1. Obillos v. CIR Their original purpose was to divide the lots for residential purposes.

Their original purpose was to divide the lots for residential purposes. If later on they found it not feasible
2. Reyes vs. CIR to build their residences on the lots because of the high cost of construction, then they had no choice
3. Evangelista vs. CIR but to resell the same to dissolve the co-ownership. The division of the profit was merely incidental to
4. Bastida vs. Menzi the dissolution of the co-ownership which was in the nature of things a temporary state.
5. ROSARIO U. YULO v. YANG CHIAO SENG
6. Estanislao Jr. vs. CA Reyes vs. CIR (24 SCRA 198)
7. OA V CIR
8. Tocao v CA FACTS: 1. Petitioners Florencio and Angel Reyes, father and son, purchased a lot and building for P
9. HEIRS OF TAN ENG KEE vs. CA 835,000.00. 2. The amount of P 375,000.00 was paid. 3. The balance of P 460,000.00 was left, which
10. Torres vs. CA represents the mortgage obligation of the vendors with the China Banking Corporation, which mortgage
11. Litonjua vs. Litonjua obligations were assumed by the vendees. 4. The initial payment of P 375,000.00 was shared equally
12. Pioneer Insurance & Surety Corporation vs Court of Appeals by the petitioners. 5. At the time of the purchase, the building was leased to various tenants, whose
13. Lim Tong Lim vs Philippine Fishing rights under the lease contracts with the original owners, the purchaser, petitioners herein, agreed to
___________________________________________________ respect. 6. Petitioners divided equally the income of operation and maintenance. 7. The gross income
from rentals of the building amounted to about P 90,000.00 annually. 8. An assessment was made
against petitioners by the CIR. 9. The assessment sought to be reconsidered was futile. 10. On appeal
Obillos v. CIR to the Court of Tax Appeals, the CTA ruled that petitioners are liable for the income tax due from the
Facts: partnership formed by petitioners.

In 1973, Jose Obillos completed payment on two lots located in Greenhills, San Juan. The next day, he
transferred his rights to his four children for them to build their own residences. The Torrens title would
show that they were co-owners of the two lots. However, the petitioners resold them to Walled City
Securities Corporation and Olga Cruz Canda for P313k or P33k for each of them. They treated the
profit as capital gains and paid an income tax of P16,792.00
The CIR requested the petitioners to pay the corporate income tax of their shares, as this entire
assessment is based on the alleged partnership under Article 1767 of the Civil Code; simply because
they contributed each to buy the lots, resold them and divided the profits among them.
But as testified by Obillos, they have no intention to form the partnership and that it was merely
incidental since they sold the said lots due to high demand of construction. Naturally, when they sell
them as co-partners, it will result to the share of profits. Further, their intention was to divide the lots for
residential purposes.
Issue:
Was there a partnership, hence, they are subject to corporate income taxes?
ISSUE: Are petitioners subject to the tax on corporations provided for in the National Internal Revenue
Code?
HELD: After referring to another section of the NIRC, which explicitly provides that the term
corporations include partnerships and then to Article 1767 of the Civil Code of the Philippines, defining
what a contract of partnership is, the opinion goes on to state that the essential elements of a
partnership are two, namely: a) an agreement to contribute money, property or industry to a common
fund; and b) intent to divide the profits among the contracting parties. The first element is undoubtedly
present in the case, for, admittedly, petitioners have agreed to, and did, contribute money and property
to a common fund. Hence, the issue narrows down to their intent in acting as they did. Upon
consideration of all the facts and circumstances surrounding the case, it was determined that their
purpose was to engage in real estate transaction for monetary gain and then divide the same among
themselves, hence taxable.
EUFEMIA EVANGELISTA, MANUELA EVANGELISTA, and FRANCISCA EVANGELISTA
petitioners, vs. THE COLLECTOR OF INTERNAL REVENUE and THE COURT OF TAX APPEALS,
respondents.
G.R. No. L-9996, October 15, 1957

Court Ruling: Facts:

Not necessarily. As Article 1769 (3) of the Civil Code provides: the sharing of gross returns does not in
itself establish a partnership, whether or not the persons sharing them have a joint or common right or
interest in any property from which the returns are derived. There must be an unmistakeable intention
to form a partnership or joint venture.
