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1|P a r t n e r s h i p Cases

B. CLASSES OF PARTNERSHIPS AND PARTNERS 70% of the profits would go to Santos while Nieves and  10% share of annual net profits
Zabat would get 15% each.  6% overriding commission for weekly sales
ABAYON: Ortega vs. CA It was a lending venture business.
 30% of sales Anay will make herself
Nieves introduced Gragera of Monte Maria Corp, who
FACTS: On December 19, 1980, respondent Misa obtained short term loans for the partnership in
associated himself together, as senior partner with  2% share for her demo services
consideration of commissions. In 1986, Nieves and Zabat
petitioners Ortega, del Castillo, Jr., and Bacorro, as junior executed an agreement which formalized their earlier verbal
partners. On Feb. 17, 1988, respondent Misa wrote a letter agreement. But, Santis and Nieves later discovered that They operated under the name Geminesse Enterprise, this
stating that he is withdrawing and retiring from the firm and name was however registered as a sole proprietorship with
Zabat engaged in the same lending business. Hence, Zabat
asking for a meeting with the petitioners to discuss the was expelled from the partnership. On June 1987, Santos the Bureau of Domestic Trade under Tocao. The joint venture
mechanics of the liquidation. On June 30, 1988, petitioner agreement was not reduced to writing because Anay trusted
filed a complaint for recovery of sum of money and damages
filed a petition to the Commision's Securities Investigation against the respondents, alleging them as employees who Belo’s assurances.
and Clearing Department for the formal dissolution and misappropriated the funds. Respondents assert they were
liquidation of the partnership. On March 31, 1989, the partners and not mere employees. Santos claimed that after The venture succeeded under Anay’s marketing prowess.
hearing officer rendered a decision ruling that the withdrawal discovery of Zabat's activities, he ceased infusing funds
of the petitioner has not dissolved the partnership. On thereby extinguishing the partnership. But then the relationship between Anay and Tocao soured.
appeal, the SEC en banc reversed the decision and was One day, Tocao advised one of the branch managers that
affirmed by the Court of Appeals. Hence, this petition. Issue: Whether or not the parties' relationship was one of Anay was no longer a part of the company. Anay then
partnership or of employer-employee demanded that the company be audited and her shares be
ISSUE: Whether or not the Court of Appeals has erred in Held: Yes they were partners. By the contract of given to her.
holding that the partnership is a partnership at will and partnership, two or more persons bind themselves to
whether or not the Court of Appeals has erred in holding ISSUE: Whether or not there is a partnership.
contribute money, property or industry to a common fund,
that the withdrawal of private respondent dissolved the with the intention of dividing the profits among
partnership regardless of his good or bad faith HELD: Yes, even though it was not reduced to writing, for
themselves. The "Articles of Agreement" stipulated that the
a partnership can be instituted in any form. The fact that it
signatories shall share the profits of the business in a 70-15-
HELD: No. The SC upheld the ruling of the CA regarding was registered as a sole proprietorship is of no moment for
15 manner, with petitioner getting the lion's share. This
the nature of the partnership. The SC further stated that a such registration was only for the company’s trade name.
stipulation clearly proved the establishment of a partnership.
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 Anay was not even an employee because when they
Indeed, the partnership was established to engage in a
mutual desire and consent of the partners. The right to ventured into the agreement, they explicitly agreed to profit
money-lending business, despite the fact that it was
choose with whom a person wishes to associate himself is sharing this is even though Anay was receiving commissions
formalized only after the Memorandum of Agreement had
the very foundation and essence of that partnership. Its because this is only incidental to her efforts as a head
been signed by petitioner and Gragera.
continued existence is, in turn, dependent on the constancy marketer.
of that mutual resolve, along with each partner's capability to
give it, and the absence of a cause for dissolution provided The Supreme Court also noted that a partner who is
by the law itself. Verily, any one of the partners may, at his Marjorie Tocao And William T. Belo Vs. CA And Nenita A. excluded wrongfully from a partnership is an innocent
sole pleasure, dictate a dissolution of the partnership at will. Anay partner. Hence, the guilty partner must give him his due
He must, however, act in good faith, not that the attendance upon the dissolution of the partnership as well as damages
of bad faith can prevent the dissolution of the partnership FACTS: William Belo introduced Nenita Anay to his or share in the profits “realized from the appropriation of the
but that it can result in a liability for damages. girlfriend, Marjorie Tocao. The three agreed to form a joint partnership business and goodwill.” An innocent partner thus
venture for the sale of cooking wares. Belo was to contribute possesses “pecuniary interest in every existing contract that
P2.5 million; Tocao also contributed some cash and she shall was incomplete and in the trade name of the co-partnership
Fernando Santos vs Spouses Arsenio and Nieves Reyes
also act as president and general manager; and Anay shall be and assets at the time he was wrongfully expelled.”
in charge of marketing. Belo and Tocao specifically asked
Facts: This is a petition for review on certiorari assailing Anay because of her experience and connections as a An unjustified dissolution by a partner can subject him to
CA decision which affirmed the RTC decision. Santos and action for damages because by the mutual agency that arises
marketer. They agreed further that Anay shall receive the
Nieves Reyes verbally agreed that Santos would act as following: in a partnership, the doctrine of delectus personaeallows the
financier while Nieves and Meliton Zabat would act as partners to have the power, although not necessarily
solicitors for membership and collectors of loan payment. the right to dissolve the partnership.
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Tocao’s unilateral exclusion of Anay from the partnership is their agreement is the equal sharing of whatever proceeds accounting procedures, strictly, this could not be profit but a
shown by her memo to the Cubao office plainly stating that realized from their business; However, sometime on July 23, net worth.
Anay was, as of October 9, 1987, no longer the vice- 1976, private respondent Olivia V. Yanson, in order for her to
president for sales of Geminesse Enterprise. By that memo, recover the above mentioned personal properties which she MORAN VS CA
petitioner Tocao effected her own withdrawal from the brought into their business, filed a complaint against
partnership and considered herself as having ceased to be petitioner Lourdes Navarro for "Delivery of Personal FACTS: In February 1971, Isabelo Moran and Mariano
associated with the partnership in the carrying on of the Properties With Damages and with an application for a writ Pecson entered into a partnership agreement where they
business. Nevertheless, the partnership was not terminated of replevin. Private respondents' application for a writ of agreed to contribute P15k each for the purpose of printing
thereby; it continues until the winding up of the business. replevin was later approved/granted by the trial court. For 95k posters of the delegates to the then 1971 Constitutional
her defense, petitioner Navarro argue that she and private Commission. Moran shall be in charge in managing the
Motion for Reconsideration filed by Tocao and Belo decided respondent Yanson actually formed a verbal partnership printing of the posters. It was further agreed that Pecson will
by the SC on September 20, 2001. which was engaged in the business of Air Freight Service receive a commission of P1k a month starting April 1971 to
Agency. She contended that the decision sustaining the writ December 1971; that the partnership is to be liquidated on
Belo is not a partner. Anay was not able to prove that Belo in of replevin is void since the properties belonging to the December 15, 1971.
fact received profits from the company. Belo merely acted as partnership do not actually belong to any of the parties until
a guarantor. His participation in the business meetings was the final disposition and winding up of the partnership. Pecson partially fulfilled his obligation to the partnership
not as a partner but as a guarantor. He in fact had only when he issued P10k in favor of the partnership. He gave the
limited partnership. Tocao also testified that Belo received ISSUE: P10k to Moran as the managing partner. Moran however did
nothing from the profits. The Supreme Court also noted that not add anything and, instead, he only used P4k out of the
the partnership was yet to be registered in the Securities and 1. Whether or not there was a partnership that existed P10k in printing 2,000 posters. He only printed 2,000 posters
Exchange Commission. As such, it was understandable that between the parties. because he felt that printing all 95k posters is a losing
Belo, who was after all petitioner Tocao’s good friend and venture because of the delay by the COMELEC in announcing
confidante, would occasionally participate in the affairs of 2. Whether the properties that were commonly used in the the full delegates. All the posters were sold for a total of
the business, although never in a formal or official capacity. operation of Allied Air Freight belonged to the alleged P10k.
partnership business.
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
RULING: Article 1767 of the New Civil Code defines the to pay P47.5k for unrealized profit; P8k for Pecson’s monthly
ACLEDAN: LOURDES NAVARRO AND MENARDO contract of partnership: Art. 1767. By the contract of commissions; P7k as return of investment because the
NAVARRO, petitioners, vs. COURT OF APPEALS, JUDGE partnership two or more persons bind themselves to venture never took off; plus interest.
BETHEL KATALBAS-MOSCARDON, Presiding Judge, contribute money, property, or industry to a common fund,
Regional Trial Court of Bacolod City, Branch 52, Sixth with the intention of dividing the proceeds among ISSUE: Whether or not the CA judgment is correct.
Judicial Region and Spouses OLIVIA V. YANSON AND themselves. A cursory examination of the evidences
RICARDO B. YANSON,respondents. presented no proof that a partnership, whether oral or HELD: No. The award of P47.5k for unrealized profit is
written had been constituted. In fact, those movables speculative. There is no evidence whatsoever that the
FACTS: Private respondent Olivia V. Yanson and Petitioner brought by the plaintiff for the use in the operation of the partnership between the Moran and Pecson would have
Lourdes Navarro were engaged in the business of Air Freight business remain registered in her name. While there may been a profitable venture (because base on the
Service Agency. Pursuant to the Agreement which they have been co-ownership or co-possession of some items circumstances then i.e. the delay of the COMELEC in
entered, they agreed to operate the said Agency; It is the and/or any sharing of proceeds by way of advances received proclaiming the candidates, profit is highly unlikely). In fact, it
Private Respondent Olivia Yanson who supplies the by both plaintiff and the defendant, these are not indicative was a failure doomed from the start. There is therefore no
necessary equipment and money used in the operation of and supportive of the existence of any partnership between basis for the award of speculative damages in favor of
the agency. Her brother in the person of Atty. Rodolfo them. Art. 1769 par. 2 provides: Co-ownership or co- Pecson. Further, there is mutual breach in this case, Pecson
Villaflores was the manager thereof while petitioner Lourdes possession does not of itself establish a partnership, whether only gave P10k instead of P15k while Moran gave nothing at
Navarro was the Cashier; In compliance to her obligation as such co-owners or co-possessors do or do not share any all.
stated in their agreement, private respondent brought into profits made by the use of the property” Besides, the alleged
their business certain chattels or movables or personal profit was a difference found after valuating the assets and As for the P8k monthly commission, this is without basis. The
properties. However, those personal properties remain to be not arising from the real operation of the business. In agreement does not state the basis of the commission. The
registered in her name; Among the provisions stipulated in payment of the commission could only have been predicated
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on relatively extravagant profits. The parties could not have 9. The assessment sought to be reconsidered was futile. Due to failure of payment of the tax demanded, a
intended the giving of a commission inspite of loss or failure warrant of distraint and levy against the property of the
of the venture. Since the venture was a failure, Pecson is not 10. On appeal to the Court of Tax Appeals, the CTA ruled plaintiffs was made. To avoid embarrassment, the plaintiffs
entitled to the P8k commission. that petitioners are liable for the income tax due from the paid under protest a sum of P601 as part of the tax and
partnership formed by petitioners. penalties to the municipal treasurer and requested that they
As for the P7k award as return for Pecson’s investment, the be allowed to pay under protest the remaining balance in
CA erred in his ruling too. Though the venture failed, it did ISSUE: Are petitioners subject to the tax on corporations monthly installments. The request was granted by the
took off the ground as evidenced by the 2,000 posters provided for in the National Internal Revenue Code? defendant with the condition that the plaintiffs file the usual
printed. Hence, return of investment is not proper in this bond secured by two solvent persons to guarantee prompt
case. There are risks in any business venture and the failure HELD: After referring to another section of the NIRC, payment of each installment as it becomes due. Before the
of the undertaking cannot entirely be blamed on the which explicitly provides that the term corporation includes first installment was due, the plaintiff's formally protested
managing partner alone, specially if the latter exercised his partnerships and then to Article 1767 of the Civil Code of the against the payment of the sum of P601 but the defendant
best business judgment, which seems to be true in this case. Philippines, defining what a contract of partnership is, the overruled the protest and denied the refund. Due to failure
opinion goes on to state that the essential elements of a of the plaintiff's to pay the installments in accordance to the
Moran must however return the unused P6k of Pecson’s partnership are two, namely: a) an agreement to contribute bond filed by them, the defendant ordered the municipal
contribution to the partnership plus P3k representing money, property or industry to a common fund; and b) treasurer to execute within five days the warrant of distraint
Pecson’s profit share in the sale of the printed posters. intent to divide the profits among the contracting parties. and levy against the plaintiff’s. In order to avoid further
Computation of P3k profit share is as follows: (P10k profit The first element is undoubtedly present in the case, for, embarrassment and annoyance, the plaintiff's paid under
from the sale of the 2,000 posters printed) – (P4k expense in admittedly, petitioners have agreed to , and did, contribute protest the sum of P1,260 representing the unpaid balance
printing the 2k posters) = (P6k profit); Profit ÷ 2 = P3k each. money and property to a common fund. Hence, the issue of the income tax and penalties demanded by defendant. A
narrows down to their intent in acting as they did. Upon claim for the refund of the total sum of P1,863.44 paid under
Reyes vs. CIR (24 SCRA 198) consideration of all the facts and circumstances surrounding protest by them but that defendant refused and still refuses
the case, it was determined that their purpose was to engage to refund the said amount notwithstanding the plaintiffs’
FACTS: in real estate transaction for monetary gain and then divide demand, hence this appeal.
the same among themselves, hence taxable.
1. Petitioners Florencio and Angel Reyes, father and son, ISSUE: Whether or not the plaintiffs formed partnership
purchased a lot and building for P 835,000.00. hence liable for income tax

