Heirs of Tan Eng Kee vs.
Court of Appeals money, property, or industry to a common fund, and (2) they
G.R. No. 126881, Oct. 3, 2000
De Leon, Jr., J.:
FACTS:
Petitioners are the common-law spouse and children of the
deceased of Tan Eng Kee. Tan Eng Kee died on Sept. 13,
1984. Following his demise, petitioners filed a complaint for
accounting, liquidation, and winding up against Benguet
Lumber Company, represented by its president, Tan Eng Lay,
brother of the deceased. Petitioners allege that Tan Eng Kee
and Tan Eng Lay combined their resources and industry
together and entered into a partnership engaged in the
business of selling lumber, hardware, and construction
supplies. They named their business Benguet Lumber.
Petitioners also allege that in 1981, Tan Eng Lay caused the
conversion of the partnership into a corporation called
Benguet Lumber Company. The incorporation was
purportedly a ruse to deprive Tan Eng Lee and his heirs their
rightful share in the profits of the business. The Regional Trial
Court of Baguio City, Branch 7 rendered a decision in favour of
petitioners declaring that Tan Eng Kee and Tan Eng Lay
entered into a joint venture akin to a particular partnership. On
appeal, respondent Court of Appeals reversed the decision of
the RTC.
ISSUE:
Whether or not Tan Eng Kee and Tan Eng Lay entered into a
contract of partnership?
RULING:
No. In order to constitute a partnership, it must be established
that (1) two or more persons bound themselves to contribute
intend to divide the profits among themselves. The essence of
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. It is indeed odd, if not unnatural, that
despite forty years the partnership was allegedly in existence,
Tan Eng Kee never asked for an accounting. A demand for
periodic accounting evinces partnership.
Also, petitioners contention that the deceased, during his
lifetime, received his share in the profits of the business, as
proof of the existence of the partnership, is untenable. What
the deceased received was his wages as Benguet Lumber
Companys employee. Art. 1769, par. 4 of the New Civil Code
states that receipt of wages shall not draw an inference that a
person is a partner in a business.
Santos vs. Spouses Reyes
G.R. No. 135813, Oct. 25, 2001
Panganiban, J.:
FACTS:
Sometime in June 1986, Santos and Nieves were introduced
to each other by one Meliton Zabat (Zabat) regarding a lending
business venture proposed by Nieves. It was verbally agreed
that Santos would act as financier while Nieves and Zabat
would take charge of solicitation of members and collection of
loan payments. The venture was launched on June 13, 1986,
with the understanding that Santos would receive 70% of the
profits while Nieves and Zabat would earn 15% each.
In July 1986, Nieves introduced Cesar Gragera (Gragera) to
Santos. Gragera, as chairman of the Monte Maria
Development Corporation (Monte Maria), sought short-term
loans for members of the corporation. Santos and Gragera
1
executed an agreement providing funds for Monte Maria's
members. Under the agreement, Monte Maria, represented by
Gragera, was entitled to P1.31 commission per thousand paid
daily to Santos. Nieves kept the books as representative of
Santos while Arsenio, husband of Nieves, acted as credit
investigator.
On August 6, 1986, Santos, Nieves and Zabat executed the
Article of Agreement which formalized their earlier verbal
arrangement. However, Santos and Nieves later discovered
that their partner Zabat engaged in the same lending business
in competition with their partnership. Zabat was thereby
expelled from the partnership. The operations with Monte
Maria continued.
On June 5, 1987, Santos filed a complaint for recovery of sum
of money and damages. Santos charged respondents,
allegedly in their capacities as employees of Santos, with
having misappropriated funds intended for Gragera. Santos
asserted that he found that of the total amount of
P4,623,201.90 entrusted to respondents, only P3,068,133.20
was remitted to Gragera, thereby leaving the balance of
P1,555,065.70 unaccounted for.
Respondents asserted that they were partners and not mere
employees of Santos. The complaint, they alleged, was filed to
preempt and prevent them from claiming their rightful share to
the profits of the partnership. Arsenio alleged that he was
enticed by Santos to take the place of Zabat after Santos
learned of Zabat's activities. Arsenio resigned from his job at
the Asian Development Bank to join the partnership.
Santos claimed that after he discovered Zabat's activities, he
ceased infusing funds, thereby causing the extinguishment of
the partnership. The agreement with Gragera was a distinct
partnership from that of Nieves and Zabat. Santos asserted
that respondents were hired as salaried employees with
respect to the partnership between him and Gragera.
The trial court held that the respondents were partners, not
mere employees. It further held that Gragera was only a
commission agent of Santos, and not his partner. Lastly, it
granted respondents counterclaim in the partnership and for
damages.
The Court of Appeals upheld the decision of the trial court;
however, it initially dismissed the counterclaim of the
respondents. Upon the latters Motion for Reconsideration, CA
reinstated the decision of the trial court in toto.
ISSUE:
Whether or not the parties relationship was one of
partnership?
RULING:
Yes. Respondents were industrial partners of Santos. They
provided services without which the partnership would not
have had the wherewithal to carry on the purpose for which it
was organized and as such were considered industrial
partners.
The Articles of Agreement stipulated that the signatories shall
share the profits of the business in a 70-15-15 manner, with
petitioner getting the lion's share. This stipulation clearly
proved the establishment of a partnership.
The partnership was technically dissolved after the expulsion
of Zabat, but the fact that Santos and Nieves continued the
business of partnership and even invited Arsenio to participate
2
as partner showed that there was no intention to dissolve the
first.