In this case, the Commissioner should have investigated if the father paid donor's tax to establish the
fact that there was really no partnership.
We hold that it is error to consider the petitioners as having formed a partnership under article 1767 of
the Civil Code simply because they allegedly contributed P178,708.12 to buy the two lots, resold the
same and divided the profit among themselves.
To regard the petitioners as having formed a taxable unregistered partnership would result in
oppressive taxation and confirm the dictum that the power to tax involves the power to destroy. That
eventuality should be obviated.
As testified by Jose Obillos, Jr., they had no such intention. They were co-owners pure and simple. To
consider them as partners would obliterate the distinction between a co-ownership and a partnership.
The petitioners were not engaged in any joint venture by reason of that isolated transaction.
Petitioners borrowed sum of money from their father and together with their own personal funds they
used said money to buy several real properties. They then appointed their brother (Simeon) as
manager of the said real properties with powers and authority to sell, lease or rent out said properties to
third persons. They realized rental income from the said properties for the period 1945-1949.
On September 24, 1954 respondent Collector of Internal Revenue demanded the payment of income
tax on corporations, real estate dealer's fixed tax and corporation residence tax for the years 1945-
1949. The letter of demand and corresponding assessments were delivered to petitioners on December
3, 1954, whereupon they instituted the present case in the Court of Tax Appeals, with a prayer that "the
decision of the respondent contained in his letter of demand dated September 24, 1954" be reversed,
and that they be absolved from the payment of the taxes in question. CTA denied their petition and
subsequent MR and New Trials were denied. Hence this petition.
Issue:
Whether or not petitioners have formed a partnership and consequently, are subject to the tax on
corporations provided for in section 24 of Commonwealth Act. No. 466, otherwise known as the
National
Internal Revenue Code, as well as to the residence tax for corporations and the real estate dealers
fixed tax.

Held: YES.
The essential elements of a partnership are two, namely: (a) an agreement to contribute money,
property or industry to a common fund; and (b) intent to divide the profits among the contracting
parties. The first element is undoubtedly present in the case at bar, for, admittedly, petitioners have
agreed to, and did, contribute money and property to a common fund. Upon consideration of all the
facts and circumstances surrounding the case, we are fully satisfied that their purpose was to engage in
real estate transactions for monetary gain and then divide the same among themselves, because of the
following observations, among others: (1) Said common fund was not something they found already in
existence; (2) They invested the same, not merely in one transaction, but in a series of transactions; (3)
The aforesaid lots were not devoted to residential purposes, or to other personal uses, of petitioners
herein.

Although, taken singly, they might not suffice to establish the intent necessary to constitute a
partnership, the collective effect of these circumstances is such as to leave no room for doubt on the
existence of said intent in petitioners herein.
For purposes of the tax on corporations, our National Internal Revenue Code, includes these
partnerships with the exception only of duly registered general co-partnerships within the purview
of the term "corporation." It is, therefore, clear to our mind that petitioners herein constitute a
partnership, insofar as said Code is concerned and are subject to the income tax for corporations

ROSARIO U. YULO v. YANG CHIAO SENG

107 Phil. 527

LABRADOR, J.:
This concerns a "Petition to Reopen Case," dated December 14, 1959, presented by attorneys for
plaintiffs-appellants, alleging that the relationship between Rosario U. Yulo, plaintiff-appellant and Yang
Chiao Seng, defendant-appellee, as lessor and lessee, has already been definitely decided by the
Court of Appeals in the case of Sta. Marina, et al., and Rosario U. Yulo and Yang Chiao Seng, C. A. G.
R. No. 8143-R. We have gone out of our way to review our conclusion that no relation of partnership
existed between said parties because we had denied the motion for reconsideration of plaintiff-
appellant questioning the conclusion of this Court without explanation.

