Professional Documents
Culture Documents
TUASON v. BOLANOS .............................................................................................................................. 18 TORRES v. CA ................................................................................................................................................. 2 HEIRS OF TANG ENG KEE v. CA .......................................................................................................... 18 ARBES v. POLISTICO ................................................................................................................................... 4 AURBACH v. SANITARY WARES ......................................................................................................... 19 TOCAO v. CA ................................................................................................................................................... 6 LITONJUA v. LITONJUA .......................................................................................................................... 23 HEIRS OF JOSE LIM, represented by Elenito Lim v. JULIET VILLA LIM ............................... 7 BOURNS v. CARMAN ................................................................................................................................ 23 AGUILA v. CA .................................................................................................................................................. 9 SEVILLA v. CA ............................................................................................................................................. 24 TAN v. DEL ROSARIO ................................................................................................................................. 9 PHILEX v. MINING CORP. ...................................................................................................................... 26 MENDIOLA v. CA ....................................................................................................................................... 10 ORTEGA v. CA ............................................................................................................................................. 27 ANGELES v. SECRETARY OF JUSTICE .............................................................................................. 13 GATCHALIAN v. CIR ................................................................................................................................. 15
THE
LAW
ON
PARTNERSHIP
I.
NATURE;
CREATION
A.
DEFINITION;
ESSENTIAL
FEATURES
B.
CREATION
AGAD
v.
MABATO
(June
28,
1968)
DOCTRINE:
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.
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.
NATURE:
Appeal,
taken
by
plaintiff
Mauricio
Agad,
from
an
order
of
dismissal
of
the
Court
of
First
Instance
of
Davao,
we
are
called
upon
to
determine
the
applicability
of
Article
1773
of
our
Civil
Code
to
the
contract
of
partnership
on
which
the
complaint
herein
is
based.
PONENTE:
Concepcion,
C.J.
FACTS:
Plaintiff
alleges
that
he
and
defendant
Severino
Mabato
are
pursuant
to
a
public
instrument
dated
August
29,
1952
"
partners
in
a
fishpond
business,
to
the
capital
of
which
Agad
contributed
P1,000,
with
the
right
to
receive
50%
of
the
profits.
That
from
1952
up
to
and
including
1956,
Mabato
who
handled
the
partnership
funds,
had
yearly
rendered
accounts
of
the
operations
of
the
partnership;
and
that,
despite
repeated
demands,
Mabato
had
failed
and
refused
to
render
accounts
for
the
years
1957
to
1963.
Agad
prayed
in
his
complaint
against
Mabato
and
Mabato
&
Agad
Company,
filed
on
June
9,
1964,
that
judgment
be
rendered
sentencing
Mabato
to
pay
him
(Agad)
the
sum
of
P14,000,
as
his
share
in
the
profits
of
the
partnership
for
the
period
from
1957
to
1963,
in
addition
to
P1,000
as
attorney's
fees,
and
ordering
the
dissolution
of
the
partnership,
as
well
as
the
winding
up
of
its
affairs
by
a
receiver
to
be
appointed.
In
his
answer,
Mabato
admitted
the
formal
allegations
of
the
complaint
and
denied
the
existence
of
said
partnership,
upon
the
ground
that
the
contract
therefor
had
not
been
perfected,
despite
the
execution
of
Annex
"A",
because
Agad
had
allegedly
failed
to
give
his
P1,000
contribution
to
the
partnership
capital.
Mabato
prayed,
therefore,
that
the
complaint
be
dismissed;
that
Annex
"A"
be
declared
void
ab
initio;
and
that
Agad
be
sentenced
to
pay
actual,
moral
and
exemplary
damages,
as
well
as
attorney's
fees.
Mabato
filed
a
motion
to
dismiss,
upon
the
ground
that
the
complaint
states
no
cause
of
action
and
that
the
lower
court
had
no
jurisdiction
over
the
subject
matter
of
the
case,
because
it
involves
principally
the
DISPOSITION: WHEREFORE, we find that said Article 1773 of the Civil Code is not in point and that, the order appealed from should be, as it is hereby set aside and the case remanded to the lower court for further proceedings, with the costs of this instance against defendant-appellee, Severino Mabato. It is so ordered. VOTE: Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur. CONCURRING/DISSENTING OPINION: None. ADDITIONAL NOTES: TORRES v. CA (December 9, 1999)
DOCTRINE:
Courts
may
not
extricate
parties
from
the
necessary
consequences
of
their
acts.
That
the
terms
of
a
contract
turn
out
to
be
financially
disadvantageous
to
them
will
not
relieve
them
of
their
obligations
therein.
The
lack
of
an
inventory
of
real
property
will
not
ipso
facto
release
the
contracting
partners
from
their
respective
obligations
to
each
other
arising
from
acts
executed
in
accordance
with
their
agreement.
NATURE:
Petition
for
review
on
certiorari
a
CA
decision
denying
MR
PONENTE:
Panganiban,
J.
FACTS:
-Sisters
Antonia
Torres
and
Emeteria
Baring,
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.
Petitioners:
the
project
failed
because
of
respondents
lack
of
funds
or
means
and
skills.
They
add
that
respondent
used
the
loan
not
for
the
development
of
the
subdivision,
but
in
furtherance
of
his
own
company,
Universal
Umbrella
Company.
Respondent:
alleged
that
he
used
the
loan
to
implement
the
Agreement.
With
the
said
amount,
he
was
able
to
effect
the
survey
and
the
subdivision
of
the
lots.
He
secured
the
Lapu
Lapu
City
Councils
approval
of
the
subdivision
project
which
he
advertised
in
a
local
newspaper.
He
also
caused
the
construction
of
roads,
curbs
and
gutters.
Likewise,
he
entered
into
a
contract
with
an
engineering
firm
for
the
building
of
sixty
low-cost
housing
units
and
actually
even
set
up
a
model
house
on
one
of
the
subdivision
lots.
He
did
all
of
these
for
a
total
expense
of
P85,000.
Respondent
claimed
that
the
subdivision
project
failed,
however,
because
petitioners
and
their
relatives
had
separately
caused
the
annotations
of
adverse
claims
on
the
title
to
the
land,
which
eventually
scared
away
prospective
buyers.
Despite
his
requests,
petitioners
refused
to
cause
the
clearing
of
the
claims,
thereby
forcing
him
to
give
up
on
the
project.
-petitioners
filed
a
criminal
case
for
estafa
against
respondent
and
his
wife,
who
were
however
acquitted.
-Thereafter,
they
filed
the
present
civil
case
which,
upon
respondent's
motion,
was
later
dismissed
by
the
trial
court
in
an
Order
dated
September
6,
1982.
-On
appeal,
however,
the
appellate
court
remanded
the
case
for
further
proceedings.
Thereafter,
the
RTC
issued
its
assailed
Decision,
which,
as
earlier
stated,
was
affirmed
by
the
CA.
CA
ruling:
petitioners
and
respondents
formed
a
partnership
for
the
development
of
the
subdivision.
Thus,
they
must
bear
the
loss
suffered
by
the
partnership
in
the
same
proportion
as
their
share
in
the
profits
stipulated
in
the
contract.
CA
cited
Article
1979
which
said
The
losses
and
profits
shall
be
distributed
in
conformity
with
the
agreement.
If
only
the
share
of
each
partner
in
the
profits
has
been
agreed
upon,
the
share
of
each
in
the
losses
shall
be
in
the
same
proportion.
Under
the
above-quoted
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.
It
should
be
stressed
that
the
parties
implemented
the
contract.
Thus,
petitioners
transferred
the
title
to
the
land
in
the
name
of
the
respondent.
On
the
other
hand,
respondent
caused
the
subject
land
to
be
mortgaged,
the
proceeds
of
which
were
used
for
the
survey
and
the
subdivision
of
the
land.
As
noted
earlier,
he
developed
the
roads,
the
curbs
and
the
gutters
of
the
subdivision
and
entered
into
a
contract
to
construct
low-cost
housing
units
on
the
property.
Respondents
actions
clearly
belie
petitioners
contention
that
he
made
no
contribution
to
the
partnership.
Under
Article
1767
of
the
Civil
Code,
a
partner
may
contribute
not
only
money
or
property,
but
also
industry.
Petitioners
Bound
by
Terms
of
Contract
Courts
are
not
authorized
to
extricate
parties
from
the
necessary
consequences
of
their
acts,
and
the
fact
that
the
contractual
stipulations
may
turn
out
to
be
financially
disadvantageous
will
not
relieve
parties
thereto
of
their
obligations.
They
cannot
now
disavow
the
relationship
formed
from
such
agreement
due
to
their
supposed
misunderstanding
of
its
terms.
Alleged
Nullity
of
the
Partnership
Agreement
Petitioners
argue
that
the
Joint
Venture
Agreement
is
void
under
Article
1773
of
the
Civil
Code,
which
provides:
ART.
1773.
A
contract
of
partnership
is
void,
whenever
immovable
property
is
contributed
thereto,
if
an
inventory
of
said
property
is
not
made,
signed
by
the
parties,
and
attached
to
the
public
instrument.
They
contend
that
since
the
parties
did
not
make,
sign
or
attach
to
the
public
instrument
an
inventory
of
the
real
property
contributed,
the
partnership
is
void.
We
clarify.
First,
Article
1773
was
intended
primarily
to
protect
third
persons.
Second,
petitioners
themselves
invoke
the
allegedly
void
contract
as
basis
for
their
claim
that
respondent
should
pay
them
60
percent
of
the
value
of
the
property.
They
cannot
in
one
breath
deny
the
contract
and
in
another
recognize
it,
depending
on
what
momentarily
suits
their
purpose.
Parties
cannot
adopt
inconsistent
positions
in
regard
to
a
contract
and
courts
will
not
tolerate,
much
less
approve,
such
practice.
Partnership
Agreement
Not
the
Result
of
an
Earlier
Illegal
Contract
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.
In
this
case,
the
cause
of
the
contract
of
sale
consisted
not
in
the
stated
peso
value
of
the
land,
but
in
the
expectation
of
profits
from
the
subdivision
project,
for
This
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
case
having
been
remanded
to
the
court
of
origin,
both
parties
amend,
respectively,
their
complaint
and
their
answer,
and
by
agreement
of
the
parties,
the
court
appointed
Amadeo
R.
Quintos,
of
the
Insular
Auditor's
Office,
commissioner
to
examine
all
the
books,
documents,
and
accounts
of
"Turnuhan
Polistico
&
Co.,"
and
to
receive
whatever
evidence
the
parties
might
desire
to
present.
The
commissioner
rendered
his
report.
