART. 1299. Any partner shall have the right to a formal account as to partnership affairs:
(1)If he is wrongfully excluded from the partnership business or possession of its property by his
co-partners;
(2)If the right exists under the terms of any agreement;
(3)As provided by article 1807;
(4)Whenever other circumstances render it just and reasonable."
In the case at hand, the company is estopped from denying Abad Santos as an industrial
partner because it has been 8 years and the company never corrected their agreement in order
to show their true intentions. The company never bothered to correct those up until Abad Santos
filed a complaint.

Duterte v Rallos (2 P 509)
Facts: Duterte (plaintiff-appellant) claimed that Rallos (defendant), and one Castro were
partners in the management of a cockpit. However, Rallos denied said claim. The court found
that no such partnership existed and ordered judgment in favor with Rallos.
It is undisputed that the plaintiff rendered services in the management of the cockpit, and
that the defendant paid him money on account of the cockpit.
Rallos, after denying that the plaintiff was his partner, testified that the profits were divided.
A portion of which was given to two friends, Duterte and Castro, but not as partners. A portion
was given to Duterte solely because he was a friend who aided and encouraged the cockpit and
had no duty to perform, except when he had to preside at the cockpit. He added that he only
paid them for his pleasure, as friends, Duterte had no legal interest.
Duterte testified that he made a verbal contract of partnership with the Rallos for this
business, uncontradicted evidence that he performed services in connection with it; that Rallos
paid him the money on account thereof and sent him accounts for three months showing his
interest to be one-third of the profits in addition to the $5 each day, and wrote him a letter in
which he said that he admitted the Duterte into the partnership in order to collect what Duterte
owed him on another transaction. The lower court found that no such partnership existed and
ordered judgment for the defendant. The plaintiff moved for a new trial, which was denied.
Issue: Whether or not Duterte and Rallos entered into a contract of partnership.
Held: Yes, Duterte and Rallos entered into a contract of partnership.
The SC have examined the evidence and are of the opinion that the finding of the lower
court as to the existence of the copartnership is manifestly against the evidence. The Court see
no other way of explaining the accounts submitted by the defendant to the plaintiff. The
evidence (letters and testimonies) presented clearly showed than that there was a partnership
between them up. That there was an agreement to share the profits is clearly proved by the
accounts submitted. The plaintiff testified that the profits and losses were to be shared equally.
But even omitting this testimony, the case is covered by article 1689 of the Civil Code, which
provides that, in the absence of agreement as to the losses, they shall be shared as the gains
are. Article 1668 of the Civil Code is not applicable to the case. No real estate was contributed
by any member. The partnership did not become the owner of the cockpit. It is undisputed that
this was owned by the defendant and that the partnership paid him ten dollars a day for the use
of it. The finding of fact by the court below, that there was no partnership, at least to September
1, 1901, was plainly and manifestly against the evidence, and for that reason a new trial of this
case must be had.

Eligio Estanislao, Jr. v. Court of Appeals ,REMEDIOS ESTANISLAO, EMILIO and
LEOCADIO SANTIAGO
FACTS:
Petitioner and private respondents are brothers and sisters who are co-owners of certain lots
at the corner of Annapolis and Aurora Blvd., Quezon City which were then being leased to the
Shell Company of the Philippines Limited (SHELL). They agreed to open and operate a gas
station thereat to be known as Estanislao Shell Service Station with an initial investment of
P15,000.00 to be taken from the advance rentals due to them from SHELL for the occupancy of
the said lots owned in common by them.
On May 26, 1966, the parties herein entered into an Additional Agreement with a proviso that
said agreement cancels and supersedes the original agreement executed by the co-
owners.
For sometime, the petitioner submitted financial statements regarding the operation of the
business to private respondents, but thereafter petitioner failed to render subsequent
accounting.
A demand was made on petitioner:

to render an accounting of the profits;
to execute a public document embodying all the provisions of the partnership agreement;
to pay the plaintiffs their lawful shares and participation in the net profits of the business.
ISSUE:
IS A PARTNERSHIP a FORMED WHERE MEMBERS OF THE SAME FAMILY BIND
THEMSELVES TO CONTRIBUTE MONEY TO A COMMON FUND WITH THE INTENTION OF
DIVIDING THE PROFITS AMONG THEMSELVES?
HELD:
YES. The Joint Affidavit of April 11, 1966 (Exhibit A), clearly stipulated by the members of the
same family that the P15,000.00 advance rental due to them from SHELL shall augment
their "capital investment" in the operation of the gasoline station.
other evidence in the record:

Petitioner submitted to private respondents periodic accounting of the business.
Petitioner gave a written authority to private respondent Remedios Estanislao, his sister, to
examine and audit the books of their "common business" (aming negosyo).
Respondent Remedios assisted in the running of the business.

Moran, Jr. vs CA
Business Organization Partnership, Agency, Trust Profit and Loss Sharing Speculative
Damages
In February 1971, Isabelo Moran and Mariano Pecson entered into a partnership agreement
where they agreed to contribute P15k each for the purpose of printing 95k posters of the
delegates to the then 1971 Constitutional Commission. Moran shall be in charge in managing
the printing of the posters. It was further agreed that Pecson will receive a commission of P1k a
month starting from April 1971 to December 1971; that the partnership is to be liquidated on
December 15, 1971.
Pecson partially fulfilled his obligation to the partnership when he issued P10k in favor of the
partnership. He gave the P10k to Moran as the managing partner. Moran however did not add
anything and, instead, he only used P4k out of the P10k in printing 2,000 posters. He only
printed 2,000 posters because he felt that printing all 95k posters is a losing venture because of
the delay by the COMELEC in announcing the full delegates. All the posters were sold for a total
of P10k.
Pecson sued Moran. The trial court ordered Moran to pay Pecson damages. The Court of
Appeals affirmed the decision of the trial court but modified the same as it ordered Moran to pay
P47.5k for unrealized profit; P8k for Pecsons monthly commissions; P7k as return of
investment because the venture never took off; plus interest.
ISSUE: Whether or not the CA judgment is correct.
HELD: No. The award of P47.5k for unrealized profit is speculative. There is no evidence
whatsoever that the partnership between the Moran and Pecson would have been a profitable
venture (because base on the circumstances then i.e. the delay of the COMELEC in proclaiming
the candidates, profit is highly unlikely). In fact, it was a failure doomed from the start. There is
therefore no basis for the award of speculative damages in favor of Pecson. Further, there is
mutual breach in this case, Pecson only gave P10k instead of P15k while Moran gave nothing
at all.
As for the P8k monthly commission, this is without basis. The agreement does not state the
basis of the commission. The payment of the commission could only have been predicated on
relatively extravagant profits. The parties could not have intended the giving of a commission
inspite of loss or failure of the venture. Since the venture was a failure, Pecson is not entitled to
the P8k commission.
As for the P7k award as return for Pecsons investment, the CA erred in his ruling too. Though
the venture failed, it did took off the ground as evidenced by the 2,000 posters printed. Hence,
return of investment is not proper in this case. There are risks in any business venture and the
failure of the undertaking cannot entirely be blamed on the managing partner alone, specially if
the latter exercised his best business judgment, which seems to be true in this case.
Moran must however return the unused P6k of Pecsons contribution to the partnership plus P3k
representing Pecsons profit share in the sale of the printed posters. Computation of P3k profit
share is as follows: (P10k profit from the sale of the 2,000 posters printed) (P4k expense in
printing the 2k posters) = (P6k profit); Profit 2 = P3k each.