In addition, Gragera and Santos were not partners. The
money-lending activities undertaken with Monte Maria was
done in pursuit of the business for which the partnership
between Santos, Nieves and Zabat (later Arsenio) was
organized.
(Not related to Partnership, but just in case)
As regards the alleged misappropriation, the SC held that the
Santos utterly failed to demonstrate why a review of the factual
findings of the lower courts was warranted. The lower courts
found it unbelievable that Nieves had embezzled
P1,555,068.70 from the partnership. She did not remit
P1,214,296.10 to Gragera, because he had deducted his
commissions before remitting his collections.
Litonjua Jr. vs. Litonjua Sr.
G.R. No. 166299-300, Dec. 13, 2005
Garcia, J.:
Aurelio and Eduardo are brothers. In 1973, Aurelio alleged that
Eduardo entered into a contract of partnership with him.
Aurelio showed as evidence a letter sent to him by Eduardo
that the latter is allowing Aurelio to manage their family
business (if Eduardos away) and in exchange thereof he will
be giving Aurelio P1 million or 10% equity, whichever is higher.
A memorandum was subsequently made for the said
partnership agreement. The memorandum this time stated that
in exchange of Aurelio, who just got married, retaining his
share in the family business (movie theatres, shipping and
land development) and some other immovable properties, he
will be givenP1 Million or 10% equity in all these businesses
and those to be subsequently acquired by them whichever is
greater. In 1992 however, the relationship between the
brothers went sour. And so Aurelio demanded an accounting
and the liquidation of his share in the partnership. Eduardo did
not heed and so Aurelio sued Eduardo.
ISSUE: Whether or not there exists a partnership.
RULING: No. The partnership is void and legally nonexistent.
The documentary evidence presented by Aurelio, i.e. the letter
from Eduardo and the Memorandum, did not prove
partnership. The 1973 letter from Eduardo on its face, contains
typewritten entries, personal in tone, but is unsigned and
undated. As an unsigned document, there can be no quibbling
that said letter does not meet the public instrumentation
requirements exacted under Article 1771 (how partnership is
constituted) of the Civil Code. Moreover, being unsigned and
doubtless referring to a partnership involving more than
P3,000.00 in money or property, said letter cannot be
presented for notarization, let alone registered with the
Securities and Exchange Commission (SEC), as called for
under the Article 1772 (capitalization of a partnership) of the
Code. And inasmuch as the inventory requirement under the
succeeding Article 1773 goes into the matter of validity when
immovable property is contributed to the partnership, the next
logical point of inquiry turns on the nature of Aurelios
contribution, if any, to the supposed partnership. The
Memorandum is also not a proof of the partnership for the
same is not a public instrument and again, no inventory was
made of the immovable property and no inventory was
attached to the Memorandum. Article 1773 of the Civil Code
requires that if immovable property is contributed to the
partnership an inventory shall be had and attached to the
contract.
3
Angeles vs. Secretary of Justice
G.R. No. 142612, July 29, 2005
Carpio, J.:
DOCTRINE:
The purpose of registration of the contract of partnership
with the SEC is to give notice to third parties. Failure to
register the contract of partnership does not affect the
liability of the partnership and of the partners to third
persons, nor does it affect the partnerships juridical
personality. A partnership may exist even if the partners
do not use the words partner or partnership. the filing of a criminal information for estafa, but after Mercado
FACTS:
Angeles spouses filed a criminal complaint for estafa against
Mercado, their brother-in-law. Petitioners claimed that
Mercado convinced them to enter into a contract of
antichresis, to last for 5 years, covering 8 parcels of land
planted with fruit-bearing lanzones trees in Nagcarlan, Laguna
and owned by Juan Sanzo. The parties agreed that Mercado
would administer the lands and complete the necessary.
After 3 years, the Angeles spouses asked for an accounting
from Mercado, and they claim that only after this demand for
an accounting did they 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. 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
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. 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 .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. 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. There is no estafa where money is
delivered by a partner to his co-partner on the latters
4
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.
ISSUES:
1. W/N the Sec. of Justice committed grave abuse of
discretion in dismissing the appeal - No
2. W/N a partnership existed between Mercado and the
Angeles spouses - Yes
3. W/N there was misappropriation by Mercado No
RULING:
1. Angeles spouses fail to convince that the Secretary of
Justice committed grave abuse of discretion when he
dismissed their appeal. Moreover, they committed a
procedural error when they failed to file a motion for
reconsideration of the Sec. of Justices resolution, which is
already enough reason to dismiss the case.
2. Angeles spouses allege that they had no partnership with
Mercado, relying on Arts. 1771 to 1773 of the Civil Code. The
Angeles spouses position that there is no partnership because
of the lack of a public instrument indicating the same and a
lack of registration with the SEC holds no water. The Angeles
spouses contributed money to the partnership and not
immovable property o Mere failure to register the contract of
partnership with the SEC does not invalidate a contract that
has the essential requisites of a partnership. The purpose of
registration is to give notice to third parties. Failure to
register does not affect the liability of the partnership and
of the partners to third persons, nor does it affect the
partnerships juridical personality. The Angeles spouses
admit to facts that prove the existence of a partnership:
contract showing a sosyo industrial or industrial partnership,
contribution of money & industry to a common fund and
division of profits between the Angeles spouses and Mercado.