The
defendants
objected
to
the
commissioner's
report,
but
the
trial
court,
having
examined
the
reasons
for
the
objection,
found
the
same
sufficiently
explained
in
the
report
and
the
evidence,
and
accepting
it,
rendered
judgment,
holding
that
the
association
"Turnuhan
Polistico
&
Co."
is
unlawful,
and
sentencing
the
defendants
jointly
and
severally
to
return
the
amount
of
P24,607.80
to
the
plaintiffs
in
this
case,
and
to
the
rest
of
the
members
of
the
said
association
ISSUES: Whether the lower court erred in ordering the return of the the amount of P24,607.80 to the plaintiffs in this case, and to the rest of the members of the said association rather than order it to be given to charitable institutions. HELD: No. The amount should be returned to the members of the said association because they pertain to their contributions and not to profits derived from such unlawful partnership. RATIO/RULING: Petitioner's contention: because the partnership is an unlawful partnership, some charitable institution to whom the partnership funds may be ordered to be turned over, should be included, as a party defendant If the partnership has no valid existence, if it is considered juridically non- existent, the contract entered into can have no legal effect; and in that case, how can it give rise to an action in favor of the partners to judicially demand from the manager or the administrator of the partnership capital, each one's contribution? COURT: The appellants allege that the necessary party, i.e. Charitable institution, was not impleaded. The appellants refer to article 1666 of the Civil Code, which provides: "A partnership must have a lawful object, and must be established for the common benefit of the partners.
consideration;
for
which
reason
he
is
not
bound
to
return
it
and
he
who
has
paid
in
his
share
is
entitled
to
recover
it.
But
this
is
not
the
case
with
regard
to
profits
earned
in
the
course
of
the
partnership,
because
they
do
not
constitute
or
represent
the
partner's
contribution
but
are
the
result
of
the
industry,
business
or
speculation
which
is
the
object
of
the
partnership
o therefor,
in
order
to
demand
the
proportional
part
of
the
said
profits,
the
partner
would
have
to
base
his
action
on
the
contract
which
is
null
and
void,
since
this
partition
or
distribution
of
the
profits
is
one
of
the
juridical
effects
thereof.
o Wherefore
considering
this
contract
as
non-existent,
by
reason
of
its
illicit
object,
it
cannot
give
rise
to
the
necessary
action,
which
must
be
the
basis
of
the
judicial
complaint.
Furthermore,
it
would
be
immoral
and
unjust
for
the
law
to
permit
a
profit
from
an
industry
prohibited
by
it.
Hence
the
distinction
made
in
the
second
paragraph
of
this
article
of
this
Code,
providing
that
the
profits
obtained
by
unlawful
means
shall
not
enrich
the
partners,
but
shall
upon
the
dissolution
of
the
partnership,
be
given
to
the
charitable
institutions
of
the
domicile
of
the
partnership,
or,
in
default
of
such,
to
those
of
the
province.
This
is
a
new
rule,
unprecedented
by
our
law,
introduced
to
supply
an
obvious
deficiency
of
the
former
law,
which
did
not
describe
the
purpose
to
which
those
profits
denied
the
partners
were
to
be
applied,
nor
state
what
to
be
done
with
them.
o 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.
Our
Code
does
not
state
whether,
upon
the
dissolution
of
the
unlawful
partnership,
the
amounts
contributed
are
to
be
returned
by
the
partners,
because
it
only
deals
with
the
disposition
of
the
profits;
but
the
fact
that
said
contributions
are
not
included
in
the
disposal
prescribed
profits,
shows
that
in
consequences
of
said
exclusion,
the
general
law
must
be
followed,
and
hence
the
partners
should
reimburse
the
amount
of
their
respective
contributions.
TOCAO
v.
CA
(October
4,
2000)
DOCTRINE: It may be constituted in any form; a publicinstrument 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. Where no immovable property or real rights areinvolved, what matters is that the parties have complied with the requisites of a partnership. NATURE: Petition for review on certiorari PONENTE: YNARES-SANTIAGO, J. FACTS: Petitioner William Belo introduced respondent NenitaAnay to petitioner Marjorie Tocao, who conveyed her desire to enter into a jointventure with her for the importation and local distribution of kitchen cookwares. Under the joint venture, Belo acted as capitalist, Tocao aspresident and general manager, and Anay as head of the marketing department and later, vice-president for sales. The parties agreed to useAnay's name in securing distributorship of cookware from West Bend Company, a manufacturer of kitchen cookwares in Wisconsin, U.S.A. Theparties agreed further that Anay would be entitled to: (1) ten percent (10%) of the annual net profits of the business; (2) overridingcommission 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. Anay having secured the distributorship of cookware products from the WestBend Company and organized the administrative staff and the sales force, the cookware business took off successfully. They operated underthe name of Geminesse Enterprise, a sole proprietorship registered in Marjorie Tocao's name, with office at 712 Rufino Building, Ayala Avenue,Makati City. Belo made good his monetary commitments to Anay. On October 9, 1987, Anay learned that Marjorie Tocao had signed a letteraddressed to the Cubao sales office to the effect that she was no longer the vice- president of GeminesseEnterprise. The following day,October 10, she received a note from Lina T. Cruz, marketing manager, that Marjorie Tocao had barred her from holding office and conductingdemonstrations in both Makati and Cubao offices. Anay attempted to contact Belo. She wrote him twice to demand her overriding commissionfor the period of January 8, 1988 to February 5, 1988 and the audit of the company to determine her share in the net profits. When her letterswere not answered, Anay consulted her lawyer, who, in turn, wrote Belo a letter. Still, that letter was not answered. Anay still received her fivepercent (5%) overriding commission up to December 1987. The following year, 1988, she did not receive the same commission although thecompany netted a gross sales of P13,300,360.00. On April 5, 1988, Nenita A. Anay filed Civil Case No. 88-509, a complaint for sum of
DISPOSITION: The judgment appealed from, being in accordance with law, should be, as it is hereby, affirmed with costs against the appellants; provided, however, the defendants shall pay the legal interest on the sum of P24,607.80 from the date of the decision of the court, and provided, further, that the defendants shall deposit this sum of money and other documents evidencing uncollected credits in the office of the clerk of the trial court, in order that said court may distribute them among the members of said association, upon being duly identified in the manner that it may deem proper. So ordered. VOTE: EN BANC; Avancea, C.J., Johnson, Street, Johns, Romualdez, and Villa-Real, JJ., concur. .
moneywith
damagesagainst
Marjorie
D.
Tocao
and
William
Belo
before
the
Regional
Trial
Court
of
Makati,
Branch
140.
The
trial
court
held
that
therewas
indeed
an
oral
partnership
agreement
between
the
plaintiff
and
the
defendants,
based
on
the
following:
(a)
there
was
an
intention
tocreate
a
partnership;
(b)
a
common
fund
was
established
through
contributions
consisting
of
money
and
industry,
and
(c)
there
was
a
jointinterest
in
the
profits.
Petitioners
appeal
to
the
Court
of
Appealswas
dismissed.
Their
Motion
for
Reconsideration
was
denied
by
the
Court
of
Appeals
for
lack
of
merit.
ISSUES:Whether
or
not
a
partnership
exists
HELD
&RATIO/RULING:
Yes.
The
issue
of
whether
or
not
a
partnership
exists
is
a
factual
matter
which
is
within
the
exclusive
domain
of
both
the
trial
andappellate
courts.
This
Court
cannot
set
aside
factual
findings
of
such
courts
absent
any
showing
that
there
is
no
evidence
to
support
theconclusion
drawn
by
the
courta
quo.
In
this
case,
both
the
trial
court
and
the
Court
of
Appeals
are
one
in
ruling
that
petitioners
and
privaterespondent
established
a
business
partnership.
This
Court
finds
no
reason
to
rule
otherwise.
To
be
considered
a
juridical
personality,
apartnership
must
fulfill
these
requisites:
(1)
two
or
more
persons
bind
themselves
to
contribute
money,
property
or
industry
to
a
commonfund;
and
(2)
intention
on
the
part
of
the
partners
to
divide
the
profits
among
themselves.
It
may
be
constituted
in
any
form;
a
publicinstrument
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.
Where
no
immovable
property
or
real
rights
areinvolved,
what
matters
is
that
the
parties
have
complied
with
the
requisites
of
a
partnership.
The
fact
that
there
appears
to
be
no
record
in
theSecurities
and
Exchange
Commission
of
a
public
instrument
embodying
the
partnership
agreement
pursuant
to
Article
1772
of
the
Civil
Code
did
not
cause
the
nullification
of
the
partnership.
The
pertinent
provision
of
the
Civil
Code
on
the
matter
states:Art.
1768.
The
partnership
has
a
juridical
personality
separate
and
distinct
from
that
of
each
of
the
partners,
even
in
case
of
failure
to
complywith
the
requirements
of
article
1772,
first
paragraph.
DISPOSITION:
WHEREFORE,
the
instant
petition
for
review
on
certiorari
is
DENIED.
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.
This
case
is
remanded
to
the
Regional
Trial
Court
for
proper
proceedings
relative
to
said
dissolution.
The
appealed
decisions
of
the
Regional
Trial
Court
and
the
Court
of
Appeals
are
AFFIRMED
with
MODIFICATIONS,
as
follows
---
2.
3. Petitioners
alleged
that
Elfledo
was
never
a
partner
or
an
investor
in
the
business
and
merely
supervised
the
purchase
of
additional
trucks
using
the
income
from
the
trucking
business
of
the
partners.
By
the
time
the
partnership
ceased,
it
had
nine
trucks,
which
were
all
registered
in
Elfledo's
name.
Elfledo
died,
leaving
respondent
as
his
sole
surviving
heir.
Petitioners
claimed
that
respondent
took
over
the
administration
of
the
properties,
which
belonged
to
the
estate
of
Jose,
without
their
consent
and
approval.
Claiming
that
they
are
co-owners
of
the
properties,
petitioners
required
respondent
to
submit
an
accounting
of
all
income,
profits
and
rentals
received
from
the
estate
of
Elfledo,
and
to
surrender
the
administration
thereof.
Respondent
refused;
thus,
the
filing
of
this
case.
Respondent
traversed
petitioners'
allegations
and
claimed
that
Elfledo
was
himself
a
partner
of
Norberto
and
Jimmy.
Respondent
also
claimed
that
per
testimony
of
Cresencia,
Jose
gave
Elfledo
capital
in
an
informal
partnership
with
Jimmy
and
Norberto.
When
Elfledo
and
respondent
got
married,
the
partnership
only
had
one
truck;
but
through
the
efforts
of
Elfledo,
the
business
flourished.
When
Norberto
was
ambushed
and
killed,
the
trucking
business
started
to
falter.