2. The amount of P 375,000.00 was paid. BANTILAN: GATCHALIAN VS. COMISSIONER OF HELD: Yes, a partnership of a civil nature was formed. The
INTERNAL REVENUE appealed decision is affirmed, with the costs of the instance
3. The balance of P 460,000.00 was left, which represents the 67 Phil. 666. April 29, 1939. to the plaintiff appellants.
mortgage obligation of the vendors with the China Banking J. Imperial.
Corporation, which mortgage obligations were assumed by Under Article 1767 of the Civil Code, by contract of
the vendees. FACTS: Gatchalian and company contributed money in partnership two or more persons bind themselves to
order to purchase one sweepstakes ticket valued at two contribute money, property, or industry to a common fund,
4. The initial payment of P 375,000.00 was shared equally by pesos (P2) from one of the duly authorized agents of the with the intention of dividing the profits among themselves.
the petitioners. National Charity Sweepstakes Office, and the same was In the instant case, the plaintiffs organized a partnership of a
registered under the same name. The ticket consequently civil nature because each of them put up money to buy a
5. At the time of the purchase, the building was leased to won one of the third prizes with the amount of P50,000. sweepstakes ticket for the sole purpose of dividing equally
various tenants, whose rights under the lease contracts with Gatchalian and company then cashed the prize check against the prize which they may win, as they did in fact in the
the original owners, the purchaser, petitioners herein, agreed the Philippine National Bank. Gatchalian was required to file amount of P50,000. The partnership was not only formed,
to respect. the corresponding income tax return covering the prize won. but upon the organization thereof and the winning of the
The defendant had an assessment against Gatchalian and prize, Jose Gatchalian personally appeared in the office of
6. Petitioners divided equally the income of operation and company requesting that the payment of the sum of P1,499 the Philippine Charity Sweepstakes, in his capacity as co-
maintenance. to the deputy provincial treasurer in Bulacan. The plaintiffs, partner, as such collection the prize, the office issued the
through their respective counsels, requested the exemption check for P50,000 in favor of Jose Gatchalian and company,
7. The gross income from rentals of the building amounted from the payment of the income tax but were denied. and the said partner, in the same capacity, collected the said
to about P 90,000.00 annually.
check. All these circumstances repel the idea that the
8. An assessment was made against petitioners by the CIR.
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plaintiffs organized and formed a community of property pursuant to the project of partition approved in 1949, “the rights to his four children, the petitioners, to enable them to
only. properties remained under the management of Lorenzo T. build their residences. The Torrens titles issued to them
Oña who used said properties in business by leasing or showed that they were co-owners of the two lots.
LORENZO T. OÑA and HEIRS OF JULIA BUÑALES, namely: selling them and investing the income derived therefrom and
RODOLFO B. OÑA, MARIANO B. OÑA, LUZ B. OÑA, the proceeds from the sales thereof in real properties and In 1974, or after having held the two lots for more
VIRGINIA B. OÑA and LORENZO B. OÑA, JR., securities. than a year, the petitioners resold them to the Walled City
vs. THE COMMISSIONER OF INTERNAL REVENUE Securities Corporation and Olga Cruz Canada for the total
G.R. No. L-19342, May 25, 1972 It is thus incontrovertible that petitioners did not, sum of P313,050. They derived from the sale a total profit of
contrary to their contention, merely limit themselves to P134, 341.88 or P33,584 for each of them. They treated the
FACTS: Julia Buñales died leaving as heirs her surviving holding the properties inherited by them. Indeed, it is profit as a capital gain and paid an income tax on one-half
spouse, Lorenzo T. Oña and her five children. A civil case was admitted that during the material years herein involved, thereof or of P16,792.
instituted in the CFI of Manila for the settlement of her some of the said properties were sold at considerable profit,
estate. Oña, the surviving spouse, was appointed and that with said profit, petitioners engaged, thru Lorenzo In April, 1980, the Commissioner of Internal
administrator of the estate of said deceased. He submitted T. Oña, in the purchase and sale of corporate securities. It is Revenue required the four petitioners to pay corporate
the project of partition, which was approved by the Court. likewise admitted that all the profits from these ventures income tax on the total profit of P134,336 in addition to
Because three of the heirs, namely, Luz, Virginia and Lorenzo, were divided among petitioners proportionately in individual income tax on their shares thereof. The petitioners
Jr, all surnamed Oña, were still minors when the project of accordance with their respective shares in the inheritance. are being held liable for deficiency income taxes and
partition was approved, Lorenzo Oña, their father and penalties totalling P127,781.76 on their profit of P134,336, in
administrator of the estate filed a petition with the CFI of As already indicated, for tax purposes, the co- addition to the tax on capital gains already paid by them.
Manila for the appointment as guardian of said minors. The ownership of inherited properties is automatically converted
Court appointed him guardian of the persons and property into an unregistered partnership the moment the said The Commissioner acted on the theory that the
of the aforenamed minors. The heirs have undivided ½ common properties and/or the incomes derived therefrom four petitioners had formed an unregistered partnership or
interest in 10 parcels of land, 6 houses and money from the are used as a common fund with intent to produce profits joint venture The petitioners contested the assessments. Two
War Damage Commission. for the heirs in proportion to their respective shares in the Judges of the Tax Court sustained the same. Hence, the
inheritance as determined in a project partition either duly instant appeal.
Although the project of partition was approved by executed in an extrajudicial settlement or approved by the
the Court, no attempt was made to divide the properties and court in the corresponding testate or intestate proceeding., Issue: W/N the petitioners had indeed formed a
the properties remained under the management of Lorenzo the petitioners formed an unregistered partnership. partnership or joint venture and thus liable for corporate tax
Oña who used said properties in business by leasing or
selling them and investing the income derived therefrom and Among the reasons for holding the appellants Held: The Supreme Court held that the petitioners
proceeds from the sales thereof in real properties and therein to be unregistered co-partners for tax purposes, that should not be considered to have formed a partnership just
securities. their common fund "was not something they found already because they allegedly contributed P178,708.12 to buy the
in existence" and that "it was not a property inherited by two lots, resold the same and divided the profit among
CIR decided that petitioners formed an them pro indiviso," but it is certainly far fetched to argue themselves. To regard so would result in oppressive taxation
unregistered partnership and therefore, subject to the therefrom, as petitioners are doing here, that ergo, in all and confirm the dictum that the power to tax involves the
corporate income tax, pursuant to Section 24, in relation to instances where an inheritance is not actually divided, there power to destroy. That eventuality should be obviated.
Section 84(b), of the Tax Code. Accordingly, he assessed can be no unregistered co-partnership.
against the petitioners corporate income taxes for 1955 and As testified by Jose Obillos, Jr., they had no such
1956. Petitioners protested against the assessment and G.R. No. L-68118 October 29, 1985 intention. They were co-owners pure and simple. To consider
asked for reconsideration of the ruling of respondent that JOSE P. OBILLOS, JR., SARAH P. OBILLOS, ROMEO P. them as partners would obliterate the distinction between a
they have formed an unregistered partnership. Finding no OBILLOS and REMEDIOS P. OBILLOS, brothers and co-ownership and a partnership. The petitioners were not
merit in petitioners' request, CIR denied it. sisters, petitioners engaged in any joint venture by reason of that isolated
ISSUE: WON petitioners formed an unregistered COURT OF TAX APPEALS, respondents.
partnership. AQUINO, J.: *Article 1769(3) of the Civil Code provides that
"the sharing of gross returns does not of itself establish a
RULING: Yes, petitioners formed an unregistered Facts: On March 2, 1973 Jose Obillos, Sr. bought two lots partnership, whether or not the persons sharing them
partnership. Supreme Court held that that instead of actually with areas of 1,124 and 963 square meters of located at have a joint or common right or interest in any property
distributing the estate of the deceased among themselves Greenhills, San Juan, Rizal. The next day he transferred his from which the returns are derived". There must be an
5|P a r t n e r s h i p Cases
unmistakable intention to form a partnership or joint received a fixed salary and a percentage of the profits. The paid some P20,000 in full satisfaction of his share of the
venture.* corporation had to borrow money or obtain credits from profits.
time to time and pay interest thereon. The amount paid for
Their original purpose was to divide the lots for interest was charged against the department concerned, and On April 27, 1922, the defendant corporation entered a
residential purposes. If later on they found it not feasible to the interest charges were taken in to account in determining written agreement with the plaintiff.
build their residences on the lots because of the high cost of the net profits of each department. The practice of the
construction, then they had no choice but to resell the same corporation was to debit or credit each department with The fertilizer business was carried on my defendant
to dissolve the co-ownership. The division of the profit was interest at the bank rate on its daily balance. The fertilizer corporation.
merely incidental to the dissolution of the co-ownership business of Menzi & Co., Inc. was carried on in accordance
which was in the nature of things a temporary state. It had to with this practice under the Sundries Department until July On May 3, 1924, plaintiff made a contract with defendant
be terminated sooner or later. 1923, and after that as a separate department. corporation to furnish it all the stems and scraps to tobacco
that it might need for its fertilizer business either in the
They did not contribute or invest additional ' In November 1921, plaintiff Bastida, who has had some Philippines or for export to other countries. This contract is
capital to increase or expand the properties, nor was there an experience in mixing and selling fertilizer, went to see Mr. rendered to in the record as the “Vastago Contract.” The
unmistakable intention to form partnership or joint venture. Toehl, the manager of the Sundries Department of Menzi & defendant corporation advanced the plaintiff, paying the
Co., Inc., and told him that he had a written contract with the salaries of his employees, and other expenses in performing
WHEREFORE, the judgment of the Tax Court is reversed and Philippine Sugar Centrals Agency for 1,250 tons of mixed his contract.
set aside. The assessments are cancelled. No costs. fertilizers, and that he could obtain other contracts, including
one from the Calamba Sugar Estates for 450 tons, but he did Prior to the expiration of the contract, the manager of the
All co-ownerships are not deemed unregistered not have the money to buy the ingredients to fill the order defendant corporation notified the plaintiff that the contract
partnership.—Co-Ownership who own properties which and carry on the business. He offered to assign to Menzi & for his services would not be renewed.
produce income should not automatically be considered Co., Inc., his contract with the Philippine Sugar Centrals
partners of an unregistered partnership, or a corporation, Agency and to supervise the mixing of the fertilizer. He also When plaintiff’s contract expired on April 27, 1927, the
within the purview of the income tax law. To hold otherwise, had the authority to obtain other orders for 50% of the net fertilizer department of Menzi & Co., Inc., had on had
would be to subject the income of all profits that the defendant corporation might derive materials and ingredients, and two Ford trucks worth
therefrom. The latter accepted plaintiff’s officer. Plaintiff P75,000 and accounts receivable amounting to P103,000.
Co-ownerships of inherited properties to the tax on assigned to Menzi & Co., Inc., his contract with the Sugar The defendant corporation decided to dispose of the
corporations, inasmuch as if a property does not produce an Centrals Agency, and the defendant corporation proceeded materials and equipment, collect the outstanding accounts of
income at all, it is not subject to any kind of income tax, to fill the order. Plaintiff supervised the mixing of the such corporation, prepare a balance sheet and a profit and
whether the income tax on individuals or the income tax on fertilizer. loss statement in order to determine the net profits at that
corporation. time. Plaintiff refused to accept it, and filed the present
On January 10, 1922, the defendant corporation, at plaintiff’s action.
BANAYBANAY: FRANCISCO BASTIDA (Plaintiff-appellee) request, gave him a letter.
vs. MENZI & CO., INC., J.M. MENZI and P.C. Menzi & Co., Inc. proceeded to liquidate its fertilizer
SCHLOBOHM (Defendants) MENZI & CO. (Appellant) Menzi & Co., Inc., continued to carry on its fertilizer business business. Since it had old and damages stocks worth
THE FACTS: under the arrangement with the plaintiff. It ordered P40,000, it proposed to sell those stocks at public or private
ingredients from the United States and other countries, and sale, and to divide the proceeds between the parties. This
Defendant Menzi & Company was organized in 1921 for the the interest on the drafts for the purchase of these materials proposal did not materialize, and eventually, the old stocks
purpose of importing and selling general merchandise, was changed to the business as part of the cost of the were taken over by the defendant corporation.
including fertilizers and fertilizer ingredients. The defendant materials. The mixed fertilizers were sold by Menzi & Co.,
corporation subsequently established a joint venture with Inc. between January 19 and April 1, 1922 under its An audit conducted after the final liquidation of the fertilizer
John Bordman, and established Menzi-Bordman Company. “CORONA” brand. business revealed certain errors of bookkeeping. A balance
Defendant eventually acquired the goodwill, trademarks, due to the plaintiff was found amounting to P21,633.20. In
business and other assets of the old German firm Behn, On or about April 24, 1922, the net profits of the business order to collect this balance, plaintiff filed a complaint, with
Meyer & Co., Ltd. Among the trademarks of fertilizers carried on under the oral agreement were determined by nine (9) causes of action, before the Court of First Instance of
acquired by the defendant corporation were those known as Menzi & Co., Inc., after deducting interest charges, Manila. Plaintiff contended that a partnership existed
the “ARADO”, “HOZ” and “CORONA.” proportional part of warehouse rent, and salaries and wages, between him and Menzi & Co., Inc. with the former as the
and other expenses of said business, and the plaintiff was industrial partner and the latter as the capitalist. He also
Menzi & Co. Inc was divided into several different
departments, each of which was headed by a manager, who
6|P a r t n e r s h i p Cases
argued that he was entitled to goodwill as well as the common fund any property, industry, or any
fertilizer trademarks of the company. of these things, in order to obtain profit. a) There already existed a settlement between
plaintiff and the defendant corporation. It is
THE RULING OF THE CFI: The CFI rendered a decision, c) Plaintiff did not own the fertilizer trademarks a settled rule that where one of the parties to
which held that a partnership agreement existed between used by the defendant corporation. He did such contract acquiesces in the terms and
plaintiff and the defendant corporation. While it dismissed not contribute to the reputation of these conditions, he is bound to it due to mutual
four (4) causes of action, it nevertheless ordered Menzi & trademarks because these already existed consent.
Co., Inc. to pay the plaintiff the amounts due to him as a long before plaintiff worked in the
partner in the business. Hence, Menzi & Co., Inc. appealed corporation. b) Plaintiff cannot claim a share of the net
the ruling of the CFI before the Supreme Court. profits after his contract with Menzi & Co.,
2) REGARDING THE SECOND ISSUE: Whether or Inc., ended. Since he was just an employee,
THE ISSUES: not the contract entered into by Menzi & Co., his right to the net profits made after his
Inc., and plaintiff Bastida was merely a termination of employment was already
1) Whether or not there existed a regular contract of employment. extinguished.
commercial co-partnership between Menzi &
Co., Inc., and plaintiff Francisco Bastida. HELD: Yes. The contract entered into by Menzi
2) Whether or not the contract entered into by & Co., Inc., and plaintiff Bastida was merely a EUFRACIO D. ROJAS (Plaintiff-Appellant) vs.
Menzi & Co., Inc., and plaintiff Bastida was contract of employment. CONSTANCIO B. MAGLANA (Defendant-Appellee)
merely a contract of employment. THE FACTS:
3) Whether or not the plaintiff was entitled to a REASONS:
percentage of the net profits. On January 14, 1955, defendant-appellee Constancio
a) The plaintiff was working for Menzi & Co., Inc. Maglana and plaintiff-appellant Eufracio Rojas executed their
THE RULING OF THE SUPREME COURT: The Articles of Co-Partnership called Eastcoast Development
as an employee because the fertilizer
Supreme Court modified the decision of the CFI of Manila. It Enterprises (EDE) with only the two of them as partners. The
business belonged to the defendant
ordered that the defendant corporation pay the plaintiff the partnership EDE with an indefinite term of existence was duly
amount of P21,633.20 with legal interest from the date of the registered on January 21, 1955 with the Securities and
filing of complaint. Exchange Commission.
b) The plaintiff was working for the defendant
corporation. However, instead of receiving a
THE BASIS OF THE SUPREME COURT RULING: One of the purposes of the duly-registered partnership was
fixed salary and a small percentage of the net
profits, he was to receive 35% of the net to “apply or secure timber and/or minor forest products
profits as compensation for his services. In licenses and concessions over public and/or private forest
there existed a regular commercial co- lands and to operate, develop and promote such forests
addition, the corporation was to give him a
partnership between Menzi & Co., Inc., and
cash advance of P300 per month on account rights and concessions.”
plaintiff Francisco Bastida.
of his participation in the profits.
A duly-registered Articles of Co-Partnership was filed
HELD: No. There existed no regular
c) While plaintiff may be associated with the together with an application for a timber concession
commercial co-partnership between Menzi &
defendant corporation, it does not mean that covering the area located at Cateel and Baganga in Davao
Co., Inc., and plaintiff Francisco Bastida.
this relationship is automatically considered a Province, with the Bureau of Forestry which was approved.
partnership. Timber License No. 35-56 was duly registered and became
the basis for subsequent renewals made for an in behalf of
a) Neither the provisions of the contract nor the 3) REGARDING THE THIRD ISSUE: Whether or not the duly registered partnership EDE.
conduct of the parties prior or subsequent to the plaintiff was entitled to a percentage of the
net profits. Under the said Articles of Co-Partnership, it was agreed that:
its execution justified the finding that it was a
contract of co-partnership.
HELD: Yes. The plaintiff was entitled to a 1) Maglana shall manage the business affairs of the
percentage of the net profits, but is only partnership, including marketing and handling of
b) There was no common fund belonging to the
allowed to collect the balance of P21,633.20. cash, and is authorized to sign all papers and
parties as joint owners or partners. The was
instruments relating to the partnership.
no evidence of the plaintiff and the
defendant corporation in placing in a REASONS:
7|P a r t n e r s h i p Cases
2) Rojas shall be the logging superintendent and later, Rojas told Maglana that he will not be able to comply dissolution of the second one, was a de facto partnership
shall manage the logging operations of the with the promised contributions and he will no longer work and at will.
partnership. It is also provided in the said Articles as logging superintendent. Maglana then told the Rojas that
of Co-Partnership that all profits and losses of the the latter’s share will be just 29% of the net profits. HELD: No. The partnership, carried on by Rojas and
partnership shall be divided share and shared alike Maglana after the dissolution of the second one, was not
between the partners. Rohas took funds from EDE more than his contribution. a de facto partnership and at will.
Thus, Maglana informed Rojas that he dissolved the
During the period from January 14, 1955 to April 30, 1956, partnership. REASONS:
there was no operation of said partnership.
Rojas filed an action before the Court of First Instance of 1) There is an existing partnership that was duly
Because of the difficulties encounted in the business, Rojas Davao against Maglana for the recovery of properties, registered at the time the second partnership was
and Maglana decided to avail the services of Agustin accounting, receivership and damages. The CFI denied Rojas’ dissolved.
Pahamotang as an industrial partner. petition for appointment of a receiver. The CFI also 2) It was not the intention of the partners to dissolve
appointed commissioners to examine the accounts of EDE. It the first partnership upon the constitution of the
On March 4, 1956, Maglana, Rojas and Pahamotang approved the submitted Commissioners’ Report. second one. Except for the fact that they took in
executed their Articles of Co-Partnership under the same one industrial partner and gave him an equal share
name EASTCOAST DEVELOPMENT ENTERPRISES (EDE). THE RULING OF THE CFI: in the profits as well as fixing the term of the
Aside from the slight difference in the purpose of the second second partnership to thirty (30) years, everything
partnership which is to hold and secure renewal of timber The CFI rendered its decision ruling that: else was the same.
license instead of to secure the license as in the first 3) The obligations of Rojas and Maglana referred to
partnership and the term of the second partnership fixed to 1) The complaint of the plaintiff be dismissed. the Articles of Co-Partnership of the first
thirty (30) years, everything else is the same. 2) The partnership of the defendant and the plaintiff partnership.
is one of a de facto and at will.
The second partnership started its operation on May 1, 1956, 3) The plaintiff is not entitled to any share in the
and was able to ship logs and realize profits amounting to profits of said partnership, since his indebtedness REGARDING THE SECOND ISSUE: Whether or not
P643,633.07. to the partnership exceeded his actual Maglana is liable for damages for liquidating the
contribution. partnership.
On October 25, 1956, the three partners executed a
document entitled “CONDITIONAL SALE OF INTEREST IN THE Hence, plaintiff Rojas filed the present petition before the HELD: No. Whether or not Maglana is liable for
PARTNERSHIP, EASTCOAST DEVELOPMENT ENTERPRISE” in Supreme Court. damages for liquidating the partnership.
which Maglana and Rojas shall purchase the interest, share
and participation of Pahamotang in the value of P31,501.12. THE ISSUES: REASONS:
Pahamotang was paid in full, and his properties contributed
to the partnership was acquired by Maglana and Rojas. 1) Whether or not the partnership, carried on by 1) Maglana can unilaterally dissolve the partnership.
Rojas and Maglana after the dissolution of the 2) The liquidation of the partnership was done
Maglana and Rojas continued the partnership. However, second one, was a de facto partnership and at properly. An accounting on the partnership assets
they did not made any written agreement or reconstitution will. was conducted after the CFI ordered
of their written Articles of Co-Partnership. 2) Whether or not Maglana is liable for damages commissioners to do such task. This was
for liquidating the partnership. accomplished.
Rojas entered into a management contract with another 3) Whether Rojas is entitled to any profit after the 3) Maglana cannot be said to be in bad faith.
logging enterprise, the CMS Estate, Inc. He left and liquidation of the partnership.
abandoned the partnership. He also withdrew his equipment
from EDE for use in the newly acquired area. Such THE RULING OF THE SUPREME COURT: The
equipment were transferred to CMS Estate, Inc., by way of Supreme Court modified that decision of the CFI of Davao. REGARDING THE SECOND ISSUE: Whether Rojas is
chattel mortgage. entitled to any profit after the liquidation of the
A month later, Maglana wrote to Rojas, reminding him of his
REGARDING THE FIRST ISSUE: Whether or not the HELD: No. Rojas is not entitled to any profit after the
obligation to contribute, either in cash or in equipment, to
the capital investments of EDE as well as the obligation to partnership, carried on by Rojas and Maglana after the liquidation of the partnership.
perform his duties as logging superintendent. Two week
8|P a r t n e r s h i p Cases
REASONS: 1) In the years 1968 and 1970, petitioners as co- REGARDING THE FIRST ISSUE: Whether or not
owners of real estate transactions formed and petitioners formed an unregistered partnership subject to
1) Rojas failed to contribute the whole amount of unregistered partnership or joint venture taxable corporate income tax.
P158,158.00 to the partnership. He only as a corporation under Section 20(b) and its
contributed P18,750. It is settled rule that when a income was subject to the taxes prescribed under HELD: No. Petitioners did not form an unregistered
partner who has undertaken to contribute a sum Section 24, both of the National Internal Revenue partnership subject to corporate income tax.
of money fails to do so, he becomes a debtor of Code.
the partnership for whatever he may have 2) The unregistered partnership was subject to REASONS:
promised to contribute (Article 1786, Civil Code). corporate income tax as distinguished from profits
He is also liable for interests and damages from derived from the partnership by them which is 1) There was no evidence that petitioners entered into
the time he should have complied with his subject to individual income tax. an agreement to contribute money, property, or
obligation (Article 1788, Civil Code). 3) The availment of tax amnesty under P.D. No. 23 industry to a common fund. Nor did they intended to
relieved petitioners of their individual income tax divide the profits among themselves. Respondent CIR
2) On the other hand, Rojas is liable in the amount of liabilities but did not relieve them from the tax and/or his representative just assumed these conditions
P131,166 to the partnership. He is liable of liability of the unregistered partnership. Hence, to be present on the basis of the fact that petitioners
P40,092 as well as on the basis of actual capital the petitioners were required to pay the deficiency purchased certain parcels of land and became co-
contribution, in the amount of P52,040.31. income tax assessed. owners thereof.
 The character of habitual activity peculiar to
3) Maglana contributed P267,541.44, which is more Petitioners filed a petition for review with the Court of Tax business transaction was absent in the case.
that his commitment to contribute P160,984. Appeals. The two transaction of buying and selling
Hence, he is subject to reimbursement from Rojas land in 1966 and 1968 were isolated.
regarding the excess. THE RULING OF THE CTA: The CTA affirmed the
decision of the Commissioner of Internal Revenue. 2) The fact that those who agree to form a co-
MARIANO P. PASCUAL and RENATO P. DRAGON However, in a separate dissenting opinion, CTA Associate ownership share or do not share any profits made
(Petitioners) vs. COMMISSION OF INTERNAL REVENUE Judge Constate Roaquin stated that considering the by the use of the property held in common does not
and COURT OF TAX APPEALS (Respondents) circumstances of the case, although there might in fact be a convert their venture into a partnership.
co-ownership between the petitioners, there was no  In the present case, there is clear evidence of
THE FACTS: adequate basis for the conclusion that they thereby formed co-ownership between the petitioners. There
an unregistered partnership which made them liable for is no adequate basis to support the
On June 22, 1956, petitioners bought two (2) parcels of land corporate income tax under the Tax Code. Hence, proposition that they thereby formed an
from Santiago Bernardino, et. al. On May 28, 1966, they petitioners filed the present petition before the Supreme unregistered partnership.
bought another three (3) parcels of land from Juan Roque. Court.  The two isolated transactions whereby they
In 1968, the first two parcels of land were sold by petitioners purchased properties and sold the same a
to Marenir Development Corporation. On March 19, 1970, THE ISSUES: few years thereafter did not make them
the three parcels of land were sold by petitioners to Erlinda partners.
Reyes and Maria Samson. Petitioners realized a profits of 1) Whether or not petitioners formed an
P60,000 in the sale made in 1970. The corresponding capital unregistered partnership subject to corporate REGARDING THE SECOND ISSUE: Whether or not the tax
gains tax were paid by petitioners in 1973 and 1974 by income tax. amnesty relieved the petitioners from payment of other
availing of the tax amnesties granted in the said years. 2) Whether or not the tax amnesty relieved the taxes for the period covered by such amnesty.
petitioners from payment of other taxes for the
On March 31, 1979, the Commissioner of Internal Revenue period covered by such amnesty. HELD: Yes. The tax amnesty relieved the petitioners
sent a letter to petitioners, in which they were assessed and from payment of other taxes for the period covered by
required to pay a total amount of P107,101.70 as alleged THE RULING OF THE SUPREME COURT: The Supreme such amnesty.
deficiency corporate income taxes for the years 1968 and Court granted the petition. It reversed and set aside the
1970. Petitioners protested the said assessment, asserting decision of the CTA. REASON: As petitioners have availed of the benefits of
that they had availed of tax amnesties way back in 1974. tax amnesty as individual taxpayers in these transactions,
THE BASIS OF THE SUPREME COURT RULING: they are thereby relieved of any further tax liability
The Commissioner replied, stating the following: arising therefrom.
9|P a r t n e r s h i p Cases
the same, not merely in one transaction, but in a series of (P5,217.25) plus legal interest to commence
CASTRO: G.R. No. L-9996 October 15, 1957 transactions; (3) The aforesaid lots were not devoted to from April 23, 1976 when this case was filed in
EUFEMIA EVANGELISTA, MANUELA EVANGELISTA, and residential purposes, or to other personal uses, of petitioners court.
FRANCISCA EVANGELISTA, petitioners, herein.
vs. THE COLLECTOR OF INTERNAL REVENUE and THE ISSUE: whether or not Sardane is a partner in a partnership
COURT OF TAX APPEALS, respondents. Although, taken singly, they might not suffice to establish thus the debts in issue are partnership contributions
the intent necessary to constitute a partnership, the
collective effect of these circumstances is such as to leave no HELD: No. The Court of Appeals held, and still the evidence
Facts: Petitioners borrowed sum of money from their father room for doubt on the existence of said intent in petitioners is insufficient to prove that a partnership existed between the
and together with their own personal funds they used said herein. private parties hereto.
money to buy several real properties. They then appointed
their brother (Simeon) as manager of the said real properties As manager of the basnig Sarcado naturally some
For purposes of the tax on corporations, our National
with powers and authority to sell, lease or rent out said degree of control over the operations and maintenance
Internal Revenue Code, includes these partnerships — with
properties to third persons. They realized rental income from thereof had to be exercised by herein petitioner. The fact
the exception only of duly registered general copartnerships
the said properties for the period 1945-1949. that he had received 50% of the net profits does not
— within the purview of the term "corporation." It is,
conclusively establish that he was a partner of the private
therefore, clear to our mind that petitioners herein constitute
respondent herein. Article 1769(4) of the Civil Code is explicit
On September 24, 1954 respondent Collector of Internal a partnership, insofar as said Code is concerned and are
that while the receipt by a person of a share of the profits of
Revenue demanded the payment of income tax on subject to the income tax for corporations.
a business is prima facie evidence that he is a partner in the
corporations, real estate dealer's fixed tax and corporation
business, no such inference shall be drawn if such profits
residence tax for the years 1945-1949. The letter of demand G.R. No. L-47045 November 22, 1988
were received in payment as wages of an employee.
and corresponding assessments were delivered to petitioners
Furthermore, herein petitioner had no voice in the
on December 3, 1954, whereupon they instituted the present NOBIO SARDANE, petitioner, vs. THE COURT OF
management of the affairs of the basnig.
case in the Court of Tax Appeals, with a prayer that "the APPEALS and ROMEO J. ACOJEDO, respondents.
decision of the respondent contained in his letter of demand
Under similar facts, this Court in the early case
dated September 24, 1954" be reversed, and that they be FACTS: Acojedo brought an action in the City Court of
of Fortis vs. Gutierrez Hermanos, in denying the claim of
absolved from the payment of the taxes in question. CTA Dipolog for collection of a sum of P5,217.25 based on
the plaintiff therein that he was a partner in the business of
denied their petition and subsequent MR and New Trials promissory notes executed by the herein Nobio Sardane in
the defendant, declared:
were denied. Hence this petition. favor of the herein Acojedo.

