Santos vs. Sps.

Reyes

FACTS: In June 1986, Fernando Santos (70%), Nieves Reyes (15%), and
Melton Zabat (15%) orally instituted a partnership with them as partners.
Their venture is to set up a lending business where it was agreed that Santos
shall be financier and that Nieves and Zabat shall contribute their
industry. **The percentages after their names denote their share in the profit.
Later, Nieves introduced Cesar Gragera to Santos. Gragera was the chairman
of a corporation. It was agreed that the partnership shall provide loans to the
employees of Grageras corporation and Gragera shall earn commission from
loan payments.
In August 1986, the three partners put into writing their verbal agreement to
form the partnership. As earlier agreed, Santos shall finance and Nieves shall
do the daily cash flow more particularly from their dealings with Gragera,
Zabat on the other hand shall be a loan investigator. But then later, Nieves
and Santos found out that Zabat was engaged in another lending business
which competes with their partnership hence Zabat was expelled.
The two continued with the partnership and they took with them Nieves
husband, Arsenio, who became their loan investigator.
Later, Santos accused the spouses of not remitting Grageras commissions to
the latter. He sued them for collection of sum of money. The spouses
countered that Santos merely filed the complaint because he did not want
the spouses to get their shares in the profits. Santos argued that the spouses,
insofar as the dealing with Gragera is concerned, are merely his employees.
Santos alleged that there is a distinct partnership between him and Gragera
which is separate from the partnership formed between him, Zabat and
Nieves.
The trial court as well as the Court of Appeals ruled against Santos and
ordered the latter to pay the shares of the spouses.
ISSUE: Whether or not the spouses are partners.

HELD: Yes. Though it is true that the original partnership between Zabat,
Santos and Nieves was terminated when Zabat was expelled, the said
partnership was however considered continued when Nieves and Santos
continued engaging as usual in the lending business even getting Nieves
husband, who resigned from the Asian Development Bank, to be their loan
investigator who, in effect, substituted Zabat.
There is no separate partnership between Santos and Gragera. The latter
being merely a commission agent of the partnership. This is even though the
partnership was formalized shortly after Gragera met with Santos (Note that
Nieves was even the one who introduced Gragera to Santos exactly for the
purpose of setting up a lending agreement between the corporation and the
partnership).
HOWEVER, the order of the Court of Appeals directing Santos to give the
spouses their shares in the profit is premature. The accounting made by the
trial court is based on the total income of the partnership. Such total
income calculated by the trial court did not consider the expenses sustained
by the partnership. All expenses incurred by the money-lending enterprise of
the parties must first be deducted from the total income in order to arrive
at the net profit of the partnership. The share of each one of them should
be based on this net profit and not from the gross income or total
income.

Heirs of Tan Eng Kee vs. CA

FACTS: Benguet Lumber has been around even before World War II but
during the war, its stocks were confiscated by the Japanese. After the war,
the brothers Tan Eng Lay and Tan Eng Kee pooled their resources in order to
revive the business. In 1981, Tan Eng Lay caused the conversion of Benguet
Lumber into a corporation called Benguet Lumber and Hardware Company,
with him and his family as the incorporators. In 1983, Tan Eng Kee died.
Thereafter, the heirs of Tan Eng Kee demanded for an accounting and the
liquidation of the partnership.
Tan Eng Lay denied that there was a partnership between him and his
brother. He said that Tan Eng Kee was merely an employee of Benguet

Lumber. He showed evidence consisting of Tan Eng Kees payroll; his SSS as
an employee and Benguet Lumber being the employee. As a result of the
presentation of said evidence, the heirs of Tan Eng Kee filed a criminal case
against Tan Eng Lay for allegedly fabricating those evidence. Said criminal
case was however dismissed for lack of evidence.
ISSUE: Whether or not Tan Eng Kee is a partner.
HELD: No. There was no certificate of partnership between the brothers. The
heirs were not able to show what was the agreement between the brothers as
to the sharing of profits. All they presented were circumstantial evidence
which in no way proved partnership.
It is obvious that there was no partnership whatsoever. Except for a firm
name, there was no firm account, no firm letterheads submitted as evidence,
no certificate of partnership, no agreement as to profits and losses, and no
time fixed for the duration of the partnership. There was even no attempt to
submit an accounting corresponding to the period after the war until Kees
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.
In fact, Tan Eng Lay was able to show evidence that Benguet Lumber is a sole
proprietorship. He registered the same as such in 1954; that Kee was just an
employee based on the latters payroll and SSS coverage, and other records
indicating Tan Eng Lay as the proprietor.
Also, the business definitely amounted to more P3,000.00 hence if there was
a partnership, it should have been made in a public instrument.
But the business was started after the war (1945) prior to the publication of
the New Civil Code in 1950?
Even so, nothing prevented the parties from complying with this requirement.
Also, the Supreme Court emphasized that for 40 years, 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. Even if it can be speculated that a scenario
wherein if excellent relations exist among the partners at the start of the

business and all the partners are more interested in seeing the firm grow
rather than get immediate returns, a deferment of sharing in the profits is
perfectly plausible. But in the situation in the case at bar, the deferment, if
any, had gone on too long to be plausible. A person is presumed to take
ordinary care of his concerns. A demand for periodic accounting is evidence
of a partnership which Kee never did.
The Supreme Court also noted:
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 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;
(c) 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.
Where circumstances taken singly may be inadequate to prove the intent to
form a partnership, nevertheless, the collective effect of these circumstances

may be such as to support a finding of the existence of the parties intent.

