CIR

vs. BURROUGHS No. Petitioner's aforesaid contention is without merit. What

case at bar is still the Revenue Ruling of January 21, 19
G.R. No. L-66653 June 19, 1986 respondent Burroughs Limited paid the branch profit remitt
on March 14, 1979. Memorandum Circular No. 8-82 dated Ma
Nature: Petition for certiorari to review and set aside the Decision of CTA which be given retroactive effect in the light of Section 327 of th
ordered petitioner CIR to grant in favor of Burroughs Limited, tax credit in the Revenue Code.
sum of P172,058.90, representing erroneously overpaid branch profit remittance
tax. The prejudice that would result to private respondent Burr
retroactive application of Memorandum Circular No. 8-82 is b
FACTS: would be deprived of the substantial amount of P172,058.90
enumerated exceptions are concerned, admittedly, Burroug
1. Burroughs Limited is a foreign corporation authorized to engage in trade or fall under any of them.
business in the Philippines through a branch office located in Metro Manila.
CIR vs.WILLIAM J. SUTER
2. In March 1979, said branch office applied with the Central Bank for authority to
remit to its parent company abroad, branch profit amounting to P7,647,058.00. G.R. No. L-25532 February 28, 1969
Thus, on March 14, 1979, it paid the 15% branch profit remittance tax, pursuant to
Sec. 24 (b) (2) (ii) and remitted to its head office the amount of P6,499,999.30. NATURE: The present case is a petition for review, filed by the
of the CTA, which court rendered a decision reversi
3. Claiming that the 15% profit remittance tax should have been computed on the determination of a deficiency income tax against respondent S
basis of the amount actually remitted (P6,499,999.30) and not on the amount
before profit remittance tax (P7,647,058.00), respondent filed for refund or tax FACTS:
credit of the amount of P172,058.90 representing alleged overpaid branch profit
remittance tax. 1. A limited partnership, named "William J. Suter 'Morcoin' C
on 30 September 1947 by William J. Suter as the general par
4. Petitioner contends that respondent is no longer entitled to a refund because and Gustav Carlson, as the limited partners.
Memorandum Circular No. 8-82 dated March 17, 1982 had revoked and/or
repealed the BIR ruling of January 21, 1980. 2. The partners contributed, respectively, P20,000.00, P18,0
to the partnership.
ISSUE:
3. On 1 October 1947, the limited partnership was registered
W/O respondent is no longer entitled to a refund because Memorandum Circular and Exchange Commission. The firm engaged, among oth
No. 8-82 dated March 17, 1982 had revoked and/or repealed the BIR ruling of importation, marketing, distribution and operation of auto
January 21, 1980. radios, television sets and amusement machines, their part
had an office and held itself out as a limited partnership, ha
HELD: merchandise, using invoices, bills and letterheads bear
maintaining its own books of accounts and bank account
allocation with the Central Bank.
4. In 1948, however, general partner Suter and limited partner Spirig got married (d) Husband and wife. — In the case of married perso
and, thereafter, on 18 December 1948, limited partner Carlson sold his share in residents or non-residents, only one consolidated re
the partnership to Suter and his wife. The sale was duly recorded with the year shall be filed by either spouse to cover the income
Securities and Exchange Commission on 20 December 1948.
In refutation of the foregoing, respondent Suter maintains,
5. The limited partnership had been filing its income tax returns as a Appeals held, that his marriage with limited partner Spirig an
corporation,until in 1959 the CIR, in an assessment, consolidated the income of the Carlson's interests in the partnership in 1948 is not a ground
firm and the individual incomes of the partners-spouses Suter and Spirig resulting partnership, either in the Code of Commerce or in the New
in a determination of a deficiency income tax against respondent Suter in the since its juridical personality had not been affected and
amount of P2,678.06 for 1954 and P4,567.00 for 1955. partnership, as contra distinguished from a duly registered ge
is taxable on its income similarly with corporations, Suter
6. Suter protested the assessment, and requested its cancellation and withdrawal, include in his individual return the income of the limited partn
as not in accordance with law, but his request was denied. On appeal the CTA
reverse the CIR decision. We find the Commissioner's appeal unmeritorious.

ISSUES: The thesis that the limited partnership, William J. Suter "Mo
been dissolved by operation of law because of the marriage
1. W/O the corporate personality of the William J. Suter "Morcoin" Co., Ltd. should partner, William J. Suter to the originally limited partner, Julia
be disregarded for income tax purposes, considering that respondent William J. the partnership was organized is rested by the appellant upo
Suter and his wife, Julia Spirig Suter actually formed a single taxable unit; and Senator Tolentino in Commentaries and Jurisprudence on Com
Philippines, Vol. 1, 4th Ed., page 58, that reads as follows:
2. W/O the partnership was dissolved after the marriage of the partners,
respondent William J. Suter and Julia Spirig Suter and the subsequent sale to them A husband and a wife may not enter
by the remaining partner, Gustav Carlson, of his participation of P2,000.00 in the of general copartnership, because under the Civil Code
partnership for a nominal amount of P1.00. absence of express provision in the Code of Commerce
from making donations to each other are prohib
The theory of the petitioner, Commissioner of Internal Revenue, is that the into universal partnerships. (2 Echaverri 196) It follow
marriage of Suter and Spirig and their subsequent acquisition of the interests of of partners necessarily brings about the dissolutio
remaining partner Carlson in the partnership dissolved the limited partnership, partnership. (1 Guy de Montella 58)
and if they did not, the fiction of juridical personality of the partnership should be
disregarded for income tax purposes because the spouses have exclusive The petitioner-appellant has evidently failed to observe the
ownership and control of the business; consequently the income tax return of Suter "Morcoin" Co., Ltd. was not a universal partnership, bu
respondent Suter for the years in question should have included his and his wife's appears from Articles 1674 and 1675 of the Spanish Civil C
individual incomes and that of the limited partnership, in accordance with Section was the law in force when the subject firm was o
45 (d) of the National Internal Revenue Code, which provides as follows: a universal partnership requires either that the object of the
present property of the partners, as contributed by them to t
else "all that the partners may acquire by their industry
existence of the partnership". William J. Suter "Morcoin" Co.,
universal partnership, since the contributions of the partners were fixed sums The rulings cited by the petitioner (Collector of Internal Reve
of MONEY , P20,000.00 by William Suter and P18,000.00 by Julia Spirig and the Visayas, L-13554, Resolution of 30 October 1964, and K
neither one of them was an industrial partner. It follows that William J. Suter Yatco, 77 Phil. 504) as authority for disregarding the fiction o
"Morcoin" Co., Ltd. was not a partnership that spouses were forbidden to enter by the corporations involved therein are not applicable to the
Article 1677 of the Civil Code of 1889. cited cases, the corporations were already subject to tax whe
corporate personality was pierced; in the present case, to do
Nor could the subsequent marriage of the partners operate to dissolve it, such limited partnership from income taxation but would throw
marriage not being one of the causes provided for that purpose either by the the partners-spouses in their individual capacities. The corpo
Spanish Civil Code or the Code of Commerce. cited, merely served as business conduits or alter egos of the s
that justified a disregard of their corporate personalities for
The appellant's view, that by the marriage of both partners the company became a not true in the present case. Here, the limited partnership is
single proprietorship, is equally erroneous. The capital contributions of partners conduit of the partner-spouses; it was organized for legitimat
William J. Suter and Julia Spirig were separately owned and contributed by it conducted its own dealings with its customers prior to app
them before their marriage; and after they were joined in wedlock, such had been filing its own income tax returns as such independe
contributions remained their respective separate property under the Spanish Civil in its membership, brought about by the marriage of the
Code (Article 1396): subsequent acquisition of all interest therein, is no ground
partnership from the coverage of Section 24 of the tax code
The following shall be the exclusive property of each spouse: income tax. As far as the records show, the partners did not e
and thereafter buy the interests of the remaining partner wi
(a) That which is brought to the marriage as his or her own; .... scheme or design to use the partnership as a business cond
laws. Regularity, not otherwise, is presumed.
Thus, the individual interest of each consort in William J. Suter "Morcoin" Co., Ltd.
did not become common property of both after their marriage in 1948. As the limited partnership under consideration is taxable on i
that income to be included in the individual tax return of re
It being a basic tenet of the Spanish and Philippine law that the partnership has a overstretch the letter and intent of the law. In fact, it woul
juridical personality of its own, distinct and separate from that of its partners what it specifically provides in its Section 24: for the appel
(unlike American and English law that does not recognize such separate juridical stand results in equal treatment, tax wise, of a general copa
personality), the bypassing of the existence of the limited partnership as a colectiva) and a limited partnership, when the code plainly d
taxpayer can only be done by ignoring or disregarding clear statutory mandates Thus, the code taxes the latter on its income, but not the for
and basic principles of our law. The limited partnership's separate individuality the case of compañias colectivas that the members, and not th
makes it impossible to equate its income with that of the component members. their individual capacities for any dividend or share of the pr
True, section 24 of the Internal Revenue Code merges registered general co- duly registered general partnership (Section 26, N.I.R.C.; Arañ
partnerships (compañias colectivas) with the personality of the individual partners the N.I.R.C., As Amended, Vol. 1, pp. 88-89).lawphi1.nêt
for income tax purposes. But this rule is exceptional in its disregard of a cardinal
tenet of our partnership laws, and can not be extended by mere implication to But it is argued that the income of the limited partner
limited partnerships. constructively the income of the spouses and forms pa
partnership of gains. This is not wholly correct. As pointed ou
50 Phil. 779, and People's Bank vs. Register of Deeds of Man
fruits of the wife's parapherna become conjugal only when no longer needed to • No local custom prohibits the continued use of a deceased partner’s name
name; and
defray the expenses for the administration and preservation of the paraphernal • The continued use of a deceased partner’s name in the firm name of law pa
capital of the wife. Then again, the appellant's argument erroneously confines consistently allowed by U.S. Courts and is an accepted practice in legal prof
in the world.
itself to the question of the legal personality of the limited partnership, which is
not essential to the income taxability of the partnership since the law taxes the
Issue: Whether or not a firm name engaged in the legal profession should continu
income of even joint accounts that have no personality of their own. 1 Appellant is, partners who had passed away.
likewise, mistaken in that it assumes that the conjugal partnership of gains is a
SC ruling: No.
taxable unit, which it is not. What is taxable is the "income of both spouses"
(Section 45 [d] in their individual capacities. Though the amount of income • The use in partnership names of the names of deceased partners will run cou
CC which provides that names in a firm name of a partnership must either be
(income of the conjugal partnership vis-a-vis the joint income of husband and wife) and, in the case of non – partners, should be living persons who can be subje
may be the same for a given taxable year, their consequences would be different, art. 1825 prohibits a third person from including his name in the firm name
liability of a partner. The heirs of a deceased partner in a law firm cannot be
as their contributions in the business partnership are not the same. members to the creditors of a firm particularly where they are non-lawyers. W
treats more of a commercial partnership with a good will to protect rather th
partnership, with no saleable good will but whose reputation depends on the
The difference in tax rates between the income of the limited partnership being its individual members. Thus, it has been held that a saleable goodwill can e
consolidated with, and when split from the income of the spouses, is not a partnership and cannot arise in a professional partnership consisting of lawy
• A partnership for the practice of law cannot be likened to partnerships forme
justification for requiring consolidation; the revenue code, as it presently stands, for business. For one thing, the law on accountancy specifically allows the us
does not authorize it, and even bars it by requiring the limited partnership to pay connection with the practice of accountancy. ‘A partnership for the practice o
It is a mere relationship or association for a particular purpose.’ It is not a pa
tax on its own income. purpose of carrying in a trade or business or of holding property. Thus, it ha
of an assumed or trade name in law practice is improper.
IN THE MATTER OF THE PETITION FOR AUTHORITY TO CONTINUE USE OF THE FIRM NAME ‘OZAETA, • The right to practice law is not a natural or constitutional right but is in the n
ROMULO, ETC. franchise. It is limited to persons of good moral character with special qualif
and certified. The right does not only presuppose in its possessor integrity, l
Facts: Two petitions were filed, one by the surviving partners of Atty. Herminio Ozaeta and the other by the attainment but also the exercise of a special privilege, highly personal and p
surviving partners of Atty. Alexander Sycip praying that they be allowed to continue using the names of public trust.
partners who had passed away in their firm names. Both petitions were consolidated.
The continued use of a deceased or former partner’s name in the firm names of l
Petitioners Arguments: sanctioned by local custom due to the possibility of deception upon the public wh
deceased partner continues to be used. The possibility of deception upon the pub
• Under the law, a partnership is not prohibited from continuing its business under a firm name which where the name of a deceased partner continues to be used cannot be ruled out.
includes the name of a deceased partner. In fact, art. 1840 of the civil code explicitly sanctions the counsel might be guided by the familiar ring of a distinguished name appearing i
practice. there’s no local custom within our jurisdiction that sanctions the practice of conti
• In regulating other professions, such as accountancy and engineering, the legislature has authorized partner’s name. Courts take no judicial notice of custom. A local custom as a sou
the adoption of firm names without any restriction as to the use, in such firm name, of the name of considered by a court of justice unless such custom is properly established by co
the deceased partner, the legislative authorization given to those engaged in the practice of other fact. Merely because something is done as a matter of practice does not me
accountancy – a profession requiring the same degree of trust and confidence in respect of clients as the same for purposes of adjudication as a juridical custom. Juridical custom mus
that implicit in the relationship of attorney and client – to acquire and use a trade name, strongly social custom. The former can supplement statutory law or be applied in the abse
indicates that there us no fundamental policy that is offended by the continued use by a firm of with the latter.
professionals of a firm name which included the name of a deceased partner, at least where such firm
name has acquired the characteristics of a ‘trade name’
• The Canon of Professional Ethics are not transgressed by the continued use of the name of a deceased ESTANISLAO, JR. VS. COURT OF APPEALS
partner in the firm name of a law partnership as declared by Canon 33 adopted by American Bar
Association declaring that ‘The continued use of the name of a deceased or former partner when Facts: The petitioner and private respondents are brothers and sisters who are
permissible by local custom, is not unethical, but care should be taken that no imposition or the in Quezon City which were then being leased to SHELL. They agreed to open
deception is practiced through this use.’ thereat to be known as Estanislao Shell Service Station with an initial investm
• There is no possibility of imposition or deception because the deaths of their respective deceased taken from the advance rentals due to them from SHELL for the occupancy
partners were well – publicized in all newspapers of general circulation for several days. common by them. A joint affidavit was executed by them on April 11, 1966.
help their brother, petitioner therein, by allowing him to operate and manage the
the family. In order not to run counter to the company’s policy of appointing only one dealer, it was agreed
that petitioner would apply for the dealership. Respondent Remedios helped in co-managing the business
Facts:
with petitioner from May 1966 up to February 1967.
Campos, Rueda & Co., a limited partnership, is indebted to th
On May 1966, the parties entered into an Additional Cash Pledge Agreement with SHELL wherein it was
reiterated that the P15,000.00 advance rental shall be deposited with SHELL to cover advances of fuel to Commercial Co. , Asiatic Petroleum Co, and International B
petitioner as dealer with a proviso that said agreement “cancels and supersedes the Joint Affidavit.”
amounting to not less than P1,000.00 (which were not paid
For sometime, the petitioner submitted financial statement regarding the operation of the business to the prior to the date of the filing by petitioners of the applic
private respondents, but thereafter petitioner failed to render subsequent accounting. Hence , the private
respondents filed a complaint against the petitioner praying among others that the latter be ordered: insolvency).
(1) To execute a public document embodying all the provisions of the partnership agreement they
entered into; The trial court denied their petition on the ground that it w
(2) To render a formal accounting of the business operation veering the period from May 6, 1966 up alleged, that the members of the firm were insolvent at the
to December 21, 1968, and from January 1, 1969 up to the time the order is issued and that the
same be subject to proper audit; was filed. It also held that the partners are personally and so
(3) To pay the plaintiffs their lawful shares and participation in the net profits of the business; and
(4) To pay the plaintiffs attorney’s fees and costs of the suit. consequences of the transactions of the partnership.
Issue: Can a partnership exist between members of the same family arising from their joint ownership of
certain properties?

Trial Court: The complaint (of the respondents) was dismissed. But upon a motion for reconsideration of Issue:
the decision, another decision was rendered in favor of the respondents.

CA: Affirmed in toto Whether or not a limited partnership may be held to have
Petitioner: The CA erred in interpreting the legal import of the Joint Affidavit vis-à-vis the Additional Cash insolvency.
Pledge Agreement. Because of the stipulation cancelling and superseding the Joint Affidavit, whatever
partnership agreement there was in said previous agreement had thereby been abrogated. Also, the CA
erred in declaring that a partnership was established by and among the petitioner and the private

respondents as regards the ownership and /or operation of the gasoline service station business.
Held:
Held: There is no merit in the petitioner’s contention that because of the stipulation cancelling and
superseding the previous joint affidavit, whatever partnership agreement there was in said previous
agreement had thereby been abrogated. Said cancelling provision was necessary for the Joint Affidavit Yes. A limited partnership’s juridical personality is different
speaks of P15,000.00 advance rental starting May 25, 1966 while the latter agreement also refers to
advance rentals of the same amount starting May 24, 1966. There is therefore a duplication of reference to
of its members. On general principle, the limited partnership
the P15,000.00 hence the need to provide in the subsequent document that it “cancels and supercedes” the suffer the consequence of its acts. Under our Insolvency Law
previous none. Indeed, it is true that the latter document is silent as to the statement in the Join Affidavit
that the value represents the “capital investment” of the parties in the business and it speaks of the bankruptcy upon w/c an adjudication of involuntary insolven
petitioner as the sole dealer, but this is as it should be for in the latter document, SHELL was a signatory and
it would be against their policy if in the agreement it should be stated that the business is a partnership is the failure to pay obligations.
with private respondents and not a sole proprietorship of the petitioner.

Furthermore, there are other evidences in the record which show that there was in fact such partnership
The failure of Campos, Rueda & Co., to pay its obligations con
agreement between parties. The petitioner submitted to the private respondents periodic accounting of the specifically provided for in the Insolvency Law for declar
business and gave a written authority to the private respondent Remedios Estanislao to examine and audit
the books of their “common business” (aming negosyo). The respondent Remedios, on the other hand, insolvency. The petitioners have a right to a judicial d
assisted in the running of the business. Indeed, the parties hereto formed a partnership when they bound
themselves to contribute money in a common fund with the intention of dividing the profits among involuntary insolvency of said partnership.
themselves.

Campos Rueda & Co v Pacific Commercial (44 Phil 916)

Republic of the Philippines A decree of insolvency begins to operate on the date it is issu
SUPREME COURT adjudge Campos Rueda & Co. insolvent in December, 1921,
Manila case, and another to declare it insolvent in July, 1922, as stated

EN BANC Turning to the merits of this appeal, we find that this limited p
is, indebted to the appellants in various sums amounting to n
G.R. No. L-18703 August 28, 1922 payable in the Philippines, which were not paid more than th
date of the filing by the petitioners of the application for inv
INVOLUNTARY INSOLVENCY OF CAMPOS RUEDA & CO., S. en C., appellee, now before us. These facts were sufficient established by the e
vs.
PACIFIC COMMERCIAL CO., ASIATIC PETROLEUM CO., and INTERNATIONAL The trial court denied the petition on the ground that it w
BANKING CORPORATION,petitioners-appellants. alleged, that the members of the aforesaid firm were insolv
application was filed; and that was said partners are perso
Jose Yulo, Ross and Lawrence and J. A. Wolfson for appellants. liable for the consequence of the transactions of the partn
Antonio Sanz for appellee. adjudged insolvent so long as the partners are not allege
insolvent. From this judgment the petitioners appeal to this
ROMUALDEZ, J.: that this finding of the lower court is erroneous.