3. Mercado satisfactorily explained that the Angeles spouses
do not want to be revealed as the financiers, thus the
document which was in the name of Mercado and his spouse
fail to convince that there was deceit or false representation
that induced the Angeles spouses to part with their money.
Even the RTC of Sta. Cruz, Laguna, which handled the civil
case filed by the Angeles spouses against Mercado and Leo
Cerayban stated that it was the practice to have the contracts
secured in Mercados name as the Angeles spouses fear
being kidnapped by the NPA or being questioned by the BIR
as Oscar Angeles was working with the government.
Accounting of the proceeds is not a proper subject for the
present case.
DISPOSITION:
Petition for certiorari dismissed. Decision of Sec. of Justice
affirmed.
Sunga-Chan vs. Sunga
G.R. No. 143440, Aug. 15, 2001
Gonzaga-Reyes, J.:
FACTS:
Lamberto Chua alleged that in 1977, he verbally entered into a
partnership with Jacinto in the distribution of Shellane
Liquefied Petroleum Gas (LPG) in Manila. For business
convenience, Chua and Jacinto Sunga allegedly agreed to
register the business name of their partnership, SHELLITE
GAS APPLIANCE CENTER (Shellite), under the name of
Jacinto as a sole proprietorship. Chua allegedly delivered his
5
initial capital contribution of P100,000.00 to Jacinto while the
latter in turn produced P100,000.00 as his counterpart
contribution, with the intention that the profits would be equally
divided between them. The partnership allegedly had Jacinto
as manager, assisted by Josephine Sy, a sister of the Chuas
wife, Erlinda Sy. As compensation, Jacinto would receive a
manager's fee or remuneration of 10% of the gross profit and
Josephine would receive 10% of the net profits, in addition to
her wages and other remuneration from the business.
Allegedly, Shellites operation (opened for business on 1977)
was profitable due to their volume of orders and deliveries of
filled Shellane tanks supplied by Shell. While Jacinto furnished
Chua with the merchandise inventories, balance sheets and
net worth of Shellite from 1977 to 1989, Chua however
suspected that the amount indicated in these documents were
understated and undervalued by Jacinto and Josephine for
their own selfish reasons and for tax avoidance.
Upon Jacinto's death in the later part of 1989, his surviving
wife, Cecilia Sunga-Chan and his daughter, Lilibeth, took over
the operations and management of Shellite without Chuas
consent. Despite Chuas repeated demands upon petitioners
for accounting, inventory, winding up and restitution of his net
shares in the partnership, petitioners failed to comply. Lilibeth
allegedly continued the operations of Shellite, converting to
her own use and advantage its properties.
In 1992, Chua filed a complaint against for "Winding Up of
Partnership Affairs, Accounting, Appraisal and Recovery of
Shares and Damages with Writ of Preliminary Attachment"
with the RTC of Zamboanga del Norte. The RTC ruled in favor
of Chua directing petitioners to render an accounting of the
assets and profits of Shellite. CA affirmed.
Petitioners maintain that said partnership had an initial capital
of P200,000 and should have been registered with the SEC
since registration is mandated by the Art. 1772 of the Civil
Code.
ISSUES:
1. Is there a partnership? YES
2. Does the non-registration of the contract of partnership
invalidate the contract of partnership? NO
RULING:
1. 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. Hence,
based on the intention of the parties, a verbal contract of
partnership may arise. The essential points that must be
proven to show that a partnership was agreed upon are (1)
mutual contribution to a common stock, and (2) a joint interest
in the profits. In view of the absence of a written contract of
partnership between Chua and Jacinto, Chua resorted to the
introduction of documentary and testimonial evidence to prove
said partnership.
2. True, Article 1772 of the Civil Code requires that
partnerships with a capital of P3,000.00 or more must register
with the SEC, however, this registration requirement is not
mandatory. Article 1768 of the Civil Code explicitly provides
that the partnership retains its juridical personality even if it
fails to register. The failure to register the contract of
partnership does not invalidate the same as among the
partners, so long as the contract has the essential requisites.
In the case at bar, non-compliance with this directory provision
of the law will not invalidate the partnership considering that
the totality of the evidence proves that Chua and Jacinto
indeed forged the partnership in question.
6
The Civil Code provides that an action to enforce an oral
contract prescribes 6 years while the right to demand an
accounting for a partner's interest as against the person
continuing the business accrues at the date of dissolution, in
the absence of any contrary agreement. Considering that the
death of a partner results in the dissolution of the partnership,
in this case, it was after Jacinto's death that Chua as the
surviving partner had the right to an account of his interest as
against petitioners. While Jacinto's death dissolved the
partnership, the dissolution did not immediately terminate the
partnership. The Civil Code expressly provides that upon
dissolution, the partnership continues and its legal personality
is retained until the complete winding up of its business,
culminating in its termination. Wherefore, petition is denied.
Primelink Properties and Development Corporation vs.
Lazatin-Magat
G.R. No. 167379, June 27, 2006
Callejo, Sr., J.:
FACTS:
Primelink Properties and Development Corporation
(Primelink for brevity) is a domestic corporation engaged
in real estate development. Rafaelito W. Lopez is its
President and Chief Executive Officer.
Ma. Clara T. Lazatin-Magat and her brothers, Jose Serafin
T. Lazatin, Jaime T. Lazatin and Jose Marcos T. Lazatin
(the Lazatins for brevity), are co-owners of two (2)
adjoining parcels of land, with a combined area of 30,000
square meters, located in Tagaytay City and covered by
Transfer Certificate of Title (TCT) No. T-10848 4 of the
Register of Deeds of Tagaytay City.
