TOCAO v. CA
G.R. No. 127405; October 4, 2000
FACTS: Private respondent Nenita A. Anay met petitioner William
T. Belo, then the vice-president for operations of Ultra Clean
Water Purifier, through her former employer in Bangkok. Belo
introduced Anay to petitioner Marjorie Tocao, who conveyed her
desire to enter into a joint venture with her for the importation
and local distribution of kitchen cookwares. Under the joint
venture, Belo acted as capitalist, Tocao as president and general
manager, and Anay as head of the marketing department and later,
vice-president for sales
The parties agreed that Belo's name should not appear in any
documents relating to their transactions with West Bend Company.
Anay having secured the distributorship of cookware products from
the West Bend Company and organized the administrative staff and
the sales force, the cookware business took off successfully. They
operated under the name of Geminesse Enterprise, a sole
proprietorship registered in Marjorie Tocao's name.
The parties agreed further that Anay would be entitled to:
(1) ten percent (10%) of the annual net profits of the
business;
(2) overriding commission of six percent (6%) of the overall
weekly production;
(3) thirty percent (30%) of the sales she would make; and
(4) two percent (2%) for her demonstration services. The
agreement was not reduced to writing on the strength of Belo's
assurances that he was sincere, dependable and honest when it came
to financial commitments.
On October 9, 1987, Anay learned that Marjorie Tocao had signed
a letter addressed to the Cubao sales office to the effect that she
was no longer the vice-president of Geminesse Enterprise.
Anay attempted to contact Belo. She wrote him twice to demand
her overriding commission for the period of January 8, 1988 to
February 5, 1988 and the audit of the company to determine her
share in the net profits.
Anay still received her five percent (5%) overriding commission
up to December 1987. The following year, 1988, she did not receive
the same commission although the company netted a gross sales of P
13,300,360.00.
On April 5, 1988, Nenita A. Anay filed Civil Case No. 88-509, a
complaint for sum of money with damages against Marjorie D. Tocao
and William Belo before the Regional Trial Court of Makati, Branch
140
The trial court held that there was indeed an "oral partnership
agreement between the plaintiff and the defendants. The Court of
Appeals affirmed the lower courts decision.
ISSUE: Whether the parties formed a partnership
HELD: Yes, the parties involved in this case formed a
partnership
The Supreme Court held that 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.
In the case at hand, Belo acted as capitalist while Tocao as
president and general manager, and Anay as head of the marketing
department and later, vice-president for sales. Furthermore, Anay
was entitled to a percentage of the net profits of the
business.
Therefore, the parties formed a partnership.
JM TUAZON and CO v. BOLANOS95 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
Held: 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. cannot act as
managing partner for plaintiff on the theory that it is illegal for
two corporations to enter into a partnership is without merit, for
the true rule is that "though a corporation has no power to enter
into a partnership, it may nevertheless enter into a joint venture
with another where the nature of that venture is in line with the
business authorized by its charter."
AGUILA, JR. v. CA
FACTS: In April 1991, the spouses Ruben and
FelicidadAbrogarentered into aloan agreementwith a lending firm
called A.C. Aguila & Sons, Co., a partnership. The loan was for
P200k. To secure the loan, the spouses mortgaged their house and
lot located in a subdivision. The terms of the loan further
stipulates that in case of non-payment, the property shall be
automatically appropriated to the partnership and a deed of sale be
readily executed in favor of the partnership. She does have a 90
day redemption period.
Ruben died, and Felicidad failed to make payment. She refused to
turn over the property and so the firm filed an ejectment case
against her (wherein she lost). She also failed to redeem the
property within the period stipulated. She then filed a civil case
against Alfredo Aguila, manager of the firm, seeking for the
declaration of nullity of the deed of sale. The RTC retained the
validity of the deed of sale. The Court of Appeals reversed the
RTC. The CA ruled that the sale is void for it is apactum
commissorium sale which is prohibited under Art. 2088 of the Civil
Code (note the disparity of the purchase price, which is the loan
amount, with the actual value of the property which is after all
located in a subdivision).
ISSUE:Whether or not the case filed by Felicidad shall
prosper.
HELD:No. Unfortunately, the civil case was filed not against the
real party in interest. As pointed out by Aguila, he is not the
real party in interest but rather it was the partnership A.C.
Aguila & Sons, Co. The Rules of Court provide that every action
must be prosecuted and defended in the name of the real party in
interest. A real party in interest is one who would be benefited or
injured by the judgment, or who is entitled to the avails of the
suit.Any decision rendered against a person who is not a real party
in interest in the case cannot be executed.Hence, a complaint filed
against such a person should be dismissed for failure to state a
cause of action, as in the case at bar.
Under Art. 1768 of the Civil Code, a partnership has a juridical
personality separate and distinct from that of each of the
partners. The partners cannot be held liable for the obligations of
the partnership unless it is shown that the legal fiction of a
different juridical personality is being used for fraudulent,
unfair, or illegal purposes.In this case, Felicidad has not shown
that A.C. Aguila & Sons, Co., as a separate juridical entity,
is being used for fraudulent, unfair, or illegal purposes.
Moreover, the title to the subject property is in the name of A.C.
Aguila & Sons, Co. It is the partnership, not its officers or
agents, which should be impleaded in any litigation involving
property registered in its name. A violation of this rule will
result in the dismissal of the complaint.
PASCUAL v. 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
Ruling: 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
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.OA v. THE COMMISSIONER OF INTERNAL REVENUEG.R. No. L-19342
May 25, 1972Facts: 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
Ruling: 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 share of the
income or profits from Lorenzo T. Oa, and instead, 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: 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.Held: 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 REVENUE139 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. NORuling: 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 v. CIR
G.R. No. L-9996, October 15, 1957
Facts: Petitioners borrowed sum of money from their father and
together with their own personal funds they used said money to buy
several real properties. They then appointed their brother (Simeon)
as manager of the said real properties with powers and authority to
sell, lease or rent out said properties to third persons. They
realized rental income from the said properties for the period
1945-1949.
