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BUSORG CASE DIGESTS Atty. Charlie Mendoza
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BATCH 1
TOCAO V. COURT OF APPEALS
342 SCRA 20 (2000)
Facts:
Petitioner William T. Bello introduced private respondent Nenita
Anay to petitioner Tocao, who conveyed her desire to enter into a
joint venture with her for the importation and local distribution
of kitchen cookwares. Belo acted the capitalist, Tocao as president
and general manager, and Anay as head of the marketing department
(considering her experience and established relationship with West
Bend Company,c a manufacturer of kitchen wares in Wisconsin, U.S.A)
and later, vice-president for sales. The parties agreed further
that Anay would be entitled to:
(1) ten percent (10%) of the annual net profits of the business;
(2) overriding commission of six percent (6%) of the overall weekly
production; (3) thirty percent (30%) of the sales she would make;
and (4) two percent (2%) for her demonstration services.
The same was not reduced to writing on the strength of Belos
assurances.
Later, Anay was able to secure the distributorship of cookware
products from the West Bend Company. They operated under the name
of Geminesse Enterprise, a sole proprietorship registered in
Marjorie Tocaos name. Anay attended distributor/dealer meetings
with West Bend Company with the consent of Tocao.
Due to Anays excellent job performance she was given a plaque of
appreciation. Also, in a memo signed by Belo, Anay was given 37%
commission for her personal sales "up Dec 31/87, apart from the 10%
share in profits.
On October 9, 1987, Anay learned that Marjorie Tocao terminated
her as vice-president of Geminesse Enterprise. Anay attempted to
contact Belo. She wrote him twice to demand her overriding
commission for the period of January 8, 1988 to February 5, 1988
and the audit of the company to determine her share in the net
profits. Belo did not answer.
Anay still received her five percent (5%) overriding commission
up to December 1987. The following year, 1988, she did not receive
the same commission although the company netted a gross sales of
P13,300,360.00.
On April 5, 1988, Nenita A. Anay filed a complaint for sum of
money with damages against Tocao and Belo before the RTC of Makati.
She prayed that she be paid (1) P32,00.00 as unpaid overriding
commission from January 8, 1988 to February 5, 1988; (2)
P100,000.00 as moral damages, and (3) P100,000.00 as exemplary
damages. The plaintiff also prayed for an audit of the finances of
Geminesse Enterprise from the inception of its business operation
until she was illegally dismissed to
determine her ten percent (10%) share in the net profits. She
further prayed that she be paid the five percent (5%) overriding
commission on the remaining 150 West Bend cookware sets before her
dismissal.
However, Tocao and Belo asserted that the alleged agreement was
not reduced to writing nor ratified, hence, unenforceable, void, or
nonexistent. Also, they denied the existence of a partnership
because, as Anay herself admitted, Geminesse Enterprise was the
sole proprietorship of Marjorie Tocao. Belo also contended that he
merely acted as a guarantor of Tocao and denied contributing
capital. Tocao, on the other hand, denied that they agreed on a ten
percent (10%) commission on the net profits.
Both trial court and court of appeals ruled that a business
partnership existed and ordered the defendants to pay.
Issue: Whether or not a partnership existed YES
Ratio:
To be considered a juridical personality, a partnership must
fulfill these requisites: (1) two or more persons bind themselves
to contribute money, property or industry to a common fund; and (2)
intention on the part of the partners to divide the profits among
themselves. It may be constituted in any form; a public instrument
is necessary only where immovable property or real rights are
contributed thereto. This implies that since a contract of
partnership is consensual, an oral contract of partnership is as
good as a written one.
Private respondent Anay contributed her expertise in the
business of distributorship of cookware to the partnership and
hence, under the law, she was the industrial or managing
partner.
Petitioner Belo had an proprietary interest. He presided over
meetings regarding matters affecting the operation of the business.
Moreover, his having authorized in writing giving Anay 37% of the
proceeds of her personal sales, could not be interpreted otherwise
than that he had a proprietary interest in the business. This is
inconsistent with his claim that he merely acted as a guarantor. If
indeed he was, he should have presented documentary evidence. Also,
Art. 2055 requires that a guaranty must be express and the Statute
of Frauds requires that it must be in writing. Petitioner Tocao was
also a capitalist in the partnership. She claimed that she herself
financed the business.
The business venture operated under Geminesse Enterprise did not
result in an employer-employee relationship between petitioners and
private respondent. First, Anay had a voice in the management of
the affairs of the cookware distributorship and second, Tocao
admitted that Anay, like her, received only commissions and
transportation and representation allowances and not a fixed
salary. If Anay was an employee, it is difficult to believe that
they recieve the same income.
Also, the fact that they operated under the name of
Geminesse
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BUSORG CASE DIGESTS Atty. Charlie Mendoza
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Enterprise, a sole proprietorship, is of no moment. Said
business name was used only for practical reasons - it was utilized
as the common name for petitioner Tocaos various business
activities, which included the distributorship of cookware.
The partnership exists until dissolved under the law. Since the
partnership created by petitioners and private respondent has no
fixed term and is therefore a partnership at will predicated on
their mutual desire and consent, it may be dissolved by the will of
a partner.
Petitioners Tocaos unilateral exclusion of private respondent
from the partnership is shown by her memo to the Cubao office
plainly stating that private respondent was, as of October 9, 1987,
no longer the vice-president for sales of Geminesse Enterprise. By
that memo, petitioner Tocao effected her own withdrawal from the
partnership and considered herself as having ceased to be
associated with the partnership in the carrying on of the business.
Nevertheless, the partnership was not terminated thereby; it
continues until the winding up of the business.
The partnership among petitioners and private respondent is
ordered dissolved, and the parties are ordered to effect the
winding up and liquidation of the partnership pursuant to the
pertinent provisions of the Civil Code. Petitioners are ordered to
pay Anays 10% share in the profits, after accounting, 5% overriding
commission for the 150 cookware sets available for disposition
since the time private respondent was wrongfully excluded from the
partnership by petitioner, overriding commission on the total
production, as well as moral and exemplary damages, and attorneys
fees
JM TUAZON and CO v. BOLANOS
95 PHIL 106
Facts:
This is an action to recover possession of registered land
situated in Barrio Tatalon, Quezon City. The complaint of plaintiff
JM Tuason & Co Inc was amended 3 times with respect to the
extent and description of the land sough to be recovered.
Originally, the land sought to be recovered was said to be more or
less 13 hectares, but it was later amended to 6 hectares, after the
defendant had indicated the plaintiff's surveyors the portion of
land claimed and occupied by him. The second amendment is that the
portion of the said land was covered in another TCT and the 3rd
amendment was made after the defendant' surveyor and a witness,
Quirino Feria testified that the land occupied by the defendant was
about 13 hectares.
Defendant raised the defense of prescription and title thru
"open, continuous, exclusive and public and notorious possession of
land in dispute. He also alleged that the registration of the land
was obtained by plaintiff's predecessor through fraud or error.
The lower court rendered judgment in favor of the plaintiff and
ordered the defendant to restore possession of the land to the
plaintiff, as well as to pay corresponding rent from January 1940
until he vacates the land. On appeal defendant raised a number of
assignments or errors in the decision, one of which is that the
trial court erred in not dismissing the case on the ground that the
case was not brought by the real party in interest.
Issue: Whether or not the lower court erred in not dismissing
the case on the ground that it was not brought by the real party in
interest? NO
Ratio:
What the Rules of Court require is that an action be broughtin
the name of, but not necessarily by, the real party in interest. In
fact the practice is for an attorney-at-law to bring the action,
that is to file the complaint, in the name of the plaintiff. That
practice appears to have been followed in this case, since the
complaint is signed by the law firm of Araneta and Araneta,
"counsel for plaintiff" and commences with the statement "comes now
plaintiff, through its undersigned counsel." It is true that the
complaint also states that the plaintiff is "represented herein by
its Managing Partner Gregorio Araneta, Inc.", another corporation,
but there is nothing against one corporation being represented by
another person, natural or juridical, in a suit in court. The
contention that Gregorio Araneta, Inc. can not act as managing
partner for plaintiff on the theory that it is illegal for two
corporations to enter into a partnership is without merit, for the
true rule is that "though a corporation has no power to enter into
a partnership, it may nevertheless enter into a joint venture with
another where the nature of that venture is in line with the
business authorized by its charter."
AGUILA, JR. v. COURT OF APPEALS 316 SCRA 246
(1999)
Facts:
Alfredo N. Aguilar, Jr. (petitioner) is the manager of A.C.
Aguila & Sons, Co., a partnership engaged in lending
activities. Felicidad S. Vda. de Abrogar (private respondent) and
her late husband, Ruben M. Abrogar, were the registered owners of a
house and lot, covered by Transfer Certificate of Title No. 195101,
in Marikina, Metro Manila. On April 18, 1991, private respondent,
with the consent of her late husband, and A.C. Aguila & Sons,
Co., represented by petitioner, entered into a Memorandum of
Agreement which provided that A.C. Aguila & Sons, Co. shall buy
the property from private respondent for P200,000 subject to an
option to repurchase for P230,000 (valid for 90 days), etc. On the
same day, the parties likewise executed a deed of absolute sale,
dated June 11, 1991, wherein private respondent, with the consent
of her late husband, sold the subject property to A.C. Aguila &
Sons, Co., represented by petitioner, for P200,000,00. In a special
power of attorney dated the same day, April 18, 1991, private
respondent authorized petitioner
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BUSORG CASE DIGESTS Atty. Charlie Mendoza
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to cause the cancellation of TCT No. 195101 and the issuance of
a new certificate of title in the name of A.C. Aguila and Sons,
Co., in the event she failed to redeem the subject property as
provided in the Memorandum of Agreement. Private respondent failed
to redeem the property. Pursuant to the special power of attorney
mentioned above, petitioner caused the cancellation of TCT No.