When
Elfledo
died
due
to
a
heart
attack,
respondent
talked
to
Jimmy
and
to
the
heirs
of
Norberto,
as
she
could
no
longer
run
the
business.
Jimmy
suggested
that
three
out
of
the
nine
trucks
be
given
to
him
as
his
share,
while
the
other
three
trucks
be
given
to
the
heirs
of
Norberto.
However,
Norberto's
wife,
Paquita
Uy,
was
not
interested
in
the
vehicles.
Thus,
she
sold
the
same
to
respondent,
who
paid
for
them
in
installments.
Respondent
also
alleged
that
when
Jose
died,
he
left
no
known
assets,
and
the
partnership
with
Jimmy
and
Norberto
ceased
upon
his
demise.
Respondent
also
stressed
that
Jose
left
no
properties
that
Elfledo
could
have
held
in
trust.
Respondent
maintained
that
all
the
properties
involved
in
this
case
were
purchased
and
acquired
through
her
and
her
husbands
joint
efforts
and
hard
work,
and
without
any
participation
or
contribution
from
petitioners
or
from
Jose.
Respondent
submitted
that
these
are
conjugal
partnership
properties;
and
thus,
she
had
the
right
to
refuse
to
render
an
accounting
for
the
income
or
profits
of
their
own
business.
TC:
favoured
petitioners
CA:
reversed
the
decision
of
TC
2. 3.
4.
4.
5.
5. 6.
6.
7.
7.
8. 9.
8.
ISSUES: WON Elfledo Lim was a partner in the business HELD: 1. Yes 9.
RATIO/RULING: 1. A partnership exists when two or more persons agree to place their money, effects, labor, and skill in lawful commerce or business, with the understanding that there shall be a proportionate sharing of the profits and losses among them.
DISPOSITION:
WHEREFORE,
the
instant
Petition
is
DENIED.
The
assailed
Court
of
Appeals
Decision
dated
June
29,
2005
is
AFFIRMED.
Costs
against
petitioners.
VOTE:
All
concur
C.
SEPARATE
JURIDICAL
PERSONALITY
AGUILA
v.
CA
FACTS:
Petitioner
is
the
manager
of
A.C.
Aguila
&
Sons,
Co,
a
partnership
engaged
in
lending
activities.
Private
respondent
Felicidad
Abrogar
entered
into
a
MOA
w/
A.C.
Aquila
&
Sons
involving
a
pacto
de
retro
sale
of
a
house
&
lot.
As
private
respondent
failed
to
redeem
the
property
within
the
prescribed
period,
petitioner
caused
the
cancellation
of
TCT
and
the
issuance
of
the
new
certificate
of
title
in
the
name
of
the
partnership.
Private
respondent
filed
a
petition
for
a
declaration
of
the
nullity
of
the
deed
of
sale
and
a
criminal
complaint
for
forgery
against
petitioner
alleging
that
the
signature
of
her
husband
was
a
forgery
because
he
was
already
dead
when
the
deed
was
supposed
to
have
been
executed.
Petitioner
now
contends
that
he
is
not
the
real
party
in
interest
but
A.C.
Aguila
&
Co.,
against
which
this
case
should
have
been
brought.
ISSUE:
WON
the
petitioner
is
the
real
party
in
interest.
HELD:
No.
Rule
3,
Section
2
of
the
Rules
of
Court
of
1964,
under
which
the
complaint
in
this
case
was
filed,
provided
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.
This
ruling
is
now
embodied
in
Rule
3,
Section
2
of
the
1997
Revised
Rules
of
Civil
Procedure.
Any
decision
rendered
against
a
practice
his
profession
alone
and
not
to
those
who
are
engaged
to
single
proprietorship.
In
the
2nd
case,
they
argued
that
respondents
have
exceeded
their
rule- making
authority
in
applying
SNIT
to
general
professional
partnerships
by
issuing
Revenue
Regulation
2-93
to
carry
out
the
RA.
This
is
anchored
on
the
administrative
interpretation
of
public
respondents
that
would
apply
SNIT
topartners
in
general
professional
partnerships.-
Petitioners
cited
the
deliberations
in
the
HOR
regarding
the
implementation
of
the
said
rule
in
which
it
was
shown
that
framers
did
not
intend
for
the
bill
to
be
applicable
to
business
corporations
or
partnerships
ISSUE: 1. WON RA 7496 is unconstitutional (G.R. No. 109289). NO 2. WON in RA 7496, the SNIT applies to partners in general professional partnerships. (G.R. No. 109446). YES HELD: 1. Constitutionality of RA 7496 o The SC ruled in the negative. The said law is not arbitrary; it is germane to the purpose of the law and; applies to all things of equal conditions and of same class. o It is neither violative of equal protection clause due to the existence of substantial difference between one who practice his profession alone and one who is engaged to proprietorship. o Further, the SC said that RA 7496 is just an amendatory provision of the code of taxpayers where it classifies taxpayers in to four main groups: Individuals, Corporations, Estate under Judicial Settlement and Irrevocable Trust. o The court would have appreciated the contention of the petitioner if RA 7496 was an independent law. But since it is attached to a law that has already classified taxpayers, there is no violation of equal protection clause. 2. Application of SNIT to partners in general professional partnerships o There is no distinction in income tax liability between a person who practices his profession alone or individually and one who does it through a partnership (whether registered or not) with others in the exercise of a common profession. o Under the present income tax system, all individuals deriving income from any source whatsoever are treated in almost invariably the same manner and under a common set of rules. o Although the general professional partnership is exempt from the payment of taxes (but it still has an obligation to file an income tax
A general professional partnership, in this context, must be formed for the sole purpose of exercising a common profession, no part of the income of which is derived from its engaging in any trade business; otherwise, it is subject to tax as an ordinary business partnership or, which is to say, as a corporation and thereby subject to the corporate income tax. The only other exempt partnership is a joint venture for undertaking construction projects or engaging in petroleum operations pursuant to an operating agreement under a service contract with the government (see Sections 20, 23 and 24, National Internal Revenue Code).
ARSENIO
T.
MENDIOLA
vs.
COURT
OF
APPEALS,
NATIONAL
LABOR
RELATIONS
COMMISSION,
PACIFIC
FOREST
RESOURCES,
PHILS.,
INC.
and/or
CELLMARK
AB
(July
31,
2006)
DOCTRINE:
In
a
partnership,
the
members
become
co-owners
of
what
is
contributed
to
the
firm
capital
and
of
all
property
that
may
be
acquired
thereby
and
through
the
efforts
of
the
members.
The
property
or
stock
of
the
partnership
forms
a
community
of
goods,
a
common
fund,
in
which
each
party
has
a
proprietary
interest.
In
fact,
the
New
Civil
Code
regards
a
partner
as
a
co-owner
of
specific
partnership
property.
Each
partner
possesses
a
joint
interest
in
the
whole
of
partnership
property.
If
the
relation
does
not
have
this
feature,
it
is
not
one
of
partnership.
This
essential
element,
the
community
of
interest,
or
co-ownership
of,
or
joint
interest
in
partnership
property
is
absent
in
the
relations
between
petitioner
and
private
respondent
Pacfor.
xxx
the
parties
in
this
case,
merely
shared
profits.
This
alone
does
not
make
a
partnership.
Besides,
a
corporation
cannot
become
a
member
of
a
partnership
in
the
absence
of
express
authorization
by
statute
or
charter.
This
doctrine
is
based
on
the
following
considerations:
(1)
that
the
mutual
agency
between
the
partners,
whereby
the
corporation
would
be
bound
by
the
acts
of
persons
who
are
not
its
duly
appointed
and
authorized
agents
and
officers,
would
be
inconsistent
with
the
policy
of
the
law
that
the
corporation
shall
manage
its
own
affairs
separately
and
exclusively;
and,
(2)
that
such
an
arrangement
would
improperly
allow
corporate
property
to
become
subject
to
risks
not
contemplated
by
the
stockholders
when
they
originally
invested
in
the
corporation.
PONENTE:
Puno,
J.
FACTS:
Private
respondent
Pacific
Forest
Resources,
Phils.,
Inc.
(Pacfor)
is
a
corporation
organized
and
existing
under
the
laws
of
California,
USA.
It
is
a
subsidiary
of
Cellulose
Marketing
International
(organized
in
Sweden)
Private
respondent
Pacfor
entered
into
a
"Side
Agreement
on
Representative
Office
known
as
Pacific
Forest
Resources
(Phils.),
Inc."
with
petitioner
Arsenio
T.
Mendiola
(ATM).
The
Side
Agreement
outlines
the
business
relationship
of
the
parties
with
regard
to
the
Philippine
operations
of
Pacfor.
Private
respondent
will
establish
a
Pacfor
representative
office
in
the
Philippines,
to
be
known
as
Pacfor
Phils,
and
petitioner
ATM
will
be
its
President.
Petitioner's
base
salary
and
the
overhead
expenditures
of
the
company
shall
be
borne
by
the
representative
office
and
funded
by
Pacfor/ATM,
since
Pacfor
Phils.
is
equally
owned
on
a
50-50
equity
by
ATM
and
Pacfor-usa.
50/50
basis,
Pacfor
Phils.'
office
furniture
and
equipment
and
the
service
car.
He
also
reiterated
his
demand
for
unpaid
commissions,
and
proposed
to
offset
these
with
the
remaining
Christmas
giveaway
fund
in
his
possession.
Furthermore,
he
did
not
renew
the
lease
contract
with
Pulp
and
Paper,
Inc.,
the
lessor
of
the
office
premises
of
Pacfor
Phils.,
wherein
he
was
the
signatory
to
the
lease
agreement.
Private
respondent
Pacfor
placed
petitioner
on
preventive
suspension
and
ordered
him
to
show
cause
why
no
disciplinary
action
should
be
taken
against
him.
Private
respondent
Pacfor
charged
petitioner
with
willful
disobedience
and
serious
misconduct
for
his
refusal
to
turn
over
the
service
car
and
the
Christmas
giveaway
fund
which
he
applied
to
his
alleged
unpaid
commissions.
Private
respondent
also
alleged
loss
of
confidence
and
gross
neglect
of
duty
on
the
part
of
petitioner
for
allegedly
allowing
another
corporation
owned
by
petitioner's
relatives,
High
End
Products,
Inc.
(HEPI),
to
use
the
same
telephone
and
facsimile
numbers
of
Pacfor,
to
possibly
steal
and
divert
the
sales
and
business
of
private
respondent.
Petitioner
denied
the
charges.
He
reiterated
that
he
considered
the
import
of
Pacfor
Presidents
letters
as
a
"cessation
of
his
position
and
of
the
existence
of
Pacfor
Phils."