On September 24, 1954 respondent Collector of Internal Revenue
demanded the payment of income tax on corporations, real estate
dealer's fixed tax and corporation residence tax for the years
1945-1949. The letter of demand and corresponding assessments were
delivered to petitioners on December 3, 1954, whereupon they
instituted the present case in the Court of Tax Appeals, with a
prayer that "the decision of the respondent contained in his letter
of demand dated September 24, 1954" be reversed, and that they be
absolved from the payment of the taxes in question. CTA denied
their petition and subsequent MR and New Trials were denied. Hence
this petition.
Issue: Whether or not petitioners have formed a partnership and
consequently, are subject to the tax on corporations provided for
in section 24 of Commonwealth Act. No. 466, otherwise known as the
National Internal Revenue Code, as well as to the residence tax for
corporations and the real estate dealers fixed tax.
Held: YES. The essential elements of a partnership are two,
namely: (a) an agreement to contribute money, property or industry
to a common fund; and (b) intent to divide the profits among the
contracting parties. The first element is undoubtedly present in
the case at bar, for, admittedly, petitioners have agreed to, and
did, contribute money and property to a common fund. Upon
consideration of all the facts and circumstances surrounding the
case, we are fully satisfied that their purpose was to engage in
real estate transactions for monetary gain and then divide the same
among themselves, because of the following observations, among
others: (1) Said common fund was not something they found already
in existence; (2) They invested the same, not merely in one
transaction, but in a series of transactions; (3) The aforesaid
lots were not devoted to residential purposes, or to other personal
uses, of petitioners herein.
Although, taken singly, they might not suffice to establish the
intent necessary to constitute a partnership, the collective effect
of these circumstances is such as to leave no room for doubt on the
existence of said intent in petitioners herein.
For purposes of the tax on corporations, our National Internal
Revenue Code, includes these partnerships with the exception only
of duly registered general copartnerships within the purview of the
term "corporation." It is, therefore, clear to our mind that
petitioners herein constitute a partnership, insofar as said Code
is concerned and are subject to the income tax for
corporations.
AFISCO INSURANCE CORP. et al. vs. COURT OF APPEALS
G.R. No. 112675.January 25, 1999DOCTRINE:Unregistered
Partnerships and associations are considered as corporations for
tax purposes Under the old internal revenue code, A tax is hereby
imposed upon the taxable net income received during each taxable
year from all sources by every corporation organized in, or
existing under the laws of the Philippines, no matter how created
or organized, xxx. Ineludibly, the Philippine legislature included
in the concept of corporations those entities that resembled them
such as unregistered partnerships and associations.
Insurance pool in the case at bar is deemed a partnership or
association taxable as a corporation In the case at bar,
petitioners-insurance companies formed 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 is considered a partnership or association which
may be taxed as a corporation.
Double Taxation is not Present in the Case at Bar Double
taxation means taxing the same person twice by the same
jurisdiction for the same thing. In the instant case, the insurance
pool is a taxable entity distince from the individual corporate
entities of the ceding companies. The tax on its income is
obviously different from the tax on the dividends received by the
companies. There is no double taxation.
FACTS:The petitioners are 41 non-life domestic insurance
corporations. They issued risk insurance policies for machines. The
petitioners in 1965 entered into aQuota Share Reinsurance Treaty
and a Surplus Reinsurance Treatywith the Munchener
Ruckversicherungs-Gesselschaft (hereafter called Munich), a
non-resident foreign insurance corporation.The reinsurance treaties
required petitioners to form a pool, which they complied with.
In 1976, the pool of machinery insurers submitted a financial
statement and filed an Information Return of Organization Exempt
from Income Tax for 1975. On the basis of this, the CIR assessed a
deficiency ofP1,843,273.60, and withholding taxes in the amount
ofP1,768,799.39 andP89,438.68 on dividends paid to Munich and to
the petitioners, respectively.
The Court of Tax Appeal sustained the petitioner's liability.
The Court of Appeals dismissed their appeal.
The CA ruled in 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/S:1. Whether or not the pool is taxable as a
corporation.
2. Whether or not there is double taxation.
HELD:1) Yes: Pool taxable as a corporation
Argument of Petitioner: The reinsurance policies were written by
them individually and separately, and that their liability was
limited to the extent of their allocated share in the original
risks thus reinsured. Hence, the pool did not act or earn income as
a reinsurer. Its role was limited to its principal function of
allocating and distributing the risk(s) arising from the original
insurance among the signatories to the treaty or the members of the
pool based on their ability to absorb the risk(s) ceded[;] as well
as the performance of incidental functions, such as records,
maintenance, collection and custody of funds, etc.
Argument of SC: According to Section 24 of the NIRC of 1975:
SEC. 24.Rate of tax on corporations.--(a)Tax on domestic
corporations.--A tax is hereby imposed upon the taxable net income
received during each taxable year from all sources by every
corporation organized in, or existing under the laws of the
Philippines, no matter how created or organized, but not including
duly registered general co-partnership (compaias colectivas),
general professional partnerships, private educational
institutions, and building and loan associations xxx.
Ineludibly, the Philippine legislature included in the concept
of corporations those entities that resembled them such as
unregistered partnerships and associations. Interestingly, the
NIRCs inclusion of such entities in the tax on corporations was
made even clearer by the Tax Reform Act of 1997 Sec. 27 read
together with Sec. 22 reads:
SEC. 27.Rates of Income Tax on Domestic Corporations.--(A)In
General.--Except as otherwise provided in this Code, an income tax
of thirty-five percent (35%) is hereby imposed upon the taxable
income derived during each taxable year from all sources within and
without the Philippines by every corporation, as defined in Section
22 (B) of this Code, and taxable under this Title as a corporation
xxx.