The claim of plaintiff-appellant Rosario U. Yulo is that the relationship between her and defendant-
appellee Yang Chiao Seng as partners had already been passed upon by the Court of Appeals in the
above-indicated decision. The portion of the decision of the Court of Appeals is contained on page 8 of
the motion for reconsideration in which it held that articles of partnership of Young & Co., Ltd. show that
the parties to this case are partners in the construction of the Astor Theatre. It is to be noted, however,
that the decision of the Court of Appeals was one in which Emilia and Maria Carrion Sta. Marina are
plaintiffs and the defendants are Rosario Yulo and Yang Chiao Seng; the action was one to eject the
defendants from the land occupied by them; the issue was the reasonable value for the use and
occupation of the land. The Court of Appeals said that the plaintiffs in that case had claimed that, the
reasonable value was P3,000, while the defendants claimed that it was only P1,000, and the Court of
Appeals held that in view of the partnership papers P3,000 represent the share of Rosario U. Yulo in
the profits of the partnership and not the reasonable rent of the property.
It is evident that no res judicata can be claimed for the previous judgment of the Court of Appeals. In
the first place, the parties in that case were Emilia and Maria Carrion Sta. Marina and the defendants,
Rosario U. Yulo and Yang Chiao Seng; in the second place, the issue decided by the Court of Appeals
was the rental value of the property in question; that the cause of action was for ejectment of Rosario U.
Yulo and Yang Chiao Seng. In the case at bar, the action is between Rosario U. Yulo as plaintiff and
Yang Chiao Seng as defendant; the issue is whether or not the plaintiff is partner in the cinematograph
business, as claimed by plaintiff, or said plaintiff is merely a sublessee, as claimed by the defendant.
There is, therefore, no identity of parties nor identity of issue, nor identity of cause of action. We call
attention to the very citation contained in appellant's motion for reconsideration,, which reads as follows:
"Parties to a judgment are not bound by it, in a subsequent controversy between each other,
unless they were adversary parties in the original action. There must have been an issue or
controversy between them. The reason for this rule obviously is the same as that which
underlies the whole doctrine of res judicata, namely, that a person should not be bound by a
judgment except to the extent that he, or someone representing him, had an adequate
opportunity not only to litigate the matters adjudicated, but to litigate them against the party
(or his predecessor in interest) who seeks to use the judgment against him." (See. 422, 1
Freeman on Judgments, 5th ed., p. 918).
Without going further, we are fully satisfied of the correctness of our conclusion that the relationship
between plaintiff-appellant Rosario U. Yulo and Yang Chiao Seng is merely that of sublessor and
sublessee, and not that of partners. The motion to reopen the case is hereby denied and considering
that judgment had become final since October 29, 1959, order is hereby given to remand the record to
the court below.
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.
LORENZO OA V 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 (8 Mertens Law of Federal Income Taxation, p. 562 Note 63;
emphasis ours.)
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.
TOCAO V. CA
G.R. No. 127405; October 4, 2000
Ponente: J. Ynares-Santiago
FACTS:
Private respondent Nenita A. Anay met petitioner William T. Belo, then the vice-president for operations
of Ultra Clean Water Purifier, through her former employer in Bangkok. Belo introduced Anay to
petitioner Marjorie Tocao, who conveyed her desire to enter into a joint venture with her for the
importation and local distribution of kitchen cookwares
Under the joint venture, Belo acted as capitalist, Tocao as president and general manager, and Anay as
head of the marketing department and later, vice-president for sales
The parties agreed that Belo's name should not appear in any documents relating to their transactions
with West Bend Company. Anay having secured the distributorship of cookware products from the West
Bend Company and organized the administrative staff and the sales force, the cookware business took
off successfully. They operated under the name of Geminesse Enterprise, a sole proprietorship
registered in Marjorie Tocao's name.
The parties agreed further that Anay would be entitled to:
(1) ten percent (10%) of the annual net profits of the business;
(2) overriding commission of six percent (6%) of the overall weekly production;
(3) thirty percent (30%) of the sales she would make; and
(4) two percent (2%) for her demonstration services. The agreement was not reduced to writing on the
strength of Belo's assurances that he was sincere, dependable and honest when it came to financial
commitments.