195101 and the issuance of a new certificate of title in the name
of A.C. Aguila and Sons, Co. Private respondent then received a
letter dated August 10, 1991 from Atty. Lamberto C. Nanquil,
counsel for A.C. Aguila & Sons, Co., demanding that she vacate
the premises within 15 days after receipt of the letter and
surrender its possession peacefully to A.C. Aguila & Sons, Co.
Otherwise, the latter would bring the appropriate action in court.
Upon the refusal of private respondent to vacate the subject
premises, A.C. Aguila & Sons, Co. filed an ejectment case
against her in the Metropolitan Trial Court, Branch 76, Marikina,
Metro Manila. MeTC, Marikina, MM (April 3, 1992): Ruled in favor of
A.C. Aguila & Sons, Co. Private respondent appealed to RTC
Pasig, CA, and then SC but she still lost. Private respondent then
filed a petition for declaration of nullity of a deed of sale filed
by Felicidad S. Vda. de Abrogar against Alfredo N. Aguila, Jr. She
alleged that the signature of her husband on the deed of sale was a
forgery because he was already dead when the deed was supposed to
have been executed on June 11, 1991.
RTC,Marikina,MM(April11,1995):Dismissed.
CA(November29,1990):Reversed ruling of the RTC. Hence, this
petition for review on certiorari.
Petitioner now contends that: (1) he is not the real party in
interest but A.C. Aguila & Co., against which this case should
have been brought; (2) the judgment in the ejectment case is a bar
to the filing of the complaint for declaration of nullity of a deed
of sale in this case; and (3) the contract between A.C. Aguila
& Sons, Co. and private respondent is a pacto de retro sale and
not an equitable mortgage as held by the appellate court.
Issue: Whether the real party in interest is A.C. Aguila &
Co. and not petitioner. YES
Ratio:
Under Art. 1768 of the Civil Code, a partnership "has a
juridical personality separate and distinct from that of each of
the partners." The partners cannot be held liable for the
obligations of the partnership unless it is shown that the legal
fiction of a different juridical personality is being used for
fraudulent, unfair, or illegal purposes. In this case, private
respondent has not shown that A.C. Aguila & Sons, Co., as a
separate juridical entity, is being used for fraudulent, unfair, or
illegal purposes. Moreover, the title to the subject property is in
the name of A.C. Aguila & Sons, Co. and the Memorandum of
Agreement was executed between private respondent, with the consent
of her late husband, and A.C. Aguila & Sons, Co., represented
by petitioner. Hence, it is the partnership, not its officers or
agents, which should be impleaded in any litigation involving
property registered in its name. A violation of this
rule will result in the dismissal of the complaint.
HEIRS OF TAN ENG KEE v. COURT OF APPEALS 341 SCRA 740 (2000)
Facts:
The heirs of Tan Eng Kee filed a suit against the decedents
brother Tan Eng Lay. The complaint alleged that after the Second
World War, the brothers, pooling their resources and industry
together, entered into a partnership engaged in the selling of
lumber and hardware and construction supplies. They named their
enterprise Benguet Lumber which they jointly managed until Tan Kees
death. Petitioners averred that the business prospered due to the
hard work and thrift of the alleged partners. However, they claimed
that in 1981, Tan Eng Lay and his children caused the conversion of
the partnership Benguet Lumber into a corporation called Benguet
Lumber Company. The incorporation was purportedly a ruse to deprive
Tan Eng Kee and his heirs of their rightful participation in the
profits of the business. Petitioners prayed for accounting of the
partnership assets, and the dissolution, and winding up of the
alleged partnership formed after the World War II between Tan Eng
Kee and Tan Eng Lay. The Regional Trial court found that Benguet
Lumber is a joint venture which is akin to a particular
partnership, and declared that the assets of Benguet Lumber are the
same assets turned over to Benguet lumber Co. and as such the heirs
or legal representatives of the deceased Tan Eng Kee have a legal
right to share in the said assets. The Court of Appeals reversed
the judgment of the Trial Court.
Issue: Whether or not a partnership existed between Tan Eng Kee
and Tan Eng Lay- NO
Ratio:
In order to constitute a partnership, it must be established
that (1) two or more persons bound themselves to contribute money,
property, or industry to a common fund, and (2) they intend to
divide the profits among themselves. The best evidence of the
partnerships existence would have been the contract of partnership
itself, or the articles of partnership but there is none. The
alleged partnership, though, was never formally organized. In
addition, petitioners point out that the New Civil Code was not yet
in effect when the partnership was allegedly formed sometime in
1945, although the contrary may well be argued that nothing
prevented the parties from complying with the provisions of the New
Civil Code when it took effect on August 30, 1950. A review of the
record persuades us that the Court of Appeals correctly reversed
the decision of the trial court. The evidence presented by
petitioners falls short of the quantum of proof required to
establish a partnership.
It is indeed odd, if not unnatural, that despite the forty years
the partnership was allegedly in existence, Tan Eng Kee never asked
for an accounting. The essence of a partnership is that the
partners share in the profits and losses. Each has the right to
demand an accounting as long as the partnership exists. A
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BUSORG CASE DIGESTS Atty. Charlie Mendoza
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demand for periodic accounting is evidence of a partnership.
During his lifetime, Tan Eng Kee appeared never to have made any
such demand for accounting from his brother.
This brings us to the matter of Exhibits 4 to 4-U for private
respondents, consisting of payrolls purporting to show that Tan Eng
Kee was an ordinary employee of Benguet Lumber, as it was then
called. Exhibits 4 to 4-U in fact shows that Tan Eng Kee received
sums as wages of an employee.In connection therewith, Article 1769
of the Civil Code provides:
In determining whether a partnership exists, these rules shall
apply:
XXX (4) The receipt by a person of a share of the profits of a
business is prima facie evidence that he is a partner in the
business, but no such inference shall be drawn if such profits were
received in payment: (a) As a debt by installment or otherwise;
(b) As wages of an employee or rent to a landlord; (b) As an
annuity to a widow or representative of a deceased partner; (d) As
interest on a loan, though the amount of payment vary with the
profits of the business; (e) As the consideration for the sale of a
goodwill of a business or other property by installments or
otherwise.
In the light of the aforequoted legal provision, we conclude
that Tan Eng Kee was only an employee, not a partner. Even if the
payrolls as evidence were discarded, petitioners would still be
back to square one, so to speak, since they did not present and
offer evidence that would show that Tan Eng Kee received amounts of
money allegedly representing his share in the profits of the
enterprise. Petitioners failed to show how much their father, Tan
Eng Kee, received, if any, as his share in the profits of Benguet
Lumber Company for any particular period. Hence, they failed to
prove that Tan Eng Kee and Tan Eng Lay intended to divide the
profits of the business between themselves, which is one of the
essential features of a partnership.
Nevertheless, petitioners would still want us to infer or
believe the alleged existence of a partnership from this set of
circumstances: that Tan Eng Lay and Tan Eng Kee were commanding the
employees; that both were supervising the employees; that both were
the ones who determined the price at which the stocks were to be
sold; and that both placed orders to the suppliers of the Benguet
Lumber Company. They also point out that the families of the
brothers Tan Eng Kee and Tan Eng Lay lived at the Benguet Lumber
Company compound, a privilege not extended to its ordinary
employees.
Even the aforesaid circumstances, when taken together are not
persuasive indicia of a partnership. They only tend to show that
Tan Eng Kee was involved in the operations of Benguet Lumber, but
in what capacity is unclear. We cannot discount the likelihood that
as a member of the family, he occupied a niche above the
rank-and-file employees. He would have enjoyed liberties otherwise
unavailable were he not kin, such
as his residence in the Benguet Lumber Company compound. He
would have moral, if not actual, superiority over his fellow
employees, thereby entitling him to exercise powers of supervision.
It may even be that among his duties is to place orders with
suppliers. Again, the circumstances proffered by petitioners do not
provide a logical nexus to the conclusion desired; these are not
inconsistent with the powers and duties of a manager, even in a
business organized and run as informally as Benguet Lumber
Company.
PASCUAL vs. COMMISSIONER OF INTERNAL REVENUE
166 SCRA 560 (1988)
Facts:
On June 22, 1965, petitioners Mariano Pascual and Renato Dragon
bought two (2) parcels of land from Santiago Bernardino, et al. and
on May 28, 1966, they bought another three (3) parcels of land from
Juan Roque.
The first two parcels of land were sold by petitioners in 1968
to Marenir Development Corporation, while the three parcels of land
were sold by petitioners to Erlinda Reyes and Maria Samson on March
19, 1970.
Petitioners realized a net profit in the sale made in 1968 in
the amount of P165,224.70, while they realized a net profit of
P60,000.00 in the sale made in 1970. The corresponding capital
gains taxes were paid by petitioners in 1973 and 1974 by availing
of the tax amnesties granted in the said years.
However, in a letter of then Acting BIR Commissioner Efren I.