SEC. 22.--Definition.--When used in this Title:
xxxxxxxxx
(B)The termcorporationshall include partnerships, no matter how
created or organized, joint-stock companies, joint accounts
(cuentas en participacion), associations, or insurance companies,
but does not include general professional partnerships [or] a joint
venture or consortium formed for the purpose of undertaking
construction projects or engaging in petroleum, coal, geothermal
and other energy operations pursuant to an operating or consortium
agreement under a service contract without the Government.General
professional partnerships are partnerships formed by persons for
the sole purpose of exercising their common profession, no part of
the income of which is derived from engaging in any trade or
business.
Thus, the Court inEvangelista v. Collector of Internal
Revenueheld that Section 24 covered these unregistered partnerships
and even associations or joint accounts, which had no legal
personalities apart from their individual members.
Furthermore, 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 may
be considered a partnership because it contains the following
elements: (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) While, the pool itself is not a reinsurer and does not issue
any policies; 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 pursuant to the agreement with Munich. Profit motive or
business is, therefore, the primordial reason for the pools
formation.
TORRES v. CA
FACTS: In 1969, sisters Antonia Torres and Emeteria Baring
entered into a joint venture agreement with Manuel Torres. Under
the agreement, the sisters agreed to execute a deed of sale in
favor Manuel over a parcel of land, the sisters received no cash
payment from Manuel but the promise of profits (60% for the sisters
and 40% for Manuel) said parcel of land is to be developed as a
subdivision.
Manuel then had the title of the land transferred in his name
and he subsequently mortgaged the property. He used the proceeds
from the mortgage to start building roads, curbs and gutters.
Manuel also contracted an engineering firm for the building of
housing units. But due to adverse claims in the land, prospective
buyers were scared off and the subdivisionprojecteventually
failed.
The sisters then filed a civil case against Manuel for damages
equivalent to 60% of the value of the property, which according to
the sisters, is whats due them as per the contract.
The lower court ruled in favor of Manuel and the Court of
Appeals affirmed the lower court.
The sisters then appealed before the Supreme Court where they
argued that there is no partnership between them and Manuel because
the joint venture agreement is void.
ISSUE:Whether or not there exists a partnership.
HELD:Yes. The joint venture agreement the sisters entered into
with Manuel is a partnership agreement whereby they agreed to
contribute property (their land) which was to be developed as a
subdivision. While on the other hand, though Manuel did not
contribute capital, he is an industrial partner for his
contribution for general expenses and other costs. Furthermore, the
income from the saidprojectwould be divided according to the
stipulated percentage (60-40). Clearly, the contract manifested the
intention of the parties toforma partnership.Further still, the
sisters cannot invoke their right to the 60% value of the property
and at the same time deny the same contract which entitles them to
it.
At any rate, the failure of the partnership cannot be blamed on
the sisters, nor can it be blamed to Manuel (the sisters on their
appeal did not show evidence as to Manuels fault in the failure of
the partnership). The sisters must then bear their loss (which is
60%). Manuel does not bear the loss of the other 40% because as an
industrial partner he is exempt from losses.
LIM TONG LIM v. PHIL. FISHING GEAR INDUSTRIES
FACTS: It was established that Lim Tong Lim requested Peter Yao
to engage in commercial fishing with him and one Antonio Chua. The
three agreed to purchase twofishing boatsbut since they do not have
the money they borrowed from one Jesus Lim (brother of Lim Tong
Lim). They again borrowed money and they agreed to purchase fishing
nets and other fishing equipments. Now, Yao and Chua represented
themselves as acting in behalf of Ocean Quest Fishing Corporation
(OQFC) they contracted with Philippine Fishing GearIndustries(PFGI)
for the purchase of fishing nets amounting to more than P500k.
They were however unable to pay PFGI and so they were sued in
their own names because apparently OQFC is a non-existent
corporation. Chua admitted liability and asked for some time to
pay. Yao waived his rights. Lim Tong Lim however argued that hes
not liable because he was not aware that Chua and Yao represented
themselves as a corporation; that the two acted without his
knowledge and consent.
ISSUE:Whether or not Lim Tong Lim is liable.
HELD:Yes. From the factual findings of both lower courts, it is
clear that Chua, Yao and Lim had decided to engage in a fishing
business, which they started by buying boats worth P3.35 million,
financed by a loan secured from Jesus Lim. In their Compromise
Agreement, they subsequently revealed their intention to pay the
loan with the proceeds of the sale of the boats, and to divide
equally among them the excess or loss. These boats, the purchase
and the repair of which were financed with borrowed money, fell
under the term common fund under Article 1767. The contribution to
such fund need not be cash or fixed assets; it could be an
intangible like credit or industry. That the parties agreed that
any loss or profit from the sale and operation of the boats would
be divided equally among them also shows that they had indeed
formed a partnership.
Lim Tong Lim cannot argue that the principle of corporation by
estoppels can only be imputed to Yao and Chua. Unquestionably, Lim
Tong Lim benefited from the use of the nets found in his boats, the
boat which has earlier been proven to be an asset of the
partnership. Lim, Chua and Yao decided toforma corporation.
Although it was never legally formed for unknown reasons, this fact
alone does not preclude the liabilities of the three as contracting
parties in representation of it. Clearly, under the law on
estoppel, those acting on behalf of a corporation and those
benefited by it, knowing it to be without valid existence,are held
liable as general partners.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.