This contention cannot be sustained. It was a mere contract

Issue: Whether or not petitioners have formed a partnership Exhibit B is a printed promissory note involving Pl,117.25 and
of employment. The plaintiff had no voice nor vote in the
and consequently, are subject to the tax on corporations dated May 13, 1972. Exhibit C is likewise a printed
management of the affairs of the company. The fact that the
provided for in section 24 of Commonwealth Act. No. 466, promissory note and denotes on its face that the sum loaned
compensation received by him was to be determined with
otherwise known as the National Internal Revenue Code, as was Pl,400.00. Exhibit D is also a printed promissory note
reference to the profits made by the defendant in their
well as to the residence tax for corporations and the real dated May 31, 1977 involving an amount of P100.00. Exhibit
business did not in any sense make him a partner therein. ...
estate dealers fixed tax. E is what is commonly known to the layman as 'vale' which
reads: 'Good for: two hundred pesos (Sgd) Nobio Sardane'.
There are other considerations noted by respondent Court
Held: YES. The essential elements of a partnership are two, Exhibit F is stated in the following tenor: 'Received from Mr.
which negate herein petitioner's pretension that he was a
namely: (a) an agreement to contribute money, property Romeo Acojedo the sum Pesos: Two Thousand Two Hundred
partner and not a mere employee indebted to the present
or industry to a common fund; and (b) intent to divide (P2,200.00) ONLY, to be paid on or before December 25,
private respondent.
the profits among the contracting parties. The first 1975. (Sgd) Nobio Sardane.' Exhibit G and H are both vales'
element is undoubtedly present in the case at bar, for, involving the same amount of one hundred pesos, and dated
Also, although he contends that herein private
admittedly, petitioners have agreed to, and did, contribute August 25, 1972 and September 12, 1972 respectively.
respondent is the treasurer of the alleged partnership, yet it
money and property to a common fund. Upon consideration is the latter who is demanding an accounting. The
IN VIEW OF THE FOREGOING, judgment is hereby rendered
of all the facts and circumstances surrounding the case, we advertence of the Court of First Instance to the fact that the
are fully satisfied that their purpose was to engage in real in favor of the plaintiff and against the defendant as follows:
casco bears the name of herein petitioner disregards the
estate transactions for monetary gain and then divide the finding of the respondent Court that it was just a concession
(a) Ordering the defendant to pay unto the plaintiff
same among themselves, because of the following since it was he who obtained the engine used in the Sardaco
the sum of Five Thousand Two Hundred
observations, among others: (1) Said common fund was not from the Department of Local Government and Community
Seventeen Pesos and Twenty-five centavos
something they found already in existence; (2) They invested
10 | P a r t n e r s h i p Cases
Development. Further, the use by the parties of the pronoun  Magalona, Sermeno, and Pesayco formed a proof, it is just as binding as if the statute has been
"our" in referring to "our basnig, our catch", "our deposit", or partnership for the purpose of catching “semillas complied with.
"our boseros" was merely indicative of the camaraderie and de baňgus o aua” in the sea and rivers of Antique.
not evidentiary of a partnership, between them.  It was agreed that Pesayco should put in a bid for ISSUE: WON a partnership agreement should be in
this privilege and that the partners should each writing. NO.
G.R. No. L-25532 February 28, 1969 supply one third of the capital in case the
defendant was awarded the desired privilege. HELD: However, we cannot agree with the appellant that
COMMISSIONER OF INTERNAL REVENUE, petitioner,  Pesayco was to be the manager in case the bid one of the requisites of a partnership agreement such as the
vs. WILLIAM J. SUTER and THE COURT OF TAX was accepted. one under consideration, is that it should be in writing.
APPEALS, respondents.  Pesayco offered 5.5K in the 1931. As a deposit of
¼ of the amount of the bid was required, each of Article 1667 of the Civil Code provides that "Civil
FACTS:A limited partnership named William J. Suter partnerships may be established in any form whatever,
the partners put up 1/3 of this amount.
'Morcoin' Co., Ltd was formed 30September 1947 by William  The privilege was awarded to the defendant. unless real property or real rights are contributed to the
J. Suter as the general partner, and Julia Spirig and Gustav same, in which case a public instrument shall be necessary."
 Pesayco enetered upon his duties and gave an
Carlson. They contributed, respectively, P20,000.00, aaccount of two sales of “semillas de baňgus o
P18,000.00 andP2,000.00. it was also duly registered with the Articles of partnership are not required to be in
aua” to Magalon’s representative, Tiburcio Lutero.
SEC. On 1948 Suter and Spirig got married and in effect writing except in the cases mentioned in article 1667, Civil
As Pesayco only had P410, he wired Lutero for
Carlson sold his share to the couple, the same was also Code, which controls article 1280 of the same Code.
sufficient money to complete the payment of the
registered with the SEC. The limited partnership had been first quarter. Lutero immediately sent P1k to the
filing its income tax returns as a corporation, without Agad vs Mabato and Mabato and Agad Company
municipality treasurer.
objection by the herein petitioner, Commissioner of Internal  Pesayco managed the business from Jan 1, 1931,
Revenue, until in 1959 when the latter, in an assessment, FACTS:
and with the exception of the two sales
consolidated the incomeof the firm and the individual mentioned, he never gave any account of his
 Alleging that he (Mauricio Agad) and defendant
incomes of the partners-spouses Suter and Spirig resulting in catched or sales to his partners.
Severino Mabato arepartners in a fishpond
a determination of a deficiency income tax against  A complaint was filed by the petitioner with a
business, to the capital of which Agad contributed
respondent Suter in the amount of P2,678.06 for 1954 and prayer that a receiver be appointed to take charge
P1,000, with the right to receive 50% of the profits.
P4,567.00 for 1955. of the funds of the partnership and management
 That from 1952 up to and including 1956, Mabato
of its affairs. Also, to order Pesayco to render an
ISSUE: Whether or not the limited partnership has been who handled the partnership funds, had yearly
account of his management and to pay to the
rendered accounts of the operations of the
dissolved after the marriage of Suter and Spirig and buying plaintiff their participation in the profits and to
the interest of limited partner Carlson. partnership.
turn over to the receiver all the funds.
 That despite repeated demands, Mabato had
 The receiver took over the management and took
RULING: NO, the limited partnership was not dissolved. “A failed and refused to render accounts for the years
possession of the funds.
husband and a wife may not enter into a contract of general 1957 to 1963, Agad prayed in his complaint
 At the trial, it was proven that Pesayco obtained
copartnership, because under the Civil Code, which applies in against Mabato and Mabato & Agad Company.
and sold a total of 975K. semillas de baňgus and
the absence of express provision in the Code of Commerce,  Mabato admitted the formal allegations of the
that he made no report of this nor did he pay the
persons prohibited from making donations to each other are complaint and denied the existence of said
plaintiffs any part of the proceeds of the sale.
prohibited from entering into universal partnerships. It partnership, upon the ground that the contract
 Pescayo denied that there was a partnership and
follows that the marriage of partners necessarily brings therefor had not been perfected because Agad
depends principally upon the fact that the
about the dissolution of a pre-existing partnership. “What had allegedly failed to give his P1,000 contribution
partnership agreement was not in writing.
the law prohibits was when the spouses entered into a to the partnership capital.
 The partnership was conclusively proven by the
general partnership. In the case at bar, the partnership was  the lower court dismissed that case on the ground
oral testimony of the plaintiffs and other witnesses
limited that it had no jurisdiction over the subject matter.
two of whom were Attys Lutero and Maza. The
defense made no objection to the questions asked ISSUE: WON immovable property or real rights have been
DACALDACAL: Magalona, et al vs Pesayco with regard to the forming of this partnership. This contributed to the partnership under consideration. NO
Court has held that if a party permits a contract,
which the provides shall be in writing, to be HELD: It should be noted that the copy of the public
proved, without objection as to the form of the instrument attached in the complaint provides that "the
partnership was established "to operate a fishpond", not to
11 | P a r t n e r s h i p Cases
"engage in a fishpond business". Moreover, none of the he padlocked the premises on June 4, 1962 to that it is one coupled with an interest, the agency having
partners contributed either a fishpond or a real right to any protect the interests of the Tourist World Service. been created for mutual interest, of the agent and the
fishpond. Their contributions were limited to the sum of  a complaint wall filed by the herein appellants principal. 19 It appears that Lina Sevilla is a bona fide travel
P1,000 each. Thus, Mabato’s contention that “it is really against the appellees with a prayer for the agent herself, and as such, she had acquired an interest in
inconceivable how a partnership engaged in the fishpond issuance of mandatory preliminary injunction. the business entrusted to her. Moreover, she had assumed a
business could exist without said fishpond property being personal obligation for the operation thereof, holding herself
contributed to the partnership” is without merit. ISSUE: WON there was a partnership between TWS and solidarily liable for the payment of rentals. She continued the
Sevilla? business, using her own name, after Tourist World had
Their contribution were limited to P1000 each and stopped further operations. Her interest, obviously, is not to
neither a fishpond nor a real right thereto was contributed to HELD: NO. It was a Principal-Agent relationship. the commissions she earned as a result of her business
the partnership. Therefore, Article 1773 of the New Civil transactions, but one that extends to the very subject matter
Code finds no application in the case at bar. Case remanded In rejecting Tourist World Service, Inc.'s arguments of the power of management delegated to her. It is an
to the lower court for further proceedings. however, we are not, as a consequence, accepting Lina agency that, as we said, cannot be revoked at the pleasure of
Sevilla's own, that is, that the parties had embarked on a the principal. Accordingly, the revocation complained of
Sevilla vs CA joint venture or otherwise, a partnership. And apparently, should entitle the petitioner, Lina Sevilla, to damages.
Sevilla herself did not recognize the existence of such a
FACTS: relation. In her letter of November 28, 1961, she expressly
'concedes your [Tourist World Service, Inc.'s] right to stop
 Mrs. Segundina Noguera and the Tourist World the operation of your branch office 14 in effect, accepting DILLERA: G.R. No. 143340 August 15, 2001
Service, Inc., represented by Mr. Eliseo Canilao Tourist World Service, Inc.'s control over the manner in which
entered into a contract that the Tourist World the business was run. A joint venture, including a LILIBETH SUNGA-CHAN and CECILIA SUNGA, petitioners,
Service, Inc. leased the premises belonging to Mrs partnership, presupposes generally a of standing between vs.
Noguera at Mabini St., Manila for the former-s use the joint co-venturers or partners, in which each party has an LAMBERTO T. CHUA, respondent.
as a branch office. equal proprietary interest in the capital or property GONZAGA-REYES, J.:
 In the said contract the party of the third part held contributed 15 and where each party exercises equal rights
herself solidarily liable with the party of the part in the conduct of the business.16 furthermore, the parties Facts:
for the prompt payment of the monthly rental did not hold themselves out as partners, and the building
Lamberto T. Chua (respondent) filed a complaint against
agreed on. When the branch office was opened, itself was embellished with the electric sign "Tourist World
Lilibeth Sunga Chan (petitioner Lilibeth) and Cecilia Sunga
the same was run by the herein appellant Una 0. Service, Inc. 17in lieu of a distinct partnership name.
(petitioner Cecilia), daughter and wife, respectively of the
Sevilla payable to Tourist World Service Inc. by any deceased Jacinto L. Sunga (hereafter Jacinto), for "Winding
airline for any fare brought in on the efforts of It is the Court's considered opinion, that when the
Up of Partnership Affairs, Accounting, Appraisal and
Mrs. Lina Sevilla, 4% was to go to Lina Sevilla and petitioner, Lina Sevilla, agreed to (wo)man the private
Recovery of Shares and Damages with Writ of Preliminary
3% was to be withheld by the Tourist World respondent, Tourist World Service, Inc.'s Ermita office, she
Attachment" with the Regional Trial Court (Branch 11,
Service, Inc. must have done so pursuant to a contract of agency. It is the
Sindangan, Zamboanga del Norte).
 On or about November 24, 1961 (Exhibit 16) the essence of this contract that the agent renders services "in
Tourist World Service, Inc. appears to have been representation or on behalf of another.18 In the case at bar, Responded alleged that he verbally entered into a
informed that Lina Sevilla was connected with a Sevilla solicited airline fares, but she did so for and on behalf partnership with Jacinto in the distribution of Shellane
rival firm, the Philippine Travel Bureau, and, since of her principal, Tourist World Service, Inc. As compensation, Liquefied Petroleum Gas in Manila. For business
the branch office was anyhow losing, the Tourist she received 4% of the proceeds in the concept of convenience, respondent and Jacinto allegedly agreed to
World Service considered closing down its office. commissions. And as we said, Sevilla herself based on her register the business name of their partnership, SHELLITE
 It appears that on Jan. 3, 1962, the contract with letter of November 28, 1961, pre-assumed her principal's GAS APPLIANCE CENTER, under the name of Jacinto as a sole
the appellees for the use of the Branch Office authority as owner of the business undertaking. We are proprietorship.
premises was terminated and while the effectivity convinced, considering the circumstances and from the
respondent Court's recital of facts, that the ties had Respondent allegedly delivered his initial capital
thereof was Jan. 31, 1962, the appellees no longer
contemplated a principal agent relationship, rather than a contribution of P100,000.00 to Jacinto while the latter in
used it.
joint management or a partnership. turn produced P100,000.00 as his counterpart contribution,
 the corporate secretary Gabino Canilao went over
with the intention that the profits would be equally
to the branch office, and, finding the premises
But unlike simple grants of a power of attorney, divided between them.
locked, and, being unable to contact Lina Sevilla,
the agency that we hereby declare to be compatible with the
intent of the parties, cannot be revoked at will. The reason is
12 | P a r t n e r s h i p Cases
Upon Jacinto's death, petitioner Cecilia and petitioner partnership from 1988 to May 30, 1992, when the entitled to the undue advantage of giving his own
Lilibeth, took over the operations, control, custody, plaintiff learned of the closure of the store the sum uncontradicted and unexplained account of the transaction.
disposition and management of Shellite without of P35,000.00 per month, with legal rate of interest
Petitioners' reliance alone on the "Dead Man's Statute" to
respondent's consent. until fully paid;
defeat respondent's claim cannot prevail over the factual
Despite respondent's repeated demands upon petitioners for (5) ORDERING them to wind up the affairs of the findings of the trial court and the Court of Appeals that a
accounting, inventory, appraisal, winding up and restitution partnership and terminate its business activities partnership was established between respondent and
of his net shares in the partnership, petitioners failed to pursuant to law, after delivering to the plaintiff all Jacinto. Based not only on the testimonial evidence, but the
comply. Petitioner Lilibeth allegedly continued the the ½ interest, shares, participation and equity in documentary evidence as well, the trial court and the Court
operations of Shellite, converting to her own use and the partnership, or the value thereof in money or of Appeals considered the evidence for respondent as
advantage its properties. money's worth, if the properties are not physically sufficient to prove the formation of partnership, albeit an
divisible; informal one.
Petitioners’ Contention:
(6) FINDING them especially Lilibeth Sunga-Chan Notably, petitioners did not present any evidence in their
“…that they are not liable for partnership shares, unreceived
guilty of breach of trust and in bad faith and hold favor during trial. Petitioners cannot now turn to this Court
income/profits, interests, damages and attorney's fees, that
them liable to the plaintiff the sum of P50,000.00 to question the admissibility and authenticity of the
respondent does not have a cause of action against them...”
as moral and exemplary damages; and, documentary evidence of respondent when petitioners failed
RTC Decision: to object to the admissibility of the evidence at the time that
(7) DIRECTING them to reimburse and pay the sum
such evidence was offered.
Ruling for respondent. of P25,000.00 as attorney's (sic) and P25,000.00 as
litigation expenses. Petitioners maintain that said partnership that had initial
"WHEREFORE, judgment is hereby rendered in capital of P200,000.00 should have been registered with the
favor of the plaintiff and against the defendants, as Securities and Exchange Commission (SEC) since registration
follows: is mandated by the Civil Code.
CA Decision: Dismissed the appeal.
(1) DIRECTING them to render an accounting in True, Article 1772 of the Civil Code requires that partnerships
"WHEREFORE, the instant appeal is dismissed. The
acceptable form under accounting procedures and with a capital of P3,000.00 or more must register with the
appealed decision is AFFIRMED in all respects."
standards of the properties, assets, income and SEC, however, this registration requirement is not mandatory.
profits of the Shellite Gas Appliance Center Since
the time of death of Jacinto L. Sunga, from whom Article 1768 of the Civil Code explicitly provides that the
Petitioners question the correctness of the finding of partnership retains its juridical personality even if it fails to
they continued the business operations including
the trial court and the Court of Appeals that a register. The failure to register the contract of partnership
all businesses derived from Shellite Gas Appliance
partnership existed between respondent and Jacinto. To does not invalidate the same as among the partners, so long
Center, submit an inventory, and appraisal of all
support the argument, petitioners invoke the “Dead as the contract has the essential requisites, because the
these properties, assets, income, profits etc. to the
Man’s Statute” or Survivorship Rule. main purpose of registration is to give notice to third
Court and to plaintiff for approval or disapproval;
Issue: Whether or not partnership can be formed or parties, and it can be assumed that the members themselves
(2) ORDERING them to return and restitute to the knew of the contents of their contract.
instituted absent written contract among the parties.
partnership any and all properties, assets, income
(Yes, oral partnership as in the case at bar). In the case at bar, non-compliance with this directory
and profits they misapplied and converted to their
own use and advantage the legally pertain to the provision of the law will not invalidate the partnership
plaintiff and account for the properties mentioned considering that the totality of the evidence proves that