On March 10, 1994, the Lazatins and Primelink,
represented by Lopez, in his capacity as President,
entered into a Joint Venture Agreement (JVA) for the
development of the aforementioned property into a
residential subdivision to be known as "Tagaytay Garden
Villas." Under the JVA, the Lazatin siblings obliged
themselves to contribute the two parcels of land as their
share in the joint venture. For its part, Primelink
undertook to contribute money, labor, personnel,
machineries, equipment, contractor's pool, marketing
activities, managerial expertise and other needed
resources to develop the property and construct therein
the units for sale to the public.
For 4 years however, Primelink failed to develop the said land.
So in 1998, the Lazatins
filed a complaint to rescind the joint venture agreement with
prayer for preliminary injunction. In said case, Primelink was
declared in default or failing to file an answer and for asking
multiple motions for extension. The trial court eventually ruled
in favor of the Lazatins and it ordered Primelink to return the
possession of said land to the Lazatins as well as some
improvements which Primelink had so far over the property
without the Lazatins paying for said improvements. This
decision was affirmed by the Court of Appeals. Citing the
ruling of this Court in Aurbach v. Sanitary Wares
Manufacturing Corporation, the appellate court ruled that,
under Philippine law, a joint venture is a form of
partnership and is to be governed by the laws of
partnership.
Primelink is now assailing the order; that turning over
improvements to the Lazatins without reimbursement is unjust;
that the Lazatins did not ask the properties to be placed under
their possession but they merely asked for rescission.
7

ISSUE: Whether or not the improvements made by Primelink
should also be turned over under the
possession of the Lazatins.
RULING:
Yes. In the first place, even though the Lazatins did specifically
pray for possession the same (placing of improvements under
their possession) is incidental in the relief they prayed for.
They are therefore entitled possession over the parcel of land
plus the improvements made thereon made by Primelink. In
this jurisdiction, joint ventures are governed by the laws of
partnership. Under the laws of partnership, when a partnership
is dissolved, as in this case when the trial court rescinded the
joint venture agreement, the innocent party has the right to
wind up the partnership affairs. With the rescission of the JVA
on account of petitioners fraudulent acts, all authority of any
partner to act for the partnership is terminated except so far as
may be necessary to wind up the partnership affairs or to
complete transactions begun but not yet finished. On
dissolution, the partnership is not terminated but continues
until the winding up of partnership affairs is completed.
Winding up means the administration of the assets of the
partnership for the purpose of terminating the business and
discharging the obligations of the partnership.
It must be stressed, too, that although the Lazatins acquired
possession of the lands and the improvements thereon, the
said lands and improvements remained partnership property,
subject to the rights and obligations of the parties, inter se, of
the creditors and of third parties and subject to the outcome of
the settlement of the accounts between the parties, absent any
agreement of the parties in their JVA to the contrary (here no
agreement in the JVA as to winding up). Until the partnership
accounts are determined, it cannot be ascertained how much
any of the parties is entitled to, if at all.
Pascual vs. CIR
G.R. No. L-78133, Oct. 18, 1988
Gancayco, J.:
FACTS:
On June 22, 1965, petitioners bought two (2) parcels of land
from Santiago Bernardino, et al. and eventually sold both
lands to Marenir Development Corporation. They realized a
net profit of P165,224.70 in such sale. On May 28, 1966, they
bought another three (3) parcels of land from Juan Roque. The
three parcels of land were also sold by petitioners to Erlinda
Reyes and Maria Samson on March 19,1970. In this sale, they
realized a net profit of P60,000. The petitioners paid the
corresponding capital gains taxes on their profits in 1973 and
1974.
However, in a letter dated March 31, 1979 of then Acting BIR
Commissioner Efren I. Plana, petitioners were assessed and
required to pay a total amount of P107,101.70 as alleged
deficiency corporate income taxes for the years 1968 and
1970. Petitioners protested the said assessment asserting that
they had availed of tax amnesties way back in 1974 and thus
exempted from other taxes.
In a reply, respondent Commissioner informed petitioners that
in the years 1968 and 1970, petitioners as co-owners in the
real estate transactions formed an unregistered partnership or
joint venture taxable as a corporation under Section 20(b) and
its income was subject to the taxes prescribed under Section
24, both of the National Internal Revenue Code that the
unregistered partnership was subject to corporate income tax
8
as distinguished from profits derived from the partnership by
them which is subject to individual income tax. Furthermore,
the availment of tax amnesty under P.D. No. 23, as amended,
by petitioners relieved petitioners of their individual income tax
liabilities but did not relieve them from the tax liability of the
unregistered partnership. Hence, the petitioners were required
to pay the deficiency income tax assessed.
The petitioners filed a petition for review with the respondent
Court of Tax. The respondent court by a majority decision
affirmed the decision and action taken by respondent
commissioner with costs against petitioners. It ruled that
on the basis of the principle that an unregistered partnership
was in fact formed by petitioners which like a corporation was
subject to corporate income tax distinct from that imposed on
the partners.
ISSUE:
Whether or not the petitioners formed an unregistered
partnership or joint venture and thus liable for corporate
income tax, residence tax for corporations, and real estate
dealers' fixed tax in pursuant to the National Internal Revenue
Code.
RULING:
No. Article 1767 of the Civil Code of the Philippines provides:
By the contract of partnership two or more persons bind
themselves to contribute money, property, or industry to a
common fund, with the intention of dividing the profits among
themselves.