YU v. NLRC
G.R. No. 97212; June 30, 1993
FACTS: Petitioner Benjamin Yu was formerly the Assistant General
Manager of the marble quarrying and export business operated by a
registered partnership with the firm name of "Jade Mountain
Products Company Limited" ("Jade Mountain"). The partnership was
originally organized on 28 June 1984 with Lea Bendal and Rhodora
Bendal as general partners and Chiu Shian Jeng, Chen Ho-Fu and Yu
Chang, all citizens of the Republic of China (Taiwan), as limited
partners.Sometime in 1988, without the knowledge of Benjamin Yu,
the general partners Lea Bendal and Rhodora Bendal sold and
transferred their interests in the partnership to private
respondent Willy Co and to one Emmanuel Zapanta. Mr. Yu Chang, a
limited partner, also sold and transferred his interest in the
partnership to Willy Co. Between Mr. Emmanuel Zapanta and himself,
private respondent Willy Co acquired the great bulk of the
partnership interest. The partnership now constituted solely by
Willy Co and Emmanuel Zapanta continued to use the old firm name of
Jade Mountain, though they moved the firm's main office from Makati
to Mandaluyong, Metropolitan Manila
Petitioner was informed by Willy Co that the latter had bought
the business from the original partners and that it was for him to
decide whether or not he was responsible for the obligations of the
old partnership, including petitioner's unpaid salaries. Petitioner
was in fact not allowed to work anymore in the Jade Mountain
business enterprise. His unpaid salaries remained unpaid.
On 21 December 1988, Benjamin Yu filed a complaint for illegal
dismissal and recovery of unpaid salaries accruing from November
1984 to October 1988
ISSUE: Whether the partnership which had hired petitioner Yu as
Assistant General Manager had been extinguished and replaced by a
new partnership composed of Willy Co and Emmanuel Zapanta
HELD: Yes, the partnership which hired Yu was extinguished and
replaced by a new partnership.
In the case at bar, just about all of the partners had sold
their partnership interests (amounting to 82% of the total
partnership interest) to Mr. Willy Co and Emmanuel Zapanta. The
record does not show what happened to the remaining 18% of the
original partnership interest. The acquisition of 82% of the
partnership interest by new partners, coupled with the retirement
or withdrawal of the partners who had originally owned such 82%
interest, was enough to constitute a new partnership
In the ordinary course of events, the legal personality of the
expiring partnership persists for the limited purpose of winding up
and closing of the affairs of the partnership.
In other words, the new partnership simply took over the
business enterprise owned by the preceding partnership, and
continued using the old name of Jade Mountain Products Company
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.
The new partnership itself which continued the business of the
old, dissolved, one, are liable for the debts of the preceding
partnership.
ROJAS v. MAGLANA
Facts:Maglana and Rojas executed their Articles of
Co-Partnership called Eastcoast Development Enterprises (EDE). It
was a partnership with an indefinite term of existence. Maglana
shall manage the business affairs while Rojas shall be the logging
superintendant and shall manage the logging operation. They shall
share in all profits and loss equally. Due to difficulties
encountered they decided to avail of the sources of Pahamatong as
industrial partners. They again executed their Articles of
Co-Partnership under EDE. The term is 30 years. After sometime
Pamahatong sold his interest to Maglana and Rojas including
equipment contributed. After withdrawal of Pamahatong, Maglana and
Rojas continued the partnership. After 3 months, Rojas entered into
a management contract with another logging enterprise. He left and
abandoned the partnership. He even withdrew his equipment from the
partnership and was transferred to CMS. He never told Maglana that
he will not be able to comply with the promised contributions and
he will not work as logging superintendent. Maglana then told Rojas
that the latter share will just be 20% of the net profits. Rojas
took funds from the partnership more than his contribution. Thus,
Maglana notified Rojas that he dissolved the partnership.
Issue:What is the nature of the partnership and legal
relationship of Maglana and Rojas after Pahamatong retired from the
second partnership
Ruling: It was not the intention of the partners to dissolve the
first partnership, upon the constitution of the second one, which
they unmistakably called additional agreement. Otherwise stated
even during the existence of the second partnership, all business
transactions were carried out under the duly registered articles.
No rights and obligations accrued in the name of the second
partnership except in favor of Pahamatong which was fully paid by
the duly registered partnership. SANTOS v. REYES
G.R. No. 135813. October 25, 2001
Facts: In June 1986, Fernando Santos, Nieves Reyes and Melton
Zabat orally agreed to form a partnership a lending business.
Santos contributed 70% (as financier) while Reyes and Zabat shared
30% (as industrial partners). Later, Reyes introduced Cesar Gragera
whom they would provide loans to Grageras corporation particularly
its employees. In return Gragera shall have a commission based on
the loan payments. The partners decided on August 1986 to have a
written agreement but they found out that Zabat engaged in a
competitor venture thus expelled him. The two had Arsenio Reyes
(husband of Nieves) replaced Zabat.However, Santos accused the
Spouses of not remitting the loans payments. He argued that the
couple were only his employees and there was a special arrangement
between him and Gragera. The trial court and the Court of Appeals
ruled against Santos.
Issue: Whether or not there was a partnership formed between
Santos and the Spouses Reyes
Held: YES. The original partnership with Zabat continued even
after the expulsion of the latter from the partnership because
there was no intent to dissolve the (partnership) relationship.
[Respondents] were industrial partners of [petitioner]. . . .
Nieves herself provided the initiative in the lending activities
with Monte Maria. In consonance with the agreement between
appellant, Nieves and Zabat (later replaced by Arsenio),
[respondents] contributed industry to the common fund with the
intention of sharing in the profits of the partnership.
[Respondents] provided services without which the partnership would
not have [had] the wherewithal to carry on the purpose for which it
was organized and as such [were] considered industrial partners
(Evangelista v. Abad Santos, 51 SCRA 416 [1973]).While
concededly,the partnership between [petitioner,] Nieves and Zabat
was technically dissolved by the expulsion of Zabat therefrom, the
remaining partners simply continued the business of the partnership
without undergoing the procedure relative to dissolution. Instead,
they invited Arsenio to participate as a partner in their
operations. There was therefore, no intent to dissolve the
earlierpartnership. The partnership between [petitioner,] Nieves
and Arsenio simply took over and continued the business of the
former partnership with Zabat, one of the incidents of which was
the lending operations with Monte Maria.