in pars. A and B on pages 4-5 of this petition as Ruling: A partnership may be constituted in any form, respondent and Jacinto indeed forged the partnership in
basis; except where immovable property of real rights are question.
contributed thereto, in which case a public instrument
(3) DIRECTING them to restitute and pay to the shall necessary.6 Hence, based on the intention of the Petition is denied.
plaintiff ½ shares and interest of the plaintiff in the parties, as gathered from the facts and ascertained from
partnership of the listed properties, assets and their language and conduct, a verbal contract of
good will (sic) in schedules A, B and C, on pages 4- partnership may arise. G.R. No. 174149 September 8, 2010
5 of the petition;
The "Dead Man's Statute" provides that if one party to the J. TIOSEJOINVESTMENTCORP. vs. SPOUSES BENJAMIN AND
(4) ORDERING them to pay the plaintiff earned but alleged transaction is precluded from testifying by death, ELEANOR
unreceived income and profits from the insanity, or other mental disabilities, the surviving party is not
13 | P a r t n e r s h i p Cases
PEREZ, J.: owners of the condominium project, were ordered to pay: (a) LIM TONG LIM, petitioner,
respondents claim for refund of the P611,519.52 they paid, vs.
with interest at the rate of 12% per annum from 5 February PHILIPPINE FISHING GEAR INDUSTRIES, INC., respondent.
(December 28, 1995) Petitioner entered into a Joint Venture 1997; (b) damages…
Agreement (JVA) with Primetown Property Group, Inc. (PPGI)
for the development of a residential condominium project to Facts:
be known as The Meditel (9,502 square meter) property HLURB Board of Commissioners: Decision of the Office
On behalf of "Ocean Quest Fishing Corporation," Antonio
along Samat St., Highway Hills, Mandaluyong City. below is modified.
Chua and Peter Yao entered into a Contract dated February
With petitioner contributing the same property to the joint Office of the President: Dismissing petitioners appeal 7, 1990, for the purchase of fishing nets of various sizes from
venture and PPGI undertaking to develop the condominium, on the ground that the latters appeal memorandum was filed the Philippine Fishing Gear Industries, Inc. (herein
the JVA provided, among other terms and conditions, that out of time and that the HLURB Board committed no grave respondent). They claimed that they were engaged in a
the developed units shall be shared by the former and the abuse of discretion in rendering the appealed decision. business venture with Petitioner Lim Tong Lim, who however
latter at a ratio of 17%-83%, respectively. was not a signatory to the agreement. The total price of the
Court of Appeals: CA issued the herein assailed 23 May
nets amounted to P532,045. Four hundred pieces of floats
The Housing and Land Use Regulatory Board (HLURB) issued 2006 resolution, disposing of the formers pending motion for
worth P68,000 were also sold to the Corporation.
License to Sell in favor of petitioner and PPGI as project extension as well as the petition itself.
owners. By virtue of said license, PPGI executed Contract to The buyers, however, failed to pay for the fishing nets and
We resolve to DENY the second extension motion
Sell (No. 0212) with Spouses Benjamin and Eleanor Ang over the floats; hence, private respondents filed a collection suit
and rule to DISMISS the petition for being filed late.
the 35.45-square meter condominium unit (P2,077,334.25), against Chua, Yao and Petitioner Lim Tong Lim with a prayer
and 12.50 square meter parking space (P313,500.00). Issue: Whether or not partnership can be constituted in a for a writ of preliminary attachment. The suit was brought
joint venture agreement. (Yes) against the three in their capacities as general partners, on
Respondents filed against petitioner and PPGI the complaint
the allegation that "Ocean Quest Fishing Corporation" was a
for the rescission of the aforesaid Contracts to Sell before the Ruling: By the express terms of the JVA, it appears that nonexistent corporation as shown by a Certification from the
HLURB. Contending that they were assured by petitioner and petitioner not only retained ownership of the property Securities and Exchange Commission.
PPGI that the subject condominium unit and parking space pending completion of the condominium project [53] but
would be available for turn-over and occupancy in December had also bound itself to answer liabilities proceeding RTC Decision: The trial court ruled that a partnership
1998, that in view of the non-completion of the project from contracts entered into by PPGI with third parties. among Lim, Chua and Yao existed based (1) on the
according to said representation, respondents instructed testimonies of the witnesses presented and (2) on a
petitioner and PPGI to stop depositing the post-dated Article VIII, Section 1 of the JVA: Compromise Agreement executed by the three.
checks they issued and to cancel said Contracts to Sell; and, Sec. 1. Rescission and damages Court of Appeals: In affirming the trial court, the CA held
that despite several demands, petitioner and PPGI have
… In any case, the Owner shall respect and strictly comply that petitioner was a partner of Chua and Yao in a fishing
failed and refused to refund the P611,519.52 they already
with any covenant entered into by the Developer and third business and may thus be held liable as a such for the fishing
paid under the circumstances.
parties with respect to any of its units in the Condominium nets and floats purchased by and for the use of the
Petitioner also specifically denied the material allegations of Project. To enable the owner to comply with this contingent partnership.
the complaint. Calling attention to the fact that its prestation liability, the Developer shall furnish the Owner with a copy of Issue: Whether or not a partnership can be instituted by
under the JVA consisted in contributing the property on its contracts with the said buyers on a month-to-month the acts of the parties therein (Yes)
which The Meditel was to be constructed, petitioner basis...
asseverated that, by the terms of the JVA, each party was Ruling: There exist a partnership.
individually responsible for the marketing and sale of the Viewed in the light of the foregoing provision of the JVA,
units pertaining to its share; that not being privy to the petitioner cannot avoid liability by claiming that it was not in Petitioner controverts the CA finding that a partnership
Contracts to Sell executed by PPGI and respondents, it did any way privy to the Contracts to Sell executed by PPGI and existed between him, Peter Yao and Antonio Chua. He
not receive any portion of the payments made by the latter. respondents. As correctly argued by the latter, moreover, a asserts that the CA based its finding on the Compromise
joint venture is considered in this jurisdiction as a form of Agreement alone. Furthermore, he disclaims any direct
Housing and Land Use (HLU) Arbiter Dunstan T. San partnership and is, accordingly, governed by the law of participation in the purchase of the nets, alleging that the
Vicente: partnerships. negotiations were conducted by Chua and Yao only, and that
he has not even met the representatives of the respondent
Declaring the subject Contracts to Sell cancelled and Petition for Review is DENIED. company. Petitioner further argues that he was a lessor,
rescinded on account of the non-completion of the
G.R. No. 136448 November 3, 1999 not a partner, of Chua and Yao, for the "Contract of Lease "
condominium project. On the ground that the JVA created a
dated February 1, 1990, showed that he had merely leased to
partnership liability on their part, petitioner and PPGI, as co-
14 | P a r t n e r s h i p Cases
the two the main asset of the purported partnership — the Respondent Philippine Fishing Gear, in behalf of Verily, as found by the lower courts, petitioner entered into a
fishing boat F/B Lourdes. The lease was for six months, with a "Ocean Quest Fishing Corporation," their business agreement with Chua and Yao, in which debts were
monthly rental of P37,500 plus 25 percent of the gross catch purported business name. undertaken in order to finance the acquisition and the
of the boat. upgrading of the vessels which would be used in their fishing
business. The sale of the boats, as well as the division among
We are not persuaded by the arguments of petitioner. The
From the factual findings of both lower courts, it is clear that the three of the balance remaining after the payment of their
facts as found by the two lower courts clearly showed that
Chua, Yao and Lim had decided to engage in a fishing loans, proves beyond cavil that F/B Lourdes, though
there existed a partnership among Chua, Yao and him,
business, which they started by buying boats worth P3.35 registered in his name, was not his own property but an
pursuant to Article 1767 of the Civil Code which provides:
million, financed by a loan secured from Jesus Lim who was asset of the partnership. It is not uncommon to register the
Art. 1767 — By the contract of partnership, two or more petitioner's brother. In their Compromise Agreement, they properties acquired from a loan in the name of the person
persons bind themselves to contribute money, property, or subsequently revealed their intention to pay the loan with the lender trusts, who in this case is the petitioner himself.
industry to a common fund, with the intention of dividing the proceeds of the sale of the boats, and to divide equally After all, he is the brother of the creditor, Jesus Lim.
the profits among themselves. among them the excess or loss. These boats, the purchase
We stress that it is unreasonable — indeed, it is absurd — for
and the repair of which were financed with borrowed money,
Specifically, both lower courts ruled that a partnership petitioner to sell his property to pay a debt he did not incur,
fell under the term "common fund" under Article 1767. The
among the three existed based on the following factual if the relationship among the three of them was merely that
contribution to such fund need not be cash or fixed assets; it
findings: 15 of lessor-lessee, instead of partners.
could be an intangible like credit or industry. That the parties
(1) That Petitioner Lim Tong Lim requested Peter agreed that any loss or profit from the sale and operation of Petition is Denied.
Yao who was engaged in commercial fishing to the boats would be divided equally among them also shows
join him, while Antonio Chua was already Yao's that they had indeed formed a partnership.
NEW YORK [G.R. No. L-7991. May 21, 1956.]
Moreover, it is clear that the partnership extended not only
(2) That after convening for a few times, Lim, Chua, to the purchase of the boat, but also to that of the nets and Facts: Stasikinocey is a partnership formed by da
and Yao verbally agreed to acquire two fishing the floats. The fishing nets and the floats, both essential to Costa, Gorcey, Kusik and Gavino. It was denied registration
boats, the FB Lourdes and the FB Nelson for the fishing, were obviously acquired in furtherance of their by the SEC due to a confusion between the partnership and
sum of P3.35 million; business. Cardinal Rattan. Cardinal Rattan is the business name or style
used by Stasikinocey. Da Costa and Gorcey are the general
(3) That they borrowed P3.25 million from Jesus Given the preceding facts, it is clear that there was, among
partners of Cardinal Rattan. Moreover, Da Costa is the
Lim, brother of Petitioner Lim Tong Lim, to finance petitioner, Chua and Yao, a partnership engaged in the
managing partner of Cardinal Rattan. Stasikinocey had an
the venture. fishing business. They purchased the boats, which
overdaft account with Nationa City Bank, which was later
constituted the main assets of the partnership, and they
(4) That they bought the boats from CMF Fishing converted into an ordinary loan due the partnership’s failure
agreed that the proceeds from the sales and operations
Corporation, which executed a Deed of Sale over in paying its obligation. The ordinary loan was secured by a
thereof would be divided among them.
these two (2) boats in favor of Petitioner Lim Tong chattel mortgage over 3 vehicles. During the subsistence of
Lim only to serve as security for the loan extended Petitioner Was a Partner, the loan, the vehicles were sold to MacDonald and later on,
by Jesus Lim; MacDonald sold 2 of the 3 vehicles to Gonzales. The bank
Not a Lessor brought an action for recovery of its credit and foreclosure of
(5) That Lim, Chua and Yao agreed that the the chattel mortgage upon learning of these transactions.
We are not convinced by petitioner's argument that he was
refurbishing, re-equipping, repairing, dry docking Held: While an unregistered commercial partnership has no
merely the lessor of the boats to Chua and Yao, not a partner
and other expenses for the boats would be juridical personality, nevertheless, where two or more
in the fishing venture. His argument allegedly finds support
shouldered by Chua and Yao; persons attempt to create a partnership failing to comply
in the Contract of Lease and the registration papers showing
that he was the owner of the boats, including F/B with all the legal formalities, the law considers them as
(6) That because of the "unavailability of funds,"
Lourdes where the nets were found. partners and the association is a partnership in so far as it is
Jesus Lim again extended a loan to the partnership
a favorable to third persons, by reason of the equitable
in the amount of P1 million secured by a check,
His allegation defies logic. In effect, he would like this Court principle of estoppel. Where a partnership not duly
because of which, Yao and Chua entrusted the
to believe that he consented to the sale of his own boats to organized has been recognized as such in its dealings with
ownership papers of two other boats, Chua's FB
pay a debt of Chua and Yao, with the excess of the proceeds certain persons, it shall be considered as “partnership by
Lady Anne Mel and Yao's FB Tracy to Lim Tong Lim.
to be divided among the three of them. No lessor would do estoppel” and the persons dealing with it are estopped from
(7) That in pursuance of the business agreement, what petitioner did. Indeed, his consent to the sale proved denying its partnership existence.
Peter Yao and Antonio Chua bought nets from that there was a preexisting partnership among all three.
15 | P a r t n e r s h i p Cases
Issue: WON the partnership, Stasikinocey is estopped The attention of Elser was drawn to a piece of land, referred involved is not one for the application of that doctrine, for
from asserting that it does not have juridical personality to as the San Juan Estate. He obtained the loan of P50,000 to no money belonging to Lyons or any partnership composed
since it is an unregistered commercial partnership complete the amount needed for the first payment on the of Elser and Lyons was in fact used by Elser in the purchase
San Juan Estate. The lender insisted that he should procure of the San Juan Estate. Of course, if any damage had been
Ratio: [YES] While an unregistered commercial the signature of the Fidelity & Surety Co. on the note to be caused to Lyons by the placing of the mortgage upon the
partnership has no juridical personality, nevertheless, where given for said loan. Elser mortgaged to the Fidelity & Surety equity of redemption in the Carriedo property, Elser's estate
two or more persons attempt to create a partnership failing Co. the equity of redemption in the property owned by would be liable for such damage. But it is evident that Lyons
to comply with all the legal formalities, the law considers himself and Lyons on Carriedo Street to secure the liability was not prejudice by that act.
them as partners and the association is a partnership in so thus assumed by it.
far as it is a favorable to third persons, by reason of the ANTONIA TORRES, assisted by her husband, ANGELO
equitable principle of estoppel. Da Costa and Gorcey cannot The case for the plaintiff supposes that, when Elser placed a TORRES; and EMETERIA BARING, petitioners,
deny that they are partners of the partnership Stasikinocey, mortgage for P50,000 upon the equity of redemption in the vs. COURT OF APPEALS and MANUEL
because in all their transactions with the National City Bank Carriedo property, Lyons, as half owner of said property, G.R. No. 134559. December 9, 1999
they represented themselves as such. McDonald cannot became, as it were, involuntarily the owner of an undivided
disclaim knowledge of the partnership Stasikinocey because interest in the property acquired partly by that money; and it FACTS: Sisters Antonia Torres and Emeteria Baring, herein
he dealt with said entity in purchasing two of the vehicles in is insisted for him that, in consideration of this fact, he is petitioners, entered into a "joint venture agreement" with
question through Gorcey and Da Costa. The sale of the entitled to the four hundred forty-six and two-thirds shares Respondent Manuel Torres for the development of a parcel
vehicles to MacDonald being void, the sale to Gonzales is of J. K. Pickering & Company, with the earnings thereon, as of land into a subdivision. They executed a Deed of Sale
also void since a buyer cannot have a better right than the claimed in his complaint. covering the said parcel of land in favor of Manuel, who then
seller. As was held in Behn Meyer & Co. vs. Rosatzin, where a had it registered in his name and obtained from Equitable
partnership not duly organized has been recognized as such ISSUE: Whether there was a general relation of partnership. Bank a loan of P40, 000 which, under the Joint Venture
in its dealings with certain persons, it shall be considered as Agreement, was to be used for the development of the
“partnership by estoppel” and the persons dealing with it are RULING: NO, The position of the appellant is, in our opinion, subdivision through mortgage of said property. All three of
estopped from denying its partnership existence. If the law untenable. If Elser had used any money actually belonging to them also agreed to share the proceeds from the sale of the
recognizes a defectively organized partnership as de facto as Lyons in this deal, he would under article 1724 of the Civil subdivided lots. The project failed and the property was
far as third persons are concerned, for purposes of its de Code and article 264 of the Code of Commerce, be obligated foreclosed. Petitioner alleged that it was due to Manuel’s
facto existence it should have such attribute of a partnership to pay interest upon the money so applied to his own use. lack of funds or means and skills. And also alleged that the
as domicile. Under the law prevailing in this jurisdiction a trust does not latter misappropriate the amount loaned to his own
ordinarily attach with respect to property acquired by a company. On the other hand, respondent alleged that he
person who uses money belonging to another (Martinez vs. used the loan to implement the Agreement, which incurred
G.R. No. L-35469 March 17, 1932 Martinez, 1 Phil., 647; Enriquez vs. Olaguer, 25 Phil., 641.). Of P85, 000 expenses. And further avers that failure of project
E. S. LYONS vs. C. W. ROSENSTOCK, course, if an actual relation of partnership had existed in the was due to petitioners and their relatives had separately
Executor of the Estate of Henry W. Elser, deceased money used, the case might be different; and much caused the annotations of adverse claims on the title to the
emphasis is laid in the appellant's brief upon the relation of land, which eventually scared away prospective buyers,
FACTS: Henry W. Elser was engaged in buying, selling, and partnership which, it is claimed, existed. But there was clearly forcing him to give up on the project. Subsequently,
administering real estate. E. S. Lyons joined with him, the no general relation of partnership, under article 1678 of the petitioners filed a criminal case for estafa against respondent
profits being shared by the two in equal parts. Civil Code. It is clear that Elser, in buying the San Juan Estate, and his wife, but were acquitted. They filed a civil case, but
was not acting for any partnership composed of himself and was dismissed by trial court and affirmed by Court of
Lyons, whose regular vocation was that of a missionary or Lyons, and the law cannot be distorted into a proposition Appeals. Hence, this petition.
missionary agent, of the Methodist Episcopal Church, went which would make Lyons a participant in this deal contrary to
on leave to the United States and was gone for nearly a year his express determination. ISSUES:
and a half. Elser made written statements showing that Lyons