ADRIANO ARBES, ET AL vs. VICENTE POLISTICO, ET AL.,
G.R. No. 31057 September 7, 1929
FACTS: 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 president-treasurer, directors and secretary of said association. This case is
brought for 2 nd time. In the 1 st one, the court 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. The court appointed commissioner of Insular Auditor's Office, to examine all the books,
documents, and accounts of "Turnuhan Polistico & Co.," and to receive whatever evidence.
Commissioner's report show a balance of P24, 607.80 cash on hand. Despite defendants
objection to the report, the trial court rendered judgment holding said association is unlawful. And
sentenced defendants jointly and severally to return the amount and documents to the plaintiffs and
members of the association. The Appellant alleged that the association being unlawful, some
charitable institution to whom the partnership funds may be ordered to be turned over, should be
included, as a party defendant. Referring to article 1666 of the Civil Code, which provides: A
partnership must have a lawful object, and must be established for the common benefit of the
partners. When the dissolution of an unlawful partnership is decreed, the profits shall be given to
charitable institutions of the domicile of the partnership, or, in default of such, to those of the
province.
ISSUE: Whether or not charitable institution is a necessary party to this case.
HELD: No. No charitable institution is a necessary party in the present case of determination of the
rights of the parties. The action which may arise from said article, in the case of unlawful
partnership, is that for the recovery of the amounts paid by the member from those in charge of the
administration of said partnership, and it is not necessary for the said parties to base their action to
the existence of the partnership, but on the fact that of having contributed some
money to the partnership capital. And hence, the charitable institution of the domicile of the
partnership, and in the default thereof, those of the province are not necessary parties in this case.
The article cited above permits no action for the purpose of obtaining the earnings made by the
unlawful partnership, during its existence as result of the business in which it was engaged,
because for the purpose, as Manresa remarks, the partner will have to base his action upon the
partnership contract, which is to annul and without legal existence by reason of its unlawful object;
and it is self evident that what does not exist cannot be a cause of action. Hence, paragraph 2 of
the same article provides that when the dissolution of the unlawful partnership is decreed, the
profits cannot inure to the benefit of the partners, but must be given to some charitable
institution.The profits are so applied, and not the contributions, because this would be an excessive
and unjust sanction for, as we have seen, there is no reason, in such a case, for depriving the
partner of the portion of the capital that he contributed, the circumstances of the two cases being
entirely different. Art. 1807. Every partner must account to the partnership for any benefit, and hold
as trustee for it any profits derived by him without the consent of the other partners from any
transaction connected with the formation, conduct, or liquidation of the partnership or from any use
by him of its property.

Evangelista vs CIR
Facts: Petitioners borrowed money from theirfather and purchased several lands. For several
years, these lands were leased to tenants by the petitioners. In 1954, respondent Collector of
Internal Revenue demanded from petitioners the payment of income tax on corporations, real
estate dealer's fixed tax and corporation residence tax for the years 1945-1949. A letter of
demand and corresponding assessments were delivered to petitioners. Petitioners claim that
they should be absolved from paying said taxes since they are not a corporation.
Issue: 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.
Held: Yes. Petitioners are subject to the income tax and residence tax for corporation.
As defined in section 84 (b) of the Internal Revenue Code, "the term corporation includes
partnerships, no 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 conformity with
the usualrequirements of the law on partnerships, in order that one could be deemed constituted
for purposes of the tax on corporations. Partnership, as has been defined in the civil code refers
to two or more persons who bind themselves to contribute money, properly, or industry to
a common fund, with the intention of dividing the profits among themselves. Thus, petitioners,
being engaged in the real estate transactions for monetary gain and dividing the same among
themselves constitute a partnership so far as the Code is concerned and are subject to income
tax for corporation.
Since Sec 2 of the Code in defining corporations also includes joint-stock company, partnership,
joint account, association or insurance company, no matter how created or organized, it follows that
petitioners, regardless of how their partnership was created is also subject to the residence tax for
corporations.

Fortis vs. Gutierrez Hermanos
Facts:
Plaintiff Fortis is an employee of defendant Gutierrez Hermanos. Theformer brought an action to

recover a balance due him as salary forthe year 1902. He also alleged that he was entitled, as
salary, to 5 percent of the net profits of the business of the defendants for said year. The
complaint also contained a cause of action for the sum of 600pesos, money expended by
plaintiff for the defendants during the year1903. The lower court ruled in favor of the plaintiff.
The total judgmentrendered amounted to P13, 025.40, which was reduced to
Philippinecurrency. The defendants moved for new trial but were denied. They brought the case
in the SC thru bill of exceptions; the appellants(defendants) alleged that that the contract made
the plaintiff acopartner of the defendants in the business, which they were carrying on.
Issue: WON the plaintiff is a co-partner of the defendants in the business.
Ruling:
NO. It was a mere contract of employment. The plaintiff had neithervoice nor vote in the
management of the affairs of the company. Thefact that the compensation received by him was
to be determined withreference to the profits made by the defendants in their business didnot in
any sense make by a partner therein. The articles of partnershipbetween the defendants
provided that the profits should be dividedamong the partners named in a certain proportion.
The contract madebetween the plaintiff and the then manager of the defendantpartnership did
not in any way vary or modify this provision of thearticles of partnership.

Pastor vs. Gaspar
Facts:
On November 1900, Macario Nicasio and the defendant Gaspar entered into a contract of
partnership under the name Nicasio and Gaspar.
The said partnership owned the steam launch Luisa, and its only business was relating to this
launch.
On November 24, 1900, with the desire to enlarge their business, a contract was made between
the firm of Nicasio and Gaspar on the one side, and on the other side the plaintiff and 4 others
from whom N and G secured a sum of P28, 000 in order to finance the purchase of 6 additional
launches.
In the contract, N and G undertakes to return the amount loaned to the plaintiff within a period of
ten years from the date of the instrument and to guarantee the fulfillment of the said payment
they pledge to the same parties the 6 launches.
Barely 7 months after the execution of the contract, it was terminated and was sold by mutual
consent.
The plaintiff brought action alleging that the contract was one of partnership, and that the
consent of his agent to terminate the contract and the sale of the launches was obtained by
fraud and the dissolution of the partnership was null and void.
Issue: WON the transaction between the parties a loan or a contract of partnership.
Ruling: It was a LOAN in view of the ff. features contained in the contract as found by the SC:
a) It is twice stated positively that N and G are the only partners and the only persons
interested in the partnership of N and G, to which statements Pastor and his associates
assented to when he signed the document;
b) It is stated, also distinctly and positively, that the money has been furnished as a loan;
c) N and G bind themselves in the contract to repay the amount something that they would not
be bound to do were the contract one of partnership;
d) In the contract, N and G create in favor of Pastor and his associates a right of pledge over
the launches, a thing inconsistent with the idea of partnership;
e) N and G are to be considered as consignees only as long as they do not pay the debt. This
indicates that they had a right to pay it;
f) They bind themselves not to alienate the launches until they had paid the debt indicating
clearly that by paying the debt they could do so, a thing inconsistent with the idea of a
partnership; and
g) It is also stated that the launch Luisa is not included in the contract.
It was also ruled that, the fact that Pastor et. al., was to share in the profits and losses of the
business and that N and G should answer for the payment of the debt only with the launches
and not with their property, indicate that the petitioner was a partner. But these provisions are
not conclusive. The rights of third persons are not concerned. The parties could, in making the
contract, if they choose, take some provisions from the law of partnership and others from the
law of loans. Loans with a right to receive a part of the profits in lieu of interests are not
uncommon. As between the parties, such a contract is not one of a partnership.

Aguila vs CA
Business Organization Partnership, Agency, Trust Identity Separate and Distinct
In April 1991, the spouses Ruben and Felicidad Abrogar entered into a loan agreement with a
lending firm called A.C. Aguila & Sons, Co., a partnership. The loan was for P200k. To secure
the loan, the spouses mortgaged their house and lot located in a subdivision. The terms of the
loan further stipulates that in case of non-payment, the property shall be automatically
appropriated to the partnership and a deed of sale be readily executed in favor of the
partnership. She does have a 90 day redemption period.
Ruben died, and Felicidad failed to make payment. She refused to turn over the property and so
the firm filed an ejectment case against her (wherein she lost). She also failed to redeem the
property within the period stipulated. She then filed a civil case against Alfredo Aguila, manager
of the firm, seeking for the declaration of nullity of the deed of sale. The RTC retained the
validity of the deed of sale. The Court of Appeals reversed the RTC. The CA ruled that the sale
is void for it is a pactum commissorium sale which is prohibited under Art. 2088 of the Civil
Code (note the disparity of the purchase price, which is the loan amount, with the actual value of
the property which is after all located in a subdivision).
ISSUE: Whether or not the case filed by Felicidad shall prosper.
HELD: No. Unfortunately, the civil case was filed not against the real party in interest. As
pointed out by Aguila, he is not the real party in interest but rather it was the partnership A.C.
Aguila & Sons, Co. The Rules of Court provide that every action must be prosecuted and
defended in the name of the real party in interest. A real party in interest is one who would be
benefited or injured by the judgment, or who is entitled to the avails of the suit. Any decision
rendered against a person who is not a real party in interest in the case cannot be
executed. Hence, a complaint filed against such a person should be dismissed for failure to
state a cause of action, as in the case at bar.
Under Art. 1768 of the Civil Code, a partnership has a juridical personality separate and distinct
from that of each of the partners. The partners cannot be held liable for the obligations of the
partnership unless it is shown that the legal fiction of a different juridical personality is being
used for fraudulent, unfair, or illegal purposes. In this case, Felicidad has not shown that A.C.
Aguila & Sons, Co., as a separate juridical entity, is being used for fraudulent, unfair, or illegal
purposes. Moreover, the title to the subject property is in the name of A.C. Aguila & Sons, Co. It
is the partnership, not its officers or agents, which should be impleaded in any litigation involving
property registered in its name. A violation of this rule will result in the dismissal of the
complaint.