Pursuant to this article, the essential elements of a partnership
are two, namely: (a) an agreement to contribute money,
property or industry to a common fund; and (b) intent to divide
the profits among the contracting parties. 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. Respondent commissioner and/ or his
representative just assumed these conditions to be present on
the basis of the fact that petitioners purchased certain parcels
of land and became co-owners thereof.
Petitioners bought two (2) parcels of land in 1965. They did not
sell the same nor make any improvements thereon. In 1966,
they bought another three (3) parcels of land from one seller. It
was only 1968 when they sold the two (2) parcels of land after
which they did not make any additional or new purchase. The
remaining three (3) parcels were sold by them in 1970. The
transactions were isolated. The character of habituality
peculiar to business transactions for the purpose of gain was
not present.
The common ownership of property does not itself create a
partnership between the owners, though they may use it for
the purpose of making gains; and they may, without becoming
partners, agree among themselves as to the management,
and use of such property and the application of the proceeds
therefrom. (Spurlock vs. Wilson, 142 S.W. 363,160 No. App.
14.)
In the present case, there is clear evidence of co-ownership
between the petitioners. There is no adequate basis to
support the proposition that they thereby formed an
unregistered partnership. The two isolated transactions
whereby they purchased properties and sold the same a few
years thereafter did not thereby make them partners. They
shared in the gross profits as co- owners and paid their capital
gains taxes on their net profits and availed of the tax amnesty
thereby. Under the circumstances, they cannot be considered
9
to have formed an unregistered partnership which is thereby
liable for corporate income tax, as the respondent
commissioner proposes.
And even assuming for the sake of argument that such
unregistered partnership appears to have been formed, since
there is no such existing unregistered partnership with a
distinct personality nor with assets that can be held liable for
said deficiency corporate income tax, then petitioners can be
held individually liable as partners for this unpaid obligation of
the partnership. However, as petitioners have availed of the
benefits of tax amnesty as individual taxpayers in these
transactions, they are thereby relieved of any further tax
liability arising therefrom.
Fue Leung vs. IAC
G.R. No. 70926
Gutierrez Jr., J.:
FACTS:
The Sun Wah Panciteria, a restaurant, located at Florentino
Torres Street, Sta. Cruz, Manila, was established sometime in
October, 1955 and was registered as a single proprietorship
and its licenses and permits were issued to and in favor of
petitioner Dan Fue Leung as the sole proprietor. Yiu adduced
evidence during the trial of the case to show that Sun Wah
Panciteria was actually a partnership and that he was one of
the partners having contributed P4,000.00 to its initial
establishment.
About the time the Sun Wah Panciteria started to become
operational, respondent Yiu gave P4,000.00 as his
contribution to the partnership evidenced by a receipt wherein
the petitioner acknowledged his acceptance of such paymenT,
affixing his signature thereto. The receipt was written in
Chinese characters (RTC commissioned an interpreter in the
person of Ms. Florence Yap to translate its contents into
English. Florence Yap issued a certification and testified that
the translation to the best of her knowledge and belief was
correct.) Yiu identified the signature on the receipt as that of
the petitioner because it was affixed by the latter in his
presence. Witnesses So Sia and Antonio Ah Heng
corroborated Yiu's testimony to the effect that they were both
present when the receipt was signed by the petitioner.
Furthermore, Yiu received from the petitioner P12,000.00
covered by the latter's Equitable Banking Corporation Check
No. 13389470-B from the profits of the operation of the
restaurant for the year 1974. Witness Teodulo Diaz, Chief of
the Savings Department of the China Banking Corporation
testified that said check was deposited by and duly credited to
the Yius savings account with the bank after it was cleared by
the drawee bank, the Equitable Banking Corporation. Another
witness Elvira Rana of the Equitable Banking Corporation
testified that the check in question was in fact and in truth
drawn by petitioner and debited against his own account in
said bank. This fact was clearly shown and indicated in the
petitioner's statement of account after the check was duly
cleared. Rana further testified that upon clearance of the
check and pursuant to normal banking procedure, said check
was returned to the petitioner as the maker thereof.
Petitioner denied having received from the private respondent
the amount of P4,000.00. He contested and impugned the
genuineness of the receipt. He maintained that he did not
receive any contribution at the time he started the Sun Wah
Panciteria; that he used his savings from his salaries as an
employee at Camp Stotsenberg in Clark Field and later as
waiter at the Toho Restaurant amounting to a little more than
P2,000.00 as capital in establishing Sun Wah Panciteria. To
bolster his contention that he was the sole owner of the
restaurant, the petitioner presented various government
10
licenses and permits showing the Sun Wah Panciteria was
and still is a single proprietorship solely owned and operated
by himself alone. Fue Leung also flatly denied having issued to
the private respondent the receipt and the Equitable Banking
Corporation's Check No. 13389470 B in the amount of
P12,000.00 The RTC, in an amended decision, ruled in favor
of Yiu declaring him a partner of Dan Fue Leung in the
business of Sun Wah Panciteria and ordering the latter to pay
the former his share in the annual profits of the said
restaurant. The IAC affirmed said decision. Hence this petition
arguing that private respondent extended 'financial assistance'
to petitioner at the time of the establishment of the Sun Wah
Panciteria, in return of which private respondent allegedly will
receive a share in the profits of the restaurant.