was, at that time, half owner with Elser of three particular It seems to be supposed that the doctrines of equity worked 1. Whether the petitioners have formed partnership
pieces of real property. Concurrently with this act Lyons out in the jurisprudence of England and the United States respondent and if they do, whether or not it was void.
execute in favor of Elser a general power of attorney with reference to trust supply a basis for this action. The
empowering him to manage and dispose of said properties doctrines referred to operate, however, only where money 2. Whether or not respondent shall be held liable to the
at will and to represent Lyons fully and amply, to the mutual belonging to one person is used by another for the failure of the project.
advantage of both. acquisition of property which should belong to both; and it
takes but little discernment to see that the situation here HELD:
16 | P a r t n e r s h i p Cases
1. A reading of the terms embodied in the 2. The Court of Appeals held that petitioners’ acts were not  Felicidad received a letter demanding that she
Agreement indubitably shows the existence of a the cause of the failure of the project. But it also ruled that vacate the premises within 15 days but she refused
partnership pursuant to Article 1767 of the Civil neither was respondent responsible therefor. In imputing the to do so
Code, which provides: “By the contract of blame solely to him, petitioners failed to give any reason why  A.C. Aguila filed an ejectment case against her
partnership two or more persons bind themselves we should disregard the factual findings of the appellate  Felicidad, on the other hand, filed a petition for
to contribute money, property, or industry to a court relieving him of fault. Verily, factual issues cannot be declaration of nullity of a deed of sale alleging
common fund, with the intention of dividing the resolved in a petition for review under Rule 45, as in this that the signature of her husband was a forgery
profits among themselves.” case. Petitioners have not alleged, not to say shown, that because he was already dead when the deed was
their Petition constitutes one of the exceptions to this supposed to have been executed
Under the Agreement, petitioners would contribute doctrine. Accordingly, we find no reversible error in the CA's  RTC: the 3 required documents (MOA, SPA &
property to the partnership in the form of land which was to ruling that petitioners are not entitled to damages. Deed of Sale) were all signed by the parties.
be developed into a subdivision; while respondent would Common sense dictates that an established
give, in addition to his industry, the amount needed for LIM: G.R. No. 127347 November 25, 1999 lending and realty firm like Aguila & Sons would
general expenses and other costs. Furthermore, the income ALFREDO N. AGUILA, JR., petitioner, not part with P200,000 to the Abrogar spouses
from the said project would be divided according to the vs. HONORABLE COURT OF APPEALS and without the simultaneous accomplishment and
stipulated percentage. There is manifestation of intent to FELICIDAD S. VDA. DE ABROGAR, respondents. signing of all the required documents.
form partnership.  CA: transaction was equitable mortgage and
MENDOZA, J. pactum commissorium, thus void
It should be stressed that the parties implemented the
contract. Thus, petitioners transferred the title to the land to
facilitate its use in the name of the respondent. On the other Facts:
hand, respondent caused the subject land to be mortgaged, Issue: WoN Aguila is the real party in interest
the proceeds of which were used for the survey and the  Aguila (petitioner) – manager of A.C. Aguila &
subdivision of the land. As noted earlier, he developed the Sons, Co., a partnership engaged in lending Held: NO. Under Art. 1768 of the Civil Code, a
roads, the curbs and the gutters of the subdivision and activities partnership "has a juridical personality separate and
entered into a contract to construct low-cost housing units  Felicidad (PR) and her late husband, Ruben – distinct from that of each of the partners."
on the property. registered owners of a house and lot
The partners cannot be held liable for the obligations of
*House & Lot: TCT No. 195101 in Marikina the partnership unless it is shown that the legal fiction of
Respondent’s actions clearly belie petitioners’
contention that he made no contribution to the partnership. a different juridical personality is being used for fraudulent,
 April 18, 1991 – Felicidad, with the consent of her unfair, or illegal purposes.
Under Article 1767 of the Civil Code, a partner may
late husband & A.C. Aguila & Sons, Co.,
contribute not only money or property, but also industry.
represented by petitioner, entered into a MOA In this case, private respondent has not shown that A.C.
 Same day – parties executed a deed of absolute Aguila & Sons, Co., as a separate juridical entity, is being
Further, under Art. 1773, A contract of partnership is
void, whenever immovable property is contributed thereto, if sale used for fraudulent, unfair, or illegal purposes.
an inventory of said property is not made, signed by the *MOA:
parties, and attached to the public instrument.” This was Moreover, the title to the subject property is in the name
intended primarily to protect third persons“ the execution of of A.C. Aguila & Sons, Co. and the Memorandum of
1. A.C. Aguila shall buy the property for P200,000.
a public instrument would be useless if there is no inventory Agreement was executed between private respondent,
of the property contributed, because without its designation with the consent of her late husband, and A.C. Aguila &
2. Felicidad is given the option to repurchase the said property
and description, they cannot be subject to inscription in the Sons, Co., represented by petitioner.
within a period of 90 days from the execution of the MOA
Registry of Property, and their contribution cannot prejudice
third persons. This will result in fraud to those who contract Hence, it is the partnership, not its officers or agents,
3. if she fails to exercise the option, she shall deliver peacefully
with the partnership in the belief [in] the efficacy of the which should be impleaded in any litigation involving
the possession of the property
guaranty in which the immovables may consist. Thus, the property registered in its name.
contract is declared void by the law when no such inventory  Felicidad failed to redeem the property. Hence,
is made.” The case at bar does not involve third parties who Aguila caused the cancellation of TCT and the G.R. No. 109289 October 3, 1994
may be prejudiced. issuance of a new title in the name of the A.C.
Aguila & Sons, Co.
17 | P a r t n e r s h i p Cases
RUFINO R. TAN, petitioner, In fine, under the Tax Code on income taxation, the general while profits & commissions will be shared
vs. professional partnership is deemed to be no more than a among them.
RAMON R. DEL ROSARIO, JR., as SECRETARY OF mere mechanism or a flow-through entity in the generation  Mendiola wrote to Kevin Daley (VP for Asia)
FINANCE & JOSE U. ONG, as COMMISSIONER OF of income by, and the ultimate distribution of such income seeking confirmation of his 50% equity of Pafcor.
INTERNAL REVENUE, respondents. to, respectively, each of the individual partners. Willia Gleason, its President, replied that petitioner
is not a part-owner of Pafcor Phils. because the
G.R. No. 109446 October 3, 1994 G.R. No. 159333 July 31, 2006 latter is merely Pacfor-USA’s representative
office & not an entity separate & distinct from
Pacfor-USA and that it is simply a “theoretical
CARAG, CABALLES, JAMORA AND SOMERA LAW ARSENIO T. MENDIOLA, petitioner, company” with the purpose of dividing the
ELPIDIO C. JAMORA, JR. and BENJAMIN A. SOMERA, COURT OF APPEALS, NATIONAL LABOR RELATIONS  Mendiola claimed that he was all along made to
JR., petitioners, COMMISSION, PACIFIC FOREST RESOURCES, PHILS., INC. believe that he was in a joint venture with them.
vs. and/or CELLMARK AB, respondents He wrote Pacfor-USA demanding payment of
RAMON R. DEL ROSARIO, in his capacity as SECRETARY unpaid commissions & office furniture and
OF FINANCE and JOSE U. ONG, in his capacity as Facts: equipment rentals.
COMMISSIONER OF INTERNAL REVENUE, respondents.  Pacfor ordered Mendiola to turn over to it all
 Pacific Forest Resources Phils, Inc. (Pacfor): papers, documents, titles, records & other
Facts: o corporation organized and existing materials I his possession that belong to Pafcor , to
under the laws of California, USA remit P300,000 Christmas giveaway and to transfer
 2 consolidated petitions: title and turn over to it possession of the service
o subsidiary of Cellulose Marketing Int’l, a
1. G.R. No. 109289 – assailing the constitutionality of car.
corporation duly organized under the
RA. No. 7496 also known as Simplified Net Income It also sent letters to its clients in the Philippines
laws of Sweden
Taxation Scheme (SNIT) advising them not to deal with Pafcor Phils.
 Pacfor entered into a Side Agreement on
2. G.R. No. 109446 – assailing the validity of Sec. 6,  Petitioner pressed charges before the Labor
Representative Office known as Pacific Forest
R.R. No. 2-93 promulgated by respondents Arbiter when he was placed on preventive
Resources (Phils), Inc. with Mendiola (petitioner)
pursuant to SNIT suspension for his refusal to return the service car
 Petitioners (taxpayers) argue that public and the Christmas giveaways.
respondents exceeded the rule-making
authority in applying SNIT to general Issue: WoN Mendiola is a partner
professional partnerships (GPPs) 1. Outlines the business relationship of the parties
with regard to Philippine operations of Pacfor.
Issue: WoN the GPP is liable for income tax 2. Pacfor will establish a Pacfor representative office Held: NO.
in the Philippines, to be known as Pacfor Phils an
Held: GPP is not itself an income taxpayer. The income Mediola will be its President. We hold that petitioner is an employee of private
tax is imposed not in GPP, which is tax-exempt, but on the 3. Mendiola’s base salary shall be borne by the respondent Pacfor and that no partnership or co-ownership
partners themselves in their individual capacity computed on representative office & funded by Pacfor/Mendiola, exists between the parties.
distributive shares of partnership profits. since Pacfor Phils. Is equally owned on a 50-50
equity by Mendiola and Pacfor-USA In a partnership, the members become co-owners of what is
Partnerships are, under the Code, either "taxable
contributed to the firm capital and of all property that may
partnerships" or "exempt partnerships." Ordinarily,  SEC granted the application of Pacfor. Pacfor be acquired thereby and through the efforts of the
partnerships, no matter how created or organized, are designated Mendiola as its resident agent in the members.
subject to income tax. "Exempt partnerships," upon the other Philippines.
hand, are not similarly identified as corporations nor even  Side Agreement was amended where the salary of
considered as independent taxable entities for income tax The property or stock of the partnership forms a community
petitioner was increased.
purposes. A general professional partnership is such an of goods, a common fund, in which each party has a
 Both agreements show that the operational
example. proprietary interest.
expenses will be borne by the representative
office & funded by all parties “as equal partners”
18 | P a r t n e r s h i p Cases
In fact, the New Civil Code regards a partner as a co-owner Facts: On 19 November 1996, the Angeles spouses filed a filed his counter-affidavit on 2 January 1997. Hence, the
of specific partnership property. Each partner possesses a criminal complaint for estafa against Mercado. Mercado is Provincial Prosecution Office issued an amended resolution
joint interest in the whole of partnership property. the brother-in-law of the Angeles spouses, being married to dismissing the Angeles spouses complaint for estafa against
Emerita Angeles sister Laura. Mercado.
If the relation does not have this feature, it is not one of The Angeles spouses claimed that in November 1992, On appeal to the Secretary of Justice, the Angeles
partnership. Mercado convinced them to enter into a contract of spouses emphasized that the document evidencing the
antichresis, colloquially known as sanglaang-perde, covering contract of sanglaang-perde with Juana Suazo was executed
This essential element, the community of interest, or co- eight parcels of land (subject land) planted with fruit-bearing in the name of the Mercado spouses, instead of the Angeles
ownership of, or joint interest in partnership property is lanzones trees located in Nagcarlan, Laguna and owned by spouses. The Angeles spouses allege that this document
absent in the relations between petitioner and private Juana Suazo. The contract of antichresis was to last for five alone proves Mercados misappropriation of their P210,000.
respondent Pacfor. Petitioner is not a part-owner of Pacfor years withP210,000 as consideration. As the Angeles spouses
Phils. stay in Manila during weekdays and go to Laguna only on The Secretary of Justice found otherwise. Thus:
weekends, the parties agreed that Mercado would administer
William Gleason, private respondent Pacfor's President the lands and complete the necessary paperwork. Reviewing the records of the case, we are of the opinion that
established this fact when he said that Pacfor Phils. is simply the indictment of [Mercado] for the crime of estafa cannot
After three years, the Angeles spouses asked for an be sustained. [The Angeles spouses] failed to show sufficient
a "theoretical company" for the purpose of dividing the
accounting from Mercado. Mercado explained that the proof that [Mercado] deliberately deceived them in the
income 50-50. He stressed that petitioner knew of this
subject land earned P46,210 in 1993, which he used to buy sanglaang perde transaction. (Absence of deceit). Hence this
arrangement from the very start, having been the one to
more lanzones trees. Mercado also reported that the trees petition.
propose to private respondent Pacfor the setting up of a
bore no fruit in 1994. Mercado gave no accounting for 1995.
representative office, and "not a branch office" in the
The Angeles spouses claim that only after this demand for an Issue: Whether a partnership existed between the Angeles
Philippines to save on taxes. Thus, the parties in this case,
accounting did they discover that Mercado had put the spouses and Mercado even without any documentary proof
merely shared profits. This alone does not make a
contract of sanglaang-perde over the subject land under to sustain its existence; YES
Mercado and his spouses names.
Ruling: The Angeles spouses allege that they had no
Besides, a corporation cannot become a member of a Mercado denied the Angeles spouses allegations. partnership with Mercado. The Angeles spouses rely on
partnership in the absence of express authorization by Mercado claimed that there exists an industrial partnership, Articles 1771 to 1773 of the Civil Code, which state that:
statute or charter. colloquially known as sosyo industrial, between him and his
spouse as industrial partners and the Angeles spouses as the Art. 1771. A partnership may be constituted in any form,
financiers. This industrial partnership had existed since 1991, except where immovable property or real rights are
This doctrine is based on the following considerations:
before the contract of antichresis over the subject land. As contributed thereto, in which case a public instrument shall
the years passed, Mercado used his and his spouses earnings be necessary.
(1) that the mutual agency between the partners, whereby as part of the capital in the business transactions which he
the corporation would be bound by the acts of persons who entered into in behalf of the Angeles spouses. It was their
are not its duly appointed and authorized agents and Art. 1772. Every contract of partnership having a capital of
practice to enter into business transactions with other people
officers, would be inconsistent with the policy of the law that three thousand pesos or more, in money or property, shall
under the name of Mercado because the Angeles spouses
the corporation shall manage its own affairs separately and appear in a public instrument, which must be recorded in the
did not want to be identified as the financiers.
exclusively; and, Office of the Securities and Exchange Commission.
Mercado attached bank receipts showing deposits in
behalf of Emerita Angeles and contracts under his name for Failure to comply with the requirements of the preceding
(2) that such an arrangement would improperly allow
the Angeles spouses. Mercado also attached the minutes of paragraph shall not affect the liability of the partnership and
corporate property to become subject to risks not
the barangay conciliation proceedings. During the barangay the members thereof to third persons.
contemplated by the stockholders when they originally
conciliation proceedings, Oscar Angeles stated that there
invested in the corporation.
was a written sosyo industrial agreement: capital would come
Art. 1773. A contract of partnership is void, whenever
from the Angeles spouses while the profit would be divided
No such authorization has been proved in the case at bar. immovable property is contributed thereto, if an inventory of
evenly between Mercado and the Angeles spouses. [9]
said property is not made, signed by the parties, and
On 3 January 1997, the Provincial Prosecution Office attached to the public instrument.
NEROSA: Angeles v Sec. of Justice
issued a resolution recommending the filing of criminal
CARPIO, J.: information for estafa against Mercado. Meanwhile, Mercado
19 | P a r t n e r s h i p Cases
The Angeles spouses position that there is no xxx two or more persons bind themselves to contribute
partnership because of the lack of a public instrument money, property, or industry to a common fund, with the
indicating the same and a lack of registration with the HEIRS OF TAN ENG KEEv CA intention of dividing the profits among themselves.
Securities and Exchange Commission (SEC) holds no water. DE LEON, JR., J.:
First, the Angeles spouses contributed money to the Two or more persons may also form a partnership for the
partnership and not immovable property. Second, mere Fact: Following the death of Tan Eng Kee on September 13, exercise of a profession.[14]
failure to register the contract of partnership with the SEC 1984, Matilde Abubo, the common-law spouse of the
does not invalidate a contract that has the essential decedent, joined by their children Teresita, Nena, Clarita, Thus, in order to constitute a partnership, it must be
requisites of a partnership. The purpose of registration of the Carlos, Corazon and Elpidio, the HEIRS OF TAN ENG KEE, established that (1) two or more persons bound themselves
contract of partnership is to give notice to third parties. filed suit against the decedents brother TAN ENG LAY. The to contribute money, property, or industry to a common
Failure to register the contract of partnership does not affect complaint, was for accounting, liquidation and winding up of fund, and (2) they intend to divide the profits among
the liability of the partnership and of the partners to third the alleged partnership formed after World War II between themselves.[15] The agreement need not be formally reduced
persons. Neither does such failure to register affect the Tan Eng Kee and Tan Eng Lay. On March 18, 1991, the into writing, since statute allows the oral constitution of a
partnerships juridical personality. A partnership may exist petitioners filed an amended complaint[4] impleading private partnership, save in two instances: (1) when immovable
even if the partners do not use the words partner or respondent herein BENGUET LUMBER COMPANY, as property or real rights are contributed, [16] and (2) when the
partnership. represented by Tan Eng Lay. partnership has a capital of three thousand pesos or more.
In both cases, a public instrument is required. [18] An
Indeed, the Angeles spouses admit to facts that prove The amended complaint alleged that after the World inventory to be signed by the parties and attached to the
the existence of a partnership: a contract showing a sosyo War II, Tan Eng Kee and Tan Eng Lay, pooling their resources public instrument is also indispensable to the validity of the
industrial or industrial partnership, contribution of money and industry together, entered into a partnership engaged in partnership whenever immovable property is contributed to
and industry to a common fund, and division of profits the business of selling lumber and hardware and the partnership.[19]