CIR vs. Suter and CTA
FACTS: A limited partnership, named "William J. Suter 'Morcoin' Co., Ltd.," was formed by
respondent William J. Suter as the general partner, and Julia Spirig and Gustav Carlson, as the
limited partners.
The partners contributed, respectively, P20,000.00, P18,000.00 and P2,000.00 to the

partnership. The limited partnership was registered with the Securities and Exchange
Commission.
In 1948, however, general partner Suter and limited partner Spirig got married and, thereafter,
on 18 December 1948, limited partner Carlson sold his share in the partnership to Suter and his
wife. The sale was duly recorded with the Securities and Exchange Commission on 20
December 1948.
The limited partnership had been filing its income tax returns as a corporation, without objection
by the petitioner, Commissioner of Internal Revenue, until in 1959 when the latter, in an
assessment, consolidated the income of the firm and the individual incomes of the partners-
spouses Suter and Spirig resulting in a determination of a deficiency income tax against
respondent Suter.
The theory of the petitioner, Commissioner of Internal Revenue, is that the marriage of Suter
and Spirig and their subsequent acquisition of the interests of remaining partner Carlson in the
partnership dissolved the limited partnership, and if they did not, the fiction of juridical
personality of the partnership should be disregarded for income tax purposes because the
spouses have exclusive ownership and control of the business; consequently the income tax
return of respondent Suter for the years in question should have included his and his wife's
individual incomes and that of the limited partnership, in accordance with Section 45 (d) of the
National Internal Revenue Code.
As stated by Senator Tolentino: A husband and a wife may not enter into a contract
of general copartnership, because under the Civil Code, which applies in the absence of
express provision in the Code of Commerce, persons prohibited from making donations to each
other are prohibited from entering into universal partnerships. It follows that the marriage of
partners necessarily brings about the dissolution of a pre-existing partnership.
ISSUE: Whether or not the partnership was dissolved after the marriage of the partners,
respondent William J. Suter and Julia Spirig Suter and the subsequent sale to them by the
remaining partner, Gustav Carlson, of his participation of P2,000.00 in the partnership for a
nominal amount of P1.00.
HELD: NO. The petitioner-appellant has evidently failed to observe the fact that William J.
Suter "Morcoin" Co., Ltd. was not a universal partnership, but a particular one. As appears from
Articles 1674 and 1675 of the Spanish Civil Code, of 1889 (which was the law in force when the
subject firm was organized in 1947), a universal partnership requires either that the object of the
association be all the present property of the partners, as contributed by them to the common
fund, or else "all that the partners may acquire by their industry or work during the existence of
the partnership".
William J. Suter "Morcoin" Co., Ltd. was not such a universal partnership, since the
contributions of the partners were fixed sums of money, P20,000.00 by William Suter and
P18,000.00 by Julia Spirig and neither one of them was an industrial partner. It follows that
William J. Suter "Morcoin" Co., Ltd. was not a partnership that spouses were forbidden to enter
by Article 1677 of the Civil Code of 1889.
Nor could the subsequent marriage of the partners operate to dissolve it, such marriage not
being one of the causes provided for that purpose either by the Spanish Civil Code or the Code
of Commerce.
The appellant's view, that by the marriage of both partners the company became a single
proprietorship, is equally erroneous. The capital contributions of partners William J. Suter and
Julia Spirig were separately owned and contributed by them before their marriage; and after
they were joined in wedlock, such contributions remained their respective separate property
under the Spanish Civil Code (Article 1396):
The following shall be the exclusive property of each spouse:

(a) That which is brought to the marriage as his or her own; ....
Thus, the individual interest of each consort in William J. Suter "Morcoin" Co., Ltd. did not
become common property of both after their marriage in 1948.
It being a basic tenet of the Spanish and Philippine law that the partnership has a juridical
personality of its own, distinct and separate from that of its partners the bypassing of the
existence of the limited partnership as a taxpayer can only be done by ignoring or disregarding
clear statutory mandates and basic principles of our law.

PETITION FOR AUTHORITY TO CONTINUE USE OF THE FIRM NAME SYCIP, SALAZAR,
FELICIANO, HERNANDEZ & CASTILLO".
July 30, 1979
Facts:
Petitions were filed by the surviving partners of Atty. Alexander Sycip, who died on May 5, 1975
and by the surviving partners of Atty. Herminio Ozaeta, who died on February 14, 1976, praying
that they be allowed to continue using, in the names of their firms, the names of partners who
had passed away.
Petitioners contend that the continued use of the name of a deceased or former partner when
permissible by local custom, is not unethical but care should be taken that no imposition or
deception is practiced through this use. They also contend that no local custom prohibits the
continued use of a deceased partners name in a professional firms name; there is no custom
or usage in the Philippines, or at least in the Greater Manila Area, which recognizes that the
name of a law firm necessarily identifies the individual members of the firm.
Issue:
WON the surviving partners may be allowed by the court to retain the name of the partners who
already passed away in the name of the firm? NO
Held:
In the case of Register of Deeds of Manila vs. China Banking Corporation, the SC said:
The Court believes that, in view of the personal and confidential nature of the relations between
attorney and client, and the high standards demanded in the canons of professional ethics, no
practice should be allowed which even in a remote degree could give rise to the possibility of
deception. Said attorneys are accordingly advised to drop the names of the deceased partners
from their firm name.
The public relations value of the use of an old firm name can tend to create undue advantages
and disadvantages in the practice of the profession. An able lawyer without connections will
have to make a name for himself starting from scratch. Another able lawyer, who can join an old
firm, can initially ride on that old firms reputation established by deceased partners.
The court also made the difference from the law firms and business corporations:
A partnership for the practice of law is not a legal entity. It is a mere relationship or association
for a particular purpose. It is not a partnership formed for the purpose of carrying on trade or
business or of holding property. Thus, it has been stated that the use of a nom de plume,
assumed or trade name in law practice is improper.
We find such proof of the existence of a local custom, and of the elements requisite to constitute
the same, wanting herein. Merely because something is done as a matter of practice does not
mean that Courts can rely on the same for purposes of adjudication as a juridical custom.
Petition suffers legal and ethical impediment.

Ortega vs. CA
FACTS:
On December 19, 1980, respondent Misa associated himself together, as senior partner with
petitioners Ortega, del Castillo, Jr., and Bacorro, as junior partners. On Feb. 17, 1988,
respondent Misa wrote a letter stating that he is withdrawing and retiring from the firm and
asking for a meeting with the petitioners to discuss the mechanics of the liquidation. On June
30, 1988, petitioner filed a petition to the Commision's Securities Investigation and Clearing
Department for the formal dissolution and liquidation of the partnership. On March 31, 1989, the
hearing officer rendered a decision ruling that the withdrawal of the petitioner has not dissolved
the partnership. On appeal, the SEC en banc reversed the decision and was affirmed by the
Court of Appeals. Hence, this petition.
ISSUE:
Whether or not the Court of Appeals has erred in holding that the partnership is a partnership at
will and whether or not the Court of Appeals has erred in holding that the withdrawal of private
respondent dissolved the partnership regardless of his good or bad faith
HELD:
No. The SC upheld the ruling of the CA regarding the nature of the partnership. The SC further
stated that a partnership that does not fix its term is a partnership at will. The birth and life of a
partnership at will is predicated on the mutual desire and consent of the partners. The right to
choose with whom a person wishes to associate himself is the very foundation and essence of
that partnership. Its continued existence is, in turn, dependent on the constancy of that mutual
resolve, along with each partner's capability to give it, and the absence of a cause for
dissolution provided by the law itself. Verily, any one of the partners may, at his sole pleasure,
dictate a dissolution of the partnership at will. He must, however, act in good faith, not that the
attendance of bad faith can prevent the dissolution of the partnership but that it can result in a
liability for damages.

ESTANISLAO V CA
Petitioner is appealing the decision of CA, which affirmed in toto the decision of RTC, ordering
him to render an accounting of the gasoline business which he entered into with his partners,
his brothers and sisters at that. He was also ordered to give the shares of his partners from the
income of the gasoline business, which was estimated at P150,000 per year.
Estanislao and his brothers and sisters are lessors of land to Shell, and on April 11, 1966 they
executed a joint affidavit in which they are taking advance rentals from Shell in the amount of
P15,000 which they would apply as initial investment for their upcoming Shell dealership.
Estanislao was appointed as the dealer because it was Shell's policy to appoint only one dealer.
On May 26, 1966, a Cash Pledge Agreement was entered into between petitioner and Shell,
stipulating that the P15,000 constituting the advance rentals of Shell would be applied instead
as credit to cover advances of fuel to petitioner as dealer of gasoline. The agreement contained
a provision that it cancels and supersedes the joint affidavit.
When petitioner was no longer reporting to his partners how the business is going, his partners
went to court and asked for an accounting and for their share in the profits. Petitioner lost at
RTC and CA, hence this appeal. Petitioner's defense is that there is no partnership to speak of
because the partnership had already been dissolved by virtue of the cash pledge agreement
that canceled the original joint affidavit.
The SC held that the thing that was being cancelled was obviously the P15,000 because there
would be two references to the P15,000. In the joint affidavit, it was referred to as advanced
rentals that will be applied as initial capital, while the cash pledge agreement said that it was to
be applied instead as credit for fuel advances that the dealer might make during the course of
the operation of the gasoline business.