He
likewise
informed
private
respondent
Pacfor
that
ATM
Marketing
Corp.
now
occupies
Pacfor
Phils.'
office
premises,
and
demanded
payment
of
his
separation
pay.
Petitioner
filed
his
complaint
for
illegal
dismissal,
recovery
of
separation
pay,
and
payment
of
attorney's
fees
with
the
NLRC.
Private
respondent
directed
petitioner
to
explain
why
he
should
not
be
disciplined
for
serious
misconduct
and
conflict
of
interest;
charged
petitioner
anew
with
serious
misconduct
for
the
latter's
alleged
act
of
fraud
and
misrepresentation
in
authorizing
the
release
of
an
additional
peso
salary
for
himself,
besides
the
dollar
salary
agreed
upon
by
the
parties.
Private
respondent
also
accused
petitioner
of
disloyalty
and
representation
of
conflicting
interests
for
having
continued
using
the
Pacfor
Phils.'
office
for
operations
of
HEPI
LA:
ruled
in
favor
of
petitioner,
finding
there
was
constructive
dismissal.
By
directing
petitioner
to
turn
over
all
office
records
and
materials,
regardless
of
whether
he
may
have
retained
copies,
private
respondent
Pacfor
virtually
deprived
petitioner
of
his
job
by
the
gradual
diminution
of
his
authority
as
resident
manager.
Petitioner's
position
as
resident
manager
whose
duty,
among
others,
was
to
maintain
the
security
of
its
business
transactions
and
communications
was
rendered
meaningless.
NLRC:
in
favor
of
Private
respondent
Pacfor.
He
set
aside
the
July
30,
2001
decision
of
the
labor
arbiter,
for
lack
of
jurisdiction
and
lack
of
merit.
It
held
there
was
no
employer-employee
relationship
between
the
parties.
Based
on
the
two
agreements
between
the
parties,
it
concluded
that
petitioner
is
not
an
employee
of
private
respondent
Pacfor,
but
a
full
co-owner
(50/50
equity).
MR
denied.
CA: Affirmed holding that "the legal basis of the complaint is not employment but perhaps partnership, co-ownership, or independent contractorship." Hence, the Labor Code cannot apply. MR denied Issues: Was there an employer-employee relationship or a partnership? Can both exist at the same time? There was an employer employee relationship but no partnership Was he constructively dismissed? (Not important so omitted) YES. Ratio: Petitioner argues that he is an industrial partner of the partnership he formed with private respondent Pacfor, and also an employee of the partnership. Petitioner insists that an industrial partner may at the same time be an employee of the partnership, provided there is such an agreement, which, in this case, is the "Side Agreement" and the "Revised Operating and Profit Sharing Agreement." We hold that petitioner is an employee of private respondent Pacfor and that no partnership or co-ownership exists between the parties. In a partnership, the members become co-owners of what is contributed to the firm capital and of all property that may be acquired thereby and through the efforts of the members. The property or stock of the partnership forms a community of goods, a common fund, in which each party has a proprietary interest. In fact, the New Civil Code regards a partner as a co-owner of specific partnership property. Each partner possesses a joint interest in the whole of partnership property. If the relation does not have this feature, it is not one of partnership. This essential element, the community of interest, or co-ownership of, or joint interest in partnership property is absent in the relations between petitioner and private respondent Pacfor. Petitioner is not a part-owner of Pacfor Phils. William Gleason, private respondent Pacfor's President established this fact when he said that Pacfor Phils. is simply a "theoretical company" for the purpose of dividing the income 50-50. He stressed that petitioner knew of this arrangement from the very start, having been the one to propose to private respondent Pacfor the setting up of a representative office, and "not a branch office" in the Philippines to save on taxes. Thus, the parties in this case, merely shared profits. This alone does not make a partnership. Besides, a corporation cannot become a member of a partnership in the absence of express authorization by statute or charter. This doctrine is based on the following considerations: (1) that the mutual agency between the partners, whereby the corporation would be bound by the acts of persons who are not its duly appointed
and
authorized
agents
and
officers,
would
be
inconsistent
with
the
policy
of
the
law
that
the
corporation
shall
manage
its
own
affairs
separately
and
exclusively;
and,
(2)
that
such
an
arrangement
would
improperly
allow
corporate
property
to
become
subject
to
risks
not
contemplated
by
the
stockholders
when
they
originally
invested
in
the
corporation.
No
such
authorization
has
been
proved
in
the
case
at
bar.
(This
part
goes
into
the
employer-employee
relationship
bit,
I
dont
think
its
important
but
I
included
it
na
din
if
ever
magtanong
re:
paano
nagging
employee)
Be
that
as
it
may,
we
hold
that
on
the
basis
of
the
evidence,
an
employer-employee
relationship
is
present
in
the
case
at
bar.
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
employer's
power
to
control
the
employee's
conduct.
The
most
important
element
is
the
employer's
control
of
the
employee's
conduct,
not
only
as
to
the
result
of
the
work
to
be
done,
but
also
as
to
the
means
and
methods
to
accomplish
it.43
In
the
instant
case,
all
the
foregoing
elements
are
present.
First,
it
was
private
respondent
Pacfor
which
selected
and
engaged
the
services
of
petitioner
as
its
resident
agent
in
the
Philippines.
Second,
as
stipulated
in
their
Side
Agreement,
private
respondent
Pacfor
pays
petitioner
his
salary
amounting
to
$65,000
per
annum
which
was
later
increased
to
$78,000.
Third,
private
respondent
Pacfor
holds
the
power
of
dismissal,
as
may
be
gleaned
through
the
various
memoranda
it
issued
against
petitioner,
placing
the
latter
on
preventive
suspension
while
charging
him
with
various
offenses,
including
willful
disobedience,
serious
misconduct,
and
gross
neglect
of
duty,
and
ordering
him
to
show
cause
why
no
disciplinary
action
should
be
taken
against
him.
Lastly
and
most
important,
private
respondent
Pacfor
has
the
power
of
control
over
the
means
and
method
of
petitioner
in
accomplishing
his
work.
The
power
of
control
refers
merely
to
the
existence
of
the
power,
and
not
to
the
actual
exercise
thereof.
The
principal
consideration
is
whether
the
employer
has
the
right
to
control
the
manner
of
doing
the
work,
and
it
is
not
the
actual
exercise
of
the
right
by
interfering
with
the
work,
but
the
right
to
control,
which
constitutes
the
test
of
the
existence
of
an
employer-employee
relationship.44
In
the
case
at
bar,
private
respondent
Pacfor,
as
employer,
clearly
possesses
such
right
of
control.
Petitioner,
as
private
respondent
Pacfor's
resident
agent
in
the
Philippines,
is,
exactly
so,
only
an
agent
of
the
corporation,
a
representative
of
Pacfor,
who
transacts
business,
and
accepts
service
on
its
behalf.
This
right
of
control
was
exercised
by
private
respondent
Pacfor
during
the
period
of
November
to
December
2000,
when
it
directed
petitioner
to
turn
over
to
it
all
records
of
Pacfor
Phils.;
when
it
ordered
petitioner
to
remit
the
Christmas
giveaway
fund
intended
for
clients
of
Pacfor
Phils.;
and,
when
it
withdrew
all
its
offers
of
settlement
and
ordered
petitioner
to
transfer
title
and
turn
over
to
it
the
possession
After
3
years,
the
Angeles
spouses
asked
for
an
accounting
from
Mercado,
and
they
claim
that
only
after
this
demand
for
an
accounting
did
thy
discover
that
Mercado
had
put
the
contract
of
antichresis
over
the
subject
land
under
Mercado
and
his
spouses
names
Mercado
denied
the
Angeles
spouses
allegations
o Claimed
that
there
exists
an
industrial
partnership,
colloquially
known
as
sosyo
industrial,
between
him
and
his
spouse
as
industrial
partners
and
the
Angeles
spouses
as
financiers,
and
that
this
had
existed
since
1991,
before
the
contract
of
antichresis
over
the
subject
land
o Mercado
used
his
and
his
spouses
earnings
as
part
of
the
capital
in
the
business
transactions
which
he
entered
into
in
behalf
of
the
Angeles
spouses.
It
was
their
practice
to
enter
into
business
transactions
with
other
people
under
the
name
of
Mercado
because
the
Angeles
spouses
did
not
want
to
be
identified
as
the
financiers
o Attached
bank
receipts
showing
deposits
in
behalf
of
Emerita
Angeles
and
contracts
under
his
name
for
the
Angeles
spouses
During
the
barangay
conciliation
proceedings,
Oscar
Angeles
stated
that
there
was
a
written
sosyo
industrial
agreement:
capital
would
come
from
the
Angeles
spouses
while
the
profit
would
be
divided
evenly
between
Mercado
and
the
Angeles
spouses
Provincial
Prosecution
Office:
first
recommended
the
filing
of
a
criminal
information
for
estafa,
but
after
Mercado
filed
his
counter-affidavit
and
moved
for
reconsideration,
issued
an
amended
resolution
dismissing
the
complaint
Angeles
spouses
appealed
to
Sec.
of
Justice,
saying
that
the
document
evidencing
the
contract
of
antichresis
executed
in
the
name
of
the
Mercado
spouses,
instead
of
the
Angeles
spouses,
and
that
such
document
alone
proves
Mercados
misappropriation
of
their
P210,
000
Sec.
of
Justice:
dismissed
the
appeal
o Angeles
spouses
failed
to
show
sufficient
proof
that
Mercado
deliberately
deceived
them
in
the
transaction
o Mercado
satisfactorily
explained
that
the
Angeles
spouses
do
not
want
to
be
revealed
as
the
financiers
o Under
the
circumstances,
it
was
more
likely
that
the
Angeles
spouses
knew
from
the
very
start
that
the
questioned
document
was
not
really
in
their
names
o A
partnership
truly
existed
between
the
Angeles
spouses
and
Mercado,
which
was
clear
from
the
fact
that
they
contributed
money
to
a
common
fund
and
divided
the
profits
among
themselves.
o Angeles
spouses
acknowledged
their
joint
business
venture
in
the
barangay
conciliation
proceedings
although
they
assailed
the
manner
the
business
was
conducted
o Although
the
legal
formalities
for
the
formation
were
not
adhered
to,
the
partnership
relationship
was
evident.
o There
is
no
estafa
where
money
is
delivered
by
a
partner
to
his
co-partner
on
the
latters
representation
that
the
amount
shall
be
applied
to
the
business
of
their
partnership.
In
case
of
the
money
received,
the
co-partners
liability
is
civil
in
nature
o
D.
MUTUAL
AGENCY
E.
DISTINGUISH
FROM
1.
Co-ownership;
Co-possession
2.
Tenancy
in
common;
joint
tenancy
3.
Joint
Ventures
4.
Joint
Adventures
5.