between the Angeles spouses and Mercado. construction supplies. They named their enterprise Benguet
Lumber which they jointly managed until Tan Eng Kees The trial court determined that Tan Eng Kee and Tan
( MA’AM MIGHT ASK THIS) Whether there was death. Petitioners averred that the business prospered due to Eng Lay had entered into a joint adventure, which it said is
Misappropriation by Mercado the hard work and thrift of the alleged partners. However, akin to a particular partnership. [20] A particular partnership is
The Secretary of Justice adequately explained the they claimed that in 1981, Tan Eng Lay and his children distinguished from a joint adventure, to wit:
alleged misappropriation by Mercado: The document alone, caused the conversion of the partnership Benguet Lumber
into a corporation called Benguet Lumber Company. The (a) A joint adventure (an American concept similar to
which was in the name of [Mercado and his spouse], failed to our joint accounts) is a sort of informal partnership,
convince us that there was deceit or false representation on incorporation was purportedly a ruse to deprive Tan Eng Kee
and his heirs of their rightful participation in the profits of with no firm name and no legal personality. In a joint
the part of [Mercado] that induced the [Angeles spouses] to account, the participating merchants can transact
part with their money. [Mercado] satisfactorily explained that the business. Petitioners prayed for accounting of the
partnership assets, and the dissolution, winding up and business under their own name, and can be
the [Angeles spouses] do not want to be revealed as the individually liable therefor.
financiers.[15] liquidation thereof, and the equal division of the net assets
of Benguet Lumber. (b) Usually, but not necessarily a joint adventure is
Even Branch 26 of the Regional Trial Court of Santa limited to a SINGLE TRANSACTION, although the
Cruz, Laguna which decided the civil case for damages, The RTC declared that Benguet Lumber is a joint adventure business of pursuing to a successful termination may
injunction and restraining order filed by the Angeles spouses which is akin to a particular partnership; that the assets of continue for a number of years; a partnership generally
against Mercado and Leo Cerayban, stated: Benguet Lumber are the same assets turned over to Benguet relates to a continuing business of various transactions
Lumber Co. Inc. and as such the heirs or legal representatives of a certain kind.[21]
xxx [I]t was the practice to have all the contracts of of the deceased Tan Eng Kee have a legal right to share in
antichresis of their partnership secured in [Mercados] name said assets. The CA reversed the said decision stating that A joint adventure presupposes generally a parity of
as [the Angeles spouses] are apprehensive that, if they come Benguet Lumber is under sole proprietorship and their standing between the joint co-ventures or partners, in which
out into the open as financiers of said contracts, they might decedent is merely an employee. Hence, the present petition. each party has an equal proprietary interest in the capital or
be kidnapped by the New Peoples Army or their business property contributed, and where each party exercises equal
deals be questioned by the Bureau of Internal Revenue or ISSUE: Whether Tan Eng Kee and Tan Eng Lay were rights in the conduct of the business.
worse, their assets and unexplained income be sequestered, partners in Benguet Lumber. NO
Undoubtedly, the best evidence would have been the
as xxx Oscar Angeles was then working with the government. Ruling: A contract of partnership is defined by law as contract of partnership itself, or the articles of partnership
one where: but there is none. The alleged partnership, though, was never
formally organized. In addition, petitioners point out that the
20 | P a r t n e r s h i p Cases
New Civil Code was not yet in effect when the partnership at bar, the deferment, if any, had gone on too long to be (d) As interest on a loan, though the amount of payment
was allegedly formed sometime in 1945, although the plausible. vary with the profits of the business;
contrary may well be argued that nothing prevented the
parties from complying with the provisions of the New Civil A demand for periodic accounting is evidence of a
partnership.[34] During his lifetime, Tan Eng Kee appeared (e) As the consideration for the sale of a goodwill of a
Code when it took effect on August 30, 1950. But all that is in business or other property by installments or otherwise.
the past. The net effect, however, is that we are asked to never to have made any such demand for accounting from
determine whether a partnership existed based purely on his brother, Tang Eng Lay. In the light of the aforequoted legal provision, we conclude
circumstantial evidence. A review of the record persuades us This brings us to the matter for private respondents, that Tan Eng Kee was only an employee, not a partner. Even
that the Court of Appeals correctly reversed the decision of consisting of payrolls purporting to show that Tan Eng Kee if the payrolls as evidence were discarded, petitioners would
the trial court. The evidence presented by petitioners falls was an ordinary employee of Benguet Lumber, as it was then still be back to square one, so to speak, since they did not
short of the quantum of proof required to establish a called. The authenticity of these documents was questioned present and offer evidence that would show that Tan Eng
partnership. by petitioners, to the extent that they filed criminal charges Kee received amounts of money allegedly representing his
against Tan Eng Lay and his wife and children. As aforesaid, share in the profits of the enterprise. Petitioners failed to
Unfortunately for petitioners, Tan Eng Kee has passed show how much their father, Tan Eng Kee, received, if any, as
away. Only he, aside from Tan Eng Lay, could have the criminal cases were dismissed for insufficiency of
evidence. In connection therewith, Article 1769 of the Civil his share in the profits of Benguet Lumber Company for any
expounded on the precise nature of the business relationship particular period. Hence, they failed to prove that Tan Eng
between them. In the absence of evidence, we cannot accept Code provides:
Kee and Tan Eng Lay intended to divide the profits of the
as an established fact that Tan Eng Kee allegedly contributed business between themselves, which is one of the essential
his resources to a common fund for the purpose of In determining whether a partnership exists, these rules shall features of a partnership.
establishing a partnership. The testimonies to that effect of apply:
petitioners witnesses is directly controverted by Tan Eng
Lay. It should be noted that it is not with the number of (1) Except as provided by Article 1825, persons who are not Litonjua v Litonjua
witnesses wherein preponderance lies;[24] the quality of their partners as to each other are not partners as to third
testimonies is to be considered. None of petitioners persons; GARCIA, J.:
witnesses could suitably account for the beginnings of
FACTS: Petitioner Aurelio K. Litonjua, Jr. (Aurelio) and herein
Benguet Lumber Company, except perhaps for Dionisio
(2) Co-ownership or co-possession does not of itself respondent Eduardo K. Litonjua, Sr. (Eduardo) are brothers.
Peralta whose deceased wife was related to Matilde Abubo.
establish a partnership, whether such co-owners or co- The legal dispute between them started when filed a suit
He stated that when he met Tan Eng Kee after the
possessors do or do not share any profits made by the use of against his brother Eduardo and herein respondent Robert T.
liberation, the latter asked the former to accompany him to
the property; Yang and several corporations for specific performance and
get 80 pieces of G.I. sheets supposedly owned by both
accounting. Aurelio alleged that, since June 1973, he and
brothers. Tan Eng Lay, however, denied knowledge of this
(3) The sharing of gross returns does not of itself establish a Eduardo are into a joint venture/partnership arrangement in
meeting or of the conversation between Peralta and his
partnership, whether or not the persons sharing them have a the Odeon Theater business which had expanded thru
brother. Tan Eng Lay consistently testified that he had his
joint or common right or interest in any property which the investment in Cineplex, Inc., LCM Theatrical Enterprises,
business and his brother had his, that it was only later on
returns are derived; Odeon Realty Corporation (operator of Odeon I and II
that his said brother, Tan Eng Kee, came to work for him. Be
theatres), Avenue Realty, Inc., owner of lands and buildings,
that as it may, co-ownership or co-possession (specifically
among other corporations. Yang is described in the
here, of the G.I. sheets) is not an indicium of the existence of (4) The receipt by a person of a share of the profits of a complaint as petitioners and Eduardos partner in their
a partnership.[28] business is prima facie evidence that he is a partner in the Odeon Theater investment.[5] The same complaint also
business, but no such inference shall be drawn if such profits contained the following material averments:
Besides, it is indeed odd, if not unnatural,
were received in payment:
that despite the forty years the partnership was allegedly in
From 22 June 1973 to about August 2001, or [in] a span of 28
existence, Tan Eng Kee never asked for an accounting. The
years, [Aurelio] and Eduardo had accumulated in their joint
essence of a partnership is that the partners share in the (a) As a debt by installment or otherwise;
venture/partnership various assets including but not limited to
profits and losses.[29] Each has the right to demand an
the corporate defendants and [their] respective assets. In
accounting as long as the partnership exists. [30] We have (b) As wages of an employee or rent to a landlord; addition, the joint venture/partnership had also acquired
allowed a scenario wherein [i]f excellent relations exist
[various other assets], but Eduardo caused to be registered in
among the partners at the start of the business and all the
(b) As an annuity to a widow or representative of a deceased the names of other parties.The substantial assets of most of
partners are more interested in seeing the firm grow rather
partner; the corporate defendants consist of real properties . Sometime
than get immediate returns, a deferment of sharing in the
in 1992, the relations between [Aurelio] and Eduardo became
profits is perfectly plausible. [31] But in the situation in the case
21 | P a r t n e r s h i p Cases
sour so that [Aurelio] requested for an accounting and immovable property or real rights are contributed thereto or
liquidation of his share in the joint venture/partnership [but when the partnership has a capital of at least P3,000.00, in
Art. 1771. A partnership may be constituted in any
these demands for complete accounting and liquidation were which case a public instrument shall be necessary. [25] And if
form, except where immovable property or real
not heeded]. only to stress what has repeatedly been articulated, an
rights are contributed thereto, in which case a
inventory to be signed by the parties and attached to the
What is worse, [Aurelio] has reasonable public instrument shall be necessary.
public instrument is also indispensable to the validity of the
cause to believe that Eduardo and/or the corporate
partnership whenever immovable property is contributed to
defendants as well as Bobby [Yang], are transferring Art. 1772. Every contract of partnership having a
various real properties of the corporations capital of three thousand pesos or more, in money
belonging to the joint venture/partnership to other or property, shall appear in a public instrument, In sum then, the Court rules, as did the CA, that petitioners
parties in fraud of [Aurelio]. In consequence, which must be recorded in the Office of the complaint for specific performance anchored on an
[Aurelio] is therefore causing at this time the Securities and Exchange Commission. actionable document of partnership which is legally
annotation on the titles of these real properties a inexistent or void or, at best, unenforceable does not state a
notice of lis pendens . Failure to comply with the requirement of the cause of action as against respondent Eduardo and the
preceding paragraph shall not affect the liability of corporate defendants. And if no of action can successfully be
Meanwhile, Eduardo and the corporate respondents, as
the partnership and the members thereof to third maintained against respondent Eduardo because no valid
defendants a quo, filed a joint ANSWER With Compulsory
persons. partnership existed between him and petitioner, the Court
Counterclaim denying under oath the material allegations of
cannot see its way clear on how the same action could
the complaint, more particularly that portion thereof
Art. 1773. A contract of partnership is void, plausibly prosper against Yang. Surely, Yang could not have
depicting petitioner and Eduardo as having entered into a
whenever immovable property is contributed become a partner in, or could not have had any form of
contract of partnership. Such defense was denied by the RTC.
thereto, if an inventory of said property is not business relationship with, an inexistent partnership.
Upon Appeal the CA ruled that there was no partnership
made, signed by the parties, and attached to the
created by the actionable document because immovable
public instrument.
properties were contributed to the partnership.
Significantly enough, petitioner matter-of-factly
Issue: W/N there had been partnership/joint concurred with the appellate courts observation that, PAZ: G.R. No. 148187 April 16, 2008
venture between Aurelio and Eduardo, Yang, prescinding from what Aurelio himself alleged in his basic
NO complaint, his contribution to the partnership consisted of PHILEX MINING CORPORATION, petitioner,
his share in the Litonjua family businesses which owned vs. COMMISSIONER OF INTERNAL REVENUE, respondent.
Ruling: A partnership exists when two or more variable immovable properties.
persons agree to place their money, effects, labor,
and skill in lawful commerce or business, with the Lest it be overlooked, the contract-validating YNARES-SANTIAGO, J.:
understanding that there shall be a proportionate inventory requirement under Article 1773 of the Civil Code
sharing of the profits and losses between them. A applies as long real property or real rights are initially Facts: Petitioner Philex Mining Corporation (Philex Mining),
contract of partnership is defined by the Civil Code brought into the partnership. In short, it is really of no entered into an agreement4 with Baguio Gold Mining
as one where two or more persons bound moment which of the partners, or, in this case, who between Company ("Baguio Gold") for the former to manage and
themselves to contribute money, property, or petitioner and his brother Eduardo, contributed immovables. operate the latter’s mining claim, known as the Sto. Nino
industry to a common fund with the intention of In context, the more important consideration is that real mine. The parties’ agreement was denominated as "Power
dividing the profits among themselves. A joint property was contributed, in which case an inventory of the of Attorney".
venture, on the other hand, is hardly contributed property duly signed by the parties should be
distinguishable from, and may be likened to, a attached to the public instrument, else there is legally no
Philex Mining made advances of cash and property in
partnership since their elements are similar, i.e., partnership to speak of.
accordance with paragraph 5 of the agreement. However,
community of interests in the business and sharing
Considering thus the value and nature of the mine suffered continuing losses over the years which
of profits and losses. Being a form of partnership, a
petitioner’s alleged contribution to the purported resulted to Philex Mining’s withdrawal as manager of the
joint venture is generally governed by the law on
partnership, the Court, even if so disposed, cannot plausibly mine and in the eventual cessation of mine operations.
partnership. Clearly, then, a look at the legal
extend the legal effects that petitioner so desires and pleads
provisions determinative of the existence, or
to be given. In fine, it cannot support the existence of the The parties executed a “Compromise with Dation in
defining the formal requisites, of a partnership is
partnership sued upon and sought to be enforced. The legal Payment” wherein Baguio Gold admitted an indebtedness to
indicated. Foremost of these are the following
and factual milieu of the case calls for this disposition. A petitioner and agreed to pay the same in three segments
provisions of the Civil Code:
partnership may be constituted in any form, save when .The parties also executed an “Amendment to Compromise
22 | P a r t n e r s h i p Cases
with Dation in Payment” where the parties determined that industry to a common fund, with the intention of dividing contribute equally to the joint venture assets under their
Baguio Gold’s indebtedness to petitioner actually amounted the profits among themselves.15 While a corporation, like respective accounts. Baguio Gold would
to P259,137,245.00,which sum included liabilities of Baguio petitioner, cannot generally enter into a contract of contribute P11M under its owner’s account plus any of its
Gold to other creditors that petitioner had assumed as partnership unless authorized by law or its charter, it has income that is left in the project, in addition to its actual
guarantor. These liabilities pertained to long-term loans been held that it may enter into a joint venture which is akin mining claim. Meanwhile, petitioner’s contribution would
contracted by Baguio Gold . to a particular partnership: consist of its expertise in the management and operation of
mines, as well as the manager’s account which is comprised
Philex Mining wrote off in its 1982 books of account the The legal concept of a joint venture is of common of P11M in funds and property and
remaining outstanding indebtedness of Baguio Gold by law origin. It has no precise legal definition, but it petitioner’s "compensation" as manager that cannot be
charging P112,136,000.00 to allowances and reserves that has been generally understood to mean an paid in cash.
were set up in 1981 and P2,860,768.00 to the 1982 organization formed for some temporary purpose.
operations. x x x It is in fact hardly distinguishable from the G.R. No. L-2880 December 4, 1906
partnership, since their elements are similar – FRANK S. BOURNS, plaintiff-appellee,
In its 1982 annual income tax return, Philex Mining deducted community of interest in the business, sharing of vs.
from its gross income the amount of P112,136,000.00 as profits and losses, and a mutual right of control. x D. M. CARMAN, ET AL., defendants-appellants.
“loss on settlement of receivables from Baguio Gold against x x The main distinction cited by most opinions in W. A. Kincaid for appellants.
reserves anda llowances.” However, the BIR disallowed the common law jurisdictions is that the partnership
amount as deduction for bad debt and assessed petitioner a contemplates a general business with some
deficiency income tax of P62,811,161.39. degree of continuity, while the joint venture is
formed for the execution of a single transaction,
FACTS: An action to recover the sum of $437.50 balance due
and is thus of a temporary nature. x x x This
Philex Mining protested before the BIR arguing that the observation is not entirely accurate in this on a contract for the sawing of lumber yard of Lo-Chim-Lim
deduction must be allowed since all requisites for a bad debt was filed by Bourns (Plaintiff). The contract was entered into
jurisdiction, since under the Civil Code, a
deduction were satisfied. Petitioner emphasized that the partnership may be particular or universal, and a by Lo-Chim-Lim, acting as in his own name with the plaintiff,
debt arose out of a valid management contract it entered and it appears that Lo-Chim-Lim personally agreed to pay
particular partnership may have for its object a
into with Baguio Gold. specific undertaking. x x x It would seem therefore for the work himself.
that under Philippine law, a joint venture is a form
CTA rejected petitioner’s assertion that the advances it made of partnership and should be governed by the law The plaintiff brought the action against Lo-Chim-Lim and his
for the Sto. Nino mine were in the nature of a loan. It instead of partnerships. The Supreme Court has however co-defendants jointly, alleging that at the time the contract