Campos Rueda & Co v Pacific Commercial (44 Phil 916)
Facts:
Campos, Rueda & Co., a limited partnership, is indebted to the appellants: Pacific Commercial
Co. , Asiatic Petroleum Co, and International Banking Corporation amounting to not less than
P1,000.00 (which were not paid more than 30 days prior to the date of the filing by petitioners of
the application for voluntary insolvency).
The trial court denied their petition on the ground that it was not proven, nor alleged, that the
members of the firm were insolvent at the time the application was filed. It also held that the
partners are personally and solidarily liable for the consequences of the transactions of the
partnership.
Issue:
Whether or not a limited partnership may be held to have committed an act of insolvency.
Held:
Yes. A limited partnerships juridical personality is different from the personality of its
members. On general principle, the limited partnership must answer for and suffer the
consequence of its acts. Under our Insolvency Law, one of the acts of bankruptcy upon w/c an
adjudication of involuntary insolvency can be predicated is the failure to pay obligations.
The failure of Campos, Rueda & Co., to pay its obligations constitutes an act w/c is specifically
provided for in the Insolvency Law for declaration of involuntary insolvency. The petitioners have
a right to a judicial decree declaring the involuntary insolvency of said partnership.

VARGAS AND CO. V CHAN HANG CHIU
Vargas appealing the judgment of CFI which ruled in favor of Chan Hang Chiu in a suit for
collection of a sum of money filed by the latter against Vargas. Vargas' defense is that Chan
Hang Chiu did not serve summons on all of the partners of Vargas and instead served
summons on just a managing partner; and even if the summons were made to the managing
agent, it was not sufficient because such managing agent did not really have any powers of
management or supervision to be competent to receive the service of the summons. Vargas
said the lack of summons did not vest jurisdiction over the RTC over Vargas and Co.
The SC held that Vargas is contradicting itself in filing the petition under the name of the
partnership, then requiring that the summons be served on the individual members instead of to
the partnership itself. It was held that the partnership has a separate personality apart from the
members. On the 2nd contention, it was held that the testimony presented by Vargas was not
sufficient to overturn the presumption that summons had been served as evidenced by the
sheriff's certificate of service of summons.
Facts: On the 19th day of August, 1911, an action was begun by Chan Hang Chiu against
theplaintiff in this case as a mercantile association duly organized under the laws of the
PhilippineIslands, to recover a sum of money. The summons and complaint were placed in the
hands of thesheriff, delivering to and leaving with one Jose Macapinlac personally true copies
thereof, hebeing the managing agent of said Vargas & Co. at the time of such service. On July
2, 1912, the justice's court rendered judgment against Vargas & Co. for the sum of 372.28.It is
plaintiffs contention that
Vargas & Co. being a partnership, it is necessary, inbringing an action against it, to serve the
summons on all of the partners, deliveringto each one of them personally a copy thereof; and
that the summons in this casehaving been served on the managing agent of the company only,
the service was of no effect as against the company and the members thereof and the judgment
enteredby virtue of such a service was void.
Issue: Whether or not it is indispensable in bringing an action to a partnership to serve
summons to all parties thereof.
Held: No, it is dispensable.
Reasons:
1. It has been the universal practice in the Philippine Islands since American
occupation,and was the practice prior to that time, to treat companies of the class to
which the plaintiff belongs as legal or juridical entities and to permit them to sue and be
sued in the name of thecompany, the summons being served solely on the managing
agent or other official of thecompany specified by the section of the Code of Civil
Procedure referred to. The plaintiff bringsthis action in the company name and not in the
name of the members of the firm. Actionsagainst companies of the class to which
plaintiff belongs are brought, according to theuninterrupted practice, against such
companies in their company names and not against theindividual partners constituting
the firm. In case the individual members of the firm must beseparately served with
process, the rule also prevails that they must be parties to the action,either plaintiffs or
defendant, and that the action cannot be brought in the name of or againstthe company
itself.
2. If it is necessary to serve the partners individually, they are entitled to be
heardindividually in the action and they must, therefore, be made parties thereto so that
they can beheard. It would be idle to serve process on individual members of a
partnership if the litigationwere to be conducted in the name of the partnership itself and
by the duly constituted officials of the partnership exclusively.
In this case, is apparent that the plaintiff is acting contrary to its owncontention by bringing the
action in the name of the company. If not served withprocess, then the action should be brought
in the individual names of the partnersand not in the name of the company itself.

NGO TIAN TEK AND NGO HAY V PHILIPPINE EDUCATION CO. INC.
Ngo Tian Tek appealing the decision of CFI and CA which granted the petition for collection of a
sum of money from Lee Guan Box Factory. The defense of Ngo Tian Tek is that the Lee Guan
Box Factory is a separate entity from the Ngo Tian Tek and Ngo Hay partnership, which is
named Modern Box Factory. Modern Box dealt in goods bought from Philippine Education Co.
since 1925, then in 1930, Lee Guan Box was established just some meters away from Modern
Box. Evidence was found that there were goods purchased in the name of Lee Guan Box that
were delivered to the Modern Box, and that the owner of the two establishments are one and
the same. The defense of Ngo Tian Tek is that he sold Lee Guan Box to Vicente Tan, aka Chan
Sy, and that the liabilities of Chan Sy is his won, because Chan Sy was acting in his own name.
The SC said that the findings of fact of the CA are conclusive upon the SC. Also even if the
contracts were entered into by a factor of a commercial establishment known to belong to a
well-known enterprise or association, it shall still be understood to be for the account of the
owner of such association, provided that such contracts involve objects in the line and business
of the establishment. Also, the lack of a power of attorney by Chan Sy does not operate to
prejudice third person. There's also a contention that Philippine Education is a mere assignee
for collection and thus could not bring suit on behalf of the other assignors, but the SC ruled that
Ngo Tian Tek is not prejudiced by this because he would still be relieved of the obligation had
he paid the assignee Philippine Education.

ANG PUE AND CO. V SECRETARY OF COMMERCE
Ang Pue appeals a dismissed petition for declaratory relief filed at the RTC. Ang Pue wants to
be able to extend for another five years their partnership pursuant to their article of co-
partnership which provides that after five years and upon the consent of the two partners, the
partnership could be extended for another five years. Ang Pue was constituted on May 1, 1953.
On June 19, 1954, the Retail Act, which limits only to Filipinos the retail business was enacted.
The Retail Act allows partnerships of non-Filipinos to continue existing until the expiration of the
said partnership. On April 1958, before the expiration of Ang Pue's term, the partners agreed to
extend the life of the partnership. When they registered it to SEC, SEC refused to register, citing
the Retail Act. Hence the petition to RTC which was denied and now being appealed in this
case.
SC held that the stipulation in the articles of partnership that it could be extended will still be
subject to the laws that will be existing at the time that such extension is to be executed.
Otherwise, such an extension would be a clear violation of the Retail Act. Also, organizing a
partnership or a corporation is a privilege and not a right.

PASCUAL AND DRAGON V COMMISSIONER OF INTERNAL REVENUE
Pascual and Dragon appealing CTA decision which found deficiency corporate income taxes
against them in the amount of P107,000 during the years 1968 and 1970. The CIR found that
the two bought 2 parcels of land in 1965, and three parcels of land in 1966. They sold the two
parcels in 1968 and the three parcels in 1970, and realized provide of about P225,000. The
corresponding capital gains tax were paid by the petitioners in 1973 and 1974 by availing of tax
amnesties during those years. The CIR said that they formed an unregistered partnership which
is liable to pay corporate income tax, aside from the income taxes of the individual partners
therein. The defense is that the tax amnesty absolved them from the tax, even if it is adjudged
that they indeed formed an unregistered partnership. The CTA said that the tax amnesty
relieved them only of the individual income tax liability, but not the tax liability of the unregistered
partnership.
SC held that the case is different from Evangelista case, because the transactions were
isolated. The coownership does not necessarily mean that they formed an unregistered
partnership. Even if they shared in the gross proceeds in the sale, regardless of whether each of
them had interests over what had been sold, does not ipso facto make them partners.