The record of this proceeding having been transmitted to this court by virtue of an The fundamental question that presents itself for decision
appeal taken herein, a motion was presented by the appellants praying this court limited partnership, such as the appellee, which has failed
that this case be considered purely a moot question now, for the reason that with three creditors for more than thirty days, may be held to
subsequent to the decision appealed from, the partnership Campos Rueda & Co., act of insolvency, and thereby be adjudged insolvent against it
voluntarily filed an application for a judicial decree adjudging itself insolvent,
which is just what the herein petitioners and appellants tried to obtain from the Unlike the common law, the Philippine statutes consider a lim
lower court in this proceeding. juridical entity for all intents and purposes, which personalit
its acts and contracts (art. 116, Code of Commerce). This bein
The motion now before us must be, and is hereby, denied even under the facts personality of a limited partnership being different from th
stated by the appellants in their motion aforesaid. The question raised in this case must, on general principle, answer for, and suffer, the conse
is not purely moot one; the fact that a man was insolvent on a certain day does not such an entity capable of being the subject of rights and obl
justify an inference that he was some time prior thereto. instant case, the limited partnership of Campos Rueda & C
obligations with three creditors for a period of more than
Proof that a man was insolvent on a certain day does not justify an failure constitutes, under our Insolvency Law, one of the acts
inference that he was on a day some time prior thereto. Many which an adjudication of involuntary insolvency can
contingencies, such as unwise INVESTMENTS , losing contracts, partnership must suffer the consequences of such a failure, an
misfortune, or accident, might happen to reduce a person from a state of insolvent. We are not unmindful of the fact that some courts
solvency within a short space of time. (Kimball vs. Dresser, 98 Me., 519; 57 have held that a partnership may not be adjudged insolven
Atl. Rep., 767.) insolvency proceeding unless all of its members are insolven
maintained a contrary view. But it must be borne in mind that
common law, partnerships have no juridical personality independent from that of Corporation, the case comes under paragraph 11 of section 20
its members; and if now they have such personality for the purpose of the consequently the petitioners have the right to a judicial d
insolvency law, it is only by virtue of general law enacted by the Congress of the involuntary insolvency of said partnership.
United States on July 1, 1898, section 5, paragraph (h), of which reads thus:
Wherefore, the judgment appealed from is reversed, and it
In the event of one or more but not all of the members of a partnership limited partnership Campos Rueda & Co. is and was on D
being adjudged bankrupt, the partnership property shall not be insolvent and liable for having failed for more than thirt
administered in bankruptcy, unless by consent of the partner or partners obligations with the three petitioners herein, and it is ordered
not adjudged bankrupt; but such partner or partners not adjudged be remanded to the Court of First Instance of Manila with inst
bankrupt shall settle the partnership business as expeditiously as its nature to issue the proper decrees under section 24 of Act No.
will permit, and account for the interest of the partner or partners therewith until its final disposition.
adjudged bankrupt.
It is so ordered without special finding as to costs.
The general consideration that these partnership had no juridical personality and
the limitations prescribed in subsection (h) above set forth gave rise to the conflict Araullo, C. J., Johnson, Street, Malcolm, Avanceña, Villamor, Os
noted in American decisions, as stated in the case of In reSamuels (215 Fed., 845), concur.
which mentions the two apparently conflicting doctrines, citing one from In
reBertenshaw (157 Fed., 363), and the other from Francis vs. McNeal (186 Fed., Republic of the Philippines
481). SUPREME COURT
Manila
But there being in our insolvency law no such provision as that contained in
section 5 of said Act of Congress of July 1, 1898, nor any rule similar thereto, and EN BANC
the juridical personality of limited partnership being recognized by our statutes
from their formation in all their acts and contracts the decision of American courts G.R. No. L-8576 February 11, 1915
on this point can have no application in this jurisdiction, nor we see any reason
why these partnerships cannot be adjudged bankrupt irrespective of the solvency VARGAS and COMPANY, plaintiff-appellee,
or insolvency of their members, provided the partnership has, as such, committed vs.
some of the acts of insolvency provided in our law. Under this view it is CHAN HANG CHIU, ET AL., defendants-appellants.
unnecessary to discuss the other points raised by the parties, although in the
particular case under consideration it can be added that the liability of the limited Rohde and Wright for appellants.
partners for the obligations and losses of the partnership is limited to the amounts Escaler and Salas for appellee.
paid or promised to be paid into the common fund except when a limited partner
should have included his name or consented to its inclusion in the firm name (arts. MORELAND, J.:
147 and 148, Code of Commerce).
This is an action brought to set aside a judgment of the justice
Therefore, it having been proven that the partnership Campos Rueda & Co. failed the ground that the plaintiff here, the defendant in the action i
for more than thirty days to pay its obligations to the petitioners the Pacific judgment was secured, was not served with summons and tha
Commercial Co. the Asiatic Petroleum Co. and the International Banking justice's court acquired no jurisdiction to render the judgment
is null and void. Judgment was entered in favor of plaintiff declaring the judgment and to permit them to sue and be sued in the name of the com
in controversy void and setting it aside. This appeal is from that judgment. being served solely on the managing agent or other official of t
specified by the section of the Code of Civil Procedure referred
It appears from the record that the plaintiff is a merchantile association duly is an illustration of the practice in vogue in the Philippine Islan
organized under the laws of the Philippine Islands and presumably registered as brings this action in the company name and not in the name of
required by law. On the 19th day of August, 1911, an action was begun by Chan firm. Actions against companies of the class to which plaintiff b
Hang Chiu against the plaintiff in this case to recover a sum of money. The according to the uninterrupted practice, against such compani
summons and complaint were placed in the hands of the sheriff, who certified that names and not against the individual partners constituting the
on the 19th day of August, 1911, he served the same on Vargas & Co. by delivering in which the individual members of the firm must be separate
to and leaving with one Jose Macapinlac personally true copies thereof, he being process, the rule also prevails that they must be parties to the
the managing agent of said Vargas & Co. at the time of such service. On July 2. plaintiffs or defendant, and that the action cannot be brought i
1912, the justice's court rendered judgment against Vargas & Co. for the sum of against the company itself. This follows naturally for the reaso
372.28. Thereafter execution was duly issued and the property of Vargas & Co. necessary to serve the partners individually, they are entitled
levied on for the payment thereof. Thereupon Vargas & Co. paid the amount of the individually in the action and they must, therefore, be made pa
judgment and costs under protest, with notice that it would sue to recover the they can be heard. It would be idle to serve process on individ
amount paid. The execution was returned satisfied and there the matter rested partnership if the litigation were to be conducted in the name
until the present action was brought. itself and by the duly constituted officials of the partnership ex

The contention of plaintiff is, and that contention is supported by the decision of From what has been said it is apparent that the plaintiff in this
the court below, that Vargas & Co. being a partnership, it is necessary, in bringing contrary to its own contention by bringing the action in the na
an action against it, to serve the summons on all of the partners, delivering to each be served with process, then the action should be brought in t
one of them personally a copy thereof; and that the summons in this case having of the partners and not in the name of the company itself.
been served on the managing agent of the company only, the service was of no
effect as against the company and the members thereof and the judgment entered Article 35 of the Civil Code provides:
by virtue of such a service was void.
The following are judicial persons:
Plaintiff also contends, and this contention is likewise supported by the court
below, that, even admitting that service on the managing agent of the plaintiff is 1. The corporation, associations, and institutions of pub
sufficient service, as a matter of fact no service was really made on the managing recognized by law.
agent of the company but, rather, on an employee or salesman of the company,
who had no powers of management or supervision and who was not competent to 2. The associations of private interest, be they civil, com
receive service on behalf of the company within the provisions of section 396 of industrial, to which the law grants proper personality,
the Code of Civil Procedure. of each member thereof.

We are of the opinion that neither of these contentions can be sustained. As to the Article 38 provides: "Judicial persons may acquire and possess
first, we may say that it has been the universal practice in the Philippine Islands kinds, as well as contract obligations and institute civil or crim
since American occupation, and was the practice prior to that time, to treat accordance with the laws and rules of their establishment."
companies of the class to which the plaintiff belongs as legal or juridicial entities
Article 116 of the Code of Commerce provides in part: "After a commercial This is the only witness who testified in the case. It does not ap
association has been established, it shall have legal representation in all its acts became the bookkeeper of the company, or that he was in such
and contracts." could know or did know personally the acts of the company an
Macapinlac. He does not testify of his own knowledge to the es
These provisions have been the foundation of the practice followed without necessary to controvert the statements contained it the sheriff
interruption for many years that association of the class to which plaintiff belongs service. His testimony is rather negative than positive, it being
have an independent and separate legal entity sufficient to permit them to sue and possible, in spite of his evidence, indeed, in strict accord there
be sued in the company name and to be served with process through the chief Co., of which the witness was neither official nor manager, cou
officer or managing agent thereof or any other official of the company specified by managing agent for the company or could have removed him w
law. knowledge of the witness. The witness had no personal knowl
between the company and Macapinlac. He never saw the contr
As to the second contention, we may say that the presumption is that a judgment between them. He did not hear the agreement between them n
rendered by a justice's court is a valid and enforceable judgment where the record his own knowledge what the relations between the company a
discloses that all of the steps necessary to confer jurisdiction on the court have were. His testimony besides being negative in character has in
been taken. In the case before us it affirmatively appears that the service of elements of hearsay and is not at all satisfactory. It would have
process was made on the person the sheriff certified was the managing agent of present one of the members of the company, or all of them, wh
the defendant company. The sheriff's certificate serves as prima facie evidence of Macapinlac, who know the relations between him and the com
the existence of the facts stated therein. The record, therefore, discloses, so far as what those relations were and to deny, if that were the fact, th
the fact of service is concerned, that it was duly made on the managing agent of the such an agent or official of the company as is within the purvie
company as required by section 396, paragraph 1, of the Code of Civil Procedure. above referred to. The facts stated in the certificate of the sher
In attacking the judgement on the ground that service was not made on the considered as overcome and rebutted except on clear evidenc
managing agent of the company, it is incumbent on the plaintiff to overcome the contrary. The evidence of the bookkeeper, who is the only witn
presumption arising from the sheriff's certificate before the attack will succeed. company, is not satisfactory in any sense and is quite insufficie
Endeavoring to overcome the presumption referred to, plaintiff offered as a presumption established by the sheriff's certificate.
witness one Tomas O. Segovia, an employee of the plaintiff company. He testified
that he was a bookkeeper and that as such he was well acquainted with the In view of these considerations it is not necessary to consider
business of the company and that the person Macapinlac referred to in the presented by the payment by the plaintiff company of the judg
sheriff's certificate as managing agent of the plaintiff company was an agent for
the sale of plows, of which the plaintiff company was a manufacturer; and that he The judgment appealed from is reversed and the complaint di
had no other relations with the company than that stated. During the course of the merits, without costs in this instance. So ordered.
examination this question was put to and answer elicited from this witness:
Arellano, C.J., Torres, Johnson and Araullo, JJ., concur.
How do you know that they were not summoned, or that they did not know
of this case brought before the justice of the peace of the city of Manila? Republic of the Philippines
SUPREME COURT
I being the bookkeeper and the general attorney-in-fact to Vargas & Co., in Manila
Iloilo, ought to know whether they have been notified or summoned, but I
only knew about it when the sheriff appeared in our office to make the levy. EN BANC
G.R. No. L-48113 April 7, 1947 Box Factory belonged to the same owner, and that the Lee Gua
subsidiary of the Modern Box Factory. There is evidence that m
NGO TIAN TEK and NGO HAY, petitioner, purchased in the name of the Lee Guan Box Factory were deliv
vs. Box Factory by the employees of the plaintiff and its assignors
PHILIPPINE EDUCATION CO., INC., respondent. direction of Vicente Tan. There is also evidence that the collec
were requested by Vicente Tan to collect — and did collect —
Tansinsin and Yatco for petitioner. Box Factory the bills against the Lee Guan Box Factory. In the f
Marcial Esposo for respondent. shows many checks signed by Ngo Hay or Ngo Tian Tek in pay
the Lee Guan Box Factory. Furthermore, — and this seems to b
PARAS, J.: Hay, testifying for the defense, admitted that 'he' was the own
Box Factory in and before the year 1934, but that in January, 1
The plaintiff, Philippine Education Co., Inc., instituted in the Court of First Instance the contract of sale Exhibit 7, to Vicente Tan, who had been his
of Manila an action against the defendants, Vicente Tan alias Chan Sy and the business. Tan declared also that before January, 1935, the Lee
partnership of Ngo Tian Tek and Ngo Hay, for the recovery of some P16,070.14, pertained to Ngo Hay and Ngo Tian Tek. The contract Exhibit 7
unpaid cost of merchandise purchased by Lee Guan Box Factory from the plaintiff referee, to be untrue and simulated, for various convincing rea
and five other corporate entities which, though not parties to the action, had repetition here. And the quoted statements serve effectively to
previously assigned their credits to the plaintiff, together with attorney's fees, evidence for the plaintiff that it was Ngo Hay's representations
interest and costs. /by agreement of the parties, the case was heard before a and responsibility for, Lee Guan Box Factory that induced them
referee, Attorney Francisco Dalupan, who in due time submitted his report holding that concern. It must be stated that in this connection — to an
the defendants jointly and severally liable to the plaintiff for the sum of fitting observation — that the plaintiff and the assignors have
P16,070.14 plus attorney's fees and interest at the rates specified in the report. On the Modern Box Factory and Ngo Hay and Co. as one and the s
March 6, 1939, the Court of First Instance of Manila rendered judgment was acts of the partners themselves, and that the proof as to Ngo H
affirmed by the Court of Appeals in its decision of January 31, 1941, now the regarding the ownership of Lee Guan Box Factory must be tak
subject of our review at the instance of the partnership Ngo Tian Tek and Ngo Hay, Hay was wont to say 'he' owned the Modern Box Factory, mea
petitioner herein. principal owner, his other partner being Ngo Tian Tek. Now, it
demonstration — for appellant does not deny it — that the ob
"It appears that," quoting from the decision of the Court of Appeals whose findings Guan Box Factory must rest upon its known owner. And that o
of fact are conclusive, "as far back as the year 1925, the Modern Box Factory was Tek and Ngo Hay."
established at 603 Magdalena Street, Manila. It was at first owned by Ngo Hay,
who three years later was joined by Ngo Tian Tek as a junior partner. The modern We must overrule petitioner's contention that the Court of Ap
Box Factory dealt in pare and similar merchandise and purchased goods from the holding that Lee Guan Box Factory was a subsidiary of the Mod
plaintiff and its assignors in the names of the Modern Box Factory, Ngo Hay and and in disregarding the fact that the contracts evidencing the d
Co., Go Hay Box Factory, or Go Hay. Then about the year 1930, the Lee Guan Box were signed by Vicente Tan alias Chan Sy, without any indicat
Factory was established a few meters from the Modern Box Factory, under the involve the Modern Box Factory or the petitioner. In the first p
management of Vicente Tan. When that concern, through Vicente Tan, sought concluded by the finding of the Court of Appeals regarding the
credit with the plaintiff and its assignors, Ngo Hay, in conversations and petitioner of Lee Guan Box Factory. Secondly, the circumstanc
interviews with their officers and employees, represented that he was the Tan alias Chan Sy acted in his own name cannot save the petit
principal owner of such factory, that the Lee Guan Box Factory and the Modern ownership, and because contracts entered into by a factor of a
establishment known to belong to a well known enterprise or association, shall be Petitioner's allegation that "fraud in the inception of the debt i
understood as made for the account of the owner of such enterprise or association, contracting parties and does not follow assignment," and that
even when the factor has not so stated at the time of executing the same, provided assigned to the respondent company "are immoral and agains
that such contracts involve objects comprised in the line and business of the therefore void," constitute defenses on the merits, but do not a
establishment. (Article 286, Code of Commerce.) The fact that Vicente Tan did not the assignment. It is obvious that, apart from the fact that the p
have any recorded power of attorney executed by the petitioner will not operate invoke fraud of its authorship to evade liability, the appealed d
to prejudice third persons, like the respondent Philippine Education Co., Inc., and on an obligation arising, not from fraud, but from the very con
its assignors. (3 Echavarri, 133.) merchandise had been purchased by Lee Guan Box Factory.