characterized the advances as petitioner’s investment in recognized a distinction between these two was made, they were the joint proprietors and operators of
a partnership with Baguio Gold for the development and business forms, and has held that although a the said lumber yard engaged in the purchase and sale of
exploitation of the Sto. Nino mine. The CTA held that the corporation cannot enter into a partnership lumber under the name and style of Lo-Chim-Lim, hence
"Power of Attorney" executed by petitioner and Baguio Gold contract, it may however engage in a joint venture were partners.
was actually a partnership agreement. Since the advanced with others. x x x (Citations omitted)
amount partook of the nature of an investment, it could not The lower court dismissed the action on the ground that
be deducted as a bad debt from petitioner’s gross income. defendants D.M. Carman, Fulgencio and Tan-Tongco, except
Perusal of the agreement denominated as the "Power of
Attorney" indicates that the parties had intended to create a Vicente Palance and Go-Tauco were not the partners of Lo-
The Court of Appeals affirmed the decision of the CTA.12 partnership and establish a common fund for the purpose. Chim-Lim.
They also had a joint interest in the profits of the business as
ISSUE: shown by a 50-50 sharing in the income of the mine. ISSUE: Whether appellants are deemed partners of Lo-Chim-
Lim and hence are liable to Bourns
WON the parties entered into a contract of agency coupled Under the "Power of Attorney", petitioner and Baguio Gold
with an interest which is not revocable at will undertook to contribute money, property and industry to the HELD: No. The alleged partnership between Lo-Chim-Lim
common fund known as the Sto. Niño mine. 17 In this regard, and the appellants was formed by verbal agreement only.
we note that there is a substantive equivalence in the There is no evidence tending to show that the said
Held: An examination of the "Power of Attorney" reveals that
respective contributions of the parties to the development agreement was reduced to writing, or that it was ever
a partnership or joint venture was indeed intended by the
and operation of the mine. Pursuant to paragraphs 4 and 5 recorded in a public instrument. Moreover, the partnership
parties. Under a contract of partnership, two or more
of the agreement, petitioner and Baguio Gold were to had no corporate name. The partnership was engaged in
persons bind themselves to contribute money, property, or
23 | P a r t n e r s h i p Cases
business under the name and style of Lo-Chim-Lim only. ISSUE: Did Catalan’s redemption of the properties make him FACTS: Jacob S. Lim (petitioner in G.R. No. 84157) was
Moreover, it does not appear that there was any mutual the absolute owner of the lands? engaged in the airline business as owner-operator of
agreement between the parties and if there were any, it has Southern Air Lines (SAL) a single proprietorship. He entered
not been shown what the agreement was. The contracts into and executed a sales contract with Japan Domestic
made with the plaintiff were made by Lo-Chim-Lim Held: No. The theory of Gatchalian that he became the Airlines (JDA) for the sale and purchase of two (2) DC-3A
individually in his own name, and there is no evidence that absolute owner of the properties in question upon making Type aircrafts and one (1) set of necessary spare parts.
the partnership over contracted in any form. Under such the redemption because he was subrogated to the rights of
circumstances we find nothing upon which to consider this Dr. Marave is untenable. Pioneer Insurance and Surety Corporation as surety executed
partnership other than as a partnership of cuentas en and issued a Surety Bond in favor of JDA, in behalf of its
participacion. It may be that, as a matter of fact, it is Under the general principles of law, a partner is an agent of principal, Lim, for the balance price of the aircrafts and spare
something different, but a simple business. the partnership (Art. 1818, NCC). Furthermore, every partner parts.
becomes a trustee for his copartner with regard to any
A partnership constituted in such a manner, the benefits or profits derived from the act as partner (Art 1807,
It appears that Border Machinery and Heavy Equipment
existence of which was only known to those who had an NCC).
Company, Inc. (Bormaheco), Francisco and Modesto
interest in the same, being no mutual agreements Cervantes (Cervanteses) and Constancio Maglana
between the partners and without a corporate name Consequently, when Gatchalian redeemed the properties in
question, he became a trustee and held the same in trust for (respondents in both petitions) contributed some funds used
indicating to the public in some way that there were in the purchase of the above aircrafts and spare parts. The
other people besides the one who ostensibly managed his copartner subject to his right to redeem his contribution
to the amount of redemption. funds were supposed to be their contributions to a new
and conducted the business, is exactly the accidental corporation proposed by Lim to expand his airline business.
partnership of cuentas en participacion defined in Art.
239 of the Code of Commerce. The principle of subrogation cannot be applied because at
the time Catalan redeemed the property, Dr. Marave had not They executed two (2) separate indemnity agreements which
yet become the absolute owner of the properties. He never stipulated that the indemnitors principally agree and bind
Those who contract with the person under whose name themselves jointly and severally to indemnify and hold and
received the definite and formal certificate of sale
the business of such partnership of cuentas en constituting the muniment of title because the redemption save harmless Pioneer from and against any/all damages,
participacion is conducted, shall have only a right of losses, costs, damages, taxes, penalties, charges and
was made.
action against such person and not against the other expenses of whatever kind and nature which Pioneer may
persons interested, and the latter, on the other hand, incur in consequence of having become surety upon the
shall have no right of action against the third person bond/note and to pay, reimburse and make good to Pioneer,
who contracted with the manager unless such manager its successors and assigns, all sums and amounts of money
PEÑERA: G.R. No. 84197 July 28, 1989
formally transfers his right to them. which it or its representatives should or may pay or cause to
be paid or become liable to pay on them of whatever kind
CATALAN vs. GATCHALIAN INC., (BORMAHECO), CONSTANCIO M. MAGLANA and Subsequently, Lim doing business under the name and style
105 Phil 1270, G.R. No. L-11648, April 22, 1959 JACOB S. LIM, respondents. 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
Facts: Eligio Catalan and Ramon Gatchalian, as partners, G.R. No. 84157 July 28, 1989 to the surety the two aircrafts. Lim defaulted on his
mortgaged to Dr. Dionisio Marave two lots, including the subsequent installment payments prompting JDA to request
improvements thereon, all belonging to the partnership, to JACOB S. LIM, petitioner, vs. COURT OF APPEALS, payments from the surety.
secure the payment of the loan. The partnership failed to pay PIONEER INSURANCE AND SURETY CORPORATION,
the loan. The mortgage was foreclosed and the properties BORDER MACHINERY and HEAVY EQUIPMENT CO., INC,, Pioneer then filed a petition for the extrajudicial foreclosure
were sold at public auction to Dr. Marave. Catalan redeemed FRANCISCO and MODESTO CERVANTES and of the said chattel mortgage before the Sheriff of Davao City.
the property and he contends that title should be cancelled CONSTANCIO MAGLANA,respondents. The Cervanteses and Maglana, however, filed a third party
and a new one must be issued in his name. claim alleging that they are co-owners of the aircrafts,
24 | P a r t n e r s h i p Cases
ISSUE: WON a de facto partnership was created among proportionate value of the land conveyed by him, and no Applying therefore the principles of law earlier cited to the
respondents Bormaheco, Spouses Cervantes, Constancio stock was ever issued in the corporation, it was treated as a facts of the case, necessarily, no de facto partnership was
Maglana and petitioner Lim as a result of their failure to trustee for the associates in an action between them for an created among the parties which would entitle the petitioner
incorporate accounting, and its capital stock was treated as partnership to a reimbursement of the supposed losses of the proposed
assets, sold, and the proceeds distributed among them in corporation. The record shows that the petitioner was acting
Petitioner Jacob S. Lim poses the following issues: proportion to the value of the property contributed by each on his own and not in behalf of his other would-be
(Shorb v. Beaudry, 56 Cal. 446). incorporators in transacting the sale of the airplanes and
spare parts.
What legal rules govern the relationship among co-investors
whose agreement was to do business through the corporate However, such a relation does not necessarily exist, for
vehicle but who failed to incorporate the entity in which they ordinarily persons cannot be made to assume the relation of G.R. No. L-45464 April 28, 1939
had chosen to invest? How are the losses to be treated in partners, as between themselves, when their purpose is that
JOSUE SONCUYA, plaintiff-appellant, vs. CARMEN DE
situations where their contributions to the intended no partnership shall exist and it should be implied only when
LUNA, defendant-appellee.
'corporation' were invested not through the corporate form? necessary to do justice between the parties; thus, one who
takes no part except to subscribe for stock in a proposed
corporation which is never legally formed does not become a VILLA-REAL, J.:
These questions are premised on the petitioner's theory that partner with other subscribers who engage in business under
as a result of the failure of respondents Bormaheco, Spouses the name of the pretended corporation, so as to be liable as FACTS: On September 11, 1936, plaintiff Josue Soncuya
Cervantes, Constancio Maglana and petitioner Lim to such in an action for settlement of the alleged partnership and filed with the Court of First Instance of Manila an amended
incorporate, a de facto partnership among them was created, contribution (Ward v. Brigham, 127 Mass. 24). complaint against Carmen de Luna in her own name and as
and that as a consequence of such relationship all must
co-administratrix of the intestate estate, of Librada Avelino
share in the losses and/or gains of the venture in proportion
to their contribution. A partnership relation between certain stockholders and
other stockholders, who were also directors, will not be To the aforesaid amended complaint defendant Carmen de
implied in the absence of an agreement, so as to make the Luna interposed a demurrer based on the following grounds:
RULING: NO. While it has been held that as between former liable to contribute for payment of debts illegally (1) That the complaint does not contain facts sufficient to
themselves the rights of the stockholders in a defectively contracted by the latter (Heald v. Owen, 44 N.W. 210, 79 constitute a cause of action; and (2) that the complaint is
incorporated association should be governed by the Iowa 23). (Corpus Juris Secundum, Vol. 68, p. 464). (Italics ambiguous, unintelligible and vague.
supposed charter and the laws of the state relating thereto supplied).
and not by the rules governing partners (Cannon v. Brush
Electric Co., 54 A. 121, 96 Md. 446, 94 Am. S.R. 584), it is In the amended complaint it is prayed that defendant
ordinarily held that persons who attempt, but fail, to In the instant case, it is to be noted that the petitioner was Carmen de Luna be sentenced to pay plaintiff damages in
form a corporation and who carry on business under the declared non-suited for his failure to appear during the the sum of P700,432 as a result of the administration, said to
corporate name occupy the position of partners inter se pretrial despite notification. In his answer, the petitioner be fraudulent, of he partnership, "Centro Escolar de
(Lynch v. Perryman, 119 P. 229, 29 Okl. 615, Ann. Cas. 1913A denied having received any amount from respondents Señoritas", of which plaintiff, defendant and the deceased
1065). Bormaheco, the Cervanteses and Maglana. The trial court Librada Avelino were members.
and the appellate court, however, found that the petitioner
received the amount of P151,000.00 representing the
Thus, where persons associate themselves together under ISSUE: WON a partner may be able to claim from another
participation of Bormaheco and Atty. Constancio B. Maglana
articles to purchase property to carry on a business, and their partner damages allegedly suffered by him by reason of the
in the ownership of the subject airplanes and spare parts.
organization is so defective as to come short of creating a fraudulent administration of the latter without a previous
The record shows that defendant Maglana gave P75,000.00
corporation within the statute, they become in legal effect liquidation of sasid partnership
to petitioner Jacob Lim thru the Cervanteses.
partners inter se, and their rights as members of the
company to the property acquired by the company will be RULING: NO
recognized (Smith v. Schoodoc Pond Packing Co., 84 A. It is therefore clear that the petitioner never had the
268,109 Me. 555; Whipple v. Parker, 29 Mich. 369). intention to form a corporation with the respondents
despite his representations to them. This gives credence to For the purpose of adjudicating to plaintiff damages which
the cross-claims of the respondents to the effect that they he alleges to have suffered as a partner by reason of the
So, where certain persons associated themselves as a were induced and lured by the petitioner to make supposed fraudulent management of the partnership
corporation for the development of land for irrigation referred to, it is first necessary that a liquidation of the
contributions to a proposed corporation which was never
purposes, and each conveyed land to the corporation, and formed because the petitioner reneged on their agreement. business thereof be made to the end that the profits and
two of them contracted to pay a third the difference in the losses may be known and the causes of the latter and the
25 | P a r t n e r s h i p Cases
responsibility of the defendant as well as the damages which ISSUE: Won petitioners are liable for the advances made by by the partnership amounting to P4,000 with his own money,
each partner may have suffered, may be determined. respondent for the work done in the casco. plaintiff reimburse him of one-half of said sum.
RULING: The work done in the casco having been
In this case, since it is not alleged in the complaint that such within the scope of the association and necessary to carry Juan D. Mencarini, assigned as receiver and liquidator. Upon
a liquidation has been effected nor is it prayed that it be out its express object, the borrowing of the money required acting on his duty, the court ordered him to deliver certain
made. Consequently, there is no reason or cause for plaintiff to carry it on, with the acquiescence if not with the machines which were then at Nos. 705-707 Ylaya Street. But
to institute the action for damages which he claims from the affirmative consent of his associates, was not outside the before he could take actual possession of said machines, the
managing partner Carmen de Luna (Po Yeng Cheo vs. Lim Ka powers of the managing partner and constitutes a debt for court, suspended the effects of its order.
Yam, 44 Phil., 172).] which all the associates are liable.
The note passed into the hands of the defendant by reason In the meantime the judgments rendered in cases Nos.
In view of the foregoing considerations, we are of the of the successive deaths of his wife and of their only child, 42794 and 43070 ordering Clemente to pay a sum of money.
opinion and so hold that for a partner to be able to claim each without debts, and for the amount thereof he became a
from another partner who manages the general creditor, subject, however, to the deduction therefrom of his In order to avoid the attachment and subsequent sale of the
copartnership, damages allegedly suffered by him by reason proportionate part of the indebtedness. machines by the sheriff. Plaintiff agreed with the intervenor,
of the fraudulent administration of the latter, a previous who is his nephew, to executed a deed of mortgage
liquidation of said partnership is necessary. The trial court treated his claim on this note, as well as the
encumbering the machines. The intervenor, as plaintiff in the
sum of P2,024.49 furnished by him, as an addition to his
G.R. No. L-3745 October 26, 1907 said case, obtained judgment in his favor because the
capital in the firm, rather than as a loan, and this constitutes
defendant did not interpose any defense or objection.
JUAN AGUSTIN, ET AL., plaintiffs; VICTOR DEL one of the grounds of error stated by the appellant. We do
ROSARIO, appellant, not deem it necessary to pass upon this objection, for the
reason that, considered as a loan, this sum would place the Issue: W/N the mortgage between Clemente and his
vs. BARTOLOME INOCENCIO, defendant-appellee. defendant as a creditor in a stronger position as against his nephew (intervenor, plaintiff in the case) is valid?
TRACEY, J.: associates than if regarded as a mere contribution to capital.
The error, if it be an error, is not, therefore, prejudicial to the Rule: No. From the foregoing facts, it is clear that plaintiff
plaintiff, but is rather beneficial to him. The respondent did could not obtain possession of the machines in question. The
FACTS: The parties in this case are engaged in a not except to it. machines in contention originally belonged to the defendant
partnership as industrial partners without a capital. and from him were transferred to the partnership Galvan y
Various small sums have been paid out of the profits to
Contributed from its profits the sum of P807.28 as a fund Compania. This being the case, said machines belong to the
some of the partners and these were properly allowed him in
toward the construction of a casco for use in their business, partnership and not to him, and shall belong to it until
the judgment.
to which they added P3,500, borrowed from Maria del partition is effected according to the result thereof after the
Rosario, the wife of the defendant, PENDATUN: G.R. No. L-45662 April 26, liquidation. Also, Clemente did not have actual possession of
1939 the machines, he could not in any manner mortgage them.
Bartolome Inocencio, managing partner, admitted that over
ENRIQUE CLEMENTE, plaintiff-appellee,
P4,300 was the estimated cost of the casco but in the
progress of the work the defendant found that it called for G.R. No. L-5963 May 20, 1953
DIONISIO GALVAN, defendant-appellee.
additional funds, which he advanced to the amount of
JOSE ECHEVARRIA, intervenor-appellant.
It satisfactorily appears from the evidence that this amount is TOMASSI, petitioners,
necessary in order to complete the work undertaken. vs.
Although it would seem that he failed to notify his partners SULPICIO V. CEA, in his capacity as Judge of the Court of
On June 6, 1931, plaintiff and defendant organized a civil First Instance of Leyte and OLEGARIO
of the various items from time to time going to make up this
partnership which they named "Galvan y Compañia" to LASTRILLA, respondents.
sum. However, it is shown that the books were at all times
engage in the manufacture and sale of paper and other BENGZON, J.:
open to their inspection, and that, being asked to examine
stationery. Hardly a year after such organization, the plaintiff This is a suit for damages by the Leyte-Samar Sales Co.
them, they omitted to do so, and that the plaintiff Juan
ask for the dissolution of the partnership. Defendant (hereinafter called LESSCO) and Raymond Tomassi against
Agustin, representing all the partners, was also present at the
expressed his conformity to the dissolution of the the Far Eastern Lumber & Commercial Co. (unregistered
construction of the casco, in charge of the practical work and
partnership and the liquidation of its affairs; but by way of commercial partnership hereinafter called FELCO), Arnold
cognizant of its needs and its progress.
counterclaim he asked that, having covered a deficit incurred Hall, Fred Brown and Jean Roxas, judgment against
26 | P a r t n e r s h i p Cases
defendants jointly and severally for the amount of
P31,589.14 plus costs.