OA vs CIR GR No. L -19342 | May 25, 1972 | J. Barredo
Facts: Julia Buales died leaving as heirs her surviving spouse, Lorenzo Oa and her five
children. A civil case was instituted for the settlement of her state, in which Oa was appointed
administrator and later on the guardian of the three heirs who were still minors when the project
for partition was approved. This shows that the heirs have undivided interest in 10 parcels of
land, 6 houses and money from the War Damage Commission.
Although the project of partition was approved by the Court, no attempt was made to divide the
properties and they remained under the management of 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. Petitioners returned for income tax purposes
their shares in the net income but they did not actually receive their shares because this left with
Oa who invested them.
Based on these facts, CIR decided that petitioners formed an unregistered partnership and
therefore, subject to the corporate income tax, particularly for years 1955 and 1956. Petitioners
asked for reconsideration, which was denied hence this petition for review from CTAs decision.
Issue:
W/N there was a co-ownership or an unregistered partnership
W/N the petitioners are liable for the deficiency corporate income tax
Held:
Unregistered partnership. The Tax Court found that instead of actually distributing the estate
of the deceased among themselves pursuant to the project of partition, the heirs allowed their
properties to remain under the management of Oa and let him use their shares as part of the
common fund for their ventures, even as they paid corresponding income taxes on their
respective shares.
Yes. For tax purposes, the co-ownership of inherited properties is automatically converted into
an unregistered partnership the moment the said common properties and/or the incomes
derived therefrom are used as a common fund with intent to produce profits for the heirs in
proportion to their respective shares in the inheritance as determined in a project partition either
duly executed in an extrajudicial settlement or approved by the court in the corresponding
testate or intestate proceeding. The reason is simple. From the moment of such partition, the
heirs are entitled already to their respective definite shares of the estate and the incomes
thereof, for each of them to manage and dispose of as exclusively his own without the
intervention of the other heirs, and, accordingly, he becomes liable individually for all taxes in
connection therewith. If after such partition, he allows his share to be held in common with his
co-heirs under a single management to be used with the intent of making profit thereby in
proportion to his share, there can be no doubt that, even if no document or instrument were
executed, for the purpose, for tax purposes, at least, an unregistered partnership is formed.
For purposes of the tax on corporations, our National Internal Revenue Code includes these
partnerships
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 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. Judgment affirmed.
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 oneticket for the sum of two pesos (P2),
said ticket wasregistered 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 deputyprovincial 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.
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 thecheck 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.

Sardane vs CA
FACTS:
Petitioner brought an action in the collection of a sum of P5,217.25 based on promissory notes
executed by the herein private respondent NobioSardane in favor of the herein petitioner.
Petitioner based his right to collect on the promissory notes executed by respondent on different
dates. It has been established in the trial court that on many occasions, the petitioner demanded
the payment of the total amount of P5,217.25. The failure of the private respondent to pay the
said amount prompted the petitioner to seek the services of lawyer who made a letter (Exhibit 1)
formally demanding the return of the sum loaned. Because of the failure of the private
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 of petitioner, he was
granted to present evidence ex parte. 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. The trial court favored plaintiffs petition. One of the questions raised in the
review was whether the oral testimony for the therein private respondent Sardane that a
partnership existed between him and therein petitioner Acojedo are admissible to vary the
meaning of the abovementioned promissory notes.
ISSUE: Whether a partnership exists between the parties
RULING: The Court of Appeals held, and agreed with by the Court, that 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 Sarcado 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. Under similar facts, this Court in the early case of Fortis vs. Gutierrez Hermanos, in
denying the claim of the plaintiff therein that he was a partner in the business of the defendant,
declared: This contention cannot be sustained. It was a mere contract of employment. The
plaintiff had no voice nor vote in the management of the affairs of the company. The fact that the
compensation received by him was to be determined with reference to the profits made by the
defendant in their business did not in any sense make him a partner therein. ... Hence, there no
partnership exists in the case.

DELUAO VS. CASTEEL 26 SCRA 475
FACTS:
Nicanor Casteel filed a fishpond application for a big tract of swampy land in the then Sitio of
Malalag (now the Municipality of Malalag), Municipality of Padada, Davao for three times since
1940 but no action was taken thereon by the authorities concerned. Despite the said rejection,
Casteel did not lose interest. Meanwhile, several applications were submitted by other persons
for portions of the area covered by Casteel's application, one of them was Felipe Deluao, uncle
of Casteel. Because of the threat poised upon his position by the above applicants who entered
upon and spread themselves within the area, Casteel sought financial aid from his uncle Deluao
with which to finance the needed improvements on the fishpond. Hence, a wide productive
fishpond was built. But despite the improvements introduced, Casteels application was still
rejected. He then appealed the rejection made with the Secretary of Agriculture and Natural
Resources. Pending appeal, Inocencia Deluao (wife of Felipe Deluao) and Nicanor Casteel
executed a contract denominated as contract of service whereby Deluao hires and
employs the Casteel. The latter will be the Manager and sole buyer of all the produce of the fish
that will be produced from said fishpond while the former will be the administrator of the same
she having financed the construction and improvement of said fishpond. At the same time,
Inocencia Deluao executed a special power of attorney in favor of Jesus Donesa, extending to
the latter the authority to represent her in the administration of the fishpond. Meanwhile, the
Secretary of Agriculture and Natural Resources issued a decision stating that Nicanor Casteel
should be, as hereby it is, reinstated and given due course for the area applied for. Nicanor
Casteel then forbade Inocencia Deluao from further administering the fishpond, and ejected the
latter's representative, Donesa, from the premises. Alleging violation of the contract of service
entered into between Deluao and Casteel, Deluao filed an action in the CFI for specific
performance and damages against Casteel and one Juan Depra (who, they alleged, instigated
Casteel to violate his contract).
ISSUES: 1) Whether the agreement made by the parties created a contract of co-ownership or
partnership.
2) Whether the reinstatement of Casteel over the subject land constitute a dissolution of the
partnership between him and Deluao.

HELD:
The evidence preponderates in favor of the view that the initial intention of the parties was not to
form a co-ownership but to establish a partnership Inocencia Deluao as capitalist partner
and Casteel as industrial partner the ultimate undertaking of which was to divide into two
equal parts such portion of the fishpond as might have been developed by the amount extended
by the plaintiffs-appellees, with the further provision that Casteel should reimburse the expenses
incurred by the appellees over one-half of the fishpond that would pertain to him. This can be
gleaned, among others, from the letter of Casteel to Felipe Deluao showing the intention to
divide the fishpond. On the second issue, the Supreme Court ruled that the arrangement under
the so-called "contract of service" continued until the decision issued by the Secretary of
Agriculture and Natural Resources. This development, by itself, brought about the dissolution of
the partnership. Since the partnership had for its object the division into two equal parts of the
fishpond between the appellees and the appellant after it shall have been awarded to the latter,
and therefore it envisaged the unauthorized transfer of one half thereof to parties other than the
applicant Casteel, it was dissolved by the approval of his application and the award to him of the
fishpond.

Kiel vs. Estate of Sabert
Facts: Albert F. Kiel commenced to work on certain public lands situated in the municipality of
Parang, Cotabato, known as Parang Plantation Company. In 1910, Kiel and P. S. Sabert
entered into an agreement to develop the plantation. Sabert was to furnish the capital and Kiel
was to manage it. It seems that this partnership was formed so that the land could be acquired
in the name of Sabert, Kiel being a German citizen and not deemed eligible to acquire public
lands in the Philippines.
During the World War, Kiel was deported from the Philippines. Five persons, including P. S.
Sabert, organized the Nituan Plantation Company, to which Sabert transferred all the rights and
interests of the Parang Plantation Company. Kiel appears to have tried to secure a settlement
from Sabert. But Sabert's death came before any amicable arrangement could be reached and
before an action by Kiel against Sabert could be decided. So these proceedings against the
estate of Sabert.
Issue: What is the nature of the proceeding? Is this an action to establish a resulting trust in the
land of Sabert?
Held: NO
The court held that a ruling on the issue of establishing trust is not needed. Note that the
complaint as framed asks for a straight money judgment against an estate. In no part of the
complaint did plaintiff allege any interest in land, claim any interest in land, or pretend to
establish a resulting trust in land. This is not an action to establish trust in the land, because
a trust will not be created when, for the purpose of evading the law prohibiting one from
taking or holding real property, he takes a conveyance thereof in the name of a third
person.
Also, no partnership agreement in writing was entered into by Kiel and Sabert. Thus the real
issue is whether or not the alleged verbal copartnership formed by Kiel and Sabert has been
proved. The court held that declarations of one partner, not made in the presence of his
copartner, are not competent to prove the existence of a partnership between them, and that the
existence of a partnership cannot be established by general reputation, rumor, or hearsay.
Although we feel that competent evidence exists establishing the partnership, Kiel under the
facts had no standing in court to ask for any part of the land and in fact he does not do
so. His only legal right is to ask for what is in effect an accounting with reference to its
improvements and income when Sabert became the trustee of the estate on behalf of Kiel.
Kiel is not entitled to any share in the land itself, but he has clearly shown his right to one-half of
the value of the improvements and personal property on the land. The value of these
improvements and of the personal property cannot be ascertained from the record and the case
must therefore be remanded for further proceedings.