Another defense set up by the petitioner is that prior to the transactions which The fourth and fifth assignments of error relate to the refusal o
gave rise to this suit, Vicente Tan had purchased Lee Guan Box Factory from Ngo Appeals to hold that the writ of attachment is issued at the com
Hay under the contract, Exhibit 7; and the petitioner assails, under the second action by the Court of First Instance is illegal, and to award in
assignment of error, the conclusion of the Court of Appeals that said contract is petitioner damages for such wrongful attachment. For us to su
simulated. This contention is purely factual and must also be overruled. contention will amount to an unauthorized reversal of the foll
fact of the Court of Appeals: "The stereotyped manner in whic
The petitioner questions the right of the respondent Philippine Education Co., Inc., obtained goods on credit from the six companies, Vicente Tan'
to sue for the credits assigned by the five entities with which Lee Guan Box disappearance, the execution of the fake sale Exhibit 7 to throw
Factory originally contracted, it being argued that the assignment, intended only responsibility upon the absent or otherwise insolvent Tan, def
for purposes of collection, did not make said respondent the real party in interest. and unbelievable theories as to the ownership of the Modern B
The petitioner has cited 5 Corpus Juris, section 144, page 958, which points out Guan Box Factory — obviously adopted in a vain effort to mee
that "under statutes authorizing only a bona fideassignee of choses in action to sue the evidentiary force of plaintiff's documentary evidence — ar
thereon in his own name, an assignee for collection merely is not entitled to sue in significant to permit a declaration that the attachment was no
his own name."
Regarding the suggestion in petitioner's memorandum that th
The finding of the Court of Appeals that there is nothing "simulated in the dismissed because of the death of Ngo Hay, it is sufficient to st
assignment," precludes us from ruling that respondent company is not a bona petitioner Ngo Tian Tek and Ngo Hay is sued as a partnership
fide assignee. Even assuming, however, that said assignment was only for personality distinct from any of the partners.
collection, we are not prepared to say that, under section 114 of the Code of Civil
Procedure, in force at the time this action was instituted, ours is not one of those The appealed decision is affirmed, with costs against the petiti
jurisdictions following the rule that "when a choose, capable of legal assignment, is
assigned absolutely to one, but the assignment is made for purpose of collection, Moran, C.J., Pablo, Perfecto, Hilado, Briones, Hontiveros, and Tua
the legal title thereto vests in the assignee, and it is no concern of the debtor that
the equitable title is in another, and payment to the assignee discharges the
debtor." (5 C. J., section 144, p. 958.) No substantial right of the petitioner could
indeed be prejudiced by such assignment, because section 114 of the Code of Civil
Procedure reserves to it "'any set-off or other defense existing at the time of or Separate Opinions
before notice of the assignment.'"
FERIA, J., concurring and dissenting:
I concur in the majority except that portion thereof which deals with the question quotes
whether an assignee for collection merely is entitled to sue in his own name, and bases its conclusion to the contrary on the first sentence o
which need not be discussed, in view of the finding of the Court of Appeals that not relied on by the petitioner, and which deals with absolute
there is nothing "simulated in the assignment" which according to the very fide assignment, and to the provision of section 114 of the Cod
opinion of the majority "precludes us from ruling that the respondent company is on set-off and defenses which defendant may set up to an actio
not a bona fide assignee;" because such being the conclusion of fact of the Court of bona fide assignee.
Appeals, this Supreme Court can not modify or reverse that conclusion and find
that respondent Philippine Education Co. was not a bona fide assignee, and the To clearly show the error, we transcribe below section 144, pa
assignment was not absolute, but made merely for collection in order that said Juris quoted and underlined by the petitioner in his brief:
respondent may sue in its own name.
144. G. Assignments for Collection. — When a chose, cap
But I dissent from the majority opinion when it further says: assignment, is assigned absolutely to one, but the assig
purpose of collection, the legal title thereto vests in the
Even assuming, however, that said assignment was only for collection, we no concern of the debtor that the equitable title is in an
are not prepared to say that, under section 114 of the Code of Civil to the assignee discharges the debtor. Under the statute
Procedure, in force at the time this action was instituted, ours is not one of jurisdictions, the assignee may prosecute an action the
those jurisdictions following the rule that "when a choose, capable of legal name as the real party in interest or as a trustee of an e
assignment, is assigned absolutely to one, but the assignment is made for under statutes authorizing only a bona fide assignee of c
purpose of collection, the legal title thereto vests in the assignee, and it is thereon in his own name, an assignee for collection mere
no concern of the debtor that the equitable title is in another, and payment sue in his own name. An assignment merely for collection
to the assignee discharges the debtor." (5 C. J., section 114, p. 958.) No the beneficial ownership to the assignee.
substantial right of the petitioner could indeed be prejudiced by such
assignment, because section 114 of the Code of Civil Procedure reserves to It is not only convenient but necessary to point this error in th
it "any set-off or other defense exiting at the time of or before notice of the concurring and dissenting opinion, for the conclusion set forth
assignment." portion of the majority decision is misleading; because it appa
ruling that an assignee not bona fide to whom a credit was ass
The reason for my dissenting is that, after quoting the finding of the Court of absolutely, but for collection merely may sue in his own name
Appeals and stating that said conclusion precludes this Court "from ruling that the question which has not yet been passed upon squarely by this
respondent company is not a bona fide assignee," the majority should have 64 L. R. A., 585]), but the premise on which the majority's conc
stopped then and there. But having preferred to adduce an additional ratio predicated in said portion of the Corpus Juris quoted in the op
decidendi, and assume that the assignment was for collection only and not an wrong premise laid down, not by the petitioner,
absolute and bona fide one, in order to meet the latter's argument, because the
Court of Appeals' conclusion is that the assignment was not simulated, that is,
absolute and bona fide, the majority should have quoted and discussed the second
and third sentences of paragraph 144, page 958, of the Corpus Juris, quoted and Republic of the Philippines
relied on by the petitioner, which refers to an assignment that is not absolutely SUPREME COURT
and bona fide made. However the majority opinion did not do so, and Manila
 EN BANC On April 15, 1958 — prior to the expiration of the five-year ter
partnership Ang Pue & Company, but after the enactment of th
G.R. No. L-17295 July 30, 1962 1180, the partners already mentioned amended the original ar
ownership (Exhibit B) so as to extend the term of life of the pa
ANG PUE & COMPANY, ET AL., plaintiffs-appellants, five years. When the amended articles were presented for regi
vs. of the Securities & Exchange Commission on April 16, 1958, re
SECRETARY OF COMMERCE AND INDUSTRY, defendant-appellee. refused upon the ground that the extension was in violation of

Felicisimo E. Escaran for plaintiffs-appellants. From the decision of the lower court dismissing the action, wi
Office of the Solicitor General for defendant-appellee. plaintiffs interposed this appeal.

DIZON, J.: The question before us is too clear to require an extended disc
a corporation or a partnership that could claim a juridical pers
Action for declaratory relief filed in the Court of First Instance of Iloilo by Ang Pue and transact business as such, is not a matter of absolute right
& Company, Ang Pue and Tan Siong against the Secretary of Commerce and which may be enjoyed only under such terms as the State may
Industry to secure judgment "declaring that plaintiffs could extend for five years impose. That the State, through Congress, and in the manner p
the term of the partnership pursuant to the provisions of plaintiffs' Amendment to the right to enact Republic Act No. 1180 and to provide therein
the Article of Co-partnership." and concerns wholly owned by Filipinos may engage in the ret
be seriously disputed. That this provision was clearly intended
The answer filed by the defendant alleged, in substance, that the extension for partnership already existing at the time of the enactment of th
another five years of the term of the plaintiffs' partnership would be in violation of showing by its provision giving them the right to continue eng
the provisions of Republic Act No. 1180. business until the expiration of their term or life.

It appears that on May 1, 1953, Ang Pue and Tan Siong, both Chinese citizens, To argue that because the original articles of partnership prov
organized the partnership Ang Pue & Company for a term of five years from May 1, partners could extend the term of the partnership, the provisio
1953, extendible by their mutual consent. The purpose of the partnership was "to 1180 cannot be adversely affect appellants herein, is to errone
maintain the business of general merchandising, buying and selling at wholesale the aforesaid provision constitute a property right of which th
and retail, particularly of lumber, hardware and other construction materials for be deprived without due process or without their consent. The
commerce, either native or foreign." The corresponding articles of partnership therein must be deemed subject to the law existing at the time
(Exhibit B) were registered in the Office of the Securities & Exchange Commission came to agree regarding the extension. In the present case, as
on June 16, 1953. the partners amended the articles of partnership, the provisio
1180 were already in force, and there can be not the slightest
On June 19, 1954 Republic Act No. 1180 was enacted to regulate the retail claimed by appellants to extend the original term of their part
business. It provided, among other things, that, after its enactment, a partnership five years would be in violation of the clear intent and purpose
not wholly formed by Filipinos could continue to engage in the retail business aforesaid.
until the expiration of its term.
WHEREFORE, the judgment appealed from is affirmed, with co
 Republic of the Philippines Petitioners protested the said assessment in a letter of June 26
SUPREME COURT that they had availed of tax amnesties way back in 1974.
Manila
In a reply of August 22, 1979, respondent Commissioner infor
FIRST DIVISION in the years 1968 and 1970, petitioners as co-owners in the re
transactions formed an unregistered partnership or joint vent
G.R. No. 78133 October 18, 1988 corporation under Section 20(b) and its income was subject to
prescribed under Section 24, both of the National Internal Rev
MARIANO P. PASCUAL and RENATO P. DRAGON, petitioners, unregistered partnership was subject to corporate income tax
vs. from profits derived from the partnership by them which is su
THE COMMISSIONER OF INTERNAL REVENUE and COURT OF TAX income tax; and that the availment of tax amnesty under P.D. N
APPEALS, respondents. by petitioners relieved petitioners of their individual income t
not relieve them from the tax liability of the unregistered part
De la Cuesta, De las Alas and Callanta Law Offices for petitioners. petitioners were required to pay the deficiency income tax ass

The Solicitor General for respondents Petitioners filed a petition for review with the respondent Cou
docketed as CTA Case No. 3045. In due course, the respondent
decision of March 30, 1987, 2 affirmed the decision and action
respondent commissioner with costs against petitioners.
GANCAYCO, J.:
It ruled that on the basis of the principle enunciated in Evange
The distinction between co-ownership and an unregistered partnership or joint unregistered partnership was in fact formed by petitioners wh
venture for income tax purposes is the issue in this petition. corporation was subject to corporate income tax distinct from
partners.
On June 22, 1965, petitioners bought two (2) parcels of land from Santiago
Bernardino, et al. and on May 28, 1966, they bought another three (3) parcels of In a separate dissenting opinion, Associate Judge Constante Ro
land from Juan Roque. The first two parcels of land were sold by petitioners in considering the circumstances of this case, although there mig
1968 toMarenir Development Corporation, while the three parcels of land were ownership between the petitioners, there was no adequate ba
sold by petitioners to Erlinda Reyes and Maria Samson on March 19,1970. conclusion that they thereby formed an unregistered partners
Petitioners realized a net profit in the sale made in 1968 in the amount of "hem liable for corporate income tax under the Tax Code.
P165,224.70, while they realized a net profit of P60,000.00 in the sale made in
1970. The corresponding capital gains taxes were paid by petitioners in 1973 and Hence, this petition wherein petitioners invoke as basis thereo
1974 by availing of the tax amnesties granted in the said years. alleged errors of the respondent court:

However, in a letter dated March 31, 1979 of then Acting BIR Commissioner Efren A. IN HOLDING AS PRESUMPTIVELY CORRECT T
I. Plana, petitioners were assessed and required to pay a total amount of DETERMINATION OF THE RESPONDENT COMM
P107,101.70 as alleged deficiency corporate income taxes for the years 1968 and EFFECT THAT PETITIONERS FORMED AN UNRE
1970. PARTNERSHIP SUBJECT TO CORPORATE INCOM
 THE BURDEN OF OFFERING EVIDENCE IN OPPOSITION THERETO partnership as used in sections 24 and 84 of said
RESTS UPON THE PETITIONERS. parts of which read:

B. IN MAKING A FINDING, SOLELY ON THE BASIS OF ISOLATED Sec. 24. Rate of the tax on corporations.—There s
SALE TRANSACTIONS, THAT AN UNREGISTERED PARTNERSHIP assessed, collected, and paid annually upon the
EXISTED THUS IGNORING THE REQUIREMENTS LAID DOWN BY received in the preceding taxable year from all s
LAW THAT WOULD WARRANT THE PRESUMPTION/CONCLUSION corporation organized in, or existing under the l
THAT A PARTNERSHIP EXISTS. Philippines, no matter how created or organized
duly registered general co-partnerships (compa
C. IN FINDING THAT THE INSTANT CASE IS SIMILAR TO THE tax upon such income equal to the sum of the fo
EVANGELISTA CASE AND THEREFORE SHOULD BE DECIDED
ALONGSIDE THE EVANGELISTA CASE. Sec. 84(b). The term "corporation" includes part
how created or organized, joint-stock companie
D. IN RULING THAT THE TAX AMNESTY DID NOT RELIEVE THE (cuentas en participation), associations or insur
PETITIONERS FROM PAYMENT OF OTHER TAXES FOR THE PERIOD does not include duly registered general co-part
COVERED BY SUCH AMNESTY. (pp. 12-13, Rollo.) (companies colectivas).

The petition is meritorious. Article 1767 of the Civil Code of the Philippines

The basis of the subject decision of the respondent court is the ruling of this Court By the contract of partnership two or more pers
in Evangelista. 4 to contribute MONEY , property, or industry to
with the intention of dividing the profits among
In the said case, petitioners borrowed a sum of MONEY from their father which
together with their own personal funds they used in buying several real Pursuant to this article, the essential elements of
properties. They appointed their brother to manage their properties with full two, namely: (a) an agreement to contribute MON
power to lease, collect, rent, issue receipts, etc. They had the real properties rented industry to a common fund; and (b) intent to divi
or leased to various tenants for several years and they gained net profits from the the contracting parties. The first element is undo
rental income. Thus, the Collector of Internal Revenue demanded the payment of the case at bar, for, admittedly, petitioners have
income tax on a corporation, among others, from them. contribute MONEY and property to a common
narrows down to their intent in acting as they did
In resolving the issue, this Court held as follows: consideration of all the facts and circumstances
case, we are fully satisfied that their purpose was
The issue in this case is whether petitioners are subject to the tax on estate transactions for monetary gain and then d
corporations provided for in section 24 of Commonwealth Act No. among themselves, because:
466, otherwise known as the National Internal Revenue Code,
as WELL as to the residence tax for corporations and the real 1. Said common fund was not something they fou
estate dealers' fixed tax. With respect to the tax on corporations, the existence. It was not a property inherited by them
issue hinges on the meaning of the terms corporation and
They created it purposely. What is more they jointly borrowed a 6. Petitioners have not testified or introduced an
substantial portion thereof in order to establish said common fund. on their purpose in creating the set up already a
causes for its continued existence. They did not
2. They INVESTED the same, not merely in one transaction, but in a explanation therefor.
series of transactions. On February 2, 1943, they bought a lot for
P100,000.00. On April 3, 1944, they purchased 21 lots for Although, taken singly, they might not suffice to
P18,000.00. This was soon followed, on April 23, 1944, by the necessary to constitute a partnership, the collect
acquisition of another real estate for P108,825.00. Five (5) days circumstances is such as to leave no room for dou
later (April 28, 1944), they got a fourth lot for P237,234.14. The said intent in petitioners herein. Only one or two o
number of lots (24) acquired and transcations undertaken, as WELL aforementioned circumstances were present in th
as the brief interregnum between each, particularly the last three petitioners herein, and, hence, those cases are not
purchases, is strongly indicative of a pattern or common design that
was not limited to the conservation and preservation of the In the present case, there is no evidence that petitioners enter
aforementioned common fund or even of the property acquired by agreement to contribute MONEY , property or industry to a co
petitioners in February, 1943. In other words, one cannot but perceive that they intended to divide the profits among themselves. Res
a character of habituality peculiar to business transactions engaged commissioner and/ or his representative just assumed these c
in for purposes of gain. present on the basis of the fact that petitioners purchased cert
and became co-owners thereof.
3. The aforesaid lots were not devoted to residential purposes or to
other personal uses, of petitioners herein. The properties were leased In Evangelists, there was a series of transactions where petition
separately to several persons, who, from 1945 to 1948 inclusive, twenty-four (24) lots showing that the purpose was not limited
paid the total sum of P70,068.30 by way of rentals. Seemingly, the or preservation of the common fund or even the properties ac
lots are still being so let, for petitioners do not even suggest that character of habituality peculiar to business transactions engag
there has been any change in the utilization thereof. of gain was present.

4. Since August, 1945, the properties have been under the In the instant case, petitioners bought two (2) parcels of land i
management of one person, namely, Simeon Evangelists, with full not sell the same nor make any improvements thereon. In 196
power to lease, to collect rents, to issue receipts, to bring suits, to another three (3) parcels of land from one seller. It was only 1
sign letters and contracts, and to indorse and deposit notes and the two (2) parcels of land after which they did not make any a
checks. Thus, the affairs relative to said properties have been handled purchase. The remaining three (3) parcels were sold by them
as if the same belonged to a corporation or business enterprise transactions were isolated. The character of habituality peculi
operated for profit. transactions for the purpose of gain was not present.

5. The foregoing conditions have existed for more than ten (10) years, In Evangelista, the properties were leased out to tenants for se
or, to be exact, over fifteen (15) years, since the first property was business was under the management of one of the partners. Su
acquired, and over twelve (12) years, since Simeon Evangelists for over fifteen (15) years. None of the circumstances are pres
became the manager. bar. The co-ownership started only in 1965 and ended in 1970
Thus, in the concurring opinion of Mr. Justice Angelo Bautista in Evangelista he to their contribution, but who severally retain th
said: respective contribution, are not thereby rendere
have no common stock or capital, and no commu
I wish however to make the following observation Article 1769 of principal proprietors in the business itself which
the new Civil Code lays down the rule for determining when a derived. (Elements of the Law of Partnership by
transaction should be deemed a partnership or a co-ownership. Said 2nd Ed., section 83, p. 74.)
article paragraphs 2 and 3, provides;
A joint purchase of land, by two, does not consti
(2) Co-ownership or co-possession does not itself establish a partnership in respect thereto; nor does an agre
partnership, whether such co-owners or co-possessors do or do not profits and losses on the sale of land create a pa
share any profits made by the use of the property; parties are only tenants in common. (Clark vs. S
682,12 Ct. 327, 35 L. Ed., 1157.)
(3) The sharing of gross returns does not of itself establish a
partnership, whether or not the persons sharing them have a joint Where plaintiff, his brother, and another agreed
or common right or interest in any property from which the returns of a single tract of realty, holding as tenants in co
are derived; divide the profits of disposing of it, the brother a
being entitled to share in plaintiffs commission,
From the above it appears that the fact that those who agree to form existed as between the three parties, whatever t
a co- ownership share or do not share any profits made by the use of have been as to third parties. (Magee vs. Magee
the property held in common does not convert their venture into a Mass. 341.)
partnership. Or the sharing of the gross returns does not of itself
establish a partnership whether or not the persons sharing therein In order to constitute a partnership inter sese the
have a joint or common right or interest in the property. This only intent to form the same; (b) generally participati
means that, aside from the circumstance of profit, the presence of losses; (c) and such a community of interest, as fa
other elements constituting partnership is necessary, such as the clear are concerned as enables each party to make con
intent to form a partnership, the existence of a juridical personality business, and dispose of the whole property.-Mun
different from that of the individual partners, and the freedom to Herring 150 P. 1067, 50 III 470.)
transfer or assign any interest in the property by one with the consent
of the others (Padilla, Civil Code of the Philippines Annotated, Vol. I, The common ownership of property does not its
1953 ed., pp. 635-636) partnership between the owners, though they m
purpose of making gains; and they may, without
It is evident that an isolated transaction whereby two or more persons agree among themselves as to the management,
contribute funds to buy certain real estate for profit in the absence of property and the application of the proceeds the
other circumstances showing a contrary intention cannot be vs. Wilson, 142 S.W. 363,160 No. App. 14.) 6
considered a partnership.
The sharing of returns does not in itself establish a partnershi
Persons who contribute property or funds for a common enterprise persons sharing therein have a joint or common right or intere
and agree to share the gross returns of that enterprise in proportion There must be a clear intent to form a partnership, the existen
personality different from the individual partners, and the freedom of each party G.R. No. L-19342 May 25, 1972
to transfer or assign the whole property.
LORENZO T. OÑA and HEIRS OF JULIA BUÑALES, namely: R
In the present case, there is clear evidence of co-ownership between the MARIANO B. OÑA, LUZ B. OÑA, VIRGINIA B. OÑA and LORE
petitioners. There is no adequate basis to support the proposition that they JR., petitioners,
thereby formed an unregistered partnership. The two isolated transactions vs.
whereby they purchased properties and sold the same a few years thereafter did THE COMMISSIONER OF INTERNAL REVENUE, respondent.
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 Orlando Velasco for petitioners.
amnesty thereby. Under the circumstances, they cannot be considered to have
formed an unregistered partnership which is thereby liable for corporate income Office of the Solicitor General Arturo A. Alafriz, Assistant Solicito
tax, as the respondent commissioner proposes. R. Rosete, and Special Attorney Purificacion Ureta for responden