The decision having become final, the sheriff sold at auction

on June 9, 1951 to Robert Dorfe and Pepito Asturias "all the
rights, interests, titles and participation" of the defendants in
certain buildings and properties described in the certificate

On June 4, 1951 Olegario Lastrilla filed in the case a motion,

wherein he claimed to be the owner by purchase on
September 29, 1949, of all the "shares and interests" of
defendant Fred Brown

June 13, 1951, granted Lastrilla's motion. On August 14,

1951, modified its order of delivery and merely declared that
Lastrilla was entitled to 17 per cent of the properties sold.

The petitioners seek relief by certiorari, their position being

the such orders were null and void for lack of jurisdiction.

Issue: W/N the court acted with excess of its jurisdiction?

Rule: Yes. The parties were not notified, and obviously took
no part in the proceedings on the motion. A valid judgment
cannot be rendered where there is a want of necessary
parties, and a court cannot properly adjudicate matters
involved in a suit when necessary and indispensable parties
to the proceedings are not before it. (49 C.J.S., 67.). All the
defendants would have reasonable motives to object to the
delivery of 17 per cent of the proceeds to Lustrial, because it
is so much money deducted, and for which the
plaintiffs might as another levy on their other holdings or

(NOTE: If Lastrilla was a partner, his remedy is to claim "the

property", not the proceeds of the sale, which the sheriff is
directed by section 14, Rule 39 to deliver unto the judgment

In other words, the owner of property wrongfully sold may

not voluntarily come to court, and insist, "I approve the sale,
therefore give me the proceeds because I am the owner".
The reason is that the sale was made for the judgment
creditor (who paid for the fees and notices), and not for
anybody else.)