ISSUE:
WON Yiu is petitioners partner in the establishment of the Sun
Wah Panciteria
RULING:
YES. In essence, the private respondent alleged that when
Sun Wah Panciteria was established, he gave P4,000.00 to
the petitioner with the understanding that he would be entitled
to twenty-two percent (22%) of the annual profit derived from
the operation of the said panciteria. These allegations, which
were proved, make Yiu and petitioner partners in the
establishment of Sun Wah Panciteria because Article 1767 of
the Civil Code provides that:
By the contract of partnership two or more persons bind
themselves to contribute money, property or industry to a
common fund, with the intention of dividing the profits among
themselves.
Therefore, the lower courts did not err in construing the
complaint as one wherein the private respondent asserted his
rights as partner of the petitioner in the establishment of the
Sun Wah Panciteria, notwithstanding the use of the
term financial assistance therein. The appellate court's
observation to the effect that ". . . given its ordinary meaning,
financial assistance 'is the giving out of money to another
without the expectation of any returns therefrom, was correct.
It connotes an ex gratia dole out in favor of someone driven
into a state of destitution. But this circumstance under which
the P4,000.00 was given to the petitioner does not obtain in
this case." The complaint explicitly stated that "as a return for
such financial assistance, plaintiff (private respondent) would
be entitled to 22% of the annual profit derived from the
operation of the said panciteria." The well-settled doctrine is
that the ". . . nature of the action filed in court is determined by
the facts alleged in the complaint as constituting the cause of
action.
The private respondent is a partner of the petitioner in Sun
Wah Panciteria. The requisites of a partnership which are
1) two or more persons bind themselves to contribute money,
property, or industry to a common fund; and 2) intention on the
part of the partners to divide the profits among themselves
have been established. As stated by the respondent, a partner
shares not only in profits but also in the losses of the firm. If
excellent relations exist among the partners at the start of
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. It would be incorrect
to state that if a partner does not assert his rights anytime
within ten years from the start of operations, such rights are
irretrievably lost. The private respondent's cause of action is
premised upon the failure of the petitioner to give him the
agreed profits in the operation of Sun Wah Panciteria. In effect
11
the private respondent was asking for an accounting of his
interests in the partnership.
There shall be a liquidation and winding up of partnership
affairs, return of capital, and other incidents of dissolution
because the continuation of the partnership has become
inequitable.
WHEREFORE, the petition for review is hereby DISMISSED
for lack of merit. The decision of the respondent court is
AFFIRMED with a MODIFICATION that as indicated above,
the partnership of the parties is ordered dissolved. So ordered.
Tocao vs. Court of Appeals
G.R. No. 70926, Jan. 31, 1989
Ynares-Santiago, J.:
Torres vs. Court of Appeals
G.R. No. 134559, Dec. 9, 1999
Panganiban, J.:
FACTS:
Sisters Antonia Torres and Emeteria Baring, herein petitioners,
entered into a "joint venture agreement" with Respondent
Manuel Torres for the development of a parcel of land into a
subdivision. Pursuant to the contract, they executed a Deed of
Sale covering the said parcel of land in favor of respondent,
who then had it registered in his name. By mortgaging the
property, respondent obtained from Equitable Bank a loan of
P40,000 which, under the Joint Venture Agreement, was to be
used for the development of the subdivision. The project did
not push through, and the land was subsequently foreclosed
by the bank. According to 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. On the other hand,
respondent alleged that he used the loan 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.
In affirming the trial court, the Court of Appeals held that
petitioners and respondent had 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.
ISSUE:
WON the transaction between the petitioners and respondent
was that of a joint venture/partnership?
RULING:
Yes. A reading of the terms embodied in the Agreement
indubitably shows the existence of a partnership. Petitioners
would contribute property to the partnership in the form of land
which was to be developed into a subdivision; while
12
respondent would give, in addition to his industry, the amount
needed for general expenses and other costs. Furthermore,
the income from the said project would be divided according to
the stipulated percentage. Clearly, the contract manifested the
intention of the parties to form a partnership.
Petitioners argue that the Joint Venture Agreement is void
under Article 1773 of the Civil Code
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.
We clarify. First, Article 1773 was intended primarily to protect
third persons. the execution of a public instrument would be
useless if there is no inventory of the property contributed,
because without its designation and description, they cannot
be subject to inscription in the Registry of Property, and their
contribution cannot prejudice third persons. This will result in
fraud to those who contract with the partnership in the belief in
the efficacy of the guaranty in which the immovables may
consist. Thus, the contract is declared void by the law when no
such inventory is made. The case at bar does not involve third
parties who may be prejudiced.
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.
Lim Tong Lim vs. Philippine Fishing Gear Industries
G.R. No. 136448, Nov. 3, 1999
Panganiban, J.:
FACTS:
On behalf of "Ocean Quest Fishing Corporation," Chua and
Yao entered into a contract for the purchase of fishing net from
respondent. They claimed that they were engaged in a
business venture with petitioner, who however, was not a
signatory to the agreement. The buyers, however, failed to
pay, hence respondent filed a collection suit against Chua,
Yao and Lim. The lower courts ruled that Lim is to be jointly
liable with Chua and Yao reasoning that the three have formed
a partnership for a specific undertaking and for the division of
profits.
ISSUE:
WON by their acts, Lim, Chua, and Yao could be deemed to
have entered into a partnership.