On October 9, 1987, Anay learned that Marjorie Tocao had signed a letter addressed to the Cubao
sales office to the effect that she was no longer the vice-president of Geminesse Enterprise.
Anay attempted to contact Belo. She wrote him twice to demand her overriding commission for the
period of January 8, 1988 to February 5, 1988 and the audit of the company to determine her share in
the net profits.
Anay still received her five percent (5%) overriding commission up to December 1987. The following
year, 1988, she did not receive the same commission although the company netted a gross sales of P
13,300,360.00.
On April 5, 1988, Nenita A. Anay filed Civil Case No. 88-509, a complaint for sum of money with
damages against Marjorie D. Tocao and William Belo before the Regional Trial Court of Makati, Branch
140
The trial court held that there was indeed an "oral partnership agreement between the plaintiff and the
defendants. The Court of Appeals affirmed the lower courts decision.
ISSUE:
Whether or not there is a partnership.
HELD:
Yes, even though it was not reduced to writing, for a partnership can be instituted in any form. The fact
that it was registered as a sole proprietorship is of no moment for such registration was only for the
companys trade name.
Anay was not even an employee because when they ventured into the agreement, they explicitly
agreed to profit sharing this is even though Anay was receiving commissions because this is only
incidental to her efforts as a head marketer.
The Supreme Court also noted that a partner who is excluded wrongfully from a partnership is an
innocent partner. Hence, the guilty partner must give him his due upon the dissolution of the partnership
as well as damages or share in the profits realized from the appropriation of the partnership business
and goodwill. An innocent partner thus possesses pecuniary interest in every existing contract that
was incomplete and in the trade name of the co-partnership and assets at the time he was wrongfully
expelled.
An unjustified dissolution by a partner can subject him to action for damages because by the mutual
agency that arises in a partnership, the doctrine of delectus personaeallows the partners to have
the power, although not necessarily the right to dissolve the partnership.
Tocaos unilateral exclusion of Anay from the partnership is shown by her memo to the Cubao office
plainly stating that Anay was, as of October 9, 1987, no longer the vice-president for sales of
Geminesse Enterprise. By that memo, petitioner Tocao effected her own withdrawal from the
partnership and considered herself as having ceased to be associated with the partnership in the
carrying on of the business. Nevertheless, the partnership was not terminated thereby; it continues until
the winding up of the business.
Motion for Reconsideration filed by Tocao and Belo decided by the SC on September 20, 2001.
Belo is not a partner. Anay was not able to prove that Belo in fact received profits from the company.
Belo merely acted as a guarantor. His participation in the business meetings was not as a partner but
as a guarantor. He in fact had only limited partnership. Tocao also testified that Belo received nothing
from the profits. The Supreme Court also noted that the partnership was yet to be registered in the
Securities and Exchange Commission. As such, it was understandable that Belo, who was after all
petitioner Tocaos good friend and confidante, would occasionally participate in the affairs of the
business, although never in a formal or official capacity.
HEIRS OF TAN ENG KEE vs. CA 341 SCRA 740, G.R. No. 126881, October 3, 2000
FACTS:
After the second World War, Tan EngKee and Tan Eng Lay, pooling their resources and industry
together, entered into a partnership engaged in the business of selling lumber and hardware and
construction supplies. They named their enterprise "Benguet Lumber" which they jointly managed until
Tan EngKee's death. Petitioners herein averred that the business prospered due to the hard work and
thrift of the alleged partners. However, they claimed that in 1981, Tan Eng Lay and his children caused
the conversion of the partnership "Benguet Lumber" into a corporation called "Benguet Lumber
Company." The incorporation was purportedly a ruse to deprive Tan EngKee and his heirs of their
rightful participation in the profits of the business. Petitioners prayed for accounting of the partnership
assets, and the dissolution, winding up and liquidation thereof, and the equal division of the net assets
of Benguet Lumber. The RTC ruled in favor of petitioners, declaring that Benguet Lumber is a joint
venture which is akin to a particular partnership. The Court of Appeals rendered the assailed decision
reversing the judgment of the trial court.