Plana, petitioners were assessed and required to pay a total amount
of P107,101.70 as alleged deficiency corporate income taxes for the
years 1968 and 1970. Petitioners protested the said assessment
asserting that they had availed of tax amnesties way back in
1974.
Respondent Commissioner informed petitioners that in the years
1968 and 1970, petitioners as co-owners in the real estate
transactions formed an unregistered partnership or joint venture
taxable as a corporation under the National Internal Revenue
Code.
Issue: Whether or not respondent is correct in its presumptive
determination that petitioners formed an unregistered partnership
thus subject to corporate income tax. NO
Ratio:
There is no evidence that petitioners entered into an agreement
to contribute money, property or industry to a common fund, and
that they intended to divide the profits among themselves.
Respondent commissioner and/ or his representative just assumed
these conditions to be present on the basis of the fact that
petitioners purchased certain parcels of land and became co-owners
thereof. In Evangelista, there was a series of transactions where
petitioners purchased twenty-four (24) lots
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BUSORG CASE DIGESTS Atty. Charlie Mendoza
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showing that the purpose was not limited to the conservation or
preservation of the common fund or even the properties acquired by
them. The character of habituality peculiar to business
transactions engaged in for the purpose of gain was present.
Reliance of the lower court to the case of Evangelista v. Collector
is untenable. In order to constitute a partnership inter sese there
must be: (a) An intent to form the same; (b) generally
participating in both profits and losses; (c) and such a community
of interest, as far as third persons are concerned as enables each
party to make contract, manage the business, and dispose of the
whole property.There is no adequate basis to support the
proposition that they thereby formed an unregistered partnership.
The two isolated transactions whereby they purchased properties and
sold the same a few years thereafter did not thereby make them
partners.
LORENZO T. OA v. THE COMMISSIONER OF
INTERNAL REVENUE
G.R. No. L-19342 May 25, 1972
Facts:
Julia Bunales died on March 23, 1944, leaving as heirs her
surviving spouse. Lorenzo T. Oa and her five children. Lorenzo T.
Oa, the surviving spouse was appointed administrator of the estate
of said deceased. A partition was thereafter approved by the Court.
The Court also appointed Lorenzo, upon petition to the CFI of
Manila, to be appointed guardian of the persons and property of
Luz, Virginia and Lorenzo, Jr., who were minors at the time.
Although the project of partition was approved by the Court on
May 16, 1949. no attempt was made to divide the properties therein
listed. Instead, the properties remained under the management of
Lorenzo T. Oa who used said properties in business by leasing or
selling them and investing the income derived therefrom and the
proceeds from the sales thereof in real properties and securities.
As a result, petitioners properties and investments gradually
increased from P105,450.00 in 1949 to P480.005.20 in 1956. However,
petitioners did not actually receive their shares in the yearly
income. The income was always left in the hands of Lorenzo T. Oa
who, as heretofore pointed out, invested them in real properties
and securities.
On the basis of the foregoing facts, respondent (Commissioner of
Internal Revenue) decided that petitioners formed an unregistered
partnership and therefore, subject to the corporate income tax,
pursuant to Section 24, in relation to Section 84(b), of the Tax
Code. Accordingly, he assessed against the petitioners the amounts
of P8,092.00 and P13,899.00 as corporate income taxes for 1955 and
1956, respectively. The defense of petitioners revolved mainly in
the contention that they are co-owners of the properties inherited
from Julia Buales and the profits derived therefrom rather than
having formed a partnership.
Issue: Whether or not it was proper to consider petitioners
as
an unregistered partnership. YES
Ratio:
The first thing that has struck the Court is that whereas
petitioners predecessor in interest died way back on March 23, 1944
and the project of partition of her estate was judicially approved
as early as May 16, 1949, and presumably petitioners have been
holding their respective shares in their inheritance since those
dates admittedly under the administration or management of the head
of the family, the widower and father Lorenzo T. Oa, the assessment
in question refers to the later years 1955 and 1956. We believe
this point to be important because, apparently, at the start, or in
the years 1944 to 1954, the respondent Commissioner of Internal
Revenue did treat petitioners as co- owners, not liable to
corporate tax, and it was only from 1955 that he considered them as
having formed an unregistered partnership.
Under the management of Lorenzo T. Oa who used said properties
in business by leasing or selling them and investing the income
derived therefrom and the proceeds from the sales thereof in real
properties and securities, as a result of which said properties and
investments steadily increased yearly from P87,860.00 in land
account and P17,590.00 in building account in 1949 to P175,028.68
in investment account, P135,714.68 in land account and P169,262.52
in building account in 1956. And all these became possible because,
admittedly, petitioners never actually received any they allowed
him to continue using said shares as part of the common fund for
their ventures, even as they paid the corresponding income taxes on
the basis of their respective shares of the profits of their common
business as reported by the said Lorenzo T. Oa.
It is thus incontrovertible that petitioners did not, contrary
to their contention, merely limit themselves to holding the
properties inherited by them. Indeed, it is admitted that during
the material years herein involved, some of the said properties
were sold at considerable profit, and that with said profit,
petitioners engaged, thru Lorenzo T. Oa, in the purchase and sale
of corporate securities. It is likewise admitted that all the
profits from these ventures were divided among petitioners
proportionately in accordance with their respective shares in the
inheritance. In these circumstances, it is Our considered view that
from the moment petitioners allowed not only the incomes from their
respective shares of the inheritance but even the inherited
properties themselves to be used by Lorenzo T. Oa as a common fund
in undertaking several transactions or in business, with the
intention of deriving profit to be shared by them proportionally,
such act was tantamount to actually contributing such incomes to a
common fund and, in effect, they thereby formed an unregistered
partnership within the purview of the abovementioned provisions of
the Tax Code.
GATCHALIAN v. COLLECTOR OF INTERNAL REVENUE 67 Phil. 666
(1939)
Facts:
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BUSORG CASE DIGESTS Atty. Charlie Mendoza
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Plaintiffs (15 persons), in order to enable them to purchase one
sweepstakes ticket valued at two pesos (P2), subscribed and paid
each varied amounts aggregating 2 pesos. The said ticket was
registered in the name of Jose Gatchalian and Company . The
above-mentioned ticket bearing No. 178637 won one of the third
prizes in the amount of 50, 000. Jose Gatchalian was required by
income tax examiner Alfredo David to file the corresponding income
tax return covering the prize won by Jose Gatchalian & Company.
The Collector of Internal Revenue collected the tax under section
10 of Act No. 2833, as last amended by section 2 of Act No. 3761,
reading as follows:
"SEC. 10. (a) There shall be levied, assessed, collected, and
paid annually upon the total net income received in the preceding
calendar year from all sources by every corporation, joint-stock
company, partnership, joint account (cuenta en participacin),
association or insurance company, organized in the Philippine
Islands, no matter how created or organized, but not including duly
registered general copartnerships (compaias colectivas), a tax of
three per centum upon such income;
Issue: Whether or not the plaintiffs formed a partnership, or
merely a community of property without a personality of its own; in
the first case it is admitted that the partnership thus formed is
liable for the payment of income tax, whereas if there was merely a
community of property, they are exempt from such payment.
Ratio:
There is no doubt that if the plaintiffs merely formed a
community of property the latter is exempt from the payment of
income tax under the law. But according to the stipulated facts the
plaintiffs organized a partnership of a civil nature because each
of them put up money to buy a sweepstakes ticket for the sole
purpose of dividing equally the prize which they may win, as they
did in fact in the amount of P50,000 (article 1665, Civil Code).
The partnership was not only formed, but upon the organization
thereof and the winning of the prize, Jose Gatchalian personally
appeared in the office of the Philippine Charity Sweepstakes, in
his capacity as co-partner, as such collected the prize, the office
issued the check for P50,000 in favor of Jose Gatchalian and
company, and the said partner, in the same capacity, collected the
said check. All these circumstances repel the idea that the
plaintiffs organized and formed a community of property only.
Having organized and constituted a partnership of a civil nature,
the 'said entity is the one bound to pay the income tax which the
defendant collected.
OBILLOS, JR. v. COMMISSIONER OF INTERNAL REVENUE 139 SCRA 436
(1985)
Facts:
On 2 March 1973, Jose Obillos, Sr. completed payment to Ortigas
& Co Ltd. on two lots located at Greenhills, San Juan, Rizal.
The next day, he transferred his rights to his four
children (petitioners) to enable them to build their residences.
The company sold the two lots to petitioners, and the torrens title
issued to them show that they were co-owners of the two lots. In
1974, petitioners resold the lots to Walled City Securities
Corporation and Olga Cruz and divided among themselves the profit.
They treated the profit as capital gain and paid an income tax on
one-half thereof. In 1980, or a day before the expiration of the
five-year prescriptive period, the CIR required the petitioners to
pay corporate income tax on the total profit, in addition to
individual income tax on their shares thereof. A total of Php
127,781.76 was ordered to be paid by the petitioners, including the
corporate income tax, 50% fraud surcharge, accumulated interest,
income taxes and distributive dividend. Such was ordered by the
Commissioner, acting on the theory that the four petitioners had
formed an unregistered partnership or joint venture.
Issue:
Whether or not the petitioners formed an unregistered
partnership by the act of selling the two lots, of which they were
co-owners. NO
Ratio:
It is wrong to consider petitioners as having formed a
partnership under Article 1767 of the Civil Code simply because
they allegedly contributed money to buy the two lots, resold the
same and divided the profit among themselves. They were co-owners,
pure and simple. The petitioners were not engaged in any joint
venture by reason of that isolated transaction.