RULING:
From the factual findings of both lower courts, it is clear that
Chua, Yao and Lim had decided to engage in a fishing
business, which they started by buying boats worth P3.35
million, financed by a loan secured from Jesus Lim who was
petitioners brother. In their Compromise Agreement, they
subsequently revealed their intention to pay the loan with the
proceeds of the sale of the boats, and to divide equally among
them the excess or loss. These boats, the purchase and the
repair of which were financed with borrowed money, fell under
the term common fund under Article 1767. The contribution to
such fund need not be cash or fixed assets; it could be an
intangible like credit or industry. That the parties agreed that
13
any loss or profit from the sale and operation of the boats
would be divided equally among them also shows that they
had indeed formed a partnership.
Moreover, it is clear that the partnership extended not only to
the purchase of the boat, but also to that of the nets and the
floats. The fishing nets and the floats, both essential to fishing,
were obviously acquired in furtherance of their business. It
would have been inconceivable for Lim to involve himself so
much in buying the boat but not in the acquisition of the
aforesaid equipment, without which the business could not
have proceeded.
Evangelista & Co. vs. Abad Santos
G.R. No. L-31684, June 28, 1973
Makalintal, Actg. C.J.:
FACTS:
On October 9, 1954, a co-partnership with herein petitioners
as capitalist partners was formed under the name Evangelista
& Co., with the Articles of Co-partnership being later amended
to include the respondent, Estrella Abad Santos, as an
industrial partner. The modified scheme provided for the profits
and losses would be divided and distributed among the first
three partners at the proportion of 70%; and the last 30%
would include the respondent.
On December 17, 1963 the respondent filed suit against the
three other partners and alleged that they had been paying
dividends to the partners except to her; and that
notwithstanding her demands the defendants continued to
refuse to let examine the partnership books, give her
information regarding the partnership affairs, or pay her any
share in the dividends declared by the partnership. She
therefore prayed that the defendants be ordered to render
accounting to her of the partnership business and to pay her
corresponding share in the partnership profits.
In their defense, the plaintiffs denied ever having declared
dividends or distributed profits of the partnership and denied
likewise that the plaintiff ever demanded that she be allowed to
examine the partnership books. In fact, they contend that the
Articles of Co-partnership did not express the true agreement
of the parties which provide that, in actuality, the plaintiff was
not an industrial partner as she did not contribute any industry
to the partnership. Her share was merely based on the profits
which might be realized by the partnership until full payment of
the loan which it had obtained from the Rehabilitation Finance
Corporation in the sum of P30,000.00 for which the plaintiff
had signed a promissory note as co-maker and mortgaged her
property as security.
Despite this fact, both the trial court and the appellate court
ruled in favor of the respondent in that, regardless of the fact
that the wording of the Articles of Co-partnership did not
express the real intention of the parties, the testimonies from
the witnesses and the evidence produced points to the fact
that the partnership, indeed, recognized Abad Santos as an
industrial partner.
ISSUE:
Can Estrella Abad Santos be considered as an industrial
partner?
RULING:
Yes, Estrella Abad Santos is an industrial partner. Despite her
non-contribution of commercial industry work into the
partnership, that she was a judge and performed her legal
duties in favor of the partnership without which they would
14
not have been able to organize is in itself considered a
contribution to the common fund. The reason for this is that
Article 1767 does not specify the kind of industry that a partner
may thus contribute, only that the partners contribute industry
thereto. Hence the said legal services performed by the
respondent may legitimately be considered as appellee's
contribution to the common fund.
The petitioners further contend that Article 1789 provides that
An industrial partner cannot engage in business for himself,
unless the partnership expressly permits him to do so; and if
he should do so, the capitalist partners may either exclude him
from the firm or avail themselves of the benefits which he may
have obtained in violation of this provision, with a right to
damages in either case. They cite this article as their
justification for excluding Abad Santos since by serving as a
judge of the City Court of Manila, the respondent cannot be
expected to contribute to the partnership since she cannot be
expected to give her full attention into the business.
The Court, however, dismissed this reason for the simple
reason that being a judge cannot be characterized as a
business in any way, and yet the petitioners somehow reached
the decision that the respondent should be excluded from and
deprived of her share because of this. Moreover, the fact that
they knew that the respondent is a judge even before she
joined the partnership and that they waited for several years
before deciding to exclude her is testament to bad faith on
their part. Thus, the assailed decision of the lower court thus
stands the respondent is rightfully entitled to her share in the
partnership.
Mobil Oil Philippines vs. CFI of Rizal
G.R. No. 40457, May 8, 1992
Nocon, J.:
FACTS:
On Nov 8, 1972, Mobil Oil Philippines filed a complaint in the
Court of First Instance of Rizal against the partnership La
Mallorca and it general partners, which included Geminiano
Yabut and Agueda Yabut, for collection of a sum of money
arising from gasoline purchased on credit but not paid, for
damages and attorneys fees.
On Dec 22, 1972, petitioner filed an Amended Complaint
impleading the heirs of the deceased partners as defendants.
Consequently, on July 25, 1974, a decision was rendered in
favor of the petitioner.
Private respondents filed a Petition to Modify Decision and/or
Petition for Reconsideration, which was opposed by petitioner
on the following grounds: a) that there was no stipulation or
agreement of the parties on the award of attorneys fees; b)
that Miguel Enriquez, not being a general partner, could not
bind the partnership in the Sales Agreement he signed with
plaintiff; and c) Geminiano Yabut already withdrew as
partner and president of La Mallorca.