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 BARREDO, J.:p
said deficiency corporate income tax, then petitioners can be held individually
liable as partners for this unpaid obligation of the partnership p. 7 However, as Petition for review of the decision of the Court of Tax Appeals
petitioners have availed of the benefits of tax amnesty as individual taxpayers in similarly entitled as above, holding that petitioners have const
these transactions, they are thereby relieved of any further tax liability arising unregistered partnership and are, therefore, subject to the pay
therefrom. deficiency corporate income taxes assessed against them by re
Commissioner of Internal Revenue for the years 1955 and 195
WHEREFROM, the petition is hereby GRANTED and the decision of the respondent P21,891.00, plus 5% surcharge and 1% monthly interest from
Court of Tax Appeals of March 30, 1987 is hereby REVERSED and SET ASIDE and subject to the provisions of Section 51 (e) (2) of the Internal R
another decision is hereby rendered relieving petitioners of the corporate income amended by Section 8 of Republic Act No. 2343 and the costs o
tax liability in this case, without pronouncement as to costs. as the resolution of said court denying petitioners' motion fo
said decision.
SO ORDERED.
The facts are stated in the decision of the Tax Court as follows
Cruz, Griño-Aquino and Medialdea, JJ., concur.
Julia Buñales died on March 23, 1944, leaving as
Narvasa, J., took no part. spouse, Lorenzo T. Oña and her five children. In
4519 was instituted in the Court of First Instanc
Republic of the Philippines settlement of her estate. Later, Lorenzo T. Oña th
SUPREME COURT was appointed administrator of the estate of sai
Manila 3, pp. 34-41, BIR rec.). On April 14, 1949, the adm
submitted the project of partition, which was ap
EN BANC on May 16, 1949 (See Exhibit K). Because three
Luz, Virginia and Lorenzo, Jr., all surnamed Oña, were still minors e MENT d
when the project of partition was approved, Lorenzo T. Oña, their

a
father and administrator of the estate, filed a petition in Civil Case r
No. 9637 of the Court of First Instance of Manila for appointment as
guardian of said minors. On November 14, 1949, the Court Account Acc
appointed him guardian of the persons and property of the oun
aforenamed minors (See p. 3, BIR rec.). t

The project of partition (Exhibit K; see also pp. 77-70, BIR rec.) 1949 — P87,860.00
shows that the heirs have undivided one-half (1/2) interest in ten
parcels of land with a total assessed value of P87,860.00, six houses 1950 P24,657.65 128,566.72
with a total assessed value of P17,590.00 and an undetermined 1951 51,301.31 120,349.28
amount to be collected from the War Damage Commission. Later,
they received from said Commission the amount of P50,000.00, 1952 67,927.52 87,065.28
more or less. This amount was not divided among them but was
used in the rehabilitation of properties owned by them in common 1953 61,258.27 84,925.68
(t.s.n., p. 46). Of the ten parcels of land aforementioned, two were
acquired after the death of the decedent with MONEY borrowed 1954 63,623.37 99,001.20
from the Philippine Trust Company in the amount of P72,173.00 1955 100,786.00 120,249.78
(t.s.n., p. 24; Exhibit 3, pp. 31-34 BIR rec.).
1956 175,028.68 135,714.68
The project of partition also shows that the estate shares equally
with Lorenzo T. Oña, the administrator thereof, in the obligation of
(See Exhibits 3 & K t.s.n., pp. 22, 25-26, 40, 50, 1
P94,973.00, consisting of loans contracted by the latter with the
approval of the Court (see p. 3 of Exhibit K; or see p. 74, BIR rec.).
From said INVESTMENTS and properties petit
incomes as profits from installment sales of sub
Although the project of partition was approved by the Court on May
from sales of stocks, dividends, rentals and inter
16, 1949, no attempt was made to divide the properties therein
Exhibit 3; p. 32, BIR rec.; t.s.n., pp. 37-38). The sa
listed. Instead, the properties remained under the management of
recorded in the books of account kept by Lorenz
Lorenzo T. Oña who used said properties in business by leasing or
corresponding shares of the petitioners in the n
selling them and investing the income derived therefrom and the
year are also known. Every year, petitioners retu
proceeds from the sales thereof in real properties and securities. As
purposes their shares in the net income derived
a result, petitioners' properties and INVESTMENTS gradually
properties and securities and/or from transactio
increased from P105,450.00 in 1949 to P480,005.20 in 1956 as can
(Exhibit 3, supra; t.s.n., pp. 25-26). However, pet
be gleaned from the following year-end balances:
actually receive their shares in the yearly incom
40, 98, 100). The income was always left in the h
Y INVEST Lan Buil
Oña who, as heretofore pointed out, INVESTED them in real Upon further consideration of the case, the 25%
properties and securities. (See Exhibit 3, t.s.n., pp. 50, 102-104). eliminated in line with the ruling of the Supreme
Batangas Transportation Co., G.R. No. L-9692, Ja
On the basis of the foregoing facts, respondent (Commissioner of the questioned assessment refers solely to the in
Internal Revenue) decided that petitioners formed an unregistered the years 1955 and 1956 and the "Compromise
partnership and therefore, subject to the corporate income tax, latter item obviously referring to the compromi
pursuant to Section 24, in relation to Section 84(b), of the Tax Code. criminal liability for failure of petitioners to file
Accordingly, he assessed against the petitioners the amounts of income tax returns for said years. (See Exh. 17, p
P8,092.00 and P13,899.00 as corporate income taxes for 1955 and records). (Pp. 1-3, Annex C to Petition)
1956, respectively. (See Exhibit 5, amended by Exhibit 17, pp. 50
and 86, BIR rec.). Petitioners protested against the assessment and Petitioners have assigned the following as alleged errors of the
asked for reconsideration of the ruling of respondent that they have
formed an unregistered partnership. Finding no merit in petitioners' I.
request, respondent denied it (See Exhibit 17, p. 86, BIR rec.). (See
pp. 1-4, Memorandum for Respondent, June 12, 1961). THE COURT OF TAX APPEALS ERRED IN HOLDI
PETITIONERS FORMED AN UNREGISTERED PAR
The original assessment was as follows:
II.
1955
THE COURT OF TAX APPEALS ERRED IN NOT H
Net income as per investigation ................ P40,209.89 PETITIONERS WERE CO-OWNERS OF THE PROP
AND (THE) PROFITS DERIVED FROM TRANSAC
Income tax due thereon ............................... 8,042.00 (sic);
25% surcharge .............................................. 2,010.50
Compromise for non-filing .......................... 50.00 III.
Total ............................................................... P10,102.50
THE COURT OF TAX APPEALS ERRED IN HOLDI
1956 PETITIONERS WERE LIABLE FOR CORPORATE
1955 AND 1956 AS AN UNREGISTERED PARTNE
Net income as per investigation ................ P69,245.23
IV.
Income tax due thereon ............................... 13,849.00
25% surcharge .............................................. 3,462.25 ON THE ASSUMPTION THAT THE PETITIONERS
Compromise for non-filing .......................... 50.00 UNREGISTERED PARTNERSHIP, THE COURT OF
Total ............................................................... P17,361.25 ERRED IN NOT HOLDING THAT THE PETITIONE
UNREGISTERED PARTNERSHIP TO THE EXTEN
(See Exhibit 13, page 50, BIR records) THEY INVESTED THE PROFITS FROM THE PRO
 IN COMMON AND THE LOANS RECEIVED USING THE INHERITED assessment in question refers to the later years 1955 and 195
PROPERTIES AS COLLATERALS; point to be important because, apparently, at the start, or in th
1954, the respondent Commissioner of Internal Revenue did t
V . co-owners, not liable to corporate tax, and it was only from 19
considered them as having formed an unregistered partnershi
ON THE ASSUMPTION THAT THERE WAS AN UNREGISTERED nothing in the record indicating that an earlier assessment had
PARTNERSHIP, THE COURT OF TAX APPEALS ERRED IN NOT Such being the case, and We see no reason how it could be oth
DEDUCTING THE VARIOUS AMOUNTS PAID BY THE PETITIONERS understandable why petitioners' position that they are co-own
AS INDIVIDUAL INCOME TAX ON THEIR RESPECTIVE SHARES OF unregistered co-partners, for the purposes of the impugned as
THE PROFITS ACCRUING FROM THE PROPERTIES OWNED IN upheld. Truth to tell, petitioners should find comfort in the fac
COMMON, FROM THE DEFICIENCY TAX OF THE UNREGISTERED similarly assessed earlier by the Bureau of Internal Revenue.
PARTNERSHIP.
The Tax Court found that instead of actually distributing the e
In other words, petitioners pose for our resolution the following questions: (1) among themselves pursuant to the project of partition approv
Under the facts found by the Court of Tax Appeals, should petitioners be properties remained under the management of Lorenzo T. Oña
considered as co-owners of the properties inherited by them from the deceased properties in business by leasing or selling them and INVESTIN
Julia Buñales and the profits derived from transactions involving the same, or, derived therefrom and the proceed from the sales thereof in re
must they be deemed to have formed an unregistered partnership subject to tax securities," as a result of which said properties and investmen
under Sections 24 and 84(b) of the National Internal Revenue Code? (2) Assuming yearly from P87,860.00 in "land account" and P17,590.00 in "b
they have formed an unregistered partnership, should this not be only in the sense 1949 to P175,028.68 in "INVESTMENT account," P135.714.6
that they INVESTED as a common fund the profits earned by the properties and P169,262.52 in "building account" in 1956. And all these b
owned by them in common and the loans granted to them upon the security of the because, admittedly, petitioners never actually received any sh
said properties, with the result that as far as their respective shares in the or profits from Lorenzo T. Oña and instead, they allowed him t
inheritance are concerned, the total income thereof should be considered as that said shares as part of the common fund for their ventures, eve
of co-owners and not of the unregistered partnership? And (3) assuming again corresponding income taxes on the basis of their respective sh
that they are taxable as an unregistered partnership, should not the various their common business as reported by the said Lorenzo T. Oña
amounts already paid by them for the same years 1955 and 1956 as individual
income taxes on their respective shares of the profits accruing from the properties It is thus incontrovertible that petitioners did not, contrary to
they owned in common be deducted from the deficiency corporate taxes, herein merely limit themselves to holding the properties inherited by
involved, assessed against such unregistered partnership by the respondent admitted that during the material years herein involved, some
Commissioner? properties were sold at considerable profit, and that with said
engaged, thru Lorenzo T. Oña, in the purchase and sale of corp
Pondering on these questions, the first thing that has struck the Court is that likewise admitted that all the profits from these ventures were
whereas petitioners' predecessor in interest died way back on March 23, 1944 and petitioners proportionately in accordance with their respectiv
the project of partition of her estate was judicially approved as early as May 16, inheritance. In these circumstances, it is Our considered view
1949, and presumably petitioners have been holding their respective shares in moment petitioners allowed not only the incomes from their r
their inheritance since those dates admittedly under the administration or the inheritance but even the inherited properties themselves t
management of the head of the family, the widower and father Lorenzo T. Oña, the Lorenzo T. Oña as a common fund in undertaking several tran
business, with the intention of deriving profit to be shared by them proportionally, of making profit thereby in proportion to his share, there can b
such act was tantamonut to actually contributing such incomes to a common fund even if no document or instrument were executed for the purp
and, in effect, they thereby formed an unregistered partnership within the purposes, at least, an unregistered partnership is formed. This
purview of the above-mentioned provisions of the Tax Code. happened to petitioners in this case.

It is but logical that in cases of inheritance, there should be a period when the In this connection, petitioners' reliance on Article 1769, parag
heirs can be considered as co-owners rather than unregistered co-partners within Code, providing that: "The sharing of gross returns does not of
the contemplation of our corporate tax laws aforementioned. Before the partition partnership, whether or not the persons sharing them have a j
and distribution of the estate of the deceased, all the income thereof does belong right or interest in any property from which the returns are de
commonly to all the heirs, obviously, without them becoming thereby matter, on any other provision of said code on partnerships is
unregistered co-partners, but it does not necessarily follow that such status as co- In Evangelista, supra, this Court clearly differentiated the conc
owners continues until the inheritance is actually and physically distributed under the Civil Code from that of unregistered partnerships w
among the heirs, for it is easily conceivable that after knowing their respective as "corporations" under Sections 24 and 84(b) of the National
shares in the partition, they might decide to continue holding said shares under Code. Mr. Justice Roberto Concepcion, now Chief Justice, elucid
the common management of the administrator or executor or of anyone chosen by thus:
them and engage in business on that basis. Withal, if this were to be allowed, it
would be the easiest thing for heirs in any inheritance to circumvent and render To begin with, the tax in question is one impose
meaningless Sections 24 and 84(b) of the National Internal Revenue Code. "corporations", which, strictly speaking, are dist
from "partnerships". When our Internal Revenu
It is true that in Evangelista vs. Collector, 102 Phil. 140, it was stated, among the "partnerships" among the entities subject to the
reasons for holding the appellants therein to be unregistered co-partners for tax "corporations", said Code must allude, therefore
purposes, that their common fund "was not something they found already in which are not necessarily "partnerships", in the t
existence" and that "it was not a property inherited by them pro indiviso," but it is the term. Thus, for instance, section 24 of said C
certainly far fetched to argue therefrom, as petitioners are doing here, that ergo, in the aforementioned tax "duly registered general
all instances where an inheritance is not actually divided, there can be no which constitute precisely one of the most typic
unregistered co-partnership. As already indicated, for tax purposes, the co- partnerships in this jurisdiction. Likewise, as de
ownership of inherited properties is automatically converted into an unregistered 84(b) of said Code, "the term corporation includ
partnership the moment the said common properties and/or the incomes derived matter how created or organized." This qualifyin
therefrom are used as a common fund with intent to produce profits for the heirs indicates that a joint venture need not be under
in proportion to their respective shares in the inheritance as determined in a standard forms, or in confirmity with the usual r
project partition either duly executed in an extrajudicial settlement or approved law on partnerships, in order that one could be d
by the court in the corresponding testate or intestate proceeding. The reason for for purposes of the tax on corporation. Again, pu
this is simple. From the moment of such partition, the heirs are entitled already to section 84(b),the term "corporation" includes, a
their respective definite shares of the estate and the incomes thereof, for each of accounts,(cuentas en participacion)" and "associ
them to manage and dispose of as exclusively his own without the intervention of which has a legal personality of its own, indepen
the other heirs, and, accordingly he becomes liable individually for all taxes in members. Accordingly, the lawmaker could not
connection therewith. If after such partition, he allows his share to be held in personality as a condition essential to the existe
common with his co-heirs under a single management to be used with the intent partnerships therein referred to. In fact, as abov
 registered general co-partnerships" — which are possessed of the As regards the second question raised by petitioners about the
aforementioned personality — have been expressly excluded by law purposes of the corporate taxes in question, of their inherited
(sections 24 and 84[b]) from the connotation of the term those acquired by them subsequently, We consider as justified
"corporation." .... ratiocination of the Tax Court in denying their motion for reco

xxx xxx xxx In connection with the second ground, it is alleg

an unregistered partnership, the holding should
Similarly, the American Law business engaged in apart from the properties in
petitioners. In other words, the taxable income o
... provides its own concept of a partnership. Under the should be limited to the income derived from th
term "partnership" it includes not only a partnership sale of real properties and corporate securities a
as known in common law but, as WELL , a syndicate, include the income derived from the inherited p
group, pool,joint venture, or other unincorporated admitted that the inherited properties and the in
organization which carries on any business, financial therefrom were used in the business of buying a
operation, or venture, and which is not, within the properties and corporate securities. Accordingly
meaning of the Code, a trust, estate, or a corporation. income must include not only the income derive
... . (7A Merten's Law of Federal Income Taxation, p. and sale of other properties but also the income
789; emphasis ours.) properties.

The term "partnership" includes a syndicate, group, Besides, as already observed earlier, the income derived from
pool, joint venture or other unincorporated may be considered as individual income of the respective heir
organization, through or by means of which any inheritance or estate is not distributed or, at least, partitioned
business, financial operation, or venture is carried on. ... their respective known shares are used as part of the common
. (8 Merten's Law of Federal Income Taxation, p. 562 to be used in making profits, it is but proper that the income o
Note 63; emphasis ours.) be considered as the part of the taxable income of an unregiste
This, We hold, is the clear intent of the law.
For purposes of the tax on corporations, our National Internal
Revenue Code includes these partnerships — with the exception only Likewise, the third question of petitioners appears to have bee
of duly registered general copartnerships — within the purview of resolved by the Tax Court in the aforementioned resolution de
the term "corporation." It is, therefore, clear to our mind that motion for reconsideration of the decision of said court. Pertin
petitioners herein constitute a partnership, insofar as said Code is ruled this wise:
concerned, and are subject to the income tax for corporations.
In support of the third ground, counsel for petiti
We reiterated this view, thru Mr. Justice Fernando, in Reyes vs. Commissioner of
Internal Revenue, G. R. Nos. L-24020-21, July 29, 1968, 24 SCRA 198, wherein the Even if we were to yield to the dec
Court ruled against a theory of co-ownership pursued by appellants therein. Honorable Court that the herein p
formed an unregistered partnersh
have to be taxed as such, it might
 petitioners in their individual income tax returns disregard prescription merely upon the ground that the reaso
reported their shares of the profits of the unregistered precisely because the taxpayers failed to make the proper retu
partnership. We think it only fair and equitable that the corporate taxes legally due from them. In principle, it is bu
the various amounts paid by the individual petitioners allow any relaxation of the tax laws in favor of persons who ar
as income tax on their respective shares of the suspicion in their conduct vis-a-vis their tax obligation to the S
unregistered partnership should be deducted from the
deficiency income tax found by this Honorable Court IN VIEW OF ALL THE FOREGOING, the judgment of the Court o
against the unregistered partnership. (page 7, appealed from is affirm with costs against petitioners.
Memorandum for the Petitioner in Support of Their
Motion for Reconsideration, Oct. 28, 1961.) Republic of the Philippines
SUPREME COURT
In other words, it is the position of petitioners that the taxable Manila
income of the partnership must be reduced by the amounts of
income tax paid by each petitioner on his share of partnership EN BANC
profits. This is not correct; rather, it should be the other way around.
The partnership profits distributable to the partners (petitioners G.R. No. L-45425 April 29, 1939
herein) should be reduced by the amounts of income tax assessed
against the partnership. Consequently, each of the petitioners in his JOSE GATCHALIAN, ET AL., plaintiffs-appellants,
individual capacity overpaid his income tax for the years in vs.
question, but the income tax due from the partnership has been THE COLLECTOR OF INTERNAL REVENUE, defendant-appell
correctly assessed. Since the individual income tax liabilities of
petitioners are not in issue in this proceeding, it is not proper for the Guillermo B. Reyes for appellants.
Court to pass upon the same. Office of the Solicitor-General Tuason for appellee.