Their original purpose was to divide the lots for residential
purposes. If later on they found it not feasible to build their
residences on the lots because of the high cost of construction,
then they had no choice but to resell the same to dissolve the co-
ownership. The division of the profit was merely incidental to the
dissolution of the co-ownership which was in the nature of things a
temporary state.
Article 1769(3) of the Civil Code provides that "the sharing of
gross returns does not of itself establish a partnership, whether
or not the persons sharing them have a joint or common right or
interest in any property from which the returns are derived". There
must be an unmistakable intention to form a partnership or joint
venture.
Evangelista, et al. v. CIR, GR No. L-9996, October 15,
1957 Facts: Herein petitioners seek a review of CTAs decision
holding them liable for income tax, real estate dealers tax and
residence tax. As stipulated, petitioners borrowed from their
father a certain sum for the purpose of buying real properties.
Within February 1943 to April 1994, they have bought parcels
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BUSORG CASE DIGESTS Atty. Charlie Mendoza
7
of land from different persons, the management of said
properties was charged to their brother Simeon evidenced by a
document. These properties were then leased or rented to various
tenants. On September 1954, CIR demanded the payment of income tax
on corporations, real estate dealers fixed tax, and corporation
residence tax to which the petitioners seek to be absolved from
such payment. Issue: Whether petitioners are subject to the tax on
corporations. Ruling: The Court ruled that with respect to the tax
on corporations, the issue hinges on the meaning of the terms
corporation and partnership as used in Section 24 (provides that a
tax shall be levied on every corporation no matter how created or
organized except general co-partnerships) and 84 (provides that the
term corporation includes among others, partnership) of the NIRC.
Pursuant to Article 1767, NCC (provides for the concept of
partnership), its essential elements are: (a) an agreement to
contribute money, property or industry to a common fund; and (b)
intent to divide the profits among the contracting parties. It is
of the opinion of the Court that the first element is undoubtedly
present for petitioners have agreed to, and did, contribute money
and property to a common fund. As to the second element, the Court
fully satisfied that their purpose was to engage in real estate
transactions for monetary gain and then divide the same among
themselves as indicated by the following circumstances: 1. The
common fund was not something they found already in existence nor a
property inherited by them pro indiviso. It was created purposely,
jointly borrowing a substantial portion thereof in order to
establish said common fund; 2. They invested the same not merely in
one transaction, but in a series of transactions. The number of
lots acquired and transactions undertake is strongly indicative of
a pattern or common design that was not limited to the conservation
and preservation of the aforementioned common fund or even of the
property acquired. In other words, one cannot but perceive a
character of habitually peculiar to business transactions engaged
in the purpose of gain; 3. Said properties were not devoted to
residential purposes, or to other personal uses, of petitioners but
were leased separately to several persons; 4. They were under the
management of one person where the affairs relative to said
properties have been handled as if the same belonged to a
corporation or business and enterprise operated for profit; 5.
Existed for more than ten years, or, to be exact, over fifteen
years, since the first property was acquired, and over twelve
years, since Simeon Evangelista became the manager; 6. Petitioners
have not testified or introduced any evidence, either on their
purpose in creating the set up already adverted to, or on the
causes for its continued existence. The collective effect of these
circumstances is such as to leave no room for doubt on the
existence of said intent in petitioners herein.
Also, petitioners argument that their being mere co-owners did
not create a separate legal entity was rejected because, according
to the Court, the tax in question is one imposed upon
"corporations", which, strictly speaking, are distinct and
different from "partnerships". When the NIRC includes
"partnerships" among the entities subject to the tax on
"corporations", said Code must allude, therefore, to organizations
which are not necessarily "partnerships", in the technical sense of
the term. The qualifying expression found in Section 24 and 84(b)
clearly indicates that a joint venture need not be undertaken in
any of the standard forms, or in conformity with the usual
requirements of the law on partnerships, in order that one could be
deemed constituted for purposes of the tax on corporations.
Accordingly, the lawmaker could not have regarded that personality
as a condition essential to the existence of the partnerships
therein referred to. For purposes of the tax on corporations, NIRC
includes these partnerships - with the exception only of duly
registered general co partnerships - within the purview of the term
"corporation." It is, therefore, clear that petitioners herein
constitute a partnership, insofar as said Code is concerned and are
subject to the income tax for corporations.
As regards the residence of tax for corporations (Section 2 of
CA No. 465), it is analogous to that of section 24 and 84 (b) of
the NIRC. It is apparent that the terms "corporation" and
"partnership" are used in both statutes with substantially the same
meaning. Consequently, petitioners are subject, also, to the
residence tax for corporations. Finally, on the issues of being
liable for real estate dealers tax, they are also liable for the
same because the records show that they have habitually engaged in
leasing said properties whose yearly gross rentals exceeds
P3,000.00 a year.
AFISCO v. COURT OF APPEALS 302 SCRA 1 (1999)
Facts:
The petitioners are 41 non-life insurance corporations,
organized and existing under the laws of the Philippines, entered
into a Quota Share Reinsurance Treaty and a Surplus Reinsurance
Treaty with the Munchener Ruckversi-cherungs-Gesselschaft
(hereafter called Munich), a non-resident foreign insurance
corporation. The reinsurance treaties required petitioners to form
a [p]ool. Accordingly, a pool composed of the petitioners was
formed on the same day.
The pool of machinery insurers submitted a financial statement
and filed an Information Return of Organization Exempt from Income
Tax for the year ending in 1975, on the basis of which it was
assessed by the Commissioner of Internal Revenue deficiency
corporate taxes in the amount of P1,843,273.60, and withholding
taxes in the amount of P1,768,799.39 and P89,438.68 on dividends
paid to Munich and to the petitioners, respectively. These
assessments were protested by the petitioners.
On January 27, 1986, the Commissioner of Internal Revenue denied
the protest and ordered the petitioners, assessed as Pool of
Machinery Insurers, to pay deficiency income tax,
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BUSORG CASE DIGESTS Atty. Charlie Mendoza
8
interest, and with[h]olding tax.
The CA ruled in the main that the pool of machinery insurers was
a partnership taxable as a corporation, and that the latters
collection of premiums on behalf of its members, the ceding
companies, was taxable income.
Issue: Whether or not the Clearing House, acting as a mere agent
and performing strictly administrative functions, and which did not
insure or assume any risk in its own name, was a partnership or
association subject to tax as a corporation YES
Ratio:
Article 1767 of the Civil Code recognizes the creation of a
contract of partnership when two or more persons bind themselves to
contribute money, property, or industry to a common fund, with the
intention of dividing the profits among themselves. Its requisites
are: (1) mutual contribution to a common stock, and (2) a joint
interest in the profits. In other words, a partnership is formed
when persons contract to devote to a common purpose either money,
property, or labor with the intention of dividing the profits
between themselves. Meanwhile, an association implies associates
who enter into a joint enterprise x x x for the transaction of
business.
In the case before us, the ceding companies entered into a Pool
Agreement or an association that would handle all the insurance
businesses covered under their quota- share reinsurance treaty and
surplus reinsurance treaty with Munich. The following unmistakably
indicates a partnership or an association covered by Section 24 of
the NIRC: (1) The pool has a common fund, consisting of money and
other valuables that are deposited in the name and credit of the
pool. This common fund pays for the administration and operation
expenses of the pool. (2) The pool functions through an executive
board, which resembles the board of directors of a corporation,
composed of one representative for each of the ceding companies.
(3) True, the pool itself is not a reinsurer and does not issue any
insurance policy; however, its work is indispensable, beneficial
and economically useful to the business of the ceding companies and
Munich, because without it they would not have received their
premiums. The ceding companies share in the business ceded to the
pool and in the expenses according to a Rules of Distribution
annexed to the Pool Agreement. Profit motive or business is,
therefore, the primordial reason for the pools formation.
TORRES v. COURT OF APPEALS G.R. No. 134559 December 9, 1999
Facts:
Sisters Antonia Torres and Emeteria Baring, herein petitioners,
entered into a joint venture agreement with Respondent Manuel
Torres for the development of a parcel of land into a subdivision.
Pursuant to the contract, they executed a Deed of Sale covering the
said parcel of land in favor of respondent, who then had it
registered in his name. By
mortgaging the property, respondent obtained from Equitable Bank
a loan of P40,000 which, under the Joint Venture Agreement, was to
be used for the development of the subdivision. All three of them
also agreed to share the proceeds from the sale of the subdivided
lots. The project did not push through, and the land was
subsequently foreclosed by the bank
Issue: Whether or not there was a contract of partnership
YES
Ratio:
Under the Agreement, petitioners would contribute property to
the partnership in the form of land which was to be developed into
a subdivision; while respondent would give, in addition to his
industry, the amount needed for general expenses and other costs.
Furthermore, the income from the said project would be divided
according to the stipulated percentage. Clearly, the contract
manifested the intention of the parties to form a partnership.
Petitioners also contend that the Joint Venture Agreement is
void under Article 1422 of the Civil Code, because it is the direct
result of an earlier illegal contract, which was for the sale of
the land without valid consideration. This argument is puerile. The
Joint Venture Agreement clearly states that the consideration for
the sale was the expectation of profits from the subdivision
project. Its first stipulation states that petitioners did not
actually receive payment for the parcel of land sold to respondent.
Consideration, more properly denominated as cause, can take
different forms, such as the prestation or promise of a thing or
service by another.