Joint
accounts
6.
Cuentas
en
Participacion
7.
Agency
GATCHALIAN
v.
CIR
PONENTE:
Imperial,
J.
FACTS:
The
15plaintiff
are
all
residents
of
the
municipality
of
Pulilan,
Bulacan,
purchased
one
sweepstakes
ticket
valued
at
two
pesos
(P2),
divided
in
various
amounts
among
themselves.
o the
said
ticket
was
registered
in
the
name
of
Jose
Gatchalian
and
Company;
o The
ticket
won
50,000
pesos.
Plaintiff
submitted
15
income
tax
returns
for
exemption
from
the
1,499
tax
on
the
lottery
winnings,
asking
that
the
tax
be
divided
according
to
the
amount
paid
by
each
plaintiff;
o CIR
denied
the
plaintiffs
request
for
exemption,
stating
that
the
plaintiffs
are
a
partnership;
ISSUE:
1. Whether
the
plaintiffs
formed
a
partnership,
or
merely
a
community
of
property
without
a
personality
of
its
own;
Formed
a
partnership
of
a
civil
nature.
2. Whether
they
should
pay
the
tax
collectively
or
whether
the
latter
should
be
prorated
among
them
and
paid
individually;
Collectively.
HELD:
1. According
to
the
stipulation
facts
the
plaintiffs
organized
a
partnership
of
a
civil
nature
because
each
of
them
put
up
money
to
buy
a
sweepstakes
ticket
for
the
sole
purpose
of
dividing
equally
the
prize
which
they
may
win,
as
they
did
in
fact
in
the
amount
of
P50,000;
April
29,
1939
PASCUAL
v.
CIR
(October
18,
1988)
2.
DOCTRINE: There must be a clear intent to form a partnership, the existence of a juridical personality different from the individual partners, and the freedom of each party to transfer or assign the whole property. NATURE: Petition for review on certiorari of the decision of the Court of Tax Appeals (CTA) affirming the decision of the Commissioner of Internal Revenue. PONENTE: Gancayo, J. FACTS: Petitioners Mariano Pascual and Renato P. Dragon are siblings. 1965 Bought 2 Parcels of Land 1966 Bought another 3 Parcels of Land 1968 Sold the first to Parcels of Land 1970 Sold the remaining 3 Parcels.
They realized a total of P 60,000.00 profit, and paid the corresponding capital gains by availing of the tax amnesty in the years 1973 74. BIR Commissioner assessed that the siblings owed P107,101.70 for corporate income tax being an unregistered partnership. Petitioners assert that they are not a partnership, but are co-owners who have paid their corresponding capital gains in 73 and 74. ISSUES: W/N the Siblings were an unregistered partnership which was liable to pay corporate tax?
HELD:
No,
they
were
co-owners.
RATIO/RULING:
The
CTA
anchored
their
ruling
on
an
earlier
case
of
Evangelista.
Which
held
that
the
requisite
for
a
partnership
is
a)
an
agreement
to
contribute
money,
property
or
industry
in
a
common
fund,
and
b)
intent
to
divide
the
profits
among
the
contracting
parties.
In
the
present
case,
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.
Commissioner
merely
assumed
the
presence
of
these
elements.
Also,
the
earlier
ruling
in
Evangelista
showed
that
there
were
several
transactions,
which
showed
the
character
of
habitually
peculiar
to
business
transactions
engaged
in
for
the
purpose
of
gain
was
present.
The
common
ownership
of
property
does
not
in
itself
create
a
partnership
between
the
owners,
though
they
may
use
it
for
purpose
of
making
gains;
and
they
may,
without
becoming
partners,
agree
among
themselves
as
to
the
management,
and
use
of
such
property
and
applications
of
the
proceeds
therefrom.
The
sharing
of
returns
does
not
in
itself
establish
a
partnership
whether
or
not
the
persons
sharing
therein
have
a
joint
or
common
right
or
interest
in
the
property.
There
must
be
a
clear
intent
to
form
a
partnership,
the
existence
of
a
juridical
personality
different
from
the
individual
partners,
and
the
freedom
of
each
party
to
transfer
or
assign
the
whole
property.
There
must
be
intent
to
create
a
PARTNERSHIP
with
a
distinct
juridical
personality
to
that
of
the
partners.
DISPOSITION:
Petition
is
GRANTED
decision
of
the
CTA
is
REVERSED
and
SET
ASIDE
VOTE:
3rd
Division.
Cruz,
Grino-Aquino,
Medialdea,
JJ.
Concur
Narvasa,
J.
Took
no
part
OBILLOS
v.
CIR
(October
29,
1985)
DOCTRINE:
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.
PONENTE:
Aquino,
J.
FACTS:
For at least one year after their receipt of two parcels of land from their father, petitioners resold said lots to the Walled City Securities Corporation and Olga Cruz Canda, for which they earned a profit of P134,341.88 or P33,584 for each of them. They treated the profit as a capital gain and paid an income tax on one-half thereof or of P16,792. One day before the expiration of the five-year prescriptive period, the Commissioner of Internal Revenue, Commissioner acting on the theory that the four petitioners had formed an unregistered partnership or joint venture, required the four petitioners to pay corporate income tax on the total profit of P134,336 in addition to individual income tax on their shares thereof, a 50% fraud surcharge and a 42% accumulated interest. Further, the Commissioner considered the share of the profits of each petitioner in the sum of P33,584 as a " taxable in full (not a mere capital gain of which is taxable) and required them to pay deficiency income taxes aggregating P56,707.20 including the 50% fraud surcharge and the accumulated interest. The petitioners contested the assessments. Two Judges of the Tax Court sustained the same. Judge Roaquin dissented. Hence, the instant appeal. ISSUES:Whether or not petitioners have indeed formed a partnership or joint venture and thus, liable for corporate income tax. HELD &RATIO/RULING:We hold that it is error to consider the petitioners as having formed a partnership under article 1767 of the Civil Code simply because they allegedly contributed P178,708.12 to buy the two lots, resold the same and divided the profit among themselves. To regard the petitioners as having formed a taxable unregistered partnership would result in oppressive taxation and confirm the dictum that the power to tax involves the power to destroy. That eventuality should be obviated. As testified by Jose Obillos, Jr., they had no such intention. They were co- owners pure and simple. To consider them as partners would obliterate the distinction between a co-ownership and a partnership. The petitioners were not engaged in any joint venture by reason of that isolated transaction. 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. DISPOSITION:WHEREFORE, the judgment of the Tax Court is reversed and set aside. The assessments are cancelled. No costs.
VOTE:
2nd
Division.
Abad
Santos,
Escolin,
Cuevas,
Alampayconcur.
Concepcion
Jr.
on
leave.
RIVERA
v.
PEOPLES
BANK
(April
7,
1942)
DOCTRINE:
In
the
absence
of
clear
proof
of
the
contrary,
the
SC
gives
full
faith
and
credit
to
the
certificate
of
deposit,
which
recites
in
effect
that
the
funds
in
question
belonged
to
persons
A
and
B;
that
they
were
joint
owners
and
that
either
of
them
could
withdraw
any
part
or
the
whole
of
said
account
during
the
lifetime
of
both,
and
the
balance,
if
any,
upon
the
death
of
either,
belonged
to
the
survivor.
NATURE:
The
question
raised
in
this
appeal
is
the
validity
of
the
survivorship
agreement
made
by
and
between
Edgar
Stephenson,
now
deceased,
and
Ana
Rivera,
appellant
herein
PONENTE:
Ozaeta,
J.
FACTS:
Ana
Rivera
was
employed
by
Edgar
Stephenson
as
housekeeper.
Stephenson
opened
an
account
in
his
name
with
the
defendant
Peoples
Bank.
When
there
was
a
balance
of
P2,072
in
said
account,
the
survivorship
agreement
in
question
was
executed
and
the
said
account
was
transferred
to
the
name
of
"Edgar
Stephenson
and/or
Ana
Rivera."
At
the
time
of
Stephenson's
death
Ana
Rivera
held
the
deposit
book,
and
there
was
a
balance
in
said
account
of
P701.43,
which
Ana
Rivera
claimed
but
which
the
bank
refused
to
pay
to
her
upon
advice
of
its
attorneys
who
gave
the
opinion
that
the
survivorship
agreement
was
of
doubtful
validity.
Ana
Rivera
instituted
the
present
action
against
the
bank,
and
Minnie
Stephenson,
administratix
of
the
estate
of
the
deceased,
intervened
and
claimed
the
amount
for
the
estate,
alleging
that
the
money
deposited
in
said
account
was
and
is
the
exclusive
property
of
the
deceased.
TC:
held
that
the
agreement
in
question,
viewed
from
its
effect
during
the
lives
of
the
parties,
was
a
mere
power
of
attorney
authorizing
Ana
Rivera
to
withdraw
the
deposit,
which
power
terminated
upon
the
death
of
the
principal,
Edgar
Stephenson;
but
that,
viewed
from
its
effect
after
the
death
of
either
of
the
parties,
the
agreement
was
a
donation
mortis
causa
with
reference
to
the
balance
remaining
at
the
death
of
one
of
them,
which,
not
having
been
executed
with
the
formalities
of
a
testamentary
disposition
as
required
by
the
Civil
Code,
was
of
no
legal
effect.
ISSUES:
1.WON
the
survivorship
agreement
was
a
mere
power
of
attorney
from
Stephenson
to
Ana
Rivera,
or
that
it
is
a
gift
mortis
causa
of
the
bank
account
in
question
from
him
to
her.
2.
WON
the
survivorship
agreement
is
valid
HELD:
Second
issue:
1. 3. 2. 3. No
Yes
RATIO/RULING: First Issue 1. The TCs conclusion is predicated on the assumption that Stephenson was the exclusive owner of the funds deposited in the bank, which assumption was in turn based on the facts (1) that the account was originally opened in the name of Stephenson alone and (2) that Ana Rivera "served only as housemaid of the deceased." But it not infrequently happens that a person deposits money in the bank in the name of another; and in the instant case it also appears that Ana Rivera served her master for about nineteen years without actually receiving her salary from him. The fact that subsequently Stephenson transferred the account to the name of himself and/or Ana Rivera and executed with the latter the survivorship agreement in question although there was no relation of kinship between them but only that of master and servant, nullifies the assumption that Stephenson was the exclusive owner of the bank account. In the absence of clear proof of the contrary, the SC gives full faith and credit to the certificate of deposit, which recites in effect that the funds in question belonged to Edgar Stephenson and Ana Rivera; that they were joint owners and that either of them could withdraw any part or the whole of said account during the lifetime of both, and the balance, if any, upon the death of either, belonged to the survivor.
2.
2.
3.