Petitioners insist that it was error for the Tax Court to so rule that whatever IMPERIAL, J.:
excess they might have paid as individual income tax cannot be credited as part
payment of the taxes herein in question. It is argued that to sanction the view of The plaintiff brought this action to recover from the defendan
the Tax Court is to oblige petitioners to pay double income tax on the same Internal Revenue the sum of P1,863.44, with legal interest the
income, and, worse, considering the time that has lapsed since they paid their paid under protest by way of income tax. They appealed from
individual income taxes, they may already be barred by prescription from rendered in the case on October 23, 1936 by the Court of First
recovering their overpayments in a separate action. We do not agree. As We see it, of Manila, which dismissed the action with the costs against th
the case of petitioners as regards the point under discussion is simply that of a
taxpayer who has paid the wrong tax, assuming that the failure to pay the The case was submitted for decision upon the following stipul
corporate taxes in question was not deliberate. Of course, such taxpayer has the
right to be reimbursed what he has erroneously paid, but the law is very clear that Come now the parties to the above-mentioned case, thr
the claim and action for such reimbursement are subject to the bar of prescription. respective undersigned attorneys, and hereby agree to
And since the period for the recovery of the excess income taxes in the case of to this Honorable Court the case upon the following sta
herein petitioners has already lapsed, it would not seem right to virtually
 1. That plaintiff are all residents of the municipality of Pulilan, Bulacan, and authorized agents of the National Charity Sweepstakes
that defendant is the Collector of Internal Revenue of the Philippines; bearing No. 178637 for the sum of two pesos (P2) and
was registered in the name of Jose Gatchalian and Com
2. That prior to December 15, 1934 plaintiffs, in order to enable them to
purchase one sweepstakes ticket valued at two pesos (P2), subscribed and 4. That as a result of the drawing of the sweepstakes on
paid therefor the amounts as follows: 1934, the above-mentioned ticket bearing No. 178637
prizes in the amount of P50,000 and that the correspon
1. Jose Gatchalian .................................................................................................... P0.18 the above-mentioned prize of P50,000 was drawn by th
Sweepstakes Office in favor of Jose Gatchalian & Compa
2. Gregoria Cristobal ............................................................................................... .18 Philippine National Bank, which check was cashed duri
December, 1934 by Jose Gatchalian & Company;
3. Saturnina Silva .................................................................................................... .08
4. Guillermo Tapia ................................................................................................... .13 5. That on December 29, 1934, Jose Gatchalian was req
examiner Alfredo David to file the corresponding incom
5. Jesus Legaspi ...................................................................................................... .15 covering the prize won by Jose Gatchalian & Company a
December 29, 1934, the said return was signed by Jose
6. Jose Silva ............................................................................................................. .07 which return is enclosed as Exhibit A and made a part h
7. Tomasa Mercado ................................................................................................ .08
6. That on January 8, 1935, the defendant made an asse
8. Julio Gatchalian ................................................................................................... .13 Gatchalian & Company requesting the payment of the s
the deputy provincial treasurer of Pulilan, Bulacan, givi
9. Emiliana Santiago ................................................................................................ .13
Gatchalian & Company until January 20, 1935 within w
10. Maria C. Legaspi ............................................................................................... .16 amount of P1,499.94, a copy of which letter marked Ex
and made a part hereof;
11. Francisco Cabral ............................................................................................... .13
12. Gonzalo Javier .................................................................................................... .14 7. That on January 20, 1935, the plaintiffs, through thei
defendant a reply, a copy of which marked Exhibit C is
13. Maria Santiago ................................................................................................... .17 part hereof, requesting exemption from payment of the
which reply there were enclosed fifteen (15) separate i
14. Buenaventura Guzman tax returns filed separately by each one of the plaintiffs
.13
...................................................................................... returns are attached and marked Exhibit D-1 to D-15, r
15. Mariano Santos ................................................................................................. .14 of their names listed in the caption of this case and mad
statement of sale signed by Jose Gatchalian showing the
each of the plaintiffs to cover up the attached and mark
Total ........................................................................................................ 2.00 made a part hereof; and a copy of the affidavit signed b
dated December 29, 1934 is attached and marked Exhi
3. That immediately thereafter but prior to December 15, 1934, plaintiffs thereof;
purchased, in the ordinary course of business, from one of the duly
8. That the defendant in his letter dated January 28, 1935, a copy of which 14. That, in view of the failure of the plaintiffs to pay th
marked Exhibit G is enclosed, denied plaintiffs' request of January 20, 1935, installments in accordance with the terms and conditio
for exemption from the payment of tax and reiterated his demand for the them, the defendant in his letter dated July 23, 1935, co
payment of the sum of P1,499.94 as income tax and gave plaintiffs until attached and marked Exhibit M, ordered the municipal
February 10, 1935 within which to pay the said tax; Bulacan to execute within five days the warrant of distr
against the plaintiffs on May 13, 1935;
9. That in view of the failure of the plaintiffs to pay the amount of tax
demanded by the defendant, notwithstanding subsequent demand made by 15. That in order to avoid annoyance and embarrassme
defendant upon the plaintiffs through their attorney on March 23, 1935, a levy of their property, the plaintiffs on August 28, 1936
copy of which marked Exhibit H is enclosed, defendant on May 13, 1935 Gatchalian, Guillermo Tapia, Maria Santiago and Emilia
issued a warrant of distraint and levy against the property of the plaintiffs, under protest to the municipal treasurer of Pulilan, Bul
a copy of which warrant marked Exhibit I is enclosed and made a part P1,260.93 representing the unpaid balance of the incom
hereof; demanded by defendant as evidenced by income tax re
which is attached and marked Exhibit N and made a pa
10. That to avoid embarrassment arising from the embargo of the property on September 3, 1936, the plaintiffs formally protested
of the plaintiffs, the said plaintiffs on June 15, 1935, through Gregoria against the payment of said amount and requested the
Cristobal, Maria C. Legaspi and Jesus Legaspi, paid under protest the sum of of which is attached and marked Exhibit O and made pa
P601.51 as part of the tax and penalties to the municipal treasurer of on September 4, 1936, the defendant overruled the pro
Pulilan, Bulacan, as evidenced by official receipt No. 7454879 which is refund thereof; copy of which is attached and marked E
attached and marked Exhibit J and made a part hereof, and requested part hereof; and
defendant that plaintiffs be allowed to pay under protest the balance of the
tax and penalties by monthly installments; 16. That plaintiffs demanded upon defendant the refun
one thousand eight hundred and sixty three pesos and
11. That plaintiff's request to pay the balance of the tax and penalties was (P1,863.44) paid under protest by them but that defend
granted by defendant subject to the condition that plaintiffs file the usual refuses to refund the said amount notwithstanding the
bond secured by two solvent persons to guarantee prompt payment of each
installments as it becomes due; 17. The parties hereto reserve the right to present othe
evidence if necessary.
12. That on July 16, 1935, plaintiff filed a bond, a copy of which marked
Exhibit K is enclosed and made a part hereof, to guarantee the payment of Exhibit E referred to in the stipulation is of the following tenor
the balance of the alleged tax liability by monthly installments at the rate of
P118.70 a month, the first payment under protest to be effected on or To whom it may concern:
before July 31, 1935;
I, Jose Gatchalian, a resident of Pulilan, Bulacan, marrie
13. That on July 16, 1935 the said plaintiffs formally protested against the certify, that on the 11th day of August, 1934, I sold part
payment of the sum of P602.51, a copy of which protest is attached and ticket No. 178637 to the persons and for the amount in
marked Exhibit L, but that defendant in his letter dated August 1, 1935 the part of may share remaining is also shown to wit:
overruled the protest and denied the request for refund of the plaintiffs;
 Purchaser Amount Address And a summary of Exhibits D-1 to D-15 is inserted in the bill o
follows:
1. Mariano Santos ........................................... P0.14 Pulilan, Bulacan.
RECAPITULATIONS OF 15 INDIVIDUAL INCOME TAX R
2. Buenaventura Guzman ............................... .13 - Do - ALL DATED JANUARY 19, 1935 SUBMITTED TO TH
3. Maria Santiago ............................................ .17 - Do - INTERNAL REVENUE.

4. Gonzalo Javier .............................................. .14 - Do -

Exhibit Purchase Price
Name E
5. Francisco Cabral .......................................... .13 - Do - No. Price Won

6. Maria C. Legaspi .......................................... .16 - Do - 1. Jose Gatchalian

D-1 P0.18 P4,425
..........................................
7. Emiliana Santiago ......................................... .13 - Do -
2. Gregoria Cristobal
8. Julio Gatchalian ............................................ .13 - Do - D-2 .18 4,575
......................................
9. Jose Silva ...................................................... .07 - Do - 3. Saturnina Silva
D-3 .08 1,875
.............................................
10. Tomasa Mercado ....................................... .08 - Do -
4. Guillermo Tapia
11. Jesus Legaspi ............................................. .15 - Do - D-4 .13 3,325
..........................................
12. Guillermo Tapia ........................................... .13 - Do -
5. Jesus Legaspi by Maria
D-5 .15 3,825
13. Saturnina Silva ............................................ .08 - Do - Cristobal .........

14. Gregoria Cristobal ....................................... .18 - Do - 6. Jose Silva

D-6 .08 1,875
....................................................
15. Jose Gatchalian ............................................ .18 - Do -
7. Tomasa Mercado
D-7 .07 1,875
.......................................
2.00 Total cost of said
8. Julio Gatchalian by
D-8 .13 3,150
Beatriz Guzman .......
ticket; and that, therefore, the persons named above are entitled to the
parts of whatever prize that might be won by said ticket. 9. Emiliana Santiago
D-9 .13 3,325
......................................
Pulilan, Bulacan, P.I.
10. Maria C. Legaspi
D-10 .16 4,100
(Sgd.) JOSE GATCHALIAN ......................................
11. Francisco Cabral D-11 .13 3,325
 ...................................... SEC. 10. (a) There shall be levied, assessed, collected, a
upon the total net income received in the preceding cal
12. Gonzalo Javier sources by every corporation, joint-stock company, par
D-12 .14 3,325 360 2,965
.......................................... account (cuenta en participacion), association or insura
organized in the Philippine Islands, no matter how crea
13. Maria Santiago but not including duly registered general copartnership
D-13 .17 4,350 360 3,990
.......................................... colectivas), a tax of three per centum upon such income
14. Buenaventura be levied, assessed, collected, and paid annually upon t
D-14 .13 3,325 360 2,965 received in the preceding calendar year from all source
Guzman ...........................
Philippine Islands by every corporation, joint-stock com
15. Mariano Santos joint account (cuenta en participacion), association, or
D-15 .14 3,325 360 2,965
........................................ organized, authorized, or existing under the laws of any
including interest on bonds, notes, or other interest-be
<="" td=""
residents, corporate or otherwise: Provided, however, T
style="font-
section shall be construed as permitting the taxation of
size: 14px;
from dividends or net profits on which the normal tax h
text-
decoration:
none; color: The gain derived or loss sustained from the sale or othe
2.00 50,000 corporation, joint-stock company, partnership, joint ac
rgb(0, 0,
participacion), association, or insurance company, or p
128); font-
personal, or mixed, shall be ascertained in accordance w
family:
and (d) of section two of Act Numbered Two thousand
arial,
thirty-three, as amended by Act Numbered Twenty-nin
verdana;">
twenty-six.

The legal questions raised in plaintiffs-appellants' five assigned errors may The foregoing tax rate shall apply to the net income rec
properly be reduced to the two following: (1) Whether the plaintiffs formed a taxable corporation, joint-stock company, partnership,
partnership, or merely a community of property without a personality of its own; (cuenta en participacion), association, or insurance com
in the first case it is admitted that the partnership thus formed is liable for the calendar year nineteen hundred and twenty and in each
payment of income tax, whereas if there was merely a community of property,
they are exempt from such payment; and (2) whether they should pay the tax There is no doubt that if the plaintiffs merely formed a commu
collectively or whether the latter should be prorated among them and paid latter is exempt from the payment of income tax under the law
individually. the stipulation facts the plaintiffs organized a partnership of a
each of them put up MONEY to buy a sweepstakes ticket for t
The Collector of Internal Revenue collected the tax under section 10 of Act No. dividing equally the prize which they may win, as they did in f
2833, as last amended by section 2 of Act No. 3761, reading as follows: P50,000 (article 1665, Civil Code). The partnership was not on
the organization thereof and the winning of the prize, Jose Gat
appeared in the office of the Philippines Charity Sweepstakes,
partner, as such collection the prize, the office issued the check for P50,000 in justifiedly sustained by said court without any reversible erro
favor of Jose Gatchalian and company, and the said partner, in the same capacity, the present petition must fail.
collected the said check. All these circumstances repel the idea that the plaintiffs
organized and formed a community of property only. The assailed decision details the facts and proceedings which
controversy as follows:
Having organized and constituted a partnership of a civil nature, the said entity is
the one bound to pay the income tax which the defendant collected under the Petitioner brought an action in the City Court of
aforesaid section 10 (a) of Act No. 2833, as amended by section 2 of Act No. 3761. collection of a sum of P5,217.25 based on promi
There is no merit in plaintiff's contention that the tax should be prorated among executed by the herein private respondent Nobi
them and paid individually, resulting in their exemption from the tax. the herein petitioner. Petitioner bases his right t
B, C, D, E, F, and G executed on different dates an
In view of the foregoing, the appealed decision is affirmed, with the costs of this respondent Nobio Sardane. Exhibit B is a printed
instance to the plaintiffs appellants. So ordered. involving Pl,117.25 and dated May 13, 1972. Exh
printed promissory note and denotes on its face
Republic of the Philippines was Pl,400.00. Exhibit D is also a printed promis
SUPREME COURT 31, 1977 involving an amount of P100.00. Exhib
Manila commonly known to the layman as 'vale' which
two hundred pesos (Sgd) Nobio Sardane'. Exhib
SECOND DIVISION following tenor: 'Received from Mr. Romeo Acoj
Two Thousand Two Hundred (P2,200.00) ONLY
G.R. No. L-47045 November 22, 1988 before December 25, 1975. (Sgd) Nobio Sardane
are both vales' involving the same amount of on
NOBIO SARDANE, petitioner, and dated August 25, 1972 and September 12, 1
vs.
THE COURT OF APPEALS and ROMEO J. ACOJEDO, respondents. It has been established in the trial court that on
petitioner demanded the payment of the total am
Y.G. Villaruz & Associates for petitioner. The failure of the private respondent to pay the
prompted the petitioner to seek the services of l
Pelagio R. Lachica for private respondent. letter (Exhibit 1) formally demanding the return
Because of the failure of the private respondent
demands extrajudicially made by the petitioner,
constrained to bring an action for collection of s
REGALADO, J.:
During the scheduled day for trial, private respo
The extensive discussion and exhaustive disquisition in the decision 1 of the appear and to file an answer. On motion by the p
respondent Court 2 should have written finis to this case without further recourse Court of Dipolog issued an order dated May 18,
to Us. The assignment of errors and arguments raised in the respondent Court by private respondent in default and allowed the p
herein private respondent, as the petitioner therein, having been correctly and
 his evidence ex-parte. Based on petitioner's evidence, the City Court testimony, there was a waiver of the presumption accorded in
of Dipolog rendered judgment by default in favor of the petitioner. petitioner by Section 8, Rule 8 of the Rules of Court.

Private respondent filed a motion to lift the order of default which On the first issue, the then Court of First Instance held that "th
was granted by the City Court in an order dated May 24, 1976, parties herein put in issue the imperfection or ambiguity of th
taking into consideration that the answer was filed within two hours question", hence "the appellant can avail of the parol evidence
after the hearing of the evidence presented ex-parte by the side of the case, that is, the said amount taken by him from app
petitioner. his personal debt to appellee, but expenses of the partnership
appellee."
After the trial on the merits, the City Court of Dipolog rendered its
decision on September 14, 1976, the dispositive portion of which Consequently, said trial court concluded that the promissory n
reads: merely receipts for the contributions to said partnership and,
the claim that there was ambiguity in the promissory notes, he
IN VIEW OF THE FOREGOING, judgment is hereby rendered in favor was allowable to vary or contradict the terms of the represent
of the plaintiff and against the defendant as follows:
The parol evidence rule in Rule 130 provides:
(a) Ordering the defendant to pay unto the plaintiff the sum of Five
Thousand Two Hundred Seventeen Pesos and Twenty-five centavos Sec. 7. Evidence of written agreements.—When t
(P5,217.25) plus legal interest to commence from April 23, 1976 agreement have been reduced to writing, it is to
when this case was filed in court; and containing all such terms, and, therefore, there c
parties and their successors in interest, no evide
(b) Ordering the defendant to pay the plaintiff the sum of P200.00 as the agreement other than the contents of the wr
attorney's fee and to pay the cost of this proceeding. 3 following cases:

Therein defendant Sardane appealed to the Court of First Instance of Zamboanga (a) Where a mistake or imperfection of the writi
del Norte which reversed the decision of the lower court by dismissing the express the the true intent and agreement of the
complaint and ordered the plaintiff-appellee Acojedo to pay said defendant- validity of the agreement is put in issue by the p
appellant P500.00 each for actual damages, moral damages, exemplary damages
and attorney's fees, as WELL as the costs of suit. Plaintiff-appellee then sought (b) When there is an intrinsic ambiguity in the w
the review of said decision by petition to the respondent Court.
As correctly pointed out by the respondent Court the exceptio
The assignment of errors in said petition for review can be capsulized into two apply in this case as there is no ambiguity in the writings in qu
decisive issues, firstly, whether the oral testimony for the therein private
respondent Sardane that a partnership existed between him and therein In the case at bar, Exhibits B, C, and D are printe
petitioner Acojedo are admissible to vary the meaning of the abovementioned containing a promise to pay a sum certain in mo
promissory notes; and, secondly, whether because of the failure of therein demand and the promise to bear the costs of liti
petitioner to cross-examine therein private respondent on his sur-rebuttal of the private respondent's failure to pay the am
demanded extrajudicially. Likewise, the vales de
 private respondent is obliged to return the sum loaned to him by the that he was a partner of the private respondent herein. Article
petitioner. On their face, nothing appears to be vague or ambigous, Code is explicit that while the receipt by a person of a share of
for the terms of the promissory notes clearly show that it was business is prima facie evidence that he is a partner in the bus
incumbent upon the private respondent to pay the amount involved inference shall be drawn if such profits were received in paym
in the promissory notes if and when the petitioner demands the employee. Furthermore, herein petitioner had no voice in the
same. It was clearly the intent of the parties to enter into a contract affairs of the basnig. Under similar facts, this Court in the early
of loan for how could an educated man like the private respondent Gutierrez Hermanos, 5 in denying the claim of the plaintiff ther
be deceived to sign a promissory note yet intending to make such a partner in the business of the defendant, declared:
writing to be mere receipts of the petitioner's supposed
contribution to the alleged partnership existing between the This contention cannot be sustained. It was a me
parties? employment. The plaintiff had no voice nor vote
of the affairs of the company. The fact that the co
It has been established in the trial court that, the private respondent received by him was to be determined with refe
has been engaged in business for quite a long period of time--as made by the defendant in their business did not
owner of the Sardane Trucking Service, entering into contracts with him a partner therein. ...
the government for the construction of wharfs and seawall; and a
member of the City Council of Dapitan (TSN, July 20, 1976, pp. 57- The same rule was reiterated in Bastida vs. Menzi & Co., Inc., et
58).<äre||anº•1àw> It indeed puzzles us how the private respondent the same factual and legal milieu.
could have been misled into signing a document containing terms
which he did not mean them to be. ... There are other considerations noted by respondent Court wh
petitioner's pretension that he was a partner and not a mere e
xxx xxx xxx the present private respondent. Thus, in an action for damage
private respondent against the North Zamboanga Timber Co.,
The private respondent admitted during the cross-examination operations of the business, herein petitioner did not ask to be
made by petitioner's counsel that he was the one who was plaintiff. Also, although he contends that herein private respon
responsible for the printing of Exhibits B, C, and D (TSN, July 28, treasurer of the alleged partnership, yet it is the latter who is d
1976, p. 64). How could he purportedly rely on such a flimsy pretext accounting. The advertence of the Court of First Instance to th
that the promissory notes were receipts of the petitioner's bears the name of herein petitioner disregards the finding of t
contribution? 4 that it was just a concession since it was he who obtained the e
Sardaco from the Department of Local Government and Comm
The Court of Appeals held, and We agree, that even if evidence aliunde other than Further, the use by the parties of the pronoun "our" in referrin
the promissory notes may be admitted to alter the meaning conveyed thereby, still catch", "our deposit", or "our boseros" was merely indicative o
the evidence is insufficient to prove that a partnership existed between the private and not evidentiary of a partnership, between them.
parties hereto.
The foregoing factual findings, which belie the further claim th
As manager of the basnig Sarcado naturally some degree of control over the promissory notes do not express the true intent and agreemen
operations and maintenance thereof had to be exercised by herein petitioner. The binding on Us since there is no showing that they fall within th
fact that he had received 50% of the net profits does not conclusively establish rule limiting the scope of appellate review herein to questions
On the second issue, the pertinent rule on actionable documents in Rule 8, for either overlooked or ignored the fact that, as held in Yu Chuck,
ready reference, reads: in other cases of Identical factual settings, such a finding of wa
a case has been tried in complete disregard of the rule and the
Sec. 8. How to contest genuineness of such documents.—When an pleaded a document by copy, presents oral evidence to prove
action or defense is founded upon a written instrument, copied in or the document and no objections are made to the defendant's e
attached to the corresponding pleading as provided in the preceding refutation. This situation does not obtain in the present case h
section, the genuineness and due execution of the instrument shall obviously inapplicable.
be deemed admitted unless the adverse party, under oath,
specifically denies them, and sets forth what he claims to be the Neither did the failure of herein private respondent to cross-e
facts; but this provision does not apply when the adverse party does petitioner on the latter's sur-rebuttal testimony constitute a w
not appear to be a party to the instrument or when compliance with aforesaid implied admission. As found by the respondent Cour
an order for the inspection of the original instrument is refused. testimony consisted solely of the denial of the testimony of he
respondent and no new or additional matter was introduced i
The record shows that herein petitioner did not deny under oath in his answer the testimony to exonerate herein petitioner from his obligations
authenticity and due execution of the promissory notes which had been duly promissory notes.
pleaded and attached to the complaint, thereby admitting their genuineness and
due execution. Even in the trial court, he did not at all question the fact that he On the foregoing premises and considerations, the respondent
signed said promissory notes and that the same were genuine. Instead, he reversed and set aside the appealed decision of the Court of Fi
presented parol evidence to vary the import of the promissory notes by alleging Zamboanga del Norte and affirmed in full the decision of the C
that they were mere receipts of his contribution to the alleged partnership. City in Civil Case No. A-1838, dated September 14, 1976.