LIM TONG LIM v. PHILIPPINE FISHING GEAR
INDUSTRIES
G.R. No. 136448. November 3, 1999
Facts:
Antonio Chua and Peter Yao entered into a contract for the
purchase of fishing nets from the Philippine Fishing Gear
Industries. They claimed that they were engeged in a business
venture with petitioner Lim Tong Lim. The buyers however failed to
pay for the nets and the floats. Private respondent filed a
collection suit against Yao, Chua an Lim Tong Lim with preliminary
attachment. Trial court rendered its decision in favor of Phil.
Fishing Gear and that Chua, Yao and Lim, as general partners were
jointly liable to pay respondents. It based its decision on a
compromise agreement wherein joint liability was presumed from the
equal distribution of the profit and loss. The Court of Appeals
affirmed. Hence, this petition.
Issue: Whether or not, by their acts, Lim, Chua and Yao could be
deemed to have entered into a partnership. YES
Ratio:
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BUSORG CASE DIGESTS Atty. Charlie Mendoza
9
There is a partnership between Lim, Chua and Yao. Petitioner Lim
requested Yao who was engaged in commercial fishing to join him,
while Antonio Chua was already Yaos partner. The three verbally
agreed to acquire two fishing boats, FB Lourdes and FB Nelson for
the sum of 3.35 million. They also borrowed 3.25 million from Jesus
Lim, brother of petitioner Lim Tong Lim. They purchased the boats
and later the nets and floats, which constituted the main asets of
the partnership and they agreed to divide tha proceeds form the
sale and operation thereof. The sale of the boats as well as the
division among the three of the balance remaining after the payment
of their loans prove that F/B Lourdes was not his own property but
an asset of the partnership. Although the corporation was never
legally formed for unknown reasons, this fact alone does not
preclude the liabilities of the three as contracting parties in
representation of it. Under the law on estoppel, those acting on
behalf of a corporation and those benefited by it, knowing it to be
without valid existence, are held liable as general partners.
Having reaped the benefits of the contract entered into by persons
with whom he previously had an existing relationship he is deemed
to be part of said association and is covered by the scope of the
doctrine of corporation by estoppel.
AGAD v. MABOLO and AGAD CO.
23 SCRA 1223 (1968)
Facts:
Petitioner Mauricio Agad claims that he and defendant Severino
Mabato are partners in a fishpond business to which they
contributed P1000 each. As managing partner, Mabato yearly rendered
the accounts of the operations of the partnership. However, for the
years 1957-1963, defendant failed to render the accounts despite
repeated demands. Petitioner filed a complaint against Mabato to
which a copy of the public instrument evidencing their partnership
is attached. Aside from the share of profits (P14,000) and
attorneys fees (P1000), petitioner prayed for the dissolution of
the partnership and winding up of its affairs.
Mabato denied the existence of the partnership alleging that
Agad failed to pay his P1000 contribution. He then filed a motion
to dismiss on the ground of lack of cause of action. The lower
court dismissed the complaint finding a failure to state a cause of
action predicated upon the theory that the contract of partnership
is null and void, pursuant to Art. 1773 of our Civil Code, because
an inventory of the fishpond referred in said instrument had not
been attached thereto.
Art. 1771. A partnership may be constituted in any form, except
where immovable property or real rights are contributed thereto, in
which case a public instrument shall be necessary. Art. 1773. A
contract of partnership is void, whenever immovable property is
contributed thereto, if inventory of said property is not made,
signed by the parties; and attached to the public instrument.
Issue: Whether or not immovable property or real rights have
been contributed to the partnership. NO
Ratio:
Based on the copy of the public instrument attached in the
complaint, the partnership was established to operate a fishpond",
and not to "engage in a fishpond business. Thus, Mabatos contention
that it is really inconceivable how a partnership engaged in the
fishpond business could exist without said fishpond property
(being) contributed to the partnership is without merit. Their
contributions were limited to P1000 each and neither a fishpond nor
a real right thereto was contributed to the partnership. Therefore,
Article 1773 of the Civil Code finds no application in the case at
bar. Case remanded to the lower court for further proceedings.
Benjamin Yu v. National Labor Relations Commission &
Jade Mountain Products Co. Ltd., Willy Co, Rhodora Bendal, Lea
Bendal, Chiu
Shian Jeng and Chen Ho-Fu Facts: Yu ex-Assistant General Manager
of the marble quarrying and export business operated by a
registered partnership called Jade Mountain Products Co. Ltd.
partnership was originally organized with Bendals as general
partners and Chin Shian Jeng, Chen Ho-Fu and Yu Chang as limited
partners; partnership business consisted of exploiting a marble
deposit in Bulacan Yu, as Ass is tan t Genera l Manager, had a
month ly sa lary of 4000. Yu, however, ac tua l ly r e c e i v e d
o n l y h a l f o f h i s s t i p u l a t e d s a l a r y , s i n c
e h e h a d a c c e p t e d t h e p r o m i s e o f t h e par tners
tha t the balance would be pa id when the f i rm sha l l have
secured addi t ional opera t ing funds f rom abroad . Yu ac tua l
ly managed the opera t ions and f inances of the business; he had
overall supervision of the workers at the marble quarry in Bulacan
and took charge of the preparation of papers relating to the
exportation of the firms products. general partners Bendals sold
and transferred their interests in the partnership to Co and
Emmanuel Zapanta par tnersh ip was cons t i tu ted so le ly by Co
and Zapanta ; i t cont inued to use the o ld f i rm name of Jade
Mountain Yu dismissed by the new partners Issues: 1 . W O N t h e p
a r t n e r s h i p w h i c h h a d h i r e d Yu a s A s s t . G e
n . M a n a g e r h a d b e e n extinguished and replaced by a new
partnership composed of Co and Zapanta; 2. if indeed a new
partnership had come into existence, WON Yu could nonetheless
assert his rights under his employment contract with the old
partnership as against the new partnership Held: 1. Yes. Changes in
the membership of the partnership resulted in the dissolution of
the old partnership which had hired Yu and the emergence of a new
partnership composed of Co and Zapanta.
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BUSORG CASE DIGESTS Atty. Charlie Mendoza
10
Legal bases: A r t . 1 8 2 8 . T h e d i s s o l u t i o n o f a
p a r t n e r s h i p i s t h e c h a n g e i n t h e r e l a t i o
n o f t h e p a r t n e r s c a u s e d b y a n y p a r t n e r c e
a s i n g t o b e a s s o c i a t e d i n t h e c a r r y i n g o n
a s distinguished from the winding up of the business. Art. 1830.
Dissolution is caused: (1) without violation of the agreement
between the partners; (b) by the express will of any partner, who
must act in good faith, when no definite term or particular
undertaking is specified; (2) in contravention of the agreement
between the partners, where the circumstances do not permit a
dissolution under any other provision of this article, by the
express will of any partner at any time; N o w i n d i n g u p o f
a f f a i r s i n t h i s c a s e a s c o n t e m p l a t e d i n A
r t 1 8 2 9 : o n d i s s o l u t i o n t h e partnership is not
terminated, but continues until the winding up of partnership
affairs is completed t h e n e w p a r t n e r s h i p s i m p l y
t o o k o v e r t h e b u s i n e s s e n t e r p r i s e o w n e d
b y t h e o l d p a r t n e r s h i p , a n d c o n t i n u e d u s
i n g t h e o l d n a m e o f J a d e M o u n t a i n P r o d u c t
s C o m p a n y Limited, without winding up the business affairs of
the old partnership, paying off its debts, liquidating and
distributing its net assets, and then re-assembling the said assets
or most of them and opening a new business enterprise 2. Yes. the
new partnership is liable for the debts of the old partnership
Legal basis: Art. 1840 (see codal)
ROJAS V. MAGLANA December 10, 1990
Paras, C.J. Raeses, Roberto Miguel
SUMMARY: Maglana and Rojas executed their articles of
co-partnership called EDE. It had an indefinite term, was
registered with the SEC, and had a Timer License. Later, Agustin
Pahamitang became an industrial partner and another articles of
co-partnership was executed. The term of the second co-partnership
was fixed to 30 years. After some time, the three executed a
conditional sale of interest in the partnership where Magalana and
Rojas shall purchase the interest, share, and participation of
Pahamotang. It was agreed that, after payment of such including the
loan secured by Pahamotang, the two shall become owners of all
equipment contributed by Pahamotang. The two continued the
partnership without any written agreement or reconstitution of the
articles of partnership. Subsequently, Rojas entered into a
contarct with CMS Estate. Maglana reminded him of his contribution
to the capital investments and his duties to the partnership. Rojas
said he would not be able to comply. Maglana told Rojas that the
latter is only
entitled to 20% of the profits, which was the sharing from
1957-1959 without dispute. Rojas took funds from the partnership
which was more than his share. Maglana notified Rojas that he had
dissolved the partnership. Rojas filed an action against Magallana.
The CFI ruled that the partnership of the two after Pahamotang left
was one de facto and at will. The SC said that it was not,
considering that the first partnership was never dissolved. With
regard to the issue of unilateral dissolution, the SC held that
Maglana had the power to do so. DOCTRINE: Under Article 1830, par.