Prima facie, SC thinks it is valid. It is an aleatory contract supported by law a lawful consideration the mutual agreement of the joint depositors permitting either of them to withdraw the whole deposit during their lifetime, and transferring the balance to the survivor upon the death of one of them. The trial court said that the Civil Code "contains no provisions sanctioning such an agreement" SC thinks it is covered by article 1790 of the Civil Code. Furthermore, "it is well established that a bank account may be so created that two persons shall be joint owners thereof during their mutual lives, and the survivor take the whole on the death of the other. The right to make such joint deposits has generally been held not to be done with by statutes abolishing joint tenancy and survivorship generally as they existed at common law." Although the survivorship agreement is per se not contrary to law, its operation or effect may be violative of the law. For instance, if it be shown in a given case that such agreement is a mere cloak to hide an
inofficious
donation,
to
transfer
property
in
fraud
of
creditors,
or
to
defeat
the
legitime
of
a
forced
heir,
it
may
be
assailed
and
annulled
upon
such
grounds.
No
such
vice
has
been
imputed
and
established
against
the
agreement
involved
in
the
case.
DISPOSITION:
The
agreement
appealed
from
is
reversed
and
another
judgment
will
be
entered
in
favor
of
the
plaintiff
ordering
the
defendant
bank
to
pay
to
her
the
sum
of
P701.43,
with
legal
interest
thereon
from
the
date
of
the
complaint,
and
the
costs
in
both
instances.
So
ordered.
VOTE:
All
concur
TUASON
v.
BOLANOS
FACTS:
This
was
an
action
to
recover
possesion
of
registered
land
situated
in
barrio
Tatalon,
Quezon
City.
The
plaintiff
was
represented
by
a
corporation,
the
law
firm
Araneta
&
Araneta.
ISSUE:
WON
the
case
should
be
dismissed
on
the
ground
that
the
case
was
not
brought
by
the
real
property
in
interest
HELD:
No.
There
is
nothing
to
the
contention
that
the
present
action
is
not
brought
by
the
real
party
in
interest,
that
is,
by
J.
M.
Tuason
and
Co.,
Inc.
What
the
Rules
of
Court
require
is
that
an
action
be
brought
in
the
name
of,
but
not
necessarily
by,
the
real
party
in
interest.
(Section
2,
Rule
2.)
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.
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
into
a
losses,
and
no
time
fixed
for
the
duration
of
the
partnership.
There
was
even
no
attempt
to
submit
an
accounting
corresponding
to
the
period
after
the
war
until
Kee's
death
in
1984.
It
had
no
business
book,
no
written
account
nor
any
memorandum
for
that
matter
and
no
license
mentioning
the
existence
of
a
partnership.
On
profits
earned:
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.
On
power
to
give
orders:
even
a
mere
supervisor
in
a
company,
factory
or
store
gives
orders
and
directions
to
his
subordinates.
So
long,
therefore,
that
an
employee's
position
is
higher
in
rank,
it
is
not
unusual
that
he
orders
around
those
lower
in
rank.
On
preparing
supply
orders:
even
a
messenger
or
other
trusted
employee,
over
whom
confidence
is
reposed
by
the
owner,
can
order
materials
from
suppliers
for
and
in
behalf
of
Benguet
Lumber.
Furthermore,
even
a
partner
does
not
necessarily
have
to
perform
this
particular
task.
It
is,
thus,
not
an
indication
that
Tan
Eng
Kee
was
a
partner.
On
staying
in
the
premises
of
Benguet
Lumber:
although
Tan
Eng
Kee,
together
with
his
family,
lived
in
the
lumber
compound
and
this
privilege
was
not
accorded
to
other
employees,
the
undisputed
fact
remains
that
Tan
Eng
Kee
is
the
brother
of
Tan
Eng
Lay.
Naturally,
close
personal
relations
existed
between
them.
Whatever
privileges
Tan
Eng
Lay
gave
his
brother,
and
which
were
not
given
the
other
employees,
only
proves
the
kindness
and
generosity
of
Tan
Eng
Lay
towards
a
blood
relative.
In
determining
whether
a
partnership
exists,
these
rules
shall
apply:
(1) Except
as
provided
by
Article
1825,
persons
who
are
not
partners
as
to
each
other
are
not
partners
as
to
third
persons;
(2) Co-ownership
or
co-possession
does
not
of
itself
establish
a
partnership,
whether
such
co-owners
or
co-possessors
do
or
do
not
share
any
profits
made
by
the
use
of
the
property;
(3) 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
which
the
returns
are
derived;
(4) The
receipt
by
a
person
of
a
share
of
the
profits
of
a
business
is
a
prima
facie
evidence
that
he
is
a
partner
in
the
business,
but
no
5.
Management
(a)
The
management
of
the
Corporation
shall
be
vested
in
a
Board
of
Directors,
which
shall
consist
of
nine
individuals.
As
long
as
American- Standard
shall
own
at
least
30%
of
the
outstanding
stock
of
the
Corporation,
three
of
the
nine
directors
shall
be
designated
by
American- Standard,
and
the
other
six
shall
be
designated
by
the
other
stockholders
of
the
Corporation.
The
agreement
contained
provisions
designed
to
protect
it
as
a
minority
group,
including
the
grant
of
veto
powers
over
a
number
of
corporate
acts
and
the
right
to
designate
certain
officers,
such
as
a
member
of
the
Executive
Committee
whose
vote
was
required
for
important
corporate
transactions.
The
joint
enterprise
thus
entered
into
by
the
Filipino
investors
and
the
American
corporation
prospered.
Unfortunately,
with
the
business
successes,
there
came
a
deterioration
of
the
initially
harmonious
relations
between
the
two
groups.
According
to
the
Filipino
group,
a
basic
disagreement
was
due
to
their
desire
to
expand
the
export
operations
of
the
company
to
which
ASI
objected
as
it
apparently
had
other
subsidiaries
of
joint
joint
venture
groups
in
the
countries
where
Philippine
exports
were
contemplated.
On
March
8,
1983,
the
annual
stockholders'
meeting
was
held.
The
ASI
group
nominated
three
persons
namely;
Wolfgang
Aurbach,
John
Griffin
and
David
P.
Whittingham.
The
Philippine
investors
nominated
six,
namely;
Ernesto
Lagdameo,
Sr.,
Raul
A.
Boncan,
Ernesto
R.
Lagdameo,
Jr.,
George
F.
Lee,
and
Baldwin
Young.
Mr.
Eduardo
R,
Ceniza
then
nominated
Mr.
Luciano
E.
Salazar,
who
in
turn
nominated
Mr.
Charles
Chamsay.
The
chairman,
Baldwin
Young
ruled
the
last
two
nominations
out
of
order
on
the
basis
of
section
5
(a)
of
the
Agreement,
the
consistent
practice
of
the
parties
during
the
past
annual
stockholders'
meetings
to
nominate
only
nine
persons
as
nominees
for
the
nine-member
board
of
directors,
and
the
legal
advice
of
Saniwares'
legal
counsel.
There
were
protests
against
the
action
of
the
Chairman
and
heated
arguments
ensued.
An
appeal
was
made
by
the
ASI
representative
to
the
body
of
stockholders
present
that
a
vote
be
taken
on
the
ruling
of
the
Chairman.
A
series
of
events
then
ensued
that
culminated
in
the
eventual
adjournment
of
the
meeting
and
where
the
ASI
Group,
Luciano
E.
Salazar
and
other
stockholders,
allegedly
representing
53
or
54%
of
the
shares
of
Saniwares,
decided
to
continue
the
meeting
at
the
elevator
lobby
of
the
American
Standard
Building.
The
continued
meeting
was
presided
by
Luciano
E.
Salazar,
while
Andres
Gatmaitan
acted
as
Secretary.
On
the
basis
of
the
cumulative
votes
cast
earlier
in
the
meeting,
the
ASI
Group
nominated
its
four
nominees;
Wolfgang
Aurbach,
John
Griffin,
David
Whittingham
and
Charles
Chamsay.
Luciano
E.
Salazar
voted
for
himself,
thus
the
said
five
directors
were
certified
as
elected
directors
by
the
Acting
Secretary,
Andres
Gatmaitan,
with
the
explanation
that
there
was
a
tie
-
THE
AMENDED
DECISION
DOES
NOT
CATEGORICALLY
RULE
THAT
PRIVATE
PETITIONERS
HEREIN
WERE
THE
DULY
ELECTED
DIRECTORS
DURING
THE
8
MARCH
1983
ANNUAL
STOCKHOLDERS
MEETING
OF
SANTWARES.
(P.
24,
Rollo-75951)
-
ISSUES:
The main issue hinges on who were the duly elected directors of Saniwares for the year 1983 during its annual stockholders' meeting held on March 8, 1983. To answer this question the following factors should be determined: (1) the nature of the business established by the parties whether it was a joint venture or a corporation and (2) whether or not the ASI Group may vote their additional 10% equity during elections of Saniwares' board of directors. HELD: In the instant cases, our examination of important provisions of the Agreement as well as the testimonial evidence presented by the Lagdameo and Young Group shows that the parties agreed to establish a joint venture and not a corporation. RATIO/RULING: There are two groups in this case, the Lagdameo group composed of Filipino investors and the American Standard Inc. composed of foreign investors. The ASI Group and petitioner Salazar contend that the actual intention of the parties should be viewed strictly on the Agreement dated August 15, 1962 wherein it stated the parties intention was to form a corporation and not a joint venture. The ASI Group and petitioner Salazar (G.R. Nos. 75975-76) contend that the actual intention of the parties should be viewed strictly on the "Agreement" dated August 15,1962 wherein it is clearly stated that the parties' intention was to form a corporation and not a joint venture. They specifically mention number 16 under Miscellaneous Provisions which states: xxx xxx xxx c) nothing herein contained shall be construed to constitute any of the parties hereto partners or joint venturers in respect of any transaction hereunder. (At P. 66, Rollo-GR No. 75875) They object to the admission of other evidence which tends to show that the parties' agreement was to establish a joint venture presented by the Lagdameo and Young Group on the ground that it contravenes the parol evidence rule under section 7, Rule 130 of the Revised Rules of Court. In the instant cases, our examination of important provisions of the Agreement as well as the testimonial evidence presented by the Lagdameo and Young Group shows that the parties agreed to establish a joint venture and not a corporation. The history of the organization of Saniwares and the unusual arrangements which govern its policy making
to
seek
the
technology
and
marketing
assistance
of
huge
multinational
corporations
of
the
developed
world.
Arrangements
are
formalized
where
a
foreign
group
becomes
a
minority
owner
of
a
firm
in
exchange
for
its
manufacturing
expertise,
use
of
its
brand
names,
and
other
such
assistance.