His arguments on this score reflect a misapprehension of the rule on parol Belatedly, in his motion for reconsideration of said decision of
evidence as distinguished from the rule on actionable documents. As the Court, herein petitioner, as the private respondent therein, rai
respondent Court correctly explained to herein petitioner, what he presented in unresolved issue that the petition for review therein should ha
the trial Court was testimonial evidence that the promissory notes were receipts for lack of jurisdiction since the lower Court's decision did not
of his supposed contributions to the alleged partnership which testimony, in the judgment of the City Court of Dipolog, and which he claimed w
light of Section 7, Rule 130, could not be admitted to vary or alter the explicit such a petition under the law then in force. He raises the same
meaning conveyed by said promissory notes. On the other hand, the presumed appeal and We will waive the procedural technicalities in orde
genuineness and due execution of said promissory notes were not affected, rest.
pursuant to the provisions of Section 8, Rule 8, since such aspects were not at all
questioned but, on the contrary, were admitted by herein petitioner. Parenthetically, in that same motion for reconsideration he ha
relief from the respondent Court praying that it sustain the de
Petitioner's invocation of the doctrines in Yu Chuck, et al. vs. Kong Li Po, 7 which Court, thereby invoking and submitting to its jurisdiction whic
was reiterated in Central Surety & Insurance Co. vs. C. N. Hodges, et al. 8 does not assail. Furthermore, the objection that he raises is actually not
sustain his thesis that the herein private respondent had "waived the mantle of but of procedure. 9
protection given him by Rule 8, Sec. 8". It is true that such implied admission of
genuineness and due execution may be waived by a party but only if he acts in a At any rate, it will be noted that petitioner anchors his said ob
manner indicative of either an express or tacit waiver thereof. Petitioner, however, provisions of Section 29, Republic Act 296 as amended by Rep
effective September 9, 1968. Subsequently, the procedure for appeal to the Court REGALADO, J.:
of Appeals from decisions of the then courts of first instance in the EXERCISE of
their appellate jurisdiction over cases originating from the municipal courts was The extensive discussion and exhaustive disquisition in the de
provided for by Republic Act 6031, amending Section 45 of the Judiciary Act respondent Court 2 should have written finis to this case witho
effective August 4, 1969. The requirement for affirmance in full of the inferior to Us. The assignment of errors and arguments raised in the re
court's decision was not adopted or reproduced in Republic Act 6031. Also, since herein private respondent, as the petitioner therein, having be
Republic Act 6031 failed to provide for the procedure or mode of appeal in the justifiedly sustained by said court without any reversible erro
cases therein contemplated, the Court of Appeals en bancprovided thereof in its the present petition must fail.
Resolution of August 12, 1971, by requiring a petition for review but which also
did not require for its availability that the judgment of the court of first instance The assailed decision details the facts and proceedings which
had affirmed in full that of the lower court. Said mode of appeal and the controversy as follows:
procedural requirements thereof governed the appeal taken in this case from the
aforesaid Court of First Instance to the Court of Appeals in 1977. 10 Herein Petitioner brought an action in the City Court of
petitioner's plaint on this issue is, therefore, devoid of merit. collection of a sum of P5,217.25 based on promi
executed by the herein private respondent Nobi
WHEREFORE, the judgment of the respondent Court of Appeals is AFFIRMED, with the herein petitioner. Petitioner bases his right t
costs against herein petitioner. B, C, D, E, F, and G executed on different dates an
respondent Nobio Sardane. Exhibit B is a printed
SO ORDERED. involving Pl,117.25 and dated May 13, 1972. Exh
printed promissory note and denotes on its face
Republic of the Philippines was Pl,400.00. Exhibit D is also a printed promis
SUPREME COURT 31, 1977 involving an amount of P100.00. Exhib
Manila commonly known to the layman as 'vale' which
two hundred pesos (Sgd) Nobio Sardane'. Exhib
SECOND DIVISION following tenor: 'Received from Mr. Romeo Acoj
Two Thousand Two Hundred (P2,200.00) ONLY
G.R. No. L-47045 November 22, 1988 before December 25, 1975. (Sgd) Nobio Sardane
are both vales' involving the same amount of on
NOBIO SARDANE, petitioner, and dated August 25, 1972 and September 12, 1
vs.
THE COURT OF APPEALS and ROMEO J. ACOJEDO, respondents. It has been established in the trial court that on
petitioner demanded the payment of the total am
Y.G. Villaruz & Associates for petitioner. The failure of the private respondent to pay the
prompted the petitioner to seek the services of l
Pelagio R. Lachica for private respondent. letter (Exhibit 1) formally demanding the return
Because of the failure of the private respondent
demands extrajudicially made by the petitioner,
constrained to bring an action for collection of s
 During the scheduled day for trial, private respondent failed to petitioner Acojedo are admissible to vary the meaning of the a
appear and to file an answer. On motion by the petitioner, the City promissory notes; and, secondly, whether because of the failur
Court of Dipolog issued an order dated May 18, 1976 declaring the petitioner to cross-examine therein private respondent on his
private respondent in default and allowed the petitioner to present testimony, there was a waiver of the presumption accorded in
his evidence ex-parte. Based on petitioner's evidence, the City Court petitioner by Section 8, Rule 8 of the Rules of Court.
of Dipolog rendered judgment by default in favor of the petitioner.
On the first issue, the then Court of First Instance held that "th
Private respondent filed a motion to lift the order of default which parties herein put in issue the imperfection or ambiguity of th
was granted by the City Court in an order dated May 24, 1976, question", hence "the appellant can avail of the parol evidence
taking into consideration that the answer was filed within two hours side of the case, that is, the said amount taken by him from app
after the hearing of the evidence presented ex-parte by the his personal debt to appellee, but expenses of the partnership
petitioner. appellee."

After the trial on the merits, the City Court of Dipolog rendered its Consequently, said trial court concluded that the promissory n
decision on September 14, 1976, the dispositive portion of which merely receipts for the contributions to said partnership and,
reads: the claim that there was ambiguity in the promissory notes, he
was allowable to vary or contradict the terms of the represent
IN VIEW OF THE FOREGOING, judgment is hereby rendered in favor
of the plaintiff and against the defendant as follows: The parol evidence rule in Rule 130 provides:

(a) Ordering the defendant to pay unto the plaintiff the sum of Five Sec. 7. Evidence of written agreements.—When t
Thousand Two Hundred Seventeen Pesos and Twenty-five centavos agreement have been reduced to writing, it is to
(P5,217.25) plus legal interest to commence from April 23, 1976 containing all such terms, and, therefore, there c
when this case was filed in court; and parties and their successors in interest, no evide
the agreement other than the contents of the wr
(b) Ordering the defendant to pay the plaintiff the sum of P200.00 as following cases:
attorney's fee and to pay the cost of this proceeding. 3
(a) Where a mistake or imperfection of the writi
Therein defendant Sardane appealed to the Court of First Instance of Zamboanga express the the true intent and agreement of the
del Norte which reversed the decision of the lower court by dismissing the validity of the agreement is put in issue by the p
complaint and ordered the plaintiff-appellee Acojedo to pay said defendant-
appellant P500.00 each for actual damages, moral damages, exemplary damages (b) When there is an intrinsic ambiguity in the w
and attorney's fees, as WELL as the costs of suit. Plaintiff-appellee then sought
the review of said decision by petition to the respondent Court. As correctly pointed out by the respondent Court the exceptio
apply in this case as there is no ambiguity in the writings in qu
The assignment of errors in said petition for review can be capsulized into two
decisive issues, firstly, whether the oral testimony for the therein private In the case at bar, Exhibits B, C, and D are printe
respondent Sardane that a partnership existed between him and therein containing a promise to pay a sum certain in MO
 demand and the promise to bear the costs of litigation in the event As manager of the basnig Sarcado naturally some degree of co
of the private respondent's failure to pay the amount loaned when operations and maintenance thereof had to be EXERCISED by
demanded extrajudicially. Likewise, the vales denote that the The fact that he had received 50% of the net profits does not c
private respondent is obliged to return the sum loaned to him by the establish that he was a partner of the private respondent here
petitioner. On their face, nothing appears to be vague or ambigous, of the Civil Code is explicit that while the receipt by a person o
for the terms of the promissory notes clearly show that it was profits of a business is prima facie evidence that he is a partne
incumbent upon the private respondent to pay the amount involved such inference shall be drawn if such profits were received in
in the promissory notes if and when the petitioner demands the an employee. Furthermore, herein petitioner had no voice in t
same. It was clearly the intent of the parties to enter into a contract the affairs of the basnig. Under similar facts, this Court in the e
of loan for how could an educated man like the private respondent Gutierrez Hermanos, 5 in denying the claim of the plaintiff ther
be deceived to sign a promissory note yet intending to make such a partner in the business of the defendant, declared:
writing to be mere receipts of the petitioner's supposed
contribution to the alleged partnership existing between the This contention cannot be sustained. It was a me
parties? of EMPLOYMENT . The plaintiff had no voice no
management of the affairs of the company. The f
It has been established in the trial court that, the private respondent compensation received by him was to be determ
has been engaged in business for quite a long period of time--as to the profits made by the defendant in their bus
owner of the Sardane Trucking Service, entering into contracts with sense make him a partner therein. ...
the government for the construction of wharfs and seawall; and a
member of the City Council of Dapitan (TSN, July 20, 1976, pp. 57- The same rule was reiterated in Bastida vs. Menzi & Co., Inc., et
58).<äre||anº•1àw> It indeed puzzles us how the private respondent the same factual and legal milieu.
could have been misled into signing a document containing terms
which he did not mean them to be. ... There are other considerations noted by respondent Court wh
petitioner's pretension that he was a partner and not a mere e
xxx xxx xxx the present private respondent. Thus, in an action for damage
private respondent against the North Zamboanga Timber Co.,
The private respondent admitted during the cross-examination operations of the business, herein petitioner did not ask to be
made by petitioner's counsel that he was the one who was plaintiff. Also, although he contends that herein private respon
responsible for the printing of Exhibits B, C, and D (TSN, July 28, treasurer of the alleged partnership, yet it is the latter who is d
1976, p. 64). How could he purportedly rely on such a flimsy pretext accounting. The advertence of the Court of First Instance to th
that the promissory notes were receipts of the petitioner's bears the name of herein petitioner disregards the finding of t
contribution? 4 that it was just a concession since it was he who obtained the e
Sardaco from the Department of Local Government and Comm
The Court of Appeals held, and We agree, that even if evidence aliunde other than Further, the use by the parties of the pronoun "our" in referrin
the promissory notes may be admitted to alter the meaning conveyed thereby, still catch", "our deposit", or "our boseros" was merely indicative o
the evidence is insufficient to prove that a partnership existed between the private and not evidentiary of a partnership, between them.
parties hereto.
The foregoing factual findings, which belie the further claim that the aforesaid Petitioner's invocation of the doctrines in Yu Chuck, et al. vs. Ko
promissory notes do not express the true intent and agreement of the parties, are was reiterated in Central Surety & Insurance Co. vs. C. N. Hodge
binding on Us since there is no showing that they fall within the exceptions to the sustain his thesis that the herein private respondent had "waiv
rule limiting the scope of appellate review herein to questions of law. protection given him by Rule 8, Sec. 8". It is true that such imp
genuineness and due execution may be waived by a party but
On the second issue, the pertinent rule on actionable documents in Rule 8, for manner indicative of either an express or tacit waiver thereof.
ready reference, reads: either overlooked or ignored the fact that, as held in Yu Chuck,
in other cases of Identical factual settings, such a finding of wa
Sec. 8. How to contest genuineness of such documents.—When an a case has been tried in complete disregard of the rule and the
action or defense is founded upon a written instrument, copied in or pleaded a document by copy, presents oral evidence to prove
attached to the corresponding pleading as provided in the preceding the document and no objections are made to the defendant's e
section, the genuineness and due execution of the instrument shall refutation. This situation does not obtain in the present case h
be deemed admitted unless the adverse party, under oath, obviously inapplicable.
specifically denies them, and sets forth what he claims to be the
facts; but this provision does not apply when the adverse party does Neither did the failure of herein private respondent to cross-e
not appear to be a party to the instrument or when compliance with petitioner on the latter's sur-rebuttal testimony constitute a w
an order for the inspection of the original instrument is refused. aforesaid implied admission. As found by the respondent Cour
testimony consisted solely of the denial of the testimony of he
The record shows that herein petitioner did not deny under oath in his answer the respondent and no new or additional matter was introduced i
authenticity and due execution of the promissory notes which had been duly testimony to exonerate herein petitioner from his obligations
pleaded and attached to the complaint, thereby admitting their genuineness and promissory notes.
due execution. Even in the trial court, he did not at all question the fact that he
signed said promissory notes and that the same were genuine. Instead, he On the foregoing premises and considerations, the respondent
presented parol evidence to vary the import of the promissory notes by alleging reversed and set aside the appealed decision of the Court of Fi
that they were mere receipts of his contribution to the alleged partnership. Zamboanga del Norte and affirmed in full the decision of the C
City in Civil Case No. A-1838, dated September 14, 1976.
His arguments on this score reflect a misapprehension of the rule on parol
evidence as distinguished from the rule on actionable documents. As the Belatedly, in his motion for reconsideration of said decision of
respondent Court correctly explained to herein petitioner, what he presented in Court, herein petitioner, as the private respondent therein, rai
the trial Court was testimonial evidence that the promissory notes were receipts unresolved issue that the petition for review therein should ha
of his supposed contributions to the alleged partnership which testimony, in the for lack of jurisdiction since the lower Court's decision did not
light of Section 7, Rule 130, could not be admitted to vary or alter the explicit judgment of the City Court of Dipolog, and which he claimed w
meaning conveyed by said promissory notes. On the other hand, the presumed such a petition under the law then in force. He raises the same
genuineness and due execution of said promissory notes were not affected, appeal and We will waive the procedural technicalities in orde
pursuant to the provisions of Section 8, Rule 8, since such aspects were not at all rest.
questioned but, on the contrary, were admitted by herein petitioner.
Parenthetically, in that same motion for reconsideration he ha
relief from the respondent Court praying that it sustain the de
Court, thereby invoking and submitting to its jurisdiction which he would now Aportadera and Palabrica and Pelaez, Jalandoni and Jamir plain
assail. Furthermore, the objection that he raises is actually not one of jurisdiction Ruiz Law Offices for defendant-appellant.
but of procedure. 9
CASTRO, J.:
At any rate, it will be noted that petitioner anchors his said objection on the
provisions of Section 29, Republic Act 296 as amended by Republic Act 5433 This is an appeal from the order of May 2, 1956, the decision o
effective September 9, 1968. Subsequently, the procedure for appeal to the Court the order of May 21, 1956, all of the Court of First Instance of D
of Appeals from decisions of the then courts of first instance in the EXERCISE of 629. The basic action is for specific performance, and damages
their appellate jurisdiction over cases originating from the municipal courts was alleged breach of contract.
provided for by Republic Act 6031, amending Section 45 of the Judiciary Act
effective August 4, 1969. The requirement for affirmance in full of the inferior In 1940 Nicanor Casteel filed a fishpond application for a big t
court's decision was not adopted or reproduced in Republic Act 6031. Also, since in the then Sitio of Malalag (now the Municipality of Malalag),
Republic Act 6031 failed to provide for the procedure or mode of appeal in the Padada, Davao. No action was taken thereon by the authorities
cases therein contemplated, the Court of Appeals en bancprovided thereof in its the Japanese occupation, he filed another fishpond application
Resolution of August 12, 1971, by requiring a petition for review but which also but because of the conditions then prevailing, it was not acted
did not require for its availability that the judgment of the court of first instance December 12, 1945 he filed a third fishpond application for th
had affirmed in full that of the lower court. Said mode of appeal and the after a survey, was found to contain 178.76 hectares. Upon inv
procedural requirements thereof governed the appeal taken in this case from the conducted by a representative of the Bureau of Forestry, it wa
aforesaid Court of First Instance to the Court of Appeals in 1977. 10 Herein area applied for was still needed for firewood production. Hen
petitioner's plaint on this issue is, therefore, devoid of merit. this third application was disapproved.