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 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.Ruling: 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 respondentBeing 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 & Co.
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: Whether the relationship between the petitioner and Menzi
is 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 one-half 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.
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
Ruling: 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 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.
ESTANISLAO, JR. v. COURT OF APPEALS
Facts: The petitioner and private respondents are brothers and
sisters who are co-owners of certain lots at the in Quezon City
which were then being leased to SHELL. They agreed to open and
operate a gas station thereat to be known as Estanislao Shell
Service Station with an initial investment of PhP15,000.00 to be
taken from the advance rentals due to them from SHELL for the
occupancy of the said lots owned in common by them. A joint
affidavit was executed by them on April 11, 1966. The respondents
agreed to help their brother, petitioner therein, by allowing him
to operate and manage the gasoline service station of the family.
In order not to run counter to the companys policy of appointing
only one dealer, it was agreed that petitioner would apply for the
dealership. Respondent Remedios helped in co-managing the business
with petitioner from May 1966 up to February 1967.
On May 1966, the parties entered into an Additional Cash Pledge
Agreement with SHELL wherein it was reiterated that the P15,000.00
advance rental shall be deposited with SHELL to cover advances of
fuel to petitioner as dealer with a proviso that said agreement
cancels and supersedes the Joint Affidavit.
For some time, the petitioner submitted financial statement
regarding the operation of the business to the private respondents,
but thereafter petitioner failed to render subsequent accounting.
Hence , the private respondents filed a complaint against the
petitioner praying among others that the latter be ordered:
(1)To execute a public document embodying all the provisions of
the partnership agreement they entered into;
(2)To render a formal accounting of the business operation
veering the period from May 6, 1966 up to December 21, 1968, and
from January 1, 1969 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; and
(4)To pay the plaintiffs attorneys fees and costs of the
suit.
Issue: Can a partnership exist between members of the same
family arising from their joint ownership of certain
properties?
Held: There is no merit in the petitioners contention that
because of the stipulation cancelling and superseding the previous
joint affidavit, whatever partnership agreement there was in said
previous agreement had thereby been abrogated. Said cancelling
provision was necessary for the Joint Affidavit speaks of
P15,000.00 advance rental 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 P15,000.00 hence the need to provide in the
subsequent document that it cancels and supercedes the previous
none. Indeed, it is true that the latter document is silent as to
the statement in the Join Affidavit that the value represents the
capital investment of the parties in the business and it speaks of
the 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 their policy if in the agreement it should be stated that
the business is a partnership with private respondents and not a
sole proprietorship of the petitioner.
Furthermore, there are other evidences in the record which show
that there was in fact such partnership agreement between parties.
The petitioner submitted to the private respondents periodic
accounting of the business and gave a written authority to the
private respondent Remedios Estanislao to examine and audit the
books of their common business (aming negosyo). The respondent
Remedios, on the other hand, assisted in the running of the
business. Indeed, the parties hereto formed a partnership when they
bound themselves to contribute money in a common fund with the
intention of dividing the profits among themselves. SY v.
CAFACTS: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. When Sahot was 59
years old, he incurred several absences due to 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 filed a week-long leave
to get medical attention. He was treated for EOR, presleyopia,
hypertensive retinopathy G II and heart enlargement. Because of
such, Belen Paulino of the SBT Trucking Service management told him
to file a formal request for extension of his leave. When Sahot
applied for an extended leave, he was threatened of termination of
employment should he refuse to go back to work. Eventually, Sahot
was dismissed from employment which prompted the latter to file an
illegal dismissal case with the NLRC. 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. The NLRC and the CA ruled that Sahot was an employee of
the petitioner.
ISSUE:Whether Sahot is an industrial partner
RULING: No. Article 1767 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. 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,
during the period when the trucking business was under operation.
Neither is there any proof that he had actively participated in the
management, administration and adoption of policies of the
business. Thus, the NLRC and the CA did not err in reversing the
finding of the Labor Arbiter that private respondent was an
industrial partner from 1958 to 1994. On this point, the Court
affirmed the findings of the appellate court and the NLRC. Private
respondent Jaime Sahot was not an industrial partner but an
employee of petitioners from 1958 to 1994. The existence of an
employer-employee relationship is ultimately a question of fact and
the findings thereon by the NLRC, as affirmed by the Court of
Appeals, deserve not only respect but finality when supported by
substantial evidence. Substantial evidence is such amount of
relevant evidence which a reasonable mind might accept as adequate
to justify a conclusion.
HEIRS OF JOSE LIM v. LIM
FACTS: In 1980, theheirsof Jose Lim alleged that Jose Lim
entered into a partnership agreement with Jimmy Yu and Norberto
Uy.The threecontributed P50,000.00 each and used the funds to
purchase a truck to start their trucking business. A year later
however, Jose Lim died. The eldest son of Jose Lim, Elfledo Lim,
took over the trucking business and under his management, the
trucking business prospered. Elfledo was able to but real
properties in his name. From one truck, he increased it to 9
trucks, all trucks were in his name however. He also acquired other
motor vehicles in his name.
In 1993, Norberto Uy was killed. In 1995, Elfledo Lim died of a
heart attack. Elfledos wife, Juliet Lim, took over the properties
but she intimated to Jimmy and theheirsof Norberto that she could
not go on with the business. So the properties in the partnership
were divided among them.
Now the otherheirsof Jose Lim, represented by Elenito Lim,
required Juliet to do an accounting of all income, profits, and
properties from the estate of Elfledo Lim as they claimed that they
are co-owners thereof. Juliet refused hence they sued her.
Theheirsof Jose Lim argued that Elfledo Lim acquired his
properties from the partnership that Jose Lim formed with Norberto
and Jimmy. In court, Jimmy Yu testified that Jose Lim was the
partner and not Elfledo Lim. Theheirstestified that Elfledo was
merely the driver of Jose Lim.
ISSUE:Who is the partner between Jose Lim and Elfledo Lim?