Agad vs Mabato
Facts: Petitioner Mauricio Agad claims that he and defendant Severino Mabato are partners in
a fishpond business to which they contributed P1000 each. As managing partner, Mabato yearly
rendered the accounts of the operations of the partnership. However, for the years 1957-1963,
defendant failed to render the accounts despite repeated demands. Petitioner filed a complaint
against Mabato to which a copy of the public instrument evidencing their partnership is
attached. Aside from the share of profits (P14,000) and attorneys fees (P1000), petitioner
prayed for the dissolution of the partnership and winding up of its affairs. Mabato denied the
existence of the partnership alleging that Agad failed to pay hisP1000 contribution.He then filed
a motion to dismiss on the ground of lack of cause of action. The lower court dismissed the
complaint finding a failure to state a cause of action predicated upon the theory that the contract
of partnership is null and void, pursuant to Art. 1773 of our Civil Code, because an inventory of
the fishpond referred in said instrument had not been attached thereto. Art. 1771. A partnership
may be constituted in any form, except where immovable property or real rights are contributed
thereto, in which case a public instrument shall be necessary. Art. 1773. A contract of
partnership is void, whenever immovable property is contributed thereto, if inventory of said
property is not made, signed by the parties; and attached to the public instrument.
Issue: Whether or not immovable property or real rights have been contributed to the
partnership.
Held: Based on the copy of the public instrument attached in the complaint, the partnership was
established to operate a fishpond", and not to "engage in a fishpond business. Thus, Mabatos
contention that it is really inconceivable how a partnership engaged in the fishpond business
could exist without said fishpond property (being) contributed to the partnership is without merit.
Their contributions were limited to P1000 each and neither a fishpond nor a real right thereto
was contributed to the partnership. Therefore, Article 1773 of the Civil Code finds no application
in the case at bar. Case remanded to the lower court for further proceedings.

TUASON VS. BOLANOS GR. No. L-4935. May 28, 195495 Phil. 106
Facts:
Plaintiffs complaint against defendant was to recover possession of a registered land. In the
complaint, the plaintiff is represented by its Managing Partner, Gregorio Araneta, Inc., another
corporation. Defendant, in his answer, sets up prescription and title in himself through "open,
continuous, exclusive and public and notorious possession under claim of ownership, adverse
to the entire world by defendant and his predecessors in interest" from "time immemorial". After
trial, the lower court rendered judgment for plaintiff, declaring defendant to be without any right
to the land in question and ordering him to restore possession thereof to plaintiff and to pay the
latter a monthly rent. Defendant appealed directly to the Supreme Court and contended, among
others, that Gregorio Araneta, Inc. cannot act as managing partner for plaintiff on the theory that
it is illegal for two corporations to enter into a partnership
Issue: Whether or not a corporation may enter into a joint venture with another corporation.
Ruling: It is true that the complaint states that the plaintiff is "represented herein by its Managing
Partner Gregorio Araneta, Inc.", another corporation, but there is nothing against one
corporation being represented by another person, natural or juridical, in a suit in court. The
contention that Gregorio Araneta, Inc. cannot act as managing partner for plaintiff on the theory
that it is illegal for two corporations to enter into a partnership is without merit, for the true rule is
that "though a corporation has no power to enter into a partnership, it may nevertheless enter
into a joint venture with another where the nature of that venture is in line with the business
authorized by its charter." There is nothing in the record to indicate that the venture in which
plaintiff is represented by Gregorio Araneta, Inc. as "its managing partner" is not in line with the
corporate business of either of them.

Aurbach vs. Sanitary Wares (Partnership; Joint Venture; Foreign and Domestic Corp)
Facts:
This consolidated petition assailed the decision of the CA directing a certain MANNER OF
ELECTION OFOFFICERS IN THE BOARD OF DIRECTORS*There are two groups in this case,
the Lagdameo group composed of Filipino investors and the American Standard Inc. (ASI)
composed of foreign investors. The ASI Group and petitioner Salazar (G.R. Nos. 75975-76)
contend that the actual intention of the parties should be viewed strictly on the "Agreement"
dated August 15,1962 wherein it is clearly stated that the parties' intention was to form a
corporation and not a joint venture.
Issue: The main issue hinges on who were the duly elected directors of Saniwares for the year
1983 during its annual stockholders' meeting held on March 8, 1983. To answer this question
the following factors should be determined:
(1) the nature of the business established by the parties whether it was a joint venture or a
corporation (and)
H:
While certain provisions of the Agreement would make it appear that the parties thereto disclaim
being partners or joint venturers such disclaimer is directed at third parties and is not
inconsistent with, and does not preclude, the existence of two distinct groups of stockholders in
Saniwares one of which (the Philippine Investors) shall constitute the majority, and the other ASI
shall constitute the minority stockholder. In any event, the evident intention of the
PhilippineInvestors and ASI in entering into the Agreement is to enter into a joint venture
enterprise
An examination of the Agreement shows that certain provisions were included to protect the
interests of ASI as the minority. For example, the vote of 7 out of 9 directors is required in
certain enumerated corporate acts. ASI is contractually entitled to designate a member of the
Executive Committee and the vote of this member is required for certain transactions
The Agreement also requires a 75% super-majority vote for the amendment of the articles and
by-laws of Saniwares. ASI is also given the right to designate the president and plant manager.
The Agreement further provides that the sales policy of Saniwares shall be that which is
normally followed by ASI and that Saniwares should not export "Standard" products otherwise
than through ASI's Export Marketing Services. Under the Agreement, ASI agreed to provide
technology and know-how to Saniwares and the latter paid royalties for the same.
The legal concept of a joint venture is of common law origin. It has no precise legal definition but
it has been generally understood to mean an organization formed for some temporary purpose.
It is in fact hardly distinguishable from the partnership, since their elements are similar
community of interest in the business, sharing of profits and losses, and a mutual right of
control.
The main distinction cited by most opinions in common law jurisdictions is that the partnership
contemplates a general business with some degree of continuity, while the joint venture is
formed for the execution of a single transaction, and is thus of a temporary nature.

Torres vs CA 320 SCRA 428
Business Organization Partnership, Agency, Trust Sharing of Loss in a Partnership
Industrial Partner
In 1969, sisters Antonia Torres and Emeteria Baring entered into a joint venture agreement with
Manuel Torres. Under the agreement, the sisters agreed to execute a deed of sale in favor
Manuel over a parcel of land, the sisters received no cash payment from Manuel but the
promise of profits (60% for the sisters and 40% for Manuel) said parcel of land is to be
developed as a subdivision.
Manuel then had the title of the land transferred in his name and he subsequently mortgaged
the property. He used the proceeds from the mortgage to start building roads, curbs and gutters.
Manuel also contracted an engineering firm for the building of housing units. But due to adverse
claims in the land, prospective buyers were scared off and the subdivision project eventually
failed.
The sisters then filed a civil case against Manuel for damages equivalent to 60% of the value of
the property, which according to the sisters, is whats due them as per the contract.
The lower court ruled in favor of Manuel and the Court of Appeals affirmed the lower court.
The sisters then appealed before the Supreme Court where they argued that there is no
partnership between them and Manuel because the joint venture agreement is void.
ISSUE: Whether or not there exists a partnership.
HELD: Yes. The joint venture agreement the sisters entered into with Manuel is a partnership
agreement whereby they agreed to contribute property (their land) which was to be developed
as a subdivision. While on the other hand, though Manuel did not contribute capital, he is an
industrial partner for his contribution for general expenses and other costs. Furthermore, the
income from the said project would be divided according to the stipulated percentage (60-40).
Clearly, the contract manifested the intention of the parties to form a partnership. Further still,
the sisters cannot invoke their right to the 60% value of the property and at the same time deny
the same contract which entitles them to it.
At any rate, the failure of the partnership cannot be blamed on the sisters, nor can it be blamed
to Manuel (the sisters on their appeal did not show evidence as to Manuels fault in the failure of
the partnership). The sisters must then bear their loss (which is 60%). Manuel does not bear the
loss of the other 40% because as an industrial partner he is exempt from losses.