2 of the Civil Code, even if there is a specified term, one partner
can cause its dissolution by expressly withdrawing even before the
expiration of the period, with or without justifiable cause. Of
course, if the cause is not justified or no cause was given, the
withdrawing partner is liable for damages but in no case can he be
compelled to remain in the firm. With his withdrawal, the number of
members is decreased, hence, the dissolution. And in whatever way
he may view the situation, the conclusion is inevitable that Rojas
and Maglana shall be guided in the liquidation of the partnership
by the provisions of its duly registered Articles of
Co-Partnership; that is, all profits and losses of the partnership
shall be divided "share and share alike" between the partners.
FACTS: Maglana and Rojas executed their Articles of
Co-partnership called Eastcoast Development Enterpises (EDE) which
had an indefinite term of existence and was registered with the SEC
and had a Timber License. One of the EDEs purposes was to apply or
secure timber and/or private forest lands and to operate, develop
and promote such forests rights and concessions. Maglana shall
manage the business affairs while Rojas shall be the logging
superintendent. All profits and losses shall be divided share and
share alike between them. Later on, the two availed the services of
Agustin Pahamotang as industrial partner and executed another
articles of co-partnership with the latter. The purpose of this
second partnership was to hold and secure renewal of timber license
and the term of which was fixed to 30 years. Still later on, the
three executed a conditional sale of interest in the partnership
wherein Maglana and Rojas shall purchase the interest, share and
participation in the partnership of Pahamotang. It was also agreed
that after payment of such including amount of loan secured by
Pahamotang in favor of the partnership, the two shall become owners
of all equipment contributed by Pahamotang. After this, the two
continued the partnership without any written agreement or
reconstitution of their articles of partnership. Subsequently,
Rojas entered into a management contract with CMS Estate Inc.
Maglana wrote him regarding his contribution to the capital
investments as well as his duties as logging superintendent. Rojas
replied that he will not be able to comply with both. Maglana then
told Rojas that the latters share will just be 20% of the net
profits. Such was the sharing from 1957 to 1959 without complaint
or dispute. Rojas took
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BUSORG CASE DIGESTS Atty. Charlie Mendoza
11
funds from the partnership more than his contribution. Maglana
notified Rojas that he dissolved the partnership. Rojas filed an
action against Maglana for the recovery of properties and
accounting of the partnership and damages. CFI RULING:
1. The partnership of Maglana and Rojas after Pahamotang retired
is one of de facto and at will; the sharing of profits and losses
is on the basis of actual contributions;
2. there is no evidence these properties were acquired by the
partnership funds thus it should not belong to it;
3. neither is entitled to damages; the letter of Maglana in
effect dissolved the partnership;
4. sale of forest concession is valid and binding and should be
considered as Maglanas contribution;
5. Rojas must pay or turn over to the partnership the profits he
received from CMS and pay his personal account to the
partnership;
6. Maglana must be paid 85k which he shouldve received but was
not paid to him and must be considered as his contribution
ACTION AND PRAYER: N/A ISSUE:
1. WON the partnership carried on after the second partnership
was a de facto partnership and at will.
2. WON Magalana may unilaterally dissolve the partnership.
HELD:
1. No. 2. Yes.
RATIO:
1. There was no intention to dissolve the first partnership upon
the constitution of the second as everything else was the same
except for the fact that they took in an industrial partner: they
pursued the same purposes, the capital contributions call for the
same amounts, all subsequent renewals of Timber License were
secured in favor of the first partnership, all businesses were
carried out under the registered articles. To all intents and
purposes therefore, the First Articles of Partnership were only
amended, in the form of Supplementary Articles of
Co-Partnership.
On the other hand, there is no dispute that the second
partnership was dissolved by common consent. Said dissolution did
not affect the first partnership which continued to exist.
Significantly, Maglana and Rojas agreed to purchase the interest,
share and participation in the second partnership of Pahamotang and
that thereafter, the two (Maglana and Rojas) became the owners of
equipment contributed by Pahamotang. Maglana even reminded Rojas of
his obligation to contribute either in cash or in equipment, to the
capital investment of the
partnership as well as his obligation to perform his duties as
logging superintendent. This reminder cannot refer to any other but
to the provisions of the duly registered Articles of
Co-Partnership.
2. As there are only two parties when Maglana notified
Rojas that he dissolved the partnership, it is in effect a
notice of withdrawal. Under Article 1830, par. 2 of the Civil Code,
even if there is a specified term, one partner can cause its
dissolution by expressly withdrawing even before the expiration of
the period, with or without justifiable cause. Of course, if the
cause is not justified or no cause was given, the withdrawing
partner is liable for damages but in no case can he be compelled to
remain in the firm. With his withdrawal, the number of members is
decreased, hence, the dissolution. And in whatever way he may view
the situation, the conclusion is inevitable that Rojas and Maglana
shall be guided in the liquidation of the partnership by the
provisions of its duly registered Articles of Co-Partnership; that
is, all profits and losses of the partnership shall be divided
"share and share alike" between the partners. But an accounting
must first be made and which in fact was ordered by the trial court
and accomplished by the commissioners appointed for the
purpose.
According to the Commissioners report, Rojas is not entitled to
any profits as he failed to give the amount he had undertaken to
contribute thus, had become a debtor of the partnership. Maglana
cannot be liable for damages as Rojas abandoned the partnership
thru his acts and also took funds in an amount more than his
contribution
DISPOSITIVE: PREMISES CONSIDERED, the assailed decision of the
Court of First Instance of Davao, Branch III, is hereby MODIFIED in
the sense that the duly registered partnership of Eastcoast
Development Enterprises continued to exist until liquidated and
that the sharing basis of the partners should be on share and share
alike as provided for in its Articles of Partnership, in accordance
with the computation of the commissioners. We also hereby AFFIRM
the decision of the trial court in all other respects. TACAO v CA
William Belo introduced Nenita Anay to his girlfriend, Marjorie
Tocao. The three agreed to form a joint venture for the sale of
cooking wares. Belo was to contribute P2.5 million; Tocao also
contributed some cash and she shall also act as president and
general manager; and Anay shall be in charge of marketing. Belo and
Tocao specifically asked Anay because of her experience and
connections as a marketer. They agreed further that Anay shall
receive the following:
1. 10% share of annual net profits
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BUSORG CASE DIGESTS Atty. Charlie Mendoza
12
2. 6% overriding commission for weekly sales 3. 30% of sales
Anay will make herself 4. 2% share for her demo services They
operated under the name Geminesse Enterprise, this name was however
registered as a sole proprietorship with the Bureau of Domestic
Trade under Tocao. The joint venture agreement was not reduced to
writing because Anay trusted Belos assurances.
The venture succeeded under Anays marketing prowess.
But then the relationship between Anay and Tocao soured. One
day, Tocao advised one of the branch managers that Anay was no
longer a part of the company. Anay then demanded that the company
be audited and her shares be given to her.
ISSUE: Whether or not there is a partnership.
HELD: Yes, even though it was not reduced to writing, for a
partnership can be instituted in any form. The fact that it was
registered as a sole proprietorship is of no moment for such
registration was only for the companys trade name.
Anay was not even an employee because when they ventured into
the agreement, they explicitly agreed to profit sharing this is
even though Anay was receiving commissions because this is only
incidental to her efforts as a head marketer.
The Supreme Court also noted that a partner who is excluded
wrongfully from a partnership is an innocent partner. Hence, the
guilty partner must give him his due upon the dissolution of the
partnership as well as damages or share in the profits realized
from the appropriation of the partnership business and goodwill. An
innocent partner thus possesses pecuniary interest in every
existing contract that was incomplete and in the trade name of the
co-partnership and assets at the time he was wrongfully
expelled.
An unjustified dissolution by a partner can subject him to
action for damages because by the mutual agency that arises in a
partnership, the doctrine of delectus personae allows the partners
to have the power, although not necessarily the right to dissolve
the partnership.
Tocaos unilateral exclusion of Anay from the partnership is
shown by her memo to the Cubao office plainly stating that Anay
was, as of October 9, 1987, no longer the vice-president for sales
of Geminesse Enterprise. By that memo, petitioner Tocao effected
her own withdrawal from the partnership and considered herself as
having ceased to be associated with the partnership in the carrying
on of the business. Nevertheless, the partnership was not
terminated thereby; it continues until the winding up of the
business.
SANTOS VS REYES 368 SCRA 261
FACTS:
- Petitioner Fernando Santos, Respondent Nieves Reyes and
Meliton Zabat started a lending Business venture together
proposed by Nieves. It was agreed on the Articles of Agreement that
petitioner will get 70% of the profits and Nieves and Zabat would
earn 15% each.
- Nievas introduced Gragera (chairman of Monte Maria Development
Corporation) to petitioner, and sought short term loans for its
members and with an agreement that Monte Maria will be entitled to
P1.31 commission per thousand paid daily. Nieves acted as
bookkeeper while her husband Arsenio acted as credit
investigator.
- Gragera complained that his commissions were inadequately
remitted. This prompt petitioner to file a complaint against
respondent allegedly in their capacities as employees of
petitioner, with having misappropriated funds.
ISSUE: Whether or not the business relationship between
petitioner and respondent was one of partnership
HELD
YES
Nieves herself provided the initiative in the lending activities
with Monte Maria.
- The fact that in their Articles of Agreement, the parties
agreed to divide the profits of a lending business in a 70-15-15,
manner, with petitioner getting the lions share proved the
establishment of a partnership, even when the other parties to the
agreement were given separate compensation as bookkeeper and
creditor investigator.
By the contract of partnership, two or more persons bind
themselves to contribute money, property or industry to a common
fund, with the intention of dividing the profits among themselves.