HELD:It is Elfledo Lim based on the evidence presented
regardless of Jimmy Yus testimony in court that Jose Lim was the
partner. If Jose Lim was the partner, then the partnership would
have been dissolved upon his death (in fact, though the SC did not
say so, I believe it should have been dissolved upon Norbertos
death in 1993). A partnership is dissolved upon the death of the
partner. Further, no evidence was presented as to the articles of
partnership or contract of partnership between Jose, Norberto and
Jimmy. Unfortunately, there is none in this case, because the
alleged partnership was never formally organized.
But at any rate, the Supreme Court noted that based on the
functions performed by Elfledo, he is the actual partner.
The following circumstances tend to prove that Elfledo was
himself the partner of Jimmy and Norberto:
1.) Cresencia testified that Jose gave ElfledoP50,000.00, as
share in the partnership, on a date that coincided with the payment
of the initial capital in the partnership;
2.) Elfledo ran the affairs of the partnership, wielding
absolute control, power and authority, without any intervention or
opposition whatsoever from any of petitioners herein;
3.) all of the properties, particularly the nine trucks of the
partnership, were registered in the name of Elfledo;
4.) Jimmy testified that Elfledo did not receive wages or
salaries from the partnership, indicating that what he actually
received were shares of the profits of the business;and
5.) none of theheirsof Jose, the alleged partner, demanded
periodic accounting from Elfledo during his lifetime. As repeatedly
stressed in the case ofHeirs of Tan Eng Kee,a demand for periodic
accounting is evidence of a partnership.
Furthermore, petitioners failed to adduce any evidence to show
that the real and personal properties acquired and registered in
the names of Elfledo and Juliet formed part of the estate of Jose,
having been derived from Joses alleged partnership with Jimmy and
Norberto.
Elfledo was not just a hired help but one of the partners in the
trucking business, active and visible in the running of its affairs
from day one until this ceased operations upon his demise. The
extent of his control, administration and management of the
partnership and its business, the fact that its properties were
placed in his name, and that he was not paid salary or other
compensation by the partners, are indicative of the fact that
Elfledo was a partner and a controlling one at that. It is apparent
that the other partners only contributed in the initial capital but
had no say thereafter on how the business was ran. Evidently it was
through Elfredos efforts and hard work that the partnership was
able to acquire more trucks and otherwise prosper. Even the
appellant participated in the affairs of the partnership by acting
as the bookkeeper sans salary.
ARBES v. POLISTICO
G.R. No. 31057 September 7, 1929
FACTS:
This is an action to bring about liquidation of the funds and
property of the association called "Turnuhan Polistico & Co."
The plaintiffs were members or shareholders, and the defendants
were designated as president-treasurer, directors and secretary of
said association.
This case is brought for 2nd time. In the 1st one, the court
held then that in an action against the officers of a voluntary
association to wind up its affairs and enforce an accounting for
money and property in their possessions, it is not necessary that
all members of the association be made parties to the action. The
court appointed commissioner of Insular Auditor's Office, to
examine all the books, documents, and accounts of "Turnuhan
Polistico & Co.," and to receive whatever evidence.
Commissioner's report show a balance of P24, 607.80 cash on hand.
Despite defendants objection to the report, the trial court
rendered judgment holding said association is unlawful. And
sentenced defendants jointly and severally to return the amount and
documents to the plaintiffs and members of the association. The
Appellant alleged that the association being unlawful, some
charitable institution to whom the partnership funds may be ordered
to be turned over, should be included, as a party defendant.
Referring to Article 1666 of the Civil Code which provides that A
partnership must have a lawful object, and must be established for
the common benefit of the partners. When the dissolution of an
unlawful partnership is decreed, the profits shall be given to
charitable institutions of the domicile of the partnership, or, in
default of such, to those of the province.ISSUE: Whether or not
charitable institution is a necessary party to this case.
HELD: No. No charitable institution is a necessary party in the
present case of determination of the rights of the parties. The
action which may arise from said article, in the case of unlawful
partnership, is that for the recovery of the amounts paid by the
member from those in charge of the administration of said
partnership, and it is not necessary for the said parties to base
their action to the existence of the partnership, but on the fact
that of having contributed some money to the partnership capital.
And hence, the charitable institution of the domicile of the
partnership, and in the default thereof, those of the province are
not necessary parties in this case.
The article cited above permits no action for the purpose of
obtaining the earnings made by the unlawful partnership, during its
existence as result of the business in which it was engaged,
because for the purpose, as Manresa remarks, the partner will have
to base his action upon the partnership contract, which is to annul
and without legal existence by reason of its unlawful object; and
it is self-evident that what does not exist cannot be a cause of
action. Hence, paragraph 2 of the same article provides that when
the dissolution of the unlawful partnership is decreed, the profits
cannot inure to the benefit of the partners, but must be given to
some charitable institution. The profits are so applied, and not
the contributions, because this would be an excessive and unjust
sanction for, as we have seen, there is no reason, in such a case,
for depriving the partner of the portion of the capital that he
contributed, the circumstances of the two cases being entirely
different.
Art. 1807. Every partner must account to the partnership for any
benefit, and hold as trustee for it any profits derived by him
without the consent of the other partners from any transaction
connected with the formation, conduct, or liquidation of the
partnership or from any use by him of its property.WOODHOUSE v.
HALILI
Facts: Defendant Halili informed Woodhouse, plaintiff, of his
desire to invest half a million dollars in the bottling and
distribution of Mission Soft Drinks. Woodhouse then relayed this
message to Mission Dry Corporation of Los Angeles, USA. Mission Dry
Corporation then gave plaintiff a thirty day option on exclusive
bottling and distribution rights in the Philippines (Exhibit
J).