TAI TONG CHUACHE & CO., petitioner, vs. THE INSURANCE COMMISSION
FACTS:
Spouses Azucena and Pedro Palomo acquired from a certain Rolando Gonzales a parcel of
land and a building located at San Rafael Village, Davao City.
AzucenaPalomo obtained a loan from Tai Tong Chuache Inc. in the amount of P100,000.00. To
secure the payment of the loan, a mortgage was executed over the land and the building in
favor of Tai Tong Chuache& Co.
Arsenio Chua, representative of Thai Tong Chuache& Co. insured the latter's interest with
Travellers Multi-Indemnity Corporation for P100,000.00.
Pedro Palomo secured a Fire Insurance Policy with Zenith Insurance Corporation and another
Fire Insurance Policy was procured from Philippine British Assurance Company, covering the
same building and the contents thereof.
The building and the contents were totally razed by fire.
The insurance companies paid their corresponding shares of the loss except Travellers Multi-
Indemnity. Travellers alleged that the Fire Insurance Policy it issued was secured and paid by
Arsenio Chua, mortage creditor, for the purpose of protecting his mortgage credit against the
complainants, hence, is not liable to pay complainants.
Tai Tong Chuache& Co. filed a complaint in intervention claiming the proceeds of the Fire
Insurance Policy issued by respondent Travellers.
Travellers Insurance alleged that the Intervenor is not entitled to indemnity under its Fire
Insurance Policy for lack of insurable interest before the loss of the insured premises and that
the complainants, spouses Pedro and AzucenaPalomo, had already paid in full their mortgage
indebtedness to the intervenor.
Insurance Commission dismissed petitioner Tai Tong Cuache's complaint in intervention on the
basis of the certification issued by the then CFI Davao, Branch II, that in a certain civil action
against the Palomos, Arsenio Lopez Chua stands as the complainant and not Tai Tong
Chuache. From said evidence respondent Insurance commission inferred that the credit
extended by herein petitioner to the Palomos secured by the insured property must have been
paid.
ISSUE: Whether the suit was properly filed by petitioners as real party in interest.

HELD:YES.
Public respondent argues however, that if the civil case really stemmed from the loan
granted to AzucenaPalomo by petitioner the same should have been brought by Tai Tong
Chuache or by its representative in its own behalf. From the above premise respondent
concluded that the obligation secured by the insured property must have been paid.
It should be borne in mind that petitioner being a partnership may sue and be
sued in its name or by its duly authorized representative. The fact that Arsenio Lopez
Chua is the representative of petitioner is not questioned. Petitioner's declaration that
Arsenio Lopez Chua acts as the managing partner of the partnership was corroborated
by respondent insurance company. Thus Chua as the managing partner of the
partnership may execute all acts of administration including the right to sue debtors of
the partnership in case of their failure to pay their obligations when it became due and
demandable. Or at the very least, Chua being a partner of petitioner Tai Tong Chuache&
Company is an agent of the partnership. Being an agent, it is understood that he acted
for and in behalf of the firm.
Public respondent's allegation that the civil case flied by Arsenio Chua was in his
capacity as personal creditor of spouses Palomo has no basis.
The respondent insurance company having issued a policy in favor of herein petitioner which
policy was of legal force and effect at the time of the fire, it is bound by its terms and conditions.
Upon its failure to prove the allegation of lack of insurable interest on the part of the petitioner,
respondent insurance company is and must be held liable.

Hung-Man Yoc v. Kieng-chiong- Seng Arellano, J., 1906
Facts:
Chua-Che Co, Yu Yec-Pin, and Ang Chu Keng were partners of Kiong-Tiao-Eng, under the firm
name Kiong-Chiong-Seng.
It was a mercantile partnership organized for engaging in commercial pursuits, specifically,
importation of goodsfor sale here at a profit.
Such organization was not evidenced by any public document as required by Art. 119 of the
Code of Commerce,nor was it registered as required by Art. 17 of the said code. It was merely
recorded in the Internal Revenueoffice and not in the Mercantile Registry.
The agent Yu Yec Pin himself and some of his so-called partners have merely noted in the
books of thepartnership, the capital which each had contributed.
The name was considered as the designation of the partnership and was not proved to be the
firm name.
The CFI of Manila rendered a judgment for a sum of money against each and all of the
defendant partners for7,962.14 pesos. Chu-Che-Co is the only one who appealed questioning
his liability.
Issue: Whether or not Chu-Che-Co can be held liable to pay the amount together with the other
defendants.
Held: No. He is absolved. Chu-Che-Co has incurred no liability and cannot be held individually
responsible for thepayment of the plaintiffs claims.
Ratio:
Firm Name:
Kieng-Chiong-Seng cannot be the firm name of a general partnership.

Firm names should contain the names of all the partners, or at least one of them to be,
followed in twolatter cases by the words and company.
In this case, none of the four names appear in the firm name.
Neither can it be considered as the firm name of a limited partnership; this should
contain the samerequisites as the firm name of a general partnership, and in addition
thereto the word limited.
Anonymous partnerships (corporations) do not require a firm name or signature; a
designation adequate,for the object or objects of the business to which it is dedicated, is
sufficient; however:
The alleged partnership never had any legal existence nor has it acquired any juridical
personality in the acts andcontracts executed and made by it.
It is a partnership de facto and the liability arising from the obligations it contracted with third
parties must be enforceable against someone despite its lack of juridical personality.
The general provisions applicable to all partnerships in Art. 120 shall be applied:
The persons in charge of the management of the association who do not comply with the
requirements of recording the articles of general partnership in the public instrument and
registration in the Mercantile Register shall be responsible together with the persons not
members of the association with whom they may have transacted business in the name of the
same.
Chu-Che-Co was not in charge of the management of the association nor did he contract with
the plaintiffs.
The agent of the partnership, being the person who made all the contracts of the partnership;
also Kieng-Tiao-Eng are the ones liable to plaintiffs.

MACDONALD v. THE NATIONAL CITY BANK OF NEW YORK
FACTS:
1) STASIKINOCEY is a partnership doing business in San Juan, Rizal.
2) This partnership was denied registration in the SEC.
3) The CARDINAL RATTAN, sometimes called the CARDINAL RATTAN FACTORY, is treated
as a copartnership, of which Defendants Gorcey and da Costa are considered general
partners, we are satisfied that, as alleged in various instruments appearing of record, said
Cardinal Rattan is merely the business name or style used by the partnership Stasikinocey.
4) Defendant Stasikinocey had an overdraft account with The National City Bank of New York,
a foreign banking association duly licensed to do business in the Philippines.
5) The overdraft showed a balance of P6,134.92 against the Defendant Stasikinocey or the
Cardinal Rattan.
6) Due to the failure of the partnership to make the required payment, was converted into an
ordinary loan for which the corresponding promissory joint note non-negotiable was
executed on June 3, 1949, by Louis F. da Costa for and in the name of the Cardinal Rattan,
Louis F. da Costa and Alan Gorcey (Exhibit D).
7) This promissory note was secured by a chattel mortgage executed by Louis F. da Costa,
Jr., General Partner for and in the name of Stasikinocey, alleged to be a duly registered
Philippine partnership, doing business under the name and style of Cardinal Rattan.
8) The mortgage deed was fully registered by the mortgagee in the Office of the Register of
Deeds for the province of Rizal.
9) While the said loan was still unpaid and the chattel mortgage subsisting, Defendant
partnership, through Defendants Gorcey and Da Costa transferred to Defendant McDonald
the Fargo truck and Plymouth sedan.
10) Paul Mcdonald, notwithstanding Plaintiffs existing mortgage lien, in turn transferred the
Fargo truck and the Plymouth sedan to Benjamin Gonzales.
11) The National City Bank of New York, Respondent herein, upon learning of the transfers
made by the partnership Stasikinocey to William Shaeffer, from the latter to Paul McDonald,
and from Paul McDonald to Benjamin Gonzales, of the vehicles previously pledged by
Stasikinocey to the Respondent, filed an action against Stasikinocey and its alleged partners
Gorcey and Da Costa, as well as Paul McDonald and Benjamin Gonzales, to recover its
credit and to foreclose the corresponding chattel mortgage.
12) McDonald and Gonzales were made Defendants because they claimed to have a better
right over the pledged vehicle.
13) The CFI annulled the sale of the vehicles in question to Benjamin Gonzales.
14) The CA modified the CFIs decision, relieving Appellant William Shaeffer of the obligation of
paying, jointly and severally, together with Alan W. Gorcey and Louis F. da Costa, Jr., any
deficiency that may remain unpaid after applying the proceeds of the sale of the said motor
vehicles, hence this appeal.
ISSUE: Whether partners herein are already stopped in denying that they are partners of the
partnership Stasikinocey