However,
there
is
always
a
danger
from
such
arrangements.
The
foreign
group
may,
from
the
start,
intend
to
establish
its
own
sole
or
monopolistic
operations
and
merely
uses
the
joint
venture
arrangement
to
gain
a
foothold
or
test
the
Philippine
waters,
so
to
speak.
Or
the
covetousness
may
come
later.
As
the
Philippine
firm
enlarges
its
operations
and
becomes
profitable,
the
foreign
group
undermines
the
local
majority
ownership
and
actively
tries
to
completely
or
predominantly
take
over
the
entire
company.
This
undermining
of
joint
ventures
is
not
consistent
with
fair
dealing
to
say
the
least.
To
the
extent
that
such
subversive
actions
can
be
lawfully
prevented,
the
courts
should
extend
protection
especially
in
industries
where
constitutional
and
legal
requirements
reserve
controlling
ownership
to
Filipino
citizens.
The
Lagdameo
Group
stated
in
their
appellees'
brief
in
the
Court
of
Appeal:
In
fact,
the
Philippine
Corporation
Code
itself
recognizes
the
right
of
stockholders
to
enter
into
agreements
regarding
the
exercise
of
their
voting
rights.
Sec.
100.
Agreements
by
stockholders.-
xxx
xxx
xxx
2.
An
agreement
between
two
or
more
stockholders,
if
in
writing
and
signed
by
the
parties
thereto,
may
provide
that
in
exercising
any
voting
rights,
the
shares
held
by
them
shall
be
voted
as
therein
provided,
or
as
they
may
agree,
or
as
determined
in
accordance
with
a
procedure
agreed
upon
by
them.
Appellants
contend
that
the
above
provision
is
included
in
the
Corporation
Code's
chapter
on
close
corporations
and
Saniwares
cannot
be
a
close
corporation
because
it
has
95
stockholders.
Firstly,
although
Saniwares
had
95
stockholders
at
the
time
of
the
disputed
stockholders
meeting,
these
95
stockholders
are
not
separate
from
each
other
but
are
divisible
into
groups
representing
a
single
Identifiable
interest.
For
example,
ASI,
its
nominees
and
lawyers
count
for
13
of
the
95
stockholders.
The
YoungYutivo
family
count
for
another
13
stockholders,
the
Chamsay
family
for
8
stockholders,
the
Santos
family
for
9
stockholders,
the
Dy
family
for
7
stockholders,
etc.
If
the
members
of
one
family
and/or
business
or
interest
group
are
considered
as
one
(which,
it
is
respectfully
submitted,
they
should
be
for
purposes
of
determining
how
closely
held
Saniwares
is
there
were
as
of
8
March
1983,
practically
only
17
stockholders
of
Saniwares.
(Please
refer
to
discussion
in
pp.
5
to
6
of
appellees'
Rejoinder
Memorandum
dated
11
December
1984
and
Annex
"A"
thereof).
DISPOSITION: WHEREFORE, the petitions in G.R. Nos. 75975-76 and G.R. No. 75875 are DISMISSED and the petition in G.R. No. 75951 is partly GRANTED. The amended decision of the Court of Appeals is MODIFIED in that Messrs. Wolfgang Aurbach John Griffin, David Whittingham Emesto V. Lagdameo, Baldwin Young, Raul A. Boncan, Ernesto R. Lagdameo, Jr., Enrique Lagdameo, and George F. Lee are declared as the duly elected directors of Saniwares at the March 8,1983 annual stockholders' meeting. In all other
respects,
the
questioned
decision
is
AFFIRMED.
Costs
against
the
petitioners
in
G.R.
Nos.
75975-76
and
G.R.
No.
75875.
SO
ORDERED.
VOTE:
3rd
Division.
Fernan,
C.J.,
(Chairman),
Bidin
and
Cortes,
JJ.,
concur.
Feliciano,
J.,
took
no
part.
CONCURRING/DISSENTING
OPINION:
None.
ADDITIONAL
NOTES:
Sorry
mahaba
at
magulo.
Essentially
just
read
the
doctrine
and
the
underlined
portions
sa
ratio.
Yung
doctrine
lang
naman
ang
importante,
the
rest
of
the
discussions
show
the
HOW
and
WHY
of
the
doctrine
na
joint
venture
nga
yung
intent.
LITONJUA
v.
LITONJUA
(Dec
13,
2005)
DOCTRINE:
A
Partnership
must
be
in
a
public
document
if:
1) 2) Immoveable
Property
and
Real
Rights
contributed
to
it.
a. If
it
involves
immoveable
property,
inventory
of
such
is
needed
signed
by
the
partners.
(else
VOID)
It
involves
capital
P
3,000
(must
be
filed
in
the
SEC)
NATURE: Petition for review on certiorari PONENTE: Garcia, J. FACTS: Aurelio (Petitioner) and Eduardo Litonjua are brothers. Aurelio alleges that he had a partnership with his brother Eduardo evidenced by a private memorandum (unsigned) executed by Eduardo which said he was giving 10% of the equity or 1 million pesos, and that they would work together in maintaining the family business. A third person Yang was also alleged to be a member in the joint venture and partnership. Here Aurelio files for an action of Specific Performance against his partners, to render an accounting and give him his share of the profits. ISSUES: W/N there is a Valid Partnership? HELD: No, the contract was void or at most unenforceable. RATIO/RULING: The supposed contract of partnership was evidenced by a private memorandum (unsigned), in which Eduardo expressed his desire to train his brother, and promising him a 10% share or 1 million pesos.
right
of
action
against
such
person
and
not
against
the
other
persons
interested,
and
the
latter,
on
the
other
hand,
shall
have
no
right
of
action
against
the
third
person
who
contracted
with
the
manager
unless
such
manager
formally
transfers
his
right
to
them.
(Art
242
of
the
code
Of
Commerce.)
It
follows,
therefore
that
the
plaintiff
has
no
right
to
demand
from
the
appellants
the
payment
of
the
amount
claimed
in
the
complaint,
as
Lo-Chim-Lim
was
the
only
one
who
contracted
with
him.
NATURE:
Appeal
from
a
judgment
of
the
CFI
PONENTE:
MAPA,
J.:
FACTS:
The
plaintiff
in
this
action
seeks
to
recover
the
sum
of
$437.50,
balance
due
on
a
contract
for
the
sawing
of
lumber
for
the
lumber
yard
of
Lo-Chim-Lim.
The
contract
relating
to
the
said
work
was
entered
into
by
the
said
Lo- Chim-Lim,
acting
as
in
his
own
name
with
the
plaintiff,
and
it
appears
that
the
said
Lo-Chim-Lim
personally
agreed
to
pay
for
the
work
himself.
The
plaintiff,
however,
has
brought
this
action
against
Lo-Chim-Lim
and
his
codefendants
jointly,
alleging
that,
o
at
the
time
the
contract
was
made,
they
were
the
joint
proprietors
and
operators
of
the
said
lumber
yard
engaged
in
the
purchase
and
sale
of
lumber
under
the
name
and
style
of
Lo-Chim-Lim.
o that
the
other
defendants
were
the
partners
of
Lo-Chim-Lim
in
the
said
lumber-yard
business.
The
court
below
dismissed
the
action
as
to
the
defendants
D.
M.
Carman
and
Fulgencio
Tan-Tongco
on
the
ground
that
they
were
not
the
partners
of
Lo-Chim-Lim,
Vicente
Palanca
and
Go-Tauco
only
excepted
to
the
said
judgment,
moved
for
a
new
trial,
and
have
brought
the
case
to
this
court
by
bill
of
exceptions.
The
evidence
of
record
shows,
according
to
the
judgment
of
the
court,
"That
Lo-Chim-Lim
had
a
certain
lumber
yard
in
Calle
Lemery
of
the
city
of
Manila,
and
that
he
was
the
manager
of
the
same,
having
ordered
the
plaintiff
to
do
some
work
for
him
at
his
sawmill
in
the
city
of
Manila;
and
that
Vicente
Palanca
was
his
partner,
and
had
an
interest
in
the
said
business
as
well
as
in
the
profits
and
losses
thereof
.
.
.,"
and
that
Go-Tuaco
received
part
of
the
earnings
of
the
lumber
yard
in
the
management
of
which
he
was
interested.
CFI:
"Lo-Chim-Lim,
Vicente
Palanca,
Go-Tuaco
had
a
lumber
yard
in
Calle
Lemmery
of
the
city
of
Manila
in
the
year
1904,
and
participated
in
the
profits
and
losses
of
business
and
that
Lo-Chim-Lim
was
managing
partner
of
the
said
lumber
yard."
In
other
words,
coparticipants
with
the
said
Lo- Chim-Lim
in
the
business
in
question.
ISSUES:
What
is
the
real
legal
nature
of
the
participation
which
the
appellants
had
in
Lo-Chim-Lim's
lumber
yard
and
consequently
their
liability
toward
the
plaintiff?
HELD:
The
partnership
is
a
partnership
of
cuentas
en
participacion.
RATIO/RULING: It seems that the alleged partnership between Lo-Chim-Lim and the appellants was formed by verbal agreement only. At least there is no evidence tending to show that the said agreement was reduced to writing, or that it was ever recorded in a public instrument. Moreover, that partnership had no corporate name. The plaintiff himself alleges in his complaint that the partnership was engaged in business under the name and style of Lo-Chim-Lim only, which according to the evidence was the name of one of the defendants. On the other hand, it does not appear that there was any mutual agreement, between the parties, and if there were any, it has not been shown what the agreement was. As far as the evidence shows it seems that the business was conducted by Lo-Chim-Lim in his own name, although he gave to the appellants a share was has been shown with certainty. o The contracts made with the plaintiff were made by Lo-Chim-Lim individually in his own name, and there is no evidence that the partnership over contracted in any other form. Under such circumstances we find nothing upon which to consider this partnership other than as a partnership of cuentas en participacion. It may be that, as a matter of fact, it is something different, but a simple business conducted by Lo-Chim-Lim exclusively, in his own name, the names of other persons interested in the profits and losses of the business nowhere appearing. A partnership constituted in such a manner, the existence of which was only known to those who had an interest in the same, being no mutual agreements between the partners and without a corporate name indicating to the public in some way that there were other people besides the one who ostensibly managed and conducted the business, is exactly the accidental partnership of cuentas en participacion defined in article 239 of the Code of Commerce. DISPOSITION: The judgment appealed from this hereby reversed and the appellants are absolved of the complaint without express provisions as to the costs of both instances. VOTE: EN BANC; Arellano, C.J., Torres, Johnson, Carson, Willard and Tracey, JJ., concur SEVILLA v. CA
(April
16,
1988)
DOCTRINE:
A
joint
venture,
including
a
partnership,
presupposes
generally
a
of
standing
between
the
joint
co-venturers
or
partners,
in
which
each
party
has
an
equal
proprietary
interest
in
the
capital
or
property
contributed
and
where
each
party
exercises
equal
rights
in
the
conduct
of
the
business.