WHEREFORE, the judgment of the respondent Court of Appeals is AFFIRMED, with Despite the said rejection, Casteel did not lose interest. He filed
costs against herein petitioner. reconsideration. While this motion was pending resolution, he
district forester of Davao City that no further action would be
SO ORDERED. unless he filed a new application for the area concerned. So he
1947 his fishpond application 1717.
Republic of the Philippines
SUPREME COURT Meanwhile, several applications were submitted by other pers
Manila the area covered by Casteel's application.

EN BANC On May 20, 1946 Leoncio Aradillos filed his fishpond applicati
hectares of land found inside the area applied for by Casteel; h
G.R. No. L-21906 December 24, 1968 fishpond permit F-289-C covering 9.3 hectares certified as ava
purposes by the Bureau of Forestry.
INOCENCIA DELUAO and FELIPE DELUAO plaintiffs-appellees,
vs. Victor D. Carpio filed on August 8, 1946 his fishpond applicatio
NICANOR CASTEEL and JUAN DEPRA, defendants, portion of the land applied for by Casteel. Alejandro Cacam's fi
NICANOR CASTEEL, defendant-appellant. 1276, filed on December 26, 1946, was given due course on De
with the issuance to him of fishpond permit F-539-C to develop 30 hectares of land denominated a "contract of service" — the salient provisions o
comprising a portion of the area applied for by Casteel, upon certification of the follows:
Bureau of Forestry that the area was likewise available for fishpond purposes. On
November 17, 1948 Felipe Deluao filed his own fishpond application for the area That the Party of the First Part in consideration of the m
covered by Casteel's application. and agreements made herein to the Party of the Second
into a contract of service, whereby the Party of the Firs
Because of the threat poised upon his position by the above applicants who and EMPLOYS the Party of the Second Part on the foll
entered upon and spread themselves within the area, Casteel realized the urgent conditions, to wit:
necessity of expanding his occupation thereof by constructing dikes and
cultivating marketable fishes, in order to prevent old and new squatters from That the Party of the First Part will finance as she has h
usurping the land. But lacking financial resources at that time, he sought financial sum of TWENTY SEVEN THOUSAND PESOS (P27,000.0
aid from his uncle Felipe Deluao who then extended loans totalling more or less Currency, to the Party of the Second Part who renders o
P27,000 with which to finance the needed improvements on the fishpond. Hence, the construction and improvements of a fishpond at Ba
a wide productive fishpond was built. Municipality of Padada, Province of Davao, Philippines;

Moreover, upon learning that portions of the area applied for by him were already That the Party of the Second Part will be the Manager a
occupied by rival applicants, Casteel immediately filed the corresponding protests. the produce of the fish that will be produced from said
Consequently, two administrative cases ensued involving the area in question, to
wit: DANR Case 353, entitled "Fp. Ap. No. 661 (now Fp. A. No. 1717), Nicanor That the Party of the First Part will be the administrato
Casteel, applicant-appellant versus Fp. A. No. 763, Victorio D. Carpio, applicant- having financed the construction and improvement of s
appellant"; and DANR Case 353-B, entitled "Fp. A. No. 661 (now Fp. A. No. 1717),
Nicanor Casteel, applicant-protestant versus Fp. Permit No. 289-C, Leoncio That this contract was the result of a verbal agreement
Aradillos, Fp. Permit No. 539-C, Alejandro Cacam, Permittees-Respondents." between the Parties sometime in the month of Novemb
above-mentioned conditions enumerated; ...
However, despite the finding made in the investigation of the above administrative
cases that Casteel had already introduced improvements on portions of the area On the same date the above contract was entered into, Inocenc
applied for by him in the form of dikes, fishpond gates, clearings, etc., the Director a special power of attorney in favor of Jesus Donesa, extending
of Fisheries nevertheless rejected Casteel's application on October 25, 1949, authority "To represent me in the administration of the fishpo
required him to remove all the improvements which he had introduced on the Municipality of Padada, Province of Davao, Philippines, which
land, and ordered that the land be leased through public auction. Failing to secure fishpond permit by Nicanor Casteel, but rejected by the Burea
a favorable resolution of his motion for reconsideration of the Director's order, supervise, demand, receive, and collect the value of the fish th
Casteel appealed to the Secretary of Agriculture and Natural Resources. periodically realized from it...."

In the interregnum, some more incidents occurred. To avoid repetition, they will On November 29, 1949 the Director of Fisheries rejected the a
be taken up in our discussion of the appellant's third assignment of error. Felipe Deluao on November 17, 1948. Unfazed by this rejectio
his claim over the same area in the two administrative cases (D
On November 25, 1949 Inocencia Deluao (wife of Felipe Deluao) as party of the 353-B) and asked for reinvestigation of the application of Nica
first part, and Nicanor Casteel as party of the second part, executed a contract — subject fishpond. However, by letter dated March 15, 1950 sen
Commerce and Agriculture and Natural Resources (now Secretary of Agriculture preliminary injunction be issued to restrain Casteel from doin
and Natural Resources), Deluao withdrew his petition for reinvestigation. complained of, and that after trial the said injunction be made
lower court on April 26, 1951 granted the motion, and, two da
On September 15, 1950 the Secretary of Agriculture and Natural Resources issued preliminary mandatory injunction addressed to Casteel, the di
a decision in DANR Case 353, the dispositive portion of which reads as follows: which reads as follows:

In view of all the foregoing considerations, Fp. A. No. 661 (now Fp. A. No. POR EL PRESENTE, queda usted ordenado que, hasta n
1717) of Nicanor Casteel should be, as hereby it is, reinstated and given due demandado y todos usu abogados, agentes, mandatario
course for the area indicated in the sketch drawn at the back of the last que obren en su ayuda, desista de impedir a la demand
page hereof; and Fp. A. No. 762 of Victorio D. Carpio shall remain rejected. Deluao que continue administrando personalmente la p
esta causa y que la misma continue recibiendo los prod
On the same date, the same official issued a decision in DANR Case 353-B, the los pescados provenientes de dicha pesqueria, y que, as
dispositive portion stating as follows: a dicho demandado Nicanor Casteel a desahuciar media
encargado de los demandantes llamado Jesus Donesa d
WHEREFORE, Fishpond Permit No. F-289-C of Leoncio Aradillos and objeto de la demanda de autos.
Fishpond Permit No. F-539-C of Alejandro Cacam, should be, as they are
hereby cancelled and revoked; Nicanor Casteel is required to pay the On May 10, 1951 Casteel filed a motion to dissolve the injuncti
improvements introduced thereon by said permittees in accordance with others, that he was the owner, lawful applicant and occupant o
the terms and dispositions contained elsewhere in this decision.... question. This motion, opposed by the plaintiffs on June 15, 19
the lower court in its order of June 26, 1961.
Sometime in January 1951 Nicanor Casteel forbade Inocencia Deluao from further
administering the fishpond, and ejected the latter's representative (encargado), The defendants on May 14, 1951 filed their answer with count
Jesus Donesa, from the premises. on January 8, 1952, denying the material averments of the pla
reply to the defendants' amended answer was filed by the plai
Alleging violation of the contract of service (exhibit A) entered into between 1952.
Inocencia Deluao and Nicanor Casteel, Felipe Deluao and Inocencia Deluao on
April 3, 1951 filed an action in the Court of First Instance of Davao for specific The defendant Juan Depra moved on May 22, 1951 to dismiss
performance and damages against Nicanor Casteel and Juan Depra (who, they him. On June 4, 1951 the plaintiffs opposed his motion.
alleged, instigated Casteel to violate his contract), praying inter alia, (a) that
Casteel be ordered to respect and abide by the terms and conditions of said The defendants filed on October 3, 1951 a joint motion to dism
contract and that Inocencia Deluao be allowed to continue administering the said that the plaintiffs' complaint failed to state a claim upon which
fishpond and collecting the proceeds from the sale of the fishes caught from time granted. The motion, opposed by the plaintiffs on October 12,
to time; and (b) that the defendants be ordered to pay jointly and severally to for lack of merit by the lower court in its order of October 22,
plaintiffs the sum of P20,000 in damages. defendants' motion for reconsideration filed on October 31, 19
same fate when it was likewise denied by the lower court in it
On April 18, 1951 the plaintiffs filed an ex parte motion for the issuance of a 12, 1951.
preliminary injunction, praying among other things, that during the pendency of
the case and upon their filling the requisite bond as may be fixed by the court, a
After the issues were joined, the case was set for trial. Then came a series of be referred back to Branch I, so that the same may be d
postponements. The lower court (Branch I, presided by Judge Enrique A. (emphasis supplied)
Fernandez) finally issued on March 21, 1956 an order in open court, reading as
follows: . A copy of the abovequoted order was served on the defendant
1956.
Upon petition of plaintiffs, without any objection on the part of defendants,
the hearing of this case is hereby transferred to May 2 and 3, 1956 at 8:30 On the scheduled date of hearing, that is, on May 2, 1956, the l
o'clock in the morning. I, with Judge Fernandez presiding), when informed about the d
for postponement filed on April 26, 1956, issued an order reite
This case was filed on April 3, 1951 and under any circumstance this Court order handed down in open court on March 21, 1956 and dire
will not entertain any other transfer of hearing of this case and if the parties introduce their evidence ex parte, there being no appearance o
will not be ready on that day set for hearing, the court will take the defendants or their counsel. On the basis of the plaintiffs' evid
necessary steps for the final determination of this case. (emphasis rendered on May 4, 1956 the dispositive portion of which read
supplied)
EN SU VIRTUD, el Juzgado dicta de decision a favor de l
On April 25, 1956 the defendants' counsel received a notice of hearing dated April en contra del demandado Nicanor Casteel:
21, 1956, issued by the office of the Clerk of Court (thru the special deputy Clerk of
Court) of the Court of First Instance of Davao, setting the hearing of the case for (a) Declara permanente el interdicto prohibitorio expe
May 2 and 3, 1956 before Judge Amador Gomez of Branch II. The defendants, thru demandado;
counsel, on April 26, 1956 filed a motion for postponement. Acting on this motion,
the lower court (Branch II, presided by Judge Gomez) issued an order dated April (b) Ordena al demandado entregue la demandante la p
27, 1956, quoted as follows: administracion de la mitad (½) del "fishpond" en cuest
mejoras existentes dentro de la misma;
This is a motion for postponement of the hearing of this case set for May 2
and 3, 1956. The motion is filed by the counsel for the defendants and has (c) Condena al demandado a pagar a la demandante la
the conformity of the counsel for the plaintiffs. mensualmente en concepto de danos a contar de la fech
de los 30 dias de la promulgacion de esta decision hasta
An examination of the records of this case shows that this case was posesion y administracion de la porcion del "fishpond"
initiated as early as April 1951 and that the same has been under
advisement of the Honorable Enrique A. Fernandez, Presiding Judge of (d) Condena al demandado a pagar a la demandante la
Branch No. I, since September 24, 1953, and that various incidents have valor de los pescado beneficiados, mas los intereses leg
already been considered and resolved by Judge Fernandez on various incoacion de la demanda de autos hasta el completo pa
occasions. The last order issued by Judge Fernandez on this case was issued principal;
on March 21, 1956, wherein he definitely states that the Court will not
entertain any further postponement of the hearing of this case. (e) Condena al demandado a pagar a la demandante la
por gastos incurridos por aquella durante la pendencia
CONSIDERING ALL THE FOREGOING, the Court believes that the
consideration and termination of any incident referring to this case should
 (f) Condena al demandado a pagar a la demandante, en concepto de Petition for relief from judgment filed by Atty. Ruiz in b
honorarios, la suma de P2,000.00; defendant, not WELL taken, the same is hereby denied

(g) Ordena el sobreseimiento de esta demanda, por insuficiencia de Dissatisfied with the said ruling, Casteel appealed to the Court
pruebas, en tanto en cuanto se refiere al demandado Juan Depra; certified the case to us for final determination on the ground t
questions of law.
(h) Ordena el sobreseimiento de la reconvencion de los demandados por
falta de pruebas; Casteel raises the following issues:

(i) Con las costas contra del demandado, Casteel. (1) Whether the lower court committed gross abuse of
ordered reception of the appellees' evidence in the abs
The defendant Casteel filed a petition for relief from the foregoing decision, at the trial on May 2, 1956, thus depriving the appellan
alleging, inter alia, lack of knowledge of the order of the court a quo setting the and of his property without due process of law;
case for trial. The petition, however, was denied by the lower court in its order of
May 21, 1956, the pertinent portion of which reads as follows: (2) Whether the lower court committed grave abuse of
denied the verified petition for relief from judgment file
The duty of Atty. Ruiz, was not to inquire from the Clerk of Court whether on May 11, 1956 in accordance with Rule 38, Rules of C
the trial of this case has been transferred or not, but to inquire from the
presiding Judge, particularly because his motion asking the transfer of this (3) Whether the lower court erred in ordering the issua
case was not set for hearing and was not also acted upon. writ of preliminary injunction against defendant-appel
dismissing appellees' complaint.
Atty. Ruiz knows the nature of the order of this Court dated March 21,
1956, which reads as follows: 1. The first and second issues must be resolved against the app

Upon petition of the plaintiff without any objection on the part of The record indisputably shows that in the order given in open
the defendants, the hearing of this case is hereby transferred to May 1956, the lower court set the case for hearing on May 2 and 3,
2 and 3, 1956, at 8:30 o'clock in the morning. in the morning and empathically stated that, since the case had
April 3, 1951, it would not entertain any further motion for tra
This case was filed on April 3, 1951, and under any circumstance scheduled hearing.
this Court will not entertain any other transfer of the hearing of this
case, and if the parties will not be ready on the day set for hearing, An order given in open court is presumed received by the part
the Court will take necessary steps for the final disposition of this and time of promulgation,1 and amounts to a legal notification
case. purposes.2 The order of March 21, 1956, given in open court, w
the parties, and the notice of hearing dated April 21, 1956 or o
In view of the order above-quoted, the Court will not accede to any transfer thereafter, was a superfluity. Moreover, as between the order
of this case and the duty of Atty. Ruiz is no other than to be present in the duly promulgated by the lower court, thru Judge Fernandez, a
Sala of this Court and to call the attention of the same to the existence of his hearing signed by a "special deputy clerk of court" setting the
motion for transfer. branch of the same court, the former's order was the one legal
because the incidents of postponements and adjournments are controlled by the The appellant does not deny the appellees' claim that on May 2
court and not by the clerk of court, pursuant to section 4, Rule 31 (now sec. 3, Rule office of the clerk of court of the Court of First Instance of Dava
22) of the Rules of Court. directly below Branch I. If the appellant and his counsel had EX
diligence, there was no impediment to their going upstairs to t
Much less had the clerk of court the authority to interfere with the order of the the Court of First Instance building in Davao on May 2, 1956 a
court or to transfer the cage from one sala to another without authority or order case was scheduled for hearing in the saidsala. The appellant a
from the court where the case originated and was being tried. He had neither the on May 2, 1956 his counsel went to the office of the clerk of co
duty nor prerogative to re-assign the trial of the case to a different branch of the
same court. His duty as such clerk of court, in so far as the incident in question was The appellant's statement that parties as a matter of right are
concerned, was simply to prepare the trial calendar. And this duty devolved upon trial, is correct. But he was properly accorded this right. He wa
the clerk of court and not upon the "special deputy clerk of court" who court on March 21, 1956 that the case was definitely and intra
purportedly signed the notice of hearing. hearing on May 2 and 3, 1956 before Branch I. He cannot argu
the doctrine in Siochi vs. Tirona,6 his counsel was entitled to a
It is of no moment that the motion for postponement had the conformity of the denial of his motion for postponement. In the cited case the m
appellees' counsel. The postponement of hearings does not depend upon postponement was the first one filed by the defendant; in the c
agreement of the parties, but upon the court's discretion.3 already been a series of postponements. Unlike the case at bar
not intransferably set for hearing. Finally, whereas the cited ca
The record further discloses that Casteel was represented by a total of 12 lawyers, a long time, the case at bar was only finally and intransferably
none of whom had ever withdrawn as counsel. Notice to Atty. Ruiz of the order March 21, 1956 — after almost five years had elapsed from th
dated March 21, 1956 intransferably setting the case for hearing for May 2 and 3, complaint on April 3, 1951.
1956, was sufficient notice to all the appellant's eleven other counsel of record.
This is a well-settled rule in our jurisdiction.4 The pretension of the appellant and his 12 counsel of record th
ample time to prepare for trial is unacceptable because betwe
It was the duty of Atty. Ruiz, or of the other lawyers of record, not excluding the and May 2, 1956, they had one month and ten days to do so. In
appellant himself, to appear before Judge Fernandez on the scheduled dates of had waived his right to appear at the trial and therefore he can
hearing Parties and their lawyers have no right to presume that their motions for complain that he has been deprived of his property without du
postponement will be granted.5 For indeed, the appellant and his 12 lawyers law.7 Verily, the constitutional requirements of due process ha
cannot pretend ignorance of the recorded fact that since September 24, 1953 until this case: the lower court is a competent court; it lawfully acqu
the trial held on May 2, 1956, the case was under the advisement of Judge over the person of the defendant (appellant) and the subject m
Fernandez who presided over Branch I. There was, therefore, no necessity to "re- the defendant (appellant) was given an opportunity to be hear
assign" the same to Branch II because Judge Fernandez had exclusive control of was rendered upon lawful hearing.8
said case, unless he was legally inhibited to try the case — and he was not.
2. Finally, the appellant contends that the lower court incurred
There is truth in the appellant's contention that it is the duty of the clerk of court ordering the issuance ex parte of a writ of preliminary injuncti
— not of the Court — to prepare the trial calendar. But the assignment or in not dismissing the appellee's complaint. We find this conten
reassignment of cases already pending in one sala to another sala, and the setting
of the date of trial after the trial calendar has been prepared, fall within the Apparently, the court a quo relied on exhibit A — the so-called
exclusive control of the presiding judge. service" — and the appellees' contention that it created a cont
and partnership between Inocencia Deluao and the appellant over the fishpond in The evidence preponderates in favor of the view that the initia
question. parties was not to form a co-ownership but to establish a part
Deluao as capitalist partner and Casteel as industrial partner —
Too well-settled to require any citation of authority is the rule that everyone is undertaking of which was to divide into two equal parts such p
conclusively presumed to know the law. It must be assumed, conformably to such fishpond as might have been developed by the amount extend
rule, that the parties entered into the so-called "contract of service" cognizant of appellees, with the further provision that Casteel should reimb
the mandatory and prohibitory laws governing the filing of applications for incurred by the appellees over one-half of the fishpond that w
fishpond permits. And since they were aware of the said laws, it must likewise be This can be gleaned, among others, from the letter of Casteel to
assumed — in fairness to the parties — that they did not intend to violate them. November 15, 1949, which states, inter alia:
This view must perforce negate the appellees' allegation that exhibit A created a
contract of co-ownership between the parties over the disputed fishpond. Were ... [W]ith respect to your allowing me to use your mone
we to admit the establishment of a co-ownership violative of the prohibitory laws to your benefit because you are the ones interested in ha
which will hereafter be discussed, we shall be compelled to declare altogether the have done so far, besides I did not insist on our being par
nullity of the contract. This would certainly not serve the cause of equity and permit, but it was you "Tatay" Eping the one who wanted
justice, considering that rights and obligations have already arisen between the and it so happened that we became partners because I a
parties. We shall therefore construe the contract as one of partnership, divided midst of my poverty it never occurred to me to be unfa
into two parts — namely, a contract of partnership to exploit the fishpond pending Therefore so that each of us may be secured, let us have
its award to either Felipe Deluao or Nicanor Casteel, and a contract of partnership prepared to the effect that we are partners in the fishpon
to divide the fishpond between them after such award. The first is valid, the be made here in Balasinon, but it does not mean that you
second illegal. of your "Bantay" (caretaker) on wage basis but not earn
while the truth is that we are partners. In the event that
It is WELL to note that when the appellee Inocencia Deluao and the appellant amenable to my proposition and consider me as "Banta
entered into the so-called "contract of service" on November 25, 1949, there were instead, do not blame me if I withdraw all my cases and
two pending applications over the fishpond. One was Casteel's which was even a little and you likewise.
appealed by him to the Secretary of Agriculture and Natural Resources after it was (emphasis supplied)9
disallowed by the Director of Fisheries on October 25, 1949. The other was Felipe
Deluao's application over the same area which was likewise rejected by the Pursuant to the foregoing suggestion of the appellant that a do
Director of Fisheries on November 29, 1949, refiled by Deluao and later on evidencing their partnership, the appellee Inocencia Deluao an
withdrawn by him by letter dated March 15, 1950 to the Secretary of Agriculture executed exhibit A which, although denominated a "contract o
and Natural Resources. Clearly, although the fishpond was then in the possession actually the memorandum of their partnership agreement. Th
of Casteel, neither he nor, Felipe Deluao was the holder of a fishpond permit over contract of the services of the appellant, was admitted by the a
the area. But be that as it may, they were not however precluded from exploiting in their letter10 to Casteel dated December 19, 1949 wherein t
the fishpond pending resolution of Casteel's appeal or the approval of Deluao's did not EMPLOY him in his (Casteel's) claim but because he u
application over the same area — whichever event happened first. No law, rule or developing and improving the fishpond, his right must be divid
regulation prohibited them from doing so. Thus, rather than let the fishpond Of course, although exhibit A did not specify any wage or shar
remain idle they cultivated it. appellant as industrial partner, he was so entitled — this being
conditions he specified for the execution of the document of pa
Further exchanges of letters between the parties reveal the continuing intent to which states that "The permittee shall not transfer or sublet al
divide the fishpond. In a letter,12dated March 24, 1950, the appellant suggested granted or any rights acquired therein without the previous co
that they divide the fishpond and the remaining capital, and offered to pay the of this Office." Parenthetically, we must observe that in DANR
Deluaos a yearly installment of P3,000 — presumably as reimbursement for the permit granted to one of the parties therein, Leoncio Aradillos
expenses of the appellees for the development and improvement of the one-half solely for the reason that his permit covered a portion of the a
that would pertain to the appellant. Two days later, the appellee Felipe Deluao appellant's prior fishpond application, but also because, upon
replied,13expressing his concurrence in the appellant's suggestion and advising the ascertained thru the admission of Aradillos himself that due to
latter to ask for a reconsideration of the order of the Director of Fisheries allowed one Lino Estepa to develop with the latter's capital th
disapproving his (appellant's) application, so that if a favorable decision was his fishpond permit F-289-C with the understanding that he (A
secured, then they would divide the area. given a share in the produce thereof.16