(Art. 1767 NCC)
MORAN JR. v. COURT OF APPEALS 133 SCRA 88 (1984)
Facts:
Moran and Pecson agreed to contribute P15 000 each for the
purpose of printing 95 000 posters of the delegates to the then
1971 Constitutional Commission. It was further agreed that Pecson
will receive a commission of P 1000 a month and that the
partnership is to be liquidated on December 15, 1971.
Pecson partially fulfilled his obligation when he issued P10k in
favor of the partnership. He gave the P10k to Moran as the managing
partner. Moran however did not add anything and, instead, he only
used P4k out of the P10k in printing 2,000 posters. He only printed
2,000 posters. All the posters were sold for a total of P10k.
Pecson sued Moran. The trial court ordered Moran to pay Pecson
damages. The Court of Appeals affirmed the decision but modified
the same as it ordered Moran to pay P47.5k for
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BUSORG CASE DIGESTS Atty. Charlie Mendoza
13
unrealized profit; P8k for Pecsons monthly commissions; P7k as
return of investment because the venture never took off; plus
interest.
Issue: Whether or not the Court of Appeals erred in holding
Moran liable to respondent Pecson in the sum of P47,500 as the
supposed expected profits due him.
Ratio:
The first question raised in this petition refers to the award
of P47,500.00 as the private respondent's share in the unrealized
profits of the partnership. The award of speculative damages has no
basis in fact and law.
The rule is, when a partner who has undertaken to contribute a
sum of money fails to do so, he becomes a debtor of the partnership
for whatever he may have promised to contribute (Art. 1786, Civil
Code) and for interests and damages from the time he should have
complied with his obligation (Art. 1788, Civil Code. In this case,
there was mutual breach. Private respondent failed to give his
entire contribution in the amount of P15,000.00. He contributed
only P10,000.00. The petitioner likewise failed to give any of the
amount expected of him. He further failed to comply with the
agreement to print 95,000 copies of the posters. Instead, he
printed only 2,000 copies.
There is no evidence whatsoever that the partnership between the
petitioner and the private respondent would have been a profitable
venture. In fact, it was a failure doomed from the start. There is
therefore no basis for the award of speculative damages in favor of
the private respondent
Being a contract of partnership, each partner must share in the
profits and losses of the venture. That is the essence of a
partnership. And even with an assurance made by one of the partners
that they would earn a huge amount of profits, in the absence of
fraud, the other partner cannot claim a right to recover the highly
speculative profits
Bastida vs Menzi
Facts: Bastida offered to assign to Menzi & Co. his contract
with Phil Sugar Centrals Agency and to supervise the mixing of the
fertilizer and to obtain other orders for 50 % of the net profit
that Menzi & Co., Inc., might derive therefrom. J. M. Menzi
(gen. manager of Menzi & Co.) accepted the offer. The agreement
between the parties was verbal and was confirmed by the letter of
Menzi to the plaintiff on January 10, 1922. Pursuant to the verbal
agreement, the defendant corporation on April 27, 1922 entered into
a written contract with the plaintiff, marked Exhibit A, which is
the basis of the present action. Still, the fertilizer business as
carried on in the same manner as it was prior to the written
contract, but the net profit that the plaintiff herein shall get
would only be 35%. The intervention of the plaintiff was limited to
supervising the mixing of the fertilizers in the bodegas of Menzi.
Prior to the expiration of the contract (April 27, 1927), the
manager of Menzi notified the plaintiff that the contract for his
services would not be renewed. Subsequently, when the contract
expired, Menzi proceeded to liquidate the fertilizer business in
question. The plaintiff refused to agree to this. It argued, among
others, that the written contract entered into by the parties is a
contract of general regular commercial partnership, wherein Menzi
was the capitalist and the plaintiff the industrial partner.
Issue: Is the relationship between the petitioner and Menzi that
of partners?
Held: The relationship established between the parties was not
that of partners, but that of employer and employee, whereby the
plaintiff was to receive 35% of the net profits of the fertilizer
business of Menzi in compensation for his services for supervising
the mixing of the fertilizers. Neither the provisions of the
contract nor the conduct of the parties prior or subsequent to its
execution justified the finding that it was a contract of
copartnership. The written contract was, in fact, a continuation of
the verbal agreement between the parties, whereby the plaintiff
worked for the defendant corporation for onehalf of the net profits
derived by the corporation form certain fertilizer contracts.
According to Art. 116 of the Code of Commerce, articles of
association by which two or more persons obligate themselves to
place in a common fund any property, industry, or any of these
things, in order to obtain profit, shall be commercial, no matter
what it class may be, provided it has been established in
accordance with the provisions of the Code. However in this case,
there was no common fund. The business belonged to Menzi & Co.
The plaintiff was working for Menzi, and instead of receiving a
fixed salary, he was to receive 35% of the net profits as
compensation for his services. The phrase in the written contract
en sociedad con, which is used as a basis of the plaintiff to prove
partnership in this case, merely means en reunion con or in
association with. It is also important to note that although Menzi
agreed to furnish the necessary financial aid for the fertilizer
business, it did not obligate itself to contribute any fixed sum as
capital or to defray at its own expense the cost of securing the
necessary credit.
Estanislao, Jr. v. Court of Appeals
G.R. No. L-49982 April 27, 1988 Facts: Petitioner and private
respondents are brothers and sisters who are co-owners of certain
lots which were then being leased to the Shell Company of the
Philippines Limited (SHELL). They agreed to open and operate a gas
station thereat to be known as Estanislao Shell Service Station
with an initial investment of P 15,000.00 to be taken from the
advance rentals due to them from SHELL. They agreed to help their
brother, petitioner herein, by allowing him to operate and manage
the gasoline service station of the family. They negotiated with
SHELL. It was agreed that petitioner would apply for the
dealership. Respondent Remedios helped in managing the business
with petitioner. Later the parties herein entered into an
Additional Cash Pledge Agreement with SHELL wherein it was
reiterated that the P 15,000.00 advance rental shall be deposited
with SHELL to cover advances of fuel to petitioner as dealer with a
proviso
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BUSORG CASE DIGESTS Atty. Charlie Mendoza
14
that said agreement cancels and supersedes the Joint Affidavit
executed by the co-owners. For sometime, the petitioner submitted
financial statements regarding the operation of the business to
private respondents, but therafter petitioner failed to render
subsequent accounting. Private respondents filed a complaint in the
Court of First Instance of Rizal against petitioner praying among
others that the latter be ordered: (1) to execute a public document
embodying all the provisions of the partnership agreement entered
into between plaintiffs and defendant as provided in Article 1771
of the New Civil Code; (2) to render a formal accounting of the
business operation up to the time the order is issued and that the
same be subject to proper audit; (3) to pay the plaintiffs their
lawful shares and participation in the net profits of the business.
The trial court dismissed the complaint. Private respondents moved
for reconsideration. The dismissal was set aside and the trial
court rendered in their favor. Petitioner appealed, the appellate
court affirmed in toto the decision of the trial court and denied
the subsequent motion for reconsideration. Hence, this petition for
certiorari. Petitioner argued that because of the said stipulation
cancelling and superseding that previous Joint Affidavit, whatever
partnership agreement there was in said previous agreement had
thereby been abrogated. Issue(s): Whether or not a partnership
exists between members of the same family arising from their joint
ownership of certain properties Held: We find no merit in
[petitioners] argument. Said cancelling provision was necessary for
the Joint Affidavit speaks of P 15,000.00 advance rentals starting
May 25, 1966 while the latter agreement also refers to advance
rentals of the same amount starting May 24, 1966. There is,
therefore, a duplication of reference to the P 15,000.00 hence the
need to provide in the subsequent document that it "cancels and
supersedes" the previous one. True it is that in the latter
document, it is silent as to the statement in the Joint Affidavit
that the P 15,000.00 represents the "capital investment" of the
parties in the gasoline station business and it speaks of
petitioner as the sole dealer, but this is as it should be for in
the latter document SHELL was a signatory and it would be against
its policy if in the agreement it should be stated that the
business is a partnership with private respondents and not a sole
proprietorship of petitioner. Moreover other evidence in the record
shows that there was in fact such partnership agreement between the
parties. This is attested by the testimonies of private respondent
Remedies Estanislao and Atty. Angeles. Petitioner submitted to
private respondents periodic accounting of the business. Petitioner
gave a written authority to private respondent Remedies Estanislao,
his sister, to examine and audit the books of their common business
(aming negosyo). Respondent Remedios assisted in the running of the
business. There is no doubt that the parties hereto formed a
partnership when they bound themselves to contribute money to a
common fund with the
intention of dividing the profits among themselves. The sole
dealership by the petitioner and the issuance of all government
permits and licenses in the name of petitioner was in compliance
with the afore-stated policy of SHELL and the understanding of the
parties of having only one dealer of the SHELL products. VICENTE
SY, TRINIDAD PAULINO, 6BS TRUCKING
CORPORATION, and SBT[1] TRUCKING CORPORATION, petitioners, vs.
HON. COURT OF
APPEALS and JAIME SAHOT, respondents.
This petition for review seeks the reversal of the decision[2]
of the Court of Appeals dated February 29, 2000, in CA-G.R. SP No.
52671, affirming with modification the decision[3] of the National
Labor Relations Commission promulgated on June 20, 1996 in NLRC NCR
CA No. 010526-96. Petitioners also pray for the reinstatement of
the decision[4] of the Labor Arbiter in NLRC NCR Case No.
00-09-06717-94.