Thereafter, plaintiff and defendant entered into a written
agreement with the ff. pertinent provisions: 1) they shall organize
a partnership for the bottling and distributing of Mission soft
drinks, with plaintiff, Woodhouse, as industrial partner or
manager, and defendant, Halili, as capitalist; 2)defendant was to
decide matters of general policy regarding the business, while
plaintiff was to attend the operation and development of the
bottling plant; 3) plaintiff was to secure Mission soft drinks
franchise for and in behalf of the proposed partnership; and 4)
plaintiff was to receive 30 percent of the net profits of the
business. This contract was signed and the parties to this case
then went to the United States to finalize the franchising
agreement. Mission Dry Corporation then granted the defendant the
exclusive right, license, and authority to produce, bottle,
distribute and sell Mission beverages in the Philippines.
When both parties went back to the Philippines, the bottling
plant began its operation. At first, plaintiff was given advances,
on account of the profits, and allowances which however ceased
after two months. Moreover, when plaintiff demanded that the
partnership papers be executed, defendant refused to do so and
instead suggest that they just enter into a settlement. As no
settlement was reached, the plaintiff filed a complaint in the
CFI.
In the CFI, plaintiff asks for execution of the contract of
partnership, accounting of the profits and a share thereof of 30
percent. Defendant on his defense claims that plaintiff
misrepresented himself that he was about to become the owner of an
exclusive bottling franchise when in fact franchise was exclusively
given to defendant, and that the plaintiff failed to contribute to
the exclusive franchise of the partnership. CFI ordered defendant
to render an accounting of the profits of the business and to pay
plaintiff 15 percent thereof. But it held that the execution of the
contract could not be enforced and the defense of fraud was not
proved. Unsatisfied with this ruling, both parties appealed to the
SC.
Issues: a) W/N plaintiff falsely represented that he had an
exclusive franchise to bottle Mission beverages. Yes.
b) W/N this false representation amounts to fraud and may annul
the agreement to form a partnership
Held: a) As found by the SC, Exhibit J was used by plaintiff as
an instrument with which to bargain with the defendant and to close
a deal with him, because if plaintiff claimed that all he had was
an option to exclusively bottle and distribute Mission soft drinks
in the Philippines, he would have probably lost the deal itself.
This is further supported by the fact that when defendant learned
that plaintiff did not have an exclusive franchise, he reduced
plaintiffs participation in the profit to 15 percent, to which the
plaintiff agreed.
b) Article 1270 of the Spanish Civil Code distinguished two
kinds of fraud, causal fraud, which may be a ground for the
annulment of a contract, and the incidental fraud, which only
renders the party who employs it liable for damages.
As founded by the SC the misrepresentation of plaintiff does not
amount to causal fraud because it was not the principal inducement
that led the plaintiff to enter into the partnership agreement. As
it was already noted, both parties expressly agreed that they shall
form a partnership.
Lastly, the SC upheld the ruling of the trial court that the
defendant may not be compelled against his will to carry out the
partnership. The law recognizes the individuals freedom or liberty
to do an act he has promised to do or not to do it as he
pleases.
LITONJUA, JR. v. LITONJUA, SR.
FACTS: Aurelioand Eduardo are brothers. In 1973,Aurelioalleged
that Eduardo entered into acontract of partnershipwith
him.Aurelioshowed as evidence a letter sent to him by Eduardo that
the latter is allowingAurelioto manage their family business (if
Eduardos away) and in exchange thereof he will be givingAurelioP1
million or 10% equity, whichever is higher. A memorandum was
subsequently made for the said partnership agreement. The
memorandum this time stated that in exchange ofAurelio, who just
got married, retaining his share in the family business (movie
theatres, shipping and land development) and some other immovable
properties, he will be given P1 Million or 10% equity in all these
businesses and those to be subsequently acquired by them whichever
is greater.
In 1992 however, the relationship between the brothers went
sour. And soAureliodemanded an accounting and the liquidation of
his share in the partnership. Eduardo did not heed and
soAureliosued Eduardo.
ISSUE:Whether or not there exists a partnership.
HELD:No. The partnership is void and legally nonexistent. The
documentary evidence presented byAurelio, i.e. the letter from
Eduardo and the Memorandum, did not prove partnership.
The 1973 letter from Eduardo on its face, contains typewritten
entries, personal in tone, but is unsigned and undated. As an
unsigned document, there can be no quibbling that said letter does
not meet the public instrumentation requirements exacted under
Article 1771 (how partnership is constituted) of the Civil Code.
Moreover, being unsigned and doubtless referring to a partnership
involving more than P3,000.00 in money or property, said
lettercannot be presented for notarization, let alone registered
with the Securities and Exchange Commission (SEC), as called for
under the Article 1772 (capitalization of a partnership) of the
Code. And inasmuch as the inventory requirement under the
succeeding Article 1773 goes into the matter of validity when
immovable property is contributed to the partnership, the next
logical point of inquiry turns on the nature of Aurelios
contribution, if any, to the supposed partnership.
The Memorandum is also not a proof of the partnership for the
same is not a public instrument and again, no inventory was made of
the immovable property and no inventory was attached to the
Memorandum. Article 1773 of the Civil Code requires that if
immovable property is contributed to the partnership an inventory
shall be had and attached to the contract.
EVANGELISTA & CO. v. ABAD SANTOS
G.R. No. L-31684; June 28, 1973
FACTS: On October 9, 1954 a co-partnership was formed under the
name of "Evangelista & Co." On June 7, 1955 the Articles of
Co-partnership were amended so as to include herein respondent,
Estrella Abad Santos, as industrial partner, with herein
petitioners Domingo C. Evangelista, Jr., Leonarda Atienza Abad
Santos and Conchita P. Navarro, the original capitalist partners,
remaining in that capacity, with a contribution of P17,500 eachOn
December 17, 1963 herein respondent filed suit against the three
other partners, alleging that the partnership, which was also made
a party-defendant, had been paying dividends to the partners except
to her; and that notwithstanding her demands the defendants had
refused and continued to refuse to let her examine the partnership
books or to give her information regarding the partnership affairs
or to pay her any share in the dividends declared by the
partnership
The defendants, in their answer, denied ever having declared
dividends or distributed profits of the partnership; denied
likewise that the plaintiff ever demanded that she be allowed to
examine the partnership books; and by way of affirmative defense
alleged that the amended Articles of Co-partnership did not express
the true agreement of the parties, which was that the plaintiff was
not an industrial partner; that she did not in fact contribute
industry to the partnership.