RULING: YES.
While an unregistered commercial partnership has no juridical personality, nevertheless, where

two or more persons attempt to create a partnership failing to comply with all the legal
formalities, the law considers them as partners and the association is a partnership in so far as
it is a favorable to third persons, by reason of the equitable principle of estoppel. In Jo Chung
Chang vs. Pacific Commercial Co., 45 Phil., 145, it was held that although the partnership with
the firm name of Teck Seing and Co. Ltd., could not be regarded as a partnership de jure, yet
with respect to third persons it will be considered a partnership with all the consequent
obligations for the purpose of enforcing the rights of such third persons. Da Costa and Gorcey
cannot deny that they are partners of the partnership Stasikinocey, because in all their
transactions with the Respondent they represented themselves as such. Petitioner
McDonald cannot disclaim knowledge of the partnership Stasikinocey because he dealt
with said entity in purchasing two of the vehicles in question through Gorcey and Da
Costa. As was held in Behn Meyer & Co. vs. Rosatzin, 5 Phil., 660, where a partnership not
duly organized has been recognized as such in its dealings with certain persons, it shall be
considered as partnership by estoppel and the persons dealing with it are estopped from
denying its partnership existence. The sale of the vehicles in question being void as to Petitioner
McDonald, the transfer from the latter to Petitioner Benjamin Gonzales is also void, as the buyer
cannot have a better right than the seller.
It results that if the law recognizes a defectively organized partnership as de facto as far as third
persons are concerned, for purposes of its de facto existence it should have such attribute of a
partnership as domicile. In Hung-Man Yoc vs. Kieng-Chiong-Seng, 6 Phil., 498, it was held that
although it has no legal standing, it is a partnership de facto and the general provisions of the
Code applicable to all partnerships apply to it. The registration of the chattel mortgage in
question with the Office of the Register of Deeds of Rizal, the residence or place of business of
the partnership Stasikinocey being San Juan, Rizal, was therefore in accordance with section 4
of the Chattel Mortgage Law.

PIONEER INSURANCE & SURETY CORPORATION, petitioner,
vs.
THE HON. COURT OF APPEALS, BORDER MACHINERY & HEAVY EQUIPMENT, INC.,
(BORMAHECO), CONSTANCIO M. MAGLANA and JACOB S. LIM, respondents.
Facts:
In 1965, Jacob S. Lim was engaged in the airline business as owner-operator of Southern
Air Lines (SAL), a single proprietorship. On May 17, 1965, Japan Domestic Airlines (JDA) and
Lim entered into and executed a sales contract for the sale and purchase of two aircrafts and
one set of necessary spare parts for the total agreed price of US $109,000.00 to be paid in
installments. On May 22, 1965, Pioneer Insurance and Surety Corporation as surety executed
and issued its Surety Bond No. 6639in favor of JDA, in behalf of its principal, Lim, for the
balance price of the aircrafts and spare parts.
It appears that Border Machinery and Heavy Equipment Company, Inc. (Bormaheco),
Francisco and Modesto Cervantes (Cervanteses) and Constancio Maglana contributed some
funds used in the purchase of the above aircrafts and spare parts. The funds were supposed to
be their contributions to a new corporation proposed by Lim to expand his airline business. On
June 10, 1965, Lim doing business under the name and style of SAL executed in favor of
Pioneer as deed of chattel mortgage as security for the latter's suretyship in favor of the former.
It was stipulated therein that Lim transfer and convey to the surety the two aircrafts.
However, Lim defaulted on his subsequent installment payments prompting JDA to request
payments from the surety. Hence, Pioneer paid a total sum of P298,626.12. Pioneer then filed a
petition for the extrajudicial foreclosure of the said chattel mortgage. On July 19, 1966, Pioneer
filed an action for judicial foreclosure with an application for a writ of preliminary attachment
against Lim and respondents, the Cervanteses, Bormaheco and Maglana.
RTC held Lim liable to pay Pioneer but dismissed Pioneer's complaint against Maglana,
Bormaheco and the Cervanteses. On appeal, the CA reversed the lower courts decision. Lim
contends that as a result of the failure of respondents Bormaheco, Spouses Cervantes,
Constancio Maglana and petitioner Lim to incorporate, a de facto partnership among them was
created, and that as a consequence of such relationship all must share in the losses and/or
gains of the venture in proportion to their contribution.
Issue:
Whether or not Maglana, Bormaheco and the Cervanteses must share in the loss of the
venture in proportion to their contribution.

Held:
No. Maglana, Bormaheco and the Cervanteseswill not share in the loss of the venture in
proportion to their contribution because theres no de facto partnership.
Ordinarily, when co-investors agreed to do business through a corporation but failed to
incorporate, a de facto partnership would have been formed, and as such, all must share in the
losses and/or gains of the venture in proportion to their contribution. Thus, where persons
associate themselves together under articles to purchase property to carry on a business, and
their organization is so defective as to come short of creating a corporation within the statute,
they become in legal effect partners inter se, and their rights as members of the company to the
property acquired by the company will be recognized
However, such a relation does not necessarily exist, for ordinarily persons cannot be made
to assume the relation of partners, as between themselves, when their purpose is that no
partnership shall exist.
In the instant case, it is to be noted that the petitioner denied having received any amount
from respondents Bormaheco, the Cervanteses and Maglana.It is therefore clear that the
petitioner never had the intention to form a corporation with the respondents despite his
representations to them. This gives credence to the cross-claims of the respondents to the
effect that they were induced and lured by the petitioner to make contributions to a proposed
corporation which was never formed because the petitioner reneged on their agreement.
Therefore, no de facto partnership was created among the parties which would entitle the
petitioner to a reimbursement of the supposed losses of the proposed corporation. The record
shows that the petitioner was acting on his own and not in behalf of his other would-be
incorporators in transacting the sale of the airplanes and spare parts.

LA COMPAIA MARITIMA vs. FRANCISCO MUOZ, ET AL.
G.R. No. L-3704 December 12, 1907FACTS
Francis Muoz de Bustillo, Emilio Muoz and Rafael Naval formed an ordinary general
commercial partnership, Francis Muoz and Sons, for the purpose of carrying a mercantile
business. Muoz de Bustillo was a capitalist partner while Muoz and Naval were industrial
partners. Plaintiff La Compania Maritima brought an action to recover the sum of P26,828.30
against the partnership and the partners in their own individual capacity. Muoz and Naval were
absolved from liability. In their brief, it is claimed that it is not an ordinary general commercial
partnership while in their article of partnership it is expressly stated that they have agreed and
do form an ordinary general commercial partnership. The object of the partnership is purely
mercantile and all requirements under the Code of Commerce were complied with. The articles
of partnership were even recorded in the mercantile registry of Albay. There is no doubt that
there is a partnership. Appellees also claimed that Muoz is not a partner because 1) he
contributed nothing to the partnership, 2) he has no salary and 3) he is excluded from the
management. The Supreme court in upholding that Muoz is a partner stated that 1) he
contributed as much as other industrial partner, 2) he receives a salary, the only difference
between him and Naval is that the latter was entitled to a fixed salary while he is not and 3) that
the partners can validly do the exclusion from management in accordance with the provision of
Art. 125 of the Code of Commerce.
ISSUE
Is an industrial partner in an ordinary general mercantile partnership liable to third persons for
debts and obligations contracted by the partnership?
RULING
Yes. In an ordinary general partnership an industrial partner is liable to third parties for debts
and obligations of partnership. The construction of the law should be avoided which would
enable two persons, each with a large amount of private property, to form and carryon a
partnership and, upon the bankruptcy of the latter, to say to its creditors that they contributed no
capital to the company but only their services, and that their private property is not, therefore,
liable for its debts. It should be noted, however, that the execution of the judgment should not
issue against the private property of the partners until the property of the partnership is
exhausted.

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Commissioner of Internal Revenue vs Borroughs Ltd.

142 SCRA 324

Issue: Is private respondent Borroughs entitled to the refund?

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Yes, Abad Santos is entitled to see the partnership books.

The Supreme Court ruled that according to

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Held: Yes, Duterte and Rallos entered into a contract of partnership.

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A demand was made on petitioner:

other evidence in the record:

Respondent Remedios assisted in the running of the business.

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ISSUE: Whether or not charitable institution is a necessary party to this case.

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Plaintiff Fortis is an employee of defendant Gutierrez Hermanos. Theformer brought an action to

Issue: WON the plaintiff is a co-partner of the defendants in the business.

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The partners contributed, respectively, P20,000.00, P18,000.00 and P2,000.00 to the

The following shall be the exclusive property of each spouse:

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July 30, 1979

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ISSUE: Whether a partnership exists between the parties

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ISSUE: Whether or not there exists a partnership.

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Kieng-Chiong-Seng cannot be the firm name of a general partnership.

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While an unregistered commercial partnership has no juridical personality, nevertheless, where

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