NATURE:
Appeal
by
certiorari
PONENTE:
Sarmiento,
J.
FACTS:
1. On
the
strength
of
a
contract
entered
into
by
and
between
Mrs.
Segundina
Noguera
and
the
Tourist
World
Service,
Inc.,
represented
by
Mr.
Eliseo
Canilao,
the
Tourist
World
Service,
Inc.
leased
the
premises
belonging
to
Noguera
at
Mabini
St.,
Manila
for
the
formers
use
as
a
branch
office.
When
the
branch
office
was
opened,
the
same
was
run
by
the
herein
appellant
Lina
Sevilla.
The
Tourist
World
Service,
Inc.
appears
to
have
been
informed
that
Lina
Sevilla
was
connected
with
a
rival
firm,
the
Philippine
Travel
Bureau,
and,
since
the
branch
office
was
anyhow
losing,
the
Tourist
World
Service
considered
closing
down
its
office.
This
was
firmed
up
by
two
resolutions
of
the
board
of
directors
of
Tourist
World
Service,
Inc.
the
first
abolishing
the
office
of
the
manager
and
vice-president
of
the
Tourist
World
Service,
Inc.,
Ermita
Branch,
and
the
second,
authorizing
the
corporate
secretary
to
receive
the
properties
of
the
Tourist
World
Service
then
located
at
the
said
branch
office.
To
comply
with
the
mandate
of
the
Tourist
World
Service,
the
corporate
secretary
Gabino
Canilao
went
over
to
the
branch
office,
and,
finding
the
premises
locked,
and,
being
unable
to
contact
Lina
Sevilla,
he
padlocked
the
premises
on
June
4,
1962
to
protect
the
interests
of
the
Tourist
World
Service.
When
neither
the
appellant
Lina
Sevilla
nor
any
of
her
employees
could
enter
the
locked
premises,
a
complaint
was
filed
by
the
herein
appellants
against
the
appellees
with
a
prayer
for
the
issuance
of
mandatory
preliminary
injunction.
Both
appellees
answered
with
counterclaims.
For
apparent
lack
of
interest
of
the
parties
therein,
the
trial
court
ordered
the
dismissal
of
the
case
without
prejudice.
The
appellee
Segundina
Noguera
sought
reconsideration
of
the
order
dismissing
her
counterclaim
which
the
court
a
quo,
in
an
order
dated
June
8,
1963,
granted
permitting
her
to
present
evidence
in
support
of
her
counterclaim.
Appellant
Lina
Sevilla
refiled
her
case
against
the
herein
appellees
and
after
the
issues
were
joined,
the
reinstated
counterclaim
of
Segundina
Noguera
and
the
new
complaint
of
appellant
Lina
Sevilla
were
jointly
heard
following
which
the
court
a
quo
ordered
both
cases
dismiss
for
lack
of
merit
2.
2.
3.
4.
3.
5.
4.
5.
appellant
Lina
O.
Sevilla
payable
to
Tourist
World
Service,
Inc.
by
any
airline
for
any
fare
brought
in
on
the
effort
of
Mrs.
Lina
Sevilla.
Under
these
circumstances,
it
cannot
be
said
that
Sevilla
was
under
the
control
of
Tourist
World
Service,
Inc.
"as
to
the
means
used."
Sevilla
in
pursuing
the
business,
obviously
relied
on
her
own
gifts
and
capabilities.
6. It
is
further
admitted
that
Sevilla
was
not
in
the
company's
payroll.
For
her
efforts,
she
retained
4%
in
commissions
from
airline
bookings,
the
remaining
3%
going
to
Tourist
World.
Unlike
an
employee
then,
who
earns
a
fixed
salary
usually,
she
earned
compensation
in
fluctuating
amounts
depending
on
her
booking
successes.
7. The
fact
that
Sevilla
had
been
designated
'branch
manager"
does
not
make
her
Tourist
World's
employee.
As
we
said,
employment
is
determined
by
the
right-of-control
test
and
certain
economic
parameters.
8. In
rejecting
Tourist
World
Service,
Inc.'s
arguments
however,
we
are
not,
as
a
consequence,
accepting
Lina
Sevilla's
own,
that
is,
that
the
parties
had
embarked
on
a
joint
venture
or
otherwise,
a
partnership.
And
apparently,
Sevilla
herself
did
not
recognize
the
existence
of
such
a
relation.
In
her
letter
of
November
28,
1961,
she
expressly
'concedes
your
[Tourist
World
Service,
Inc.'s]
right
to
stop
the
operation
of
your
branch
office
in
effect,
accepting
Tourist
World
Service,
Inc.'s
control
over
the
manner
in
which
the
business
was
run.
A
joint
venture,
including
a
partnership,
presupposes
generally
a
of
standing
between
the
joint
co- venturers
or
partners,
in
which
each
party
has
an
equal
proprietary
interest
in
the
capital
or
property
contributed
and
where
each
party
exercises
equal
rights
in
the
conduct
of
the
business.
9. Furthermore,
the
parties
did
not
hold
themselves
out
as
partners,
and
the
building
itself
was
embellished
with
the
electric
sign
"Tourist
World
Service,
Inc.
in
lieu
of
a
distinct
partnership
name.
10. It
is
the
Court's
considered
opinion,
when
the
petitioner,
Lina
Sevilla,
agreed
to
(wo)man
the
private
respondent,
Tourist
World
Service,
Inc.'s
Ermita
office,
she
must
have
done
so
pursuant
to
a
contract
of
agency.
It
is
the
essence
of
this
contract
that
the
agent
renders
services
"in
representation
or
on
behalf
of
another.
In
the
case
at
bar,
Sevilla
solicited
airline
fares,
but
she
did
so
for
and
on
behalf
of
her
principal,
Tourist
World
Service,
Inc.
As
compensation,
she
received
4%
of
the
proceeds
in
the
concept
of
commissions.
And
as
we
said,
Sevilla
herself
based
on
her
letter
of
November
28,
1961,
pre-assumed
her
principal's
authority
as
owner
of
the
business
undertaking.
We
are
convinced,
considering
the
circumstances
and
from
the
respondent
Court's
recital
of
facts,
that
the
ties
had
contemplated
a
principal
agent
relationship,
rather
than
a
joint
managament
or
a
partnership.
11. But
unlike
simple
grants
of
a
power
of
attorney,
the
agency
that
we
hereby
declare
to
be
compatible
with
the
intent
of
the
parties,
cannot
be
revoked
at
will.
The
reason
is
that
it
is
one
coupled
with
an
interest,
the
agency
having
been
created
for
mutual
interest,
of
the
agent
and
the
principal.
It
appears
that
Lina
Sevilla
is
a
bona
fide
travel
agent
herself,
and
as
such,
she
had
acquired
an
interest
in
the
business
entrusted
to
her.
Moreover,
she
had
Petitioner
denied
the
allegations
of
the
CIR
and
maintained
that
its
advances
of
money
and
property
to
Baguio
Gold
were
in
a
nature
of
a
loan
as
evidenced
by
the
compromise
agreement.
ISSUE:
WON
the
parties
entered
into
a
contract
of
agency
coupled
with
an
interest
which
is
not
revocable
at
will
HELD:
No.
An
examination
of
the
Power
of
Attorney
reveals
that
a
partnership
or
joint
venture
was
indeed
intended
by
the
parties.
In
an
agency
coupled
with
interest,
it
is
the
agency
that
cannot
be
revoked
or
withdrawn
by
the
principal
due
to
an
interest
of
a
third
party
that
depends
upon
it,
or
the
mutual
interest
of
both
principal
and
agent.
In
this
case,
the
non-revocation
or
non-withdrawal
under
paragraph
5(c)
applies
to
the
advances
made
by
petitioner
who
is
supposedly
the
agent
and
not
the
principal
under
the
contract.
Thus,
it
cannot
be
inferred
from
the
stipulation
that
the
parties
relation
under
the
agreement
is
one
of
agency
coupled
with
an
interest
and
not
a
partnership.
Neither
can
paragraph
16
of
the
agreement
be
taken
as
an
indication
that
the
relationship
of
the
parties
was
one
of
agency
and
not
a
partnership.
Although
the
said
provision
states
that
this
Agency
shall
be
irrevocable
while
any
obligation
of
the
PRINCIPAL
in
favor
of
the
MANAGERS
is
outstanding,
inclusive
of
the
MANAGERS
account,
it
does
not
necessarily
follow
that
the
parties
entered
into
an
agency
contract
coupled
with
an
interest
that
cannot
be
withdrawn
by
Baguio
Gold.
The
main
object
of
the
Power
of
Attorney
was
not
to
confer
a
power
in
favor
of
petitioner
to
contract
with
third
persons
on
behalf
of
Baguio
Gold
but
to
create
a
business
relationship
between
petitioner
and
Baguio
Gold,
in
which
the
former
was
to
manage
and
operate
the
latters
mine
through
the
parties
mutual
contribution
of
material
resources
and
industry.
The
essence
of
an
agency,
even
one
that
is
coupled
with
interest,
is
the
agents
ability
to
represent
his
principal
and
bring
about
business
relations
between
the
latter
and
third
persons.
The
strongest
indication
that
petitioner
was
a
partner
in
the
Sto.
Nino
Mine
is
the
fact
that
it
would
receive
50%
of
the
net
profits
as
compensation
under
paragraph
12
of
the
agreement.
The
entirety
of
the
parties
contractual
stipulations
simply
leads
to
no
other
conclusion
than
that
petitioners
compensation
is
actually
its
share
in
the
income
of
the
joint
venture.
Article
1769
(4)
of
the
Civil
Code
explicitly
provides
that
the
receipt
by
a
person
of
a
share
in
the
profits
of
a
business
is
prima
facie
evidence
that
he
is
a
partner
in
the
business.
While
a
corporation,
like
the
petitioner,
cannot
generally
enter
into
a
contract
of
partnership
unless
authorized
by
law
or
its
charter,
it
has
been
o
II. KINDS OF PARTNERSHIP A. UNIVERSAL B. PARTICULAR C. GENERAL D. LIMITED E. AT WILL F. FOR A TERM OR UNDERTAKING G. COMMERCIAL H. PROFESSIONAL I. BY ESTOPPEL APPARENT ORTEGA v. CA (err walang nakaassign ditto?) III. KINDS OF PARTNER A. INDUSTRIAL B. CAPITALIST C. MANAGING D. BY ESTOPPEL