ISSUE: Whether Abad Santos is entitled to see the partnership
books because she is an industrial partner in the partnership
HELD: Yes, Abad Santos is entitled to see the partnership
books.
The Supreme Court ruled that according to
ART. 1299. Any partner shall have the right to a formal account
as to partnership affairs:
(1)If he is wrongfully excluded from the partnership business or
possession of its property by his co-partners;
(2)If the right exists under the terms of any agreement;
(3)As provided by article 1807;
(4)Whenever other circumstances render it just and
reasonable."
In the case at hand, the company is estopped from denying Abad
Santos as an industrial partner because it has been 8 years and the
company never corrected their agreement in order to show their true
intentions. The company never bothered to correct those up until
Abad Santos filed a complaint.FUE LEUNG v. INTERMEDIATE APPELLATE
COURT
G.R. No. 70926 January 31, 1989
Facts: The petitioner asks for the reversal of the decision of
the then Intermediate Appellate Court in AC-G.R. No. CV-00881 which
affirmed the decision of the then Court of First Instance of
Manila, Branch II in Civil Case No. 116725 declaring private
respondent Leung Yiu a partner of petitioner Dan Fue Leung in the
business of Sun Wah Panciteria and ordering the petitioner to pay
to the private respondent his share in the annual profits of the
said restaurant. This case originated from a complaint filed by
respondent Leung Yiu with the then Court of First Instance of
Manila, Branch II to recover the sum equivalent to twenty-two
percent (22%) of the annual profits derived from the operation of
Sun Wah Panciteria since October, 1955 from petitioner Dan Fue
Leung. The Sun Wah Panciteria, a restaurant, located at Florentino
Torres Street, Sta. Cruz, Manila, was established sometime in
October, 1955. It was registered as a single proprietorship and its
licenses and permits were issued to and in favor of petitioner Dan
Fue Leung as the sole proprietor. Respondent Leung Yiu adduced
evidence during the trial of the case to show that Sun Wah
Panciteria was actually a partnership and that he was one of the
partners having contributed P4,000.00 to its initial establishment.
Furthermore, the private respondent received from the petitioner
the amount of P12,000.00 covered by the latter's Equitable Banking
Corporation Check No. 13389470-B from the profits of the operation
of the restaurant for the year 1974. The petitioner denied having
received from the private respondent the amount of P4,000.00. He
contested and impugned the genuineness of the receipt. To bolster
his contention that he was the sole owner of the restaurant, the
petitioner presented various government licenses and permits
showing the Sun Wah Panciteria was and still is a single
proprietorship solely owned and operated by himself alone. Both the
trial court and the appellate court found that the private
respondent is a partner of the petitioner in the setting up and
operations of the panciteria. While the dispositive portions merely
ordered the payment of the respondents share, there is no question
from the factual findings that the respondent invested in the
business as a partner. Hence, the two courts declared that the
private petitioner is entitled to a share of the annual profits of
the restaurant. The petitioner, however, claims that this factual
finding is erroneous. The petitioner also claims that it was an
error for the Hon. Intermediate Appellate Court to interpret or
construe 'financial assistance' to mean the contribution of capital
by a partner to a partnership;"
Issue: Whether or not the private respondent is a partner of the
petitioner in the establishment of Sun Wah Panciteria YES
Ruling: In essence, the private respondent alleged that when Sun
Wah Panciteria was established, he gave P4,000.00 to the petitioner
with the understanding that he would be entitled to twenty-two
percent (22%) of the annual profit derived from the operation of
the said panciteria. These allegations, which were proved, make the
private respondent and the petitioner partners in the establishment
of Sun Wah Panciteria because Article 1767 of the Civil Code
provides that "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".Therefore, the lower courts did not err in construing
the complaint as one wherein the private respondent asserted his
rights as partner of the petitioner in the establishment of the Sun
Wah Panciteria, notwithstanding the use of the term financial
assistance therein.
LIM TANHU v. RAMOLETE
G.R. No. L-40098; August 29, 1975
FACTS: Tan alleged that she is the widow of Tee Hoon Lim Po
Chuan, who was a partner in the commercial partnership, Glory
Commercial Company with Antonio Lim Tanhu and Alfonso Ng Sua".
Defendant Antonio Lim Tanhu, Alfonso Leonardo Ng Sua, Lim Teck
Chuan, and Eng Chong Leonardo, through fraud and machination, took
actual and active management of the partnership and although Tee
Hoon Lim Po Chuan was the manager of Glory Commercial Company,
defendants managed to use the funds of the partnership to purchase
lands and buildings in the cities of Cebu, Lapulapu, Mandaue, and
the municipalities of Talisay and Minglanilla.
She alleged in her complaint that after the death of Tee Hoon
Lim Po Chuan, the defendants, without liquidation, continued the
business of Glory Commercial Company, by purportedly organizing a
corporation known as the Glory Commercial Company, Incorporated and
sometime in the month of November, 1967, defendants, particularly
Antonio Lim Tanhu, by means of fraud deceit, and misrepresentations
did then and there, induce and convince her to execute a quitclaim
of all her rights and interests, in the assets of the partnership
of Glory Commercial Company.
Thereafter, in the year 1968-69, the defendants who had earlier
promised to liquidate the aforesaid properties and assets in favor,
among others of plaintiff and until the middle of the year 1970
when the plaintiff formally demanded from the defendants the
accounting of real and personal properties o