Culled from the records are the following facts of this
case:
Sometime in 1958, private respondent Jaime Sahot[5] started
working as a truck helper for petitioners family-owned trucking
business named Vicente Sy Trucking. In 1965, he became a truck
driver of the same family business, renamed T. Paulino Trucking
Service, later 6Bs Trucking Corporation in 1985, and thereafter
known as SBT Trucking Corporation since 1994. Throughout all these
changes in names and for 36 years, private respondent continuously
served the trucking business of petitioners.
In April 1994, Sahot was already 59 years old. He had been
incurring absences as he was suffering from various ailments.
Particularly causing him pain was his left thigh, which greatly
affected the performance of his task as a driver. He inquired about
his medical and retirement benefits with the Social Security System
(SSS) on April 25, 1994, but discovered that his premium payments
had not been remitted by his employer.
Sahot had filed a week-long leave sometime in May 1994. On May
27th, he was medically examined and treated for EOR, presleyopia,
hypertensive retinopathy G II (Annexes G-5 and G-3, pp. 48, 104,
respectively),[6] HPM, UTI, Osteoarthritis (Annex G-4, p. 105),[7]
and heart enlargement (Annex G, p. 107).[8] On said grounds, Belen
Paulino of the SBT Trucking Service management told him to file a
formal request for extension of his leave. At the end of his
week-long absence, Sahot applied for extension of his leave for the
whole month of June, 1994. It was at this time when petitioners
allegedly threatened to terminate his employment should he refuse
to go back to work.
At this point, Sahot found himself in a dilemma. He was facing
dismissal if he refused to work, But he could not retire on pension
because petitioners never paid his correct SSS premiums. The fact
remained he could no longer work as his left thigh hurt abominably.
Petitioners ended his dilemma.
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BUSORG CASE DIGESTS Atty. Charlie Mendoza
15
They carried out their threat and dismissed him from work,
effective June 30, 1994. He ended up sick, jobless and
penniless.
On September 13, 1994, Sahot filed with the NLRC NCR Arbitration
Branch, a complaint for illegal dismissal, docketed as NLRC NCR
Case No. 00-09-06717-94. He prayed for the recovery of separation
pay and attorneys fees against Vicente Sy and Trinidad Paulino-Sy,
Belen Paulino, Vicente Sy Trucking, T. Paulino Trucking Service,
6Bs Trucking and SBT Trucking, herein petitioners.
For their part, petitioners admitted they had a trucking
business in the 1950s but denied employing helpers and drivers.
They contend that private respondent was not illegally dismissed as
a driver because he was in fact petitioners industrial partner.
They add that it was not until the year 1994, when SBT Trucking
Corporation was established, and only then did respondent Sahot
become an employee of the company, with a monthly salary that
reached P4,160.00 at the time of his separation.
Petitioners further claimed that sometime prior to June 1, 1994,
Sahot went on leave and was not able to report for work for almost
seven days. On June 1, 1994, Sahot asked permission to extend his
leave of absence until June 30, 1994. It appeared that from the
expiration of his leave, private respondent never reported back to
work nor did he file an extension of his leave. Instead, he filed
the complaint for illegal dismissal against the trucking company
and its owners.
Petitioners add that due to Sahots refusal to work after the
expiration of his authorized leave of absence, he should be deemed
to have voluntarily resigned from his work. They contended that
Sahot had all the time to extend his leave or at least inform
petitioners of his health condition. Lastly, they cited NLRC Case
No. RE-4997-76, entitled Manuelito Jimenez et al. vs. T. Paulino
Trucking Service, as a defense in view of the alleged similarity in
the factual milieu and issues of said case to that of Sahots, hence
they are in pari material and Sahots complaint ought also to be
dismissed.
The NLRC NCR Arbitration Branch, through Labor Arbiter Ariel
Cadiente Santos, ruled that there was no illegal dismissal in
Sahots case. Private respondent had failed to report to work.
Moreover, said the Labor Arbiter, petitioners and private
respondent were industrial partners before January 1994. The Labor
Arbiter concluded by ordering petitioners to pay financial
assistance of P15,000 to Sahot for having served the company as a
regular employee since January 1994 only.
On appeal, the National Labor Relations Commission modified the
judgment of the Labor Arbiter. It declared that private respondent
was an employee, not an industrial partner, since the start.
Private respondent Sahot did not abandon his job but his employment
was terminated on account of his illness, pursuant to Article
284[9] of the Labor Code. Accordingly, the NLRC ordered petitioners
to pay private respondent separation pay in the amount of
P60,320.00, at the rate of P2,080.00 per year for 29 years of
service.
Petitioners assailed the decision of the NLRC before the Court
of Appeals. In its decision dated February 29, 2000, the appellate
court affirmed with modification the judgment of the NLRC. It held
that private respondent was indeed an employee of petitioners since
1958. It also increased the amount of separation pay awarded to
private respondent to P74,880, computed at the rate of P2,080 per
year for 36 years of service from 1958 to 1994. It decreed:
WHEREFORE, the assailed decision is hereby AFFIRMED with
MODIFICATION. SB Trucking Corporation is hereby directed to pay
complainant Jaime Sahot the sum of SEVENTY-FOUR THOUSAND EIGHT
HUNDRED EIGHTY (P74,880.00) PESOS as and for his separation
pay.[10]
Hence, the instant petition anchored on the following
contentions:
I
RESPONDENT COURT OF APPEALS IN PROMULGATING THE QUESTION[ED]
DECISION AFFIRMING WITH MODIFICATION THE DECISION OF NATIONAL LABOR
RELATIONS COMMISSION DECIDED NOT IN ACCORD WITH LAW AND PUT AT
NAUGHT ARTICLE 402 OF THE CIVIL CODE.[11]
II
RESPONDENT COURT OF APPEALS VIOLATED SUPREME COURT RULING THAT
THE NATIONAL LABOR RELATIONS COMMISSION IS BOUND BY THE FACTUAL
FINDINGS OF THE LABOR ARBITER AS THE LATTER WAS IN A BETTER
POSITION TO OBSERVE THE DEMEANOR AND DEPORTMENT OF THE WITNESSES IN
THE CASE OF ASSOCIATION OF INDEPENDENT UNIONS IN THE PHILIPPINES
VERSUS NATIONAL CAPITAL REGION (305 SCRA 233).[12]
III
PRIVATE RESPONDENT WAS NOT DISMISS[ED] BY RESPONDENT SBT
TRUCKING CORPORATION.[13]
Three issues are to be resolved: (1) Whether or not an
employer-employee relationship existed between petitioners and
respondent Sahot; (2) Whether or not there was valid dismissal; and
(3) Whether or not respondent Sahot is entitled to separation
pay.
Crucial to the resolution of this case is the determination of
the first issue. Before a case for illegal dismissal can prosper,
an employer-employee relationship must first be
established.[14]
Petitioners invoke the decision of the Labor Arbiter Ariel
Cadiente Santos which found that respondent Sahot was not an
employee but was in fact, petitioners industrial partner.[15] It is
contended that it was the Labor Arbiter who
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BUSORG CASE DIGESTS Atty. Charlie Mendoza
16
heard the case and had the opportunity to observe the demeanor
and deportment of the parties. The same conclusion, aver
petitioners, is supported by substantial evidence.[16] Moreover, it
is argued that the findings of fact of the Labor Arbiter was
wrongly overturned by the NLRC when the latter made the following
pronouncement:
We agree with complainant that there was error committed by the
Labor Arbiter when he concluded that complainant was an industrial
partner prior to 1994. A computation of the age of complainant
shows that he was only twenty-three (23) years when he started
working with respondent as truck helper. How can we entertain in
our mind that a twenty-three (23) year old man, working as a truck
helper, be considered an industrial partner. Hence we rule that
complainant was only an employee, not a partner of respondents from
the time complainant started working for respondent.[17]
Because the Court of Appeals also found that an
employer-employee relationship existed, petitioners aver that the
appellate courts decision gives an imprimatur to the illegal
finding and conclusion of the NLRC.
Private respondent, for his part, denies that he was ever an
industrial partner of petitioners. There was no written agreement,
no proof that he received a share in petitioners profits, nor was
there anything to show he had any participation with respect to the
running of the business.[18]
The elements to determine the existence of an employment
relationship are: (a) the selection and engagement of the employee;
(b) the payment of wages; (c) the power of dismissal; and (d) the
employers power to control the employees conduct. The most
important element is the employers control of the employees
conduct, not only as to the result of the work to be done, but also
as to the means and methods to accomplish it.[19]
As found by the appellate court, petitioners owned and operated
a trucking business since the 1950s and by their own allegations,
they determined private respondents wages and rest day.[20] Records
of the case show that private respondent actually engaged in work
as an employee. During the entire course of his employment he did
not have the freedom to determine where he would go, what he would
do, and how he would do it. He merely followed instructions of
petitioners and was content to do so, as long as he was paid his
wages. Indeed, said the CA, private respondent had worked as a
truck helper and driver of petitioners not for his own pleasure but
under the latters control.
Article 1767[21] of the Civil Code states that in a contract of
partnership two or more persons bind themselves to contribute
money, property or industry to a common fund, with the intention of
dividing the profits among themselves.[22] Not one of these
circumstances is present in this case. No written agreement exists
to prove the partnership between the parties. Private respondent
did not contribute money, property or industry for the purpose of
engaging in the supposed business. There is no proof that he was
receiving a share in the profits as a matter of course