ISSUE: Whether the deceased Tan EngKee and Tan Eng Lay are joint adventurers and/or partners in a
business venture and/or particular partnership called Benguet Lumber and as such should share in the
profits and/or losses of the business venture or particular partnership
RULING:
There was no partnership whatsoever. Except for a firm name, there was no firm account, no firm
letterheads submitted as evidence, no certificate of partnership, no agreement as to profits and losses,
and no time fixed for the duration of the partnership. There was even no attempt to submit an
accounting corresponding to the period after the war until Kee's death in 1984. It had no business book,
no written account nor any memorandum for that matter and no license mentioning the existence of a
partnership. Also, the trial court determined that Tan EngKee and Tan Eng Lay had entered into a joint
venture, which it said is akin to a particular partnership. A particular partnership is distinguished from a
joint adventure, to wit:(a) A joint adventure (an American concept similar to our joint accounts) is a sort
of informal partnership, with no firm name and no legal personality. In a joint account, the participating
merchants can transact business under their own name, and can be individually liable therefor. (b)
Usually, but not necessarily a joint adventure is limited to a SINGLE TRANSACTION, although the
business of pursuing to a successful termination maycontinue for a number of years; a partnership
generally relates to a continuing business of various transactions of a certain kind. A joint venture
"presupposes generally a parity of standing between the joint co-ventures or partners, in which each
party has an equal proprietary interest in the capital or property contributed, and where each party
exercises equal rights in the conduct of the business. The evidence presented by petitioners falls short
of the quantum of proof required to establish a partnership. In the absence of evidence, we cannot
accept as an established fact that Tan EngKee allegedly contributed his resources to a common fund
for the purpose of establishing a partnership. Besides, it is indeed odd, if not unnatural, that despite the
forty years the partnership was allegedly in existence, Tan EngKee never asked for an accounting. The
essence of a partnership is that the partners share in the profits and losses .Each has the right to
demand an accounting as long as the partnership exists. A demand for periodic accounting is evidence
of a partnership. During his lifetime, Tan EngKee appeared never to have made any such demand for
accounting from his brother, Tang Eng Lay. We conclude that Tan EngKee was only an employee, not
a partner since they did not present and offer evidence that would show that Tan EngKee received
amounts of money allegedly representing his share in the profits of the enterprise. There being no
partnership, it follows that there is no dissolution, winding up or liquidation to speak of.
In the instant case, we find private respondent's arguments to be well-taken. Where circumstances
taken singly may be inadequate to prove the intent to form a partnership, nevertheless, the collective
effect of these circumstances may be such as to support a finding of the existence of the parties'
intent.36 Yet, in the case at bench, even the aforesaid circumstances when taken together are not
persuasive indicia of a partnership. They only tend to show that Tan Eng Kee was involved in the
operations of Benguet Lumber, but in what capacity is unclear. We cannot discount the likelihood that
as a member of the family, he occupied a niche above the rank-and-file employees. He would have
enjoyed liberties otherwise unavailable were he not kin, such as his residence in the Benguet Lumber
Company compound. He would have moral, if not actual, superiority over his fellow employees, thereby
entitling him to exercise powers of supervision. It may even be that among his duties is to place orders
with suppliers. Again, the circumstances proffered by petitioners do not provide a logical nexus to the
conclusion desired; these are not inconsistent with the powers and duties of a manager, even in a
business organized and run as informally as Benguet Lumber Company.
There being no partnership, it follows that there is no dissolution, winding up or liquidation to speak of.
Hence, the petition must fail.
ANTONIA TORRES, assisted by her husband, ANGELO TORRES; and EMETERIA BARING,
petitioners, vs. COURT OF APPEALS and MANUEL TORRES, respondents.
Facts:
Petitioners Torres and Baring entered into a joint venture agreement with Respondent Torres for the
development of a parcel of land into a subdivision. They executed a Deed of Sale covering the said
parcel of land in favor of respondent Manual Torres, who then had it registered in his name. By
mortgaging the property, respondent Manuel Torres obtained from Equitable Bank a loan of P40,000,
which was supposed to be used for the development of subdivision as per the JVA. However, the
project did not push through and the land was subsequently foreclosed by the bank.