Respondent court issued it disputed order declaring its
decision null and void on the ground that there was no
evidence to show that the counsel for the defendants had
been duly authorized by their respective clients to enter into a
stipulation or facts, a compromise agreement or a confession
judgment with petitioner, a ground never raised by the parties.
Petitioner filed a Motion for Reconsideration and Clarification
but respondent court denied the motion, as well as petitioners
15
Motion for Issuance of a Writ of Execution and Appointment of
Special Sheriff. Hence, this petition.
ISSUE:
a.) Whether or not Miguel Enriquez cannot be bind in
partnership.
b.) Whether or not Geminiano Yabut cannot be held liable as a
partner.
RULING:
a.) Miguel Enriquez became a general partner of the
partnership La Maloorca being one of the heirs of the
deceased partner Mariano Enriquez in accordance with Article
IV of the uncontested Articles of Co-Partnership of La
Mallorca.
b.) The Court is not convinced that respondent Geminiano
Yabuts claim that he cannot be liable as a partner. The debt
was incurred long before his withdrawal and his resignation as
President of La Mallorca on Sept 14, 1972. Respondent
Geminiano Yabut could not just withdraw unilaterally from the
partnership to avoid his liability as general partner to third
persons like the petitioner in the instant case.
This is likewise true with regard to the alleged non-active
participation of respondent Agueda Yabut in the partnership.
Active partnership in a partnership is not a condition
precedent for membership in a partnership so as to be entitled
to its profits nor be burdened with its liabilities.
From the foregoing, it is evident that the court a quo erred in
issuing the Orders nullifying the decision and dismissing the
complaint against private respondents Geminiano Yabut and
Agueda Enriquez-Yabut.
Ramnani vs. Court of Appeals
G.R. No. 85494, May 7, 1991
Gancayco, J.:
FACTS:
In the latter part of 1965, Spouses Ishwar Jethmal Ramnani,
an American citizen, and Sonya Jethmal Ramnani, both from
New York, invested substantial amount of money for a
profitable business venture in the Philippines. Since they could
not personally manage their investments, they appointed two
of Ishwars brothers, Choithram Jethmal Ramnani and Navalrai
Jethmal Ramnani, as their attorneys-in-fact. Choithram
decided to invest in the real estate business. On February 1,
1966 and May 16, 1966, Choithram, in his capacity as
attorney-in-fact of Ishwar, bought two parcels of land located in
Barrio Ugong, Pasig, Rizal from Ortigas & Company, Ltd.
Partnership (Ortigas). Instead of paying for the lots in cash,
Choithram paid in installments and used the balance of the
capital entrusted to him, plus a loan, to build a building from
whose profits sprouted three more buildings. 2 buildings were
burned later but neverthess, through the industry and genius
of Choithram, Ishwars property was developed and improved
into a valuable asset worth millions of pesos.
Unfortunately, Choithram, while showing himself to be a good
manager, proved unfaithful to the trust reposed in him by
spouses Ishwar. Without their knowledge, Choithram started to
appropriate his brothers property and other assets as his own.
Spouses Ishwar learned what Choithram was doing. Hence,
16
they asked him to render an accounting for the income and
expenses from 1967 to 1970, but there was none forthcoming.
Choithram failed and refused to render such accounting. As a
consequence, on February 4, 1971, Ishwar revoked the
general power of attorney Ortigas was informed of such fact
and such revocation was also published in the SEC and
Manila Times.
In 1973, upon complete payments of Ishwars lots purchased
from Ortigas, Choithram caused the latter to execute the
corresponding deeds of sale in favor of his daughter-in-law,
Nirmla. Eventually, TCT Nos. 403150 and 403152 were issued
by the Registry of Deeds of Rizal in her favor. Choithram
repudiated all well-meaning efforts to solve the controversy
within the Ramnani family. Moreover, he denied the genuine
nature of the trust relationship between him and his brother
Ishwar.
CFI: Spouses Ishwar filed on October 6, 1982 with the Court
of First Instance of Rizal a complaint for reconveyance and
damages against Choithram and his son Moti and daughter-in-
law Nirmla. CFI dismissed the complaint and recognized
Choithrams full ownership of the questioned two parcels of
land.
CA: CA reversed the CFI, finding that spouses Ishwar
entrusted capital to Choithram to be invested in the
Philippines. The appellate court held the Choithram family and
Ortigas jointly and severally liable to spouses Ishwar. Court of
Appeals modified its earlier decision by dismissing the case
against Ortigas.
ISSUE: Is there a trust relationship between Ishwar and
Choithram?
RULING:
Yes. Choithram violated the trust relationship between him and
Ishwar. However, despite the fact that Choithram had
committed acts which demonstrate their bad faith and scheme
to defraud spouses Ishwar and Sonya of their rightful share in
the properties in litigation, the Court cannot ignore the fact that
Choithram must have been motivated by a strong conviction
that as the industrial partner in the acquisition of said assets
he has as much claim to said properties as Ishwar, the
capitalist partner in the joint venture. Through the industry and
genius of Choithram, Ishwar's property was developed and
improved into what it is now. Justice and equity dictate that the
two share equally the fruit of their joint investment and efforts.
The Court applied the Solomonic solution by dividing equally
between spouses Ishwar and the Choithram family the two
parcels of land subject of the litigation, including all the
improvements thereon and income from 1967.
The Court also ruled that Ortigas is solidarily liable with
Choithram family to spouses Ishwar because of its bad faith in
executing the deeds of sale in favor of Nirmla despite its
knowledge that Choithrams general power of attorney had
been revoked by Ishwar.
17