(Evangelista vs. Collector of Internal Revenue)
Negado vs. Makabenta
Facts:
Plaintiffs filed a suit against the defendant for the recovery of possession and
management of
Liberty Theater located in Leyte and for an accounting of all money and
property pertaining
thereto.
The plaintiffs allege that the theater is owned and operated by a partnership
known as Hemarogui
Company composed of the plaintiffs and defendant. Conversely, the
defendant alleges that he is
the sole and exclusive owner of the theater while the plaintiffs are merely
creditor.
The trial court held that no partnership exists and the oral and material
evidence (books,
accounts, and papers) presented by the plaintiffs are incompetent to
establish existence of the
partnership.
Issue:
Whether or not a partnership exists among Negado, Rocha, Guirindola and
Makabenta
Decision:
There exists a partnership. In determining whether or not a particular
transaction constitutes
partnership, the intention as disclosed by the entire transaction, and as
gathered from the facts
and from the language employed by the parties as well as their conduct. A
partnership may be
created without any definite intention to create it, the intention of the parties
being inferred from
their conduct and dealings with each other. For the purpose of showing the
existence of a
partnership, books, papers, accounts and similar writings are admissible as
evidence provided
that the party against whom they are offered is shown to have authorized or
ratified them.

Yulo vs. Yang Chiaco Seng

FACTS: Yang Chiao Seng proposed to form a partnership with Rosario Yulo to
run and operate a theatre on the premises occupied by Cine Oro, Plaza Sta.
Cruz, Manila, the principal conditions of the offer being (1) Yang guarantees
Yulo a monthly participation of P3,000 (2) partnership shall be for a period of
2 years and 6 months with the condition that if the land is expropriated,
rendered impracticable for business, owner constructs a permanent building,
then Yulos right to lease and partnership even if period agreed upon has not
yet expired; (3) Yulo is authorized to personally conduct business in the lobby
of the building; and (4) after Dec 31, 1947, all improvements placed by
partnership shall belong to Yulo but if partnership is terminated before lapse
of 1 and years, Yang shall have right to remove improvements. Parties
established, Yang and Co. Ltd., to exist from July 1,1945 Dec 31, 1947.In
June 1946, they executed a supplementary agreement extending the
partnership for 3 years beginning Jan 1, 1948 to Dec 31, 1950. The land on
which the theater was constructed was leased by Yulo from owners, Emilia
Carrion and Maria Carrion Santa Marina for an indefinite period but that after
1 year, such lease may be cancelled by either party upon 90-day notice. In
Apr 1949, the owners notified Yulo of their desire to cancel the lease contract
come July. Yulo and husband brought a civil action to declare the lease for a
indefinite period. Owners brought their own civil action for ejectment upon
Yulo and Yang.
CFI: Two cases were heard jointly; Complaint of Yulo and Yang dismissed
declaring contract of lease terminated.
CA: Affirmed the judgment. In 1950, Yulo demanded from Yang her share in
the profits of the business. Yang answered saying he had to suspend payment
because of pending ejectment suit. Yulo filed present action in 1954, alleging
the existence of a partnership between them and that Yang has refused to
pay her shares.
Defendants Position: The real agreement between plaintiff and defendant
was one of lease and not of partnership; that the partnership was adopted as
a subterfuge to get around the prohibition contained in the contract of lease
between the owners and the plaintiff against the sublease of the property.
Trial Court: Dismissal. It is not true that a partnership was created between
them because defendant has not actually contributed the sum mentioned in
the Articles of Partnership or any other amount. The agreement is a lease
because plaintiff didnt share either in the profits or in the losses of the

business as required by Art 1769 (CC) and because plaintiff was granted a
guaranteed participation in the profits belies the supposed existence of a
partnership.
Issue: Was the agreement a contract a lease or a partnership?
Ruling: Dismissal. The agreement was a sublease nota partnership. The
following are the requisites of partnership: (1) two or more persons who bind
themselves to contribute money, property or industry to a common fund; (2)
the intention on the part of the partners to divide the profits among
themselves (Article 1761, CC)Plaintiff did not furnish the supposed P20,000
capital nor did she furnish any help or intervention in the management of the
theatre. Neither has she demanded from defendant any accounting of the
expenses and earnings of the business. She was absolutely silent with
respect to any of the acts that a partner should have done; all she did was to
receive her share of P3,000 a month which cannot be interpreted in any
manner than a payment for the use of premises which she had leased from
the owners.