Petitioners Antonia Torres alleged that it was due to respondents lack of funds/skills that caused the
project to fail, and that respondent use the loan in the furtherance of his own company. On the
otherhand, respondent Manuel Torres alleged that he used the loan to implement the JVA surveying
and subdivision of lots, approval of the project, advertisement, and construction of roads and the likes,
and that he did all of these for a total of P85,000.
Petitioners filed a case for estafa against respondent but failed. They then instituted a civil case. CA
held that the two parties formed a partnership for the development of subdivision and as such, they
must bear the loss suffered by the partnership in the same proportion as their share in profits. Hence,
the petition.
Issue #1:
Whether or not the transaction between petitioner and respondent was that of joint venture/partnership.
Held:
Yes. There formed a partnership between the two on the basis of joint-venture agreement and deed of
sale. A reading of the terms of agreement shows the existence of partnership pursuant to Art 1767 of
Civil Code, which states By the contract of partnership two or more persons bind themselves to
contribute money, property, or industry to a common fund, with the intention of dividing the profits
among themselves. In the agreement, petitioners would contribute property to the partnership in the
form of land which was to be developed into a subdivision; while respondent would give, in addition to
his industry, the amount needed for general expenses and other costs. Furthermore, the income from
the said project would be divided according to the stipulated percentage. Clearly, the contract
manifested the intention of the parties to form a partnership.
Issue #2:
Whether or not the deed of sale between the two was valid.
Held:
No. Petitioners were wrong in contending that the JVA is void under Article 1422[14] of the Civil Code,
because it is the direct result of an earlier illegal contract, which was for the sale of the land without
valid consideration.
The Joint Venture Agreement clearly states that the consideration for the sale was the expectation of
profits from the subdivision project. Its first stipulation states that petitioners did not actually receive
payment for the parcel of land sold to respondent. Consideration, more properly denominated as cause,
can take different forms, such as the prestation or promise of a thing or service by another.
In this case, the cause of the contract of sale consisted not in the stated peso value of the land, but in
the expectation of profits from the subdivision project, for which the land was intended to be used. As
explained by the trial court, the land was in effect given to the partnership as petitioners participation
therein. There was therefore a consideration for the sale, the petitioners acting in the expectation that,
should the venture come into fruition, they would get sixty percent of the net profits.
Aurelio Litonjua Jr vs Eduardo Litonjua Sr. et al
Business Organization Partnership, Agency, Trust Partnership, how formed
FACTS: Aurelio and Eduardo are brothers. In 1973, Aurelio alleged that Eduardo entered into a
contract of partnership with him. Aurelio showed as evidence a letter sent to him by Eduardo that the
latter is allowing Aurelio to manage their family business (if Eduardos away) and in exchange thereof
he will be giving Aurelio P1 million or 10% equity, whichever is higher. A memorandum was
subsequently made for the said partnership agreement. The memorandum this time stated that in
exchange of Aurelio, who just got married, retaining his share in the family business (movie theatres,
shipping and land development) and some other immovable properties, he will be given P1 Million or
10% equity in all these businesses and those to be subsequently acquired by them whichever is
greater.
In 1992 however, the relationship between the brothers went sour. And so Aurelio demanded an
accounting and the liquidation of his share in the partnership. Eduardo did not heed and so Aurelio
sued Eduardo.
ISSUE: Whether or not there exists a partnership.
HELD: No. The partnership is void and legally nonexistent. The documentary evidence presented by
Aurelio, i.e. the letter from Eduardo and the Memorandum, did not prove partnership.
The 1973 letter from Eduardo on its face, contains typewritten entries, personal in tone, but is unsigned
and undated. As an unsigned document, there can be no quibbling that said letter does not meet the
public instrumentation requirements exacted under Article 1771 (how partnership is constituted) of the
Civil Code. Moreover, being unsigned and doubtless referring to a partnership involving more than
P3,000.00 in money or property, said letter cannot be presented for notarization, let alone registered
with the Securities and Exchange Commission (SEC), as called for under the Article 1772
(capitalization of a partnership) of the Code. And inasmuch as the inventory requirement under the
succeeding Article 1773 goes into the matter of validity when immovable property is contributed to the
partnership, the next logical point of inquiry turns on the nature of Aurelios contribution, if any, to the
supposed partnership.
The Memorandum is also not a proof of the partnership for the same is not a public instrument and
again, no inventory was made of the immovable property and no inventory was attached to the
Memorandum. Article 1773 of the Civil Code requires that if immovable property is contributed to the
partnership an inventory shall be had and attached to the contract.
Pioneer Insurance & Surety Corporation vs Court of Appeals
175 SCRA 668 Business Organization Corporation Law When De Facto Partnership Does Not
Exist
Jacob Lim was the owner of Southern Air Lines, a single proprietorship. In 1965, Lim convinced
Constancio Maglana, Modesto Cervantes, Francisco Cervantes, and Border Machinery and Heavy
Equipment Company (BORMAHECO) to contribute funds and to buy two aircrafts which would form
part a corporation which will be the expansion of Southern Air Lines. Maglana et al then contributed
and delivered money to Lim.
But instead of using the money given to him to pay in full the aircrafts, Lim, without the knowledge of
Maglana et al, made an agreement with Pioneer Insurance for the latter to insure the two aircrafts which
were brought in installment from Japan Domestic Airlines (JDA) using said aircrafts as security. So
when Lim defaulted from paying JDA, the two aircrafts were foreclosed by Pioneer Insurance.
It was established that no corporation was formally formed between Lim and Maglana et al.
ISSUE: Whether or not Maglana et al must share in the loss as general partners.
HELD: No. There was 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. But in
this case, it was shown that Lim did not have the intent to form a corporation with Maglana et al. This
can be inferred from acts of unilaterally taking out a surety from Pioneer Insurance and not using the
funds he got from Maglana et al. The record shows that Lim 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.
Lim Tong Lim vs Philippine Fishing Gear Industries, Inc.
Business Organization Partnership, Agency, Trust Corporation by Estoppel
FACTS: It was established that Lim Tong Lim requested Peter Yao to engage in commercial fishing
with him and one Antonio Chua. The three agreed to purchase two fishing boats but since they do not
have the money they borrowed from one Jesus Lim (brother of Lim Tong Lim). They again borrowed
money and they agreed to purchase fishing nets and other fishing equipments. Now, Yao and Chua
represented themselves as acting in behalf of Ocean Quest Fishing Corporation (OQFC) they
contracted with Philippine Fishing Gear Industries (PFGI) for the purchase of fishing nets amounting to
more than P500k.
They were however unable to pay PFGI and so they were sued in their own names because apparently
OQFC is a non-existent corporation. Chua admitted liability and asked for some time to pay. Yao
waived his rights. Lim Tong Lim however argued that hes not liable because he was not aware that
Chua and Yao represented themselves as a corporation; that the two acted without his knowledge and
consent.
ISSUE: Whether or not Lim Tong Lim is liable.
HELD: Yes. From the factual findings of both lower courts, it is clear that Chua, Yao and Lim had
decided to engage in a fishing business, which they started by buying boats worth P3.35 million,
financed by a loan secured from Jesus Lim. In their Compromise Agreement, they subsequently
revealed their intention to pay the loan with the proceeds of the sale of the boats, and to divide equally
among them the excess or loss. These boats, the purchase and the repair of which were financed with
borrowed money, fell under the term common fund under Article 1767. The contribution to such fund
need not be cash or fixed assets; it could be an intangible like credit or industry. That the parties agreed
that any loss or profit from the sale and operation of the boats would be divided equally among them
also shows that they had indeed formed a partnership.
Lim Tong Lim cannot argue that the principle of corporation by estoppels can only be imputed to Yao
and Chua. Unquestionably, Lim Tong Lim benefited from the use of the nets found in his boats, the boat
which has earlier been proven to be an asset of the partnership. Lim, Chua and Yao decided to form a
corporation. Although it was never legally formed for unknown reasons, this fact alone does not
preclude the liabilities of the three as contracting parties in representation of it. Clearly, under the law
on estoppel, those acting on behalf of a corporation and those benefited by it, knowing it to be without
valid existence, are held liable as general partners.