Apparently relying on the partnership agreement, the appellee Felipe Deluao saw Sec. 40 of Commonwealth Act 141, otherwise known as the Pu
no further need to maintain his petition for the reinvestigation of Casteel's likewise provides that
application. Thus by letter14 dated March 15, 1950 addressed to the Secretary of
Agriculture and Natural Resources, he withdrew his petition on the alleged ground The lessee shall not assign, encumber, or sublet his righ
that he was no longer interested in the area, but stated however that he wanted consent of the Secretary of Agriculture and Commerce,
his interest to be protected and his capital to be reimbursed by the highest bidder. this condition shall avoid the contract; Provided, That a
encumbrance, or subletting for purposes of speculation
The arrangement under the so-called "contract of service" continued until the permitted in any case:Provided, further, That nothing co
decisions both dated September 15, 1950 were issued by the Secretary of section shall be understood or construed to permit the
Agriculture and Natural Resources in DANR Cases 353 and 353-B. This encumbrance, or subletting of lands leased under this A
development, by itself, brought about the dissolution of the partnership. previous Act, to persons, corporations, or associations
Moreover, subsequent events likewise reveal the intent of both parties to Act, are not authorized to lease public lands.
terminate the partnership because each refused to share the fishpond with the
other. Finally, section 37 of Administrative Order No. 14 of the Secre
and Natural Resources issued in August 1937, prohibits a tran
Art. 1830(3) of the Civil Code enumerates, as one of the causes for the dissolution unless first approved by the Director of Lands and under such
of a partnership, "... any event which makes it unlawful for the business of the conditions as he may prescribe. Thus, it states:
partnership to be carried on or for the members to carry it on in partnership." The
approval of the appellant's fishpond application by the decisions in DANR Cases When a transfer or sub-lease of area and improvement
353 and 353-B brought to the fore several provisions of law which made the If the permittee or lessee had, unless otherwise specific
continuation of the partnership unlawful and therefore caused its ipso the permit or lease and actually operated and made im
facto dissolution. area for at least one year, he/she may request permissi
transfer the area and improvements under certain cond
Act 4003, known as the Fisheries Act, prohibits the holder of a fishpond permit
(the permittee) from transferring or subletting the fishpond granted to him, (a) Transfer subject to approval. — A sub-lease or trans
without the previous consent or approval of the Secretary of Agriculture and valid when first approved by the Director under such te
Natural Resources.15 To the same effect is Condition No. 3 of the fishpond permit as may be prescribed, otherwise it shall be null and voi
 previously approved or reported shall be considered sufficient cause for reason why administration had been granted to the Deluaos w
the cancellation of the permit or lease and forfeiture of the bond and for indebted to them. In the same letter, the appellant forbade Fel
granting the area to a qualified applicant or bidder, as provided in sending the couple's encargado, Jesus Donesa, to the fishpond.
subsection (r) of Sec. 33 of this Order. Felipe Deluao wrote a letter20 dated January 5, 1951 in which
refusal to grant the administration of the fishpond to the appe
Since the partnership had for its object the division into two equal parts of the ground his belief "that only the competent agencies of the gov
fishpond between the appellees and the appellant after it shall have been awarded better position to render any equitable arrangement relative t
to the latter, and therefore it envisaged the unauthorized transfer of one-half hence, any action we may privately take may not meet the pro
thereof to parties other than the applicant Casteel, it was dissolved by the order."
approval of his application and the award to him of the fishpond. The approval
was an event which made it unlawful for the business of the partnership to be Inasmuch as the erstwhile partners articulated in the aforecite
carried on or for the members to carry it on in partnership. respective resolutions not to share the fishpond with each oth
violation of the undertaking for which they have established th
The appellees, however, argue that in approving the appellant's application, the each must be deemed to have expressly withdrawn from the p
Secretary of Agriculture and Natural Resources likewise recognized and/or causing its dissolution pursuant to art. 1830(2) of the Civil Cod
confirmed their property right to one-half of the fishpond by virtue of the contract provides, inter alia, that dissolution is caused "by the express w
of service, exhibit A. But the untenability of this argument would readily surface if any time."
one were to consider that the Secretary of Agriculture and Natural Resources did
not do so for the simple reason that he does not possess the authority to violate In this jurisdiction, the Secretary of Agriculture and Natural Re
the aforementioned prohibitory laws nor to exempt anyone from their operation. executive and administrative powers with regard to the surve
lease, sale or any other form of concession or disposition and m
However, assuming in gratia argumenti that the approval of Casteel's application, lands of the public domain, and, more specifically, with regard
coupled with the foregoing prohibitory laws, was not enough to cause the withholding of licenses, permits, leases and contracts over por
dissolution ipso facto of their partnership, succeeding events reveal the intent of domain to be utilized as fishponds.21, Thus, we held in Pajo, et
both parties to terminate the partnership by refusing to share the fishpond with 15414, June 30, 1960), and reiterated in Ganitano vs. Secretary
the other. Natural Resources, et al.
(L-21167, March 31, 1966), that
On December 27, 1950 Casteel wrote17 the appellee Inocencia Deluao, expressing
his desire to divide the fishpond so that he could administer his own share, such ... [T]he powers granted to the Secretary of Agriculture
division to be subject to the approval of the Secretary of Agriculture and Natural (Natural Resources) by law regarding the disposition o
Resources. By letter dated December 29, 1950,18 the appellee Felipe Deluao as granting of licenses, permits, leases, and contracts, o
demurred to Casteel's proposition because there were allegedly no appropriate rejecting, reinstating, or cancelling applications, or dec
grounds to support the same and, moreover, the conflict over the fishpond had not applications, are all executive and administrative in nat
been finally resolved. recognized principle that purely administrative and disc
may not be interfered with by the courts (Coloso v. Boar
The appellant wrote on January 4, 1951 a last letter19 to the appellee Felipe Deluao G.R. No. L-5750, April 20, 1953). In general, courts have
wherein the former expressed his determination to administer the fishpond power over the proceedings and action of the administ
himself because the decision of the Government was in his favor and the only of the government. This is generally true with respect t
 the EXERCISE of judgment or discretion, and findings of fact. (54 Am. Jur. to an accounting from November 25, 1949 to September 15, 1
558-559) Findings of fact by an administrative board or official, following a court to determine (a) the profits realized by the partnership,
hearing, are binding upon the courts and will not be disturbed except profits) of Casteel as industrial partner, (e) the share (in the p
where the board or official has gone beyond his statutory capitalist partner, and (d) whether the amounts totalling abou
authority, EXERCISED unconstitutional powers or clearly acted arbitrarily by Deluao to Casteel for the development and improvement of
and without regard to his duty or with grave abuse of discretion... already been liquidated. Besides, since the appellee Inocencia
(emphasis supplied) possession and enjoyment of the fishpond even after it was aw
she did so no longer in the concept of a capitalist partner but m
In the case at bar, the Secretary of Agriculture and Natural Resources gave due the appellant, and therefore, she must likewise submit in the lo
course to the appellant's fishpond application 1717 and awarded to him the accounting of the proceeds of the sales of all the fishes harvest
possession of the area in question. In view of the finality of the Secretary's fishpond from September 16, 1950 until Casteel shall have bee
decision in DANR Cases 353 and 353-B, and considering the absence of any proof possession and enjoyment of the same. In the event that the ap
that the said official exceeded his statutory authority, EXERCISED received more than her lawful credit of P27,000 (or whatever
unconstitutional powers, or acted with arbitrariness and in disregard of his advanced to Casteel), plus 6% interest thereon per annum, the
duty, or with grave abuse of discretion, we can do no less than respect and reimburse the excess to the appellant.
maintain unfettered his official acts in the premises. It is a salutary rule that the
judicial department should not dictate to the executive department what to do ACCORDINGLY, the judgment of the lower court is set aside. A
with regard to the administration and disposition of the public domain which the hereby rendered: (1) dissolving the injunction issued against t
law has entrusted to its care and administration. Indeed, courts cannot placing the latter back in possession of the fishpond in litigatio
superimpose their discretion on that of the land department and compel the latter remanding this case to the court of origin for the reception of e
to do an act which involves the exercise of judgment and discretion.22 the accounting that the parties must perforce render in the pre
termination of which the court shall render judgment accordin
Therefore, with the view that we take of this case, and even assuming that the counterclaim is dismissed. No pronouncement as to costs.
injunction was properly issued because present all the requisite grounds for its
issuance, its continuation, and, worse, its declaration as permanent, was improper Republic of the Philippines
in the face of the knowledge later acquired by the lower court that it was the SUPREME COURT
appellant's application over the fishpond which was given due course. After the Manila
Secretary of Agriculture and Natural Resources approved the appellant's
application, he became to all intents and purposes the legal permittee of the area EN BANC
with the corresponding right to possess, occupy and enjoy the same.
Consequently, the lower court erred in issuing the preliminary mandatory G.R. No. 21639 September 25, 1924
injunction. We cannot overemphasize that an injunction should not be granted to
take property out of the possession and control of one party and place it in the ALBERT F. KIEL, plaintiff-appellee,
hands of another whose title has not been clearly established by law.23 vs.
ESTATE OF P. S. SABERT, defendant-appellant.
However, pursuant to our holding that there was a partnership between the
parties for the exploitation of the fishpond before it was awarded to Casteel, this J. F. Yeager for appellant.
case should be remanded to the lower court for the reception of evidence relative J. S. Alano for appellee.
MALCOLM, J.: In this court, the defendant-appellant assigns the following err

This action relates to the legal right of Albert F. Kiel to secure from the estate of P. The lower court erred —
S. Sabert the sum of P20,000, on a claim first presented to the commissioners and
disallowed, then on appeal to the Court of First Instance allowed, and ultimately (1) In finding this was an action to establish a resulting
the subject-matter of the appeal taken to this court.
(2) In finding a resulting trust in land could have been e
A skeletonized statement of the case and the facts based on the complaint, the lands in favor of plaintiff herein who was an alien subje
findings of the trial judge, and the record, may be made in the following manner: said alleged resulting trust was created.

In 1907, Albert F. Kiel along with William Milfeil commenced to work on certain (3) In finding a resulting trust in land had been establis
public lands situated in the municipality of Parang, Province of Cotabato, known as in the case.
Parang Plantation Company. Kiel subsequently took over the interest of Milfeil. In
1910, Kiel and P. S. Sabert entered into an agreement to develop the Parang (4) In admitting the testimony of the plaintiff herein.
Plantation Company. Sabert was to furnish the capital to run the plantation and
Kiel was to manage it. They were to share and share alike in the property. It seems (5) In admitting the testimony of William Milfeil, John C
that this partnership was formed so that the land could be acquired in the name of Frank R. Lasage, Oscar C. Butler and Stephen Jurika wit
Sabert, Kiel being a German citizen and not deemed eligible to acquire public lands alleged statements and declarations of the deceased P.
in the Philippines.
(6) In finding any copartnership existed between plain
By virtue of the agreement, from 1910 to 1917, Kiel worked upon and developed Sabert.
the plantation. During the World War, he was deported from the Philippines.
(7) In rendering judgment for the plaintiff herein.
On August 16, 1919, five persons, including P. S. Sabert, organized the Nituan
Plantation Company, with a subscribed capital of P40,000. On April 10, 1922, P. S. Errors 1, 2, and 3, relating to resulting trusts. — These three er
Sabert transferred all of his rights in two parcels of land situated in the same subject may be resolved together. In effect, as will soon a
municipality of Parang, Province of Cotabato, embraced within his homestead conclusion that both parties were in error in devoting so much
application No. 21045 and his purchase application No. 1048, in consideration of elaboration of these questions, and that a ruling on the same is
the sum of P1, to the Nituan Plantation Company.
It is conceivable, that the facts in this case could have been so
In this same period, Kiel appears to have tried to secure a settlement from Sabert. court by means of allegations in the complaint, as to disclose c
At least in a letter dated June 6, 1918, Sabert wrote Kiel that he had offered "to sell resulting trust. But the complaint as framed asks for a straight
all property that I have for P40,000 or take in a partner who is willing to develop against an estate. In no part of the complaint did plaintiff alleg
the plantation, to take up the K. & S. debt no matter which way I will straiten out land, claim any interest in land, or pretend to establish a resul
with you." But Sabert's death came before any amicable arrangement could be That the plaintiff did not care to press such an action is demon
reached and before an action by Kiel against Sabert could be decided. So these relation of the fact of alienage with the rule, that a trust will no
proceedings against the estate of Sabert. for the purpose of evading the law prohibiting one from taking
property, he takes a conveyance thereof in the name of a third person. (26 R. C. L., [1907], 7 Phil., 401.) The testimony of these witnesses with re
1214-1222; Leggett vs. Dubois [1835], 5 Paige, N. Y., 114; 28 Am. Dec., 413.) or declarations of Sabert was, therefore, properly received for
might be worth.
The parties are wrong in assuming that the trial judge found that this was an
action to establish a resulting trust in land. In reality, all that the trial judge did Error 6, relating to the existence of a copartnership between Kie
was to ground one point of his decision on an authority coming from the Supreme Not WELL taken.
Court of California, which discussed the subject of resulting trusts.
No partnership agreement in writing was entered into by Kiel
Error 4, relating to the admission of testimony of the plaintiff herein. — WELL question consequently is whether or not the alleged verbal cop
taken. by Kiel and Sabert has been proved, if we eliminate the testim
consider the relevant testimony of other witnesses. In perform
The Code of Civil Procedure in section 383, No. 7, names as incompetent not unaware of the rule of partnership that the declarations of
witnesses, parties to an action or proceeding against an executor or administrator made in the presence of his copartner, are not competent to pr
of a deceased person upon a claim or demand against the estate of such deceased a partnership between them as against such other partner, and
person, who "cannot testify as to any matter of fact occuring before the death of of a partnership cannot be established by general reputation, r
such deceased person." But the trial judge, misled somewhat by the decision of the (Mechem on Partnership, sec. 65; 20 R. C. L., sec. 53; Owensbo
Supreme Court of California in the city ofMyers vs. Reinstein ([1885], 67 Cal., 89), Company vs. Bliss [1901], 132 Ala., 253.)
permitted this testimony to go in, whereas if the decision had been read more
carefully, it would have been noted that "the action was not on a claim or demand The testimony of the plaintiff's witnesses, together with the do
against the estate of Reinstein." Here this is exactly the situation which confronts evidence, leaves the firm impression with us that Kiel and Sab
us. partnership, and that they were to share equally. Applying the
existence of partnership, we feel that competent evidence exis
The case of Maxilom vs. Tabotabo ([1907], 9 Phil., 390), is squarely on all fours partnership. Even more primary than any of the rules of partn
with the case at bar. It was there held that "A party to an action against an announced, is the injunction to seek out the intention of the pa
executor or administrator of a deceased person, upon a claim against the estate of from the facts and as ascertained from their language and con
the latter, is absolutely prohibited by law from giving testimony concerning such give this intention effect. (Giles vs. Vette [1924], 263 U. S., 553.
claim or demand as to anything that occurred before the death of the person
against whose estate the action is prosecuted." Error 7, relating to the judgment rendered for the plaintiff. — W

Error 5, relating to the testimony of five witnesses with reference to alleged The judgment handed down, it will be remembered, permitted
statements and declarations of the deceased P. S. Sabert. — Not WELL taken. recover from the estate the full amount claimed, presumably o
that Sabert having sold by property to the Nituan Plantation C
By section 282 of the Code of Civil Procedure, the declaration, act, or omission of a Kiel should have one-half of the same, or P20,000. There is, ho
deceased person having sufficient knowledge of the subject, against his pecuniary record absolutely no evidence as to the precise amount receiv
interest, is admissible as evidence to that extent against his successor in interest. the sale of this particular land. If it is true that Sabert sold all h
By section 298, No. 4, of the same Code, evidence may be given up a trial of the Plantation Company for P40,000, although this fact was not pr
following facts: ". . . the act or declaration of a deceased person, done or made the P40,000 would correspond to the property which belonge
against his interest in respect to his real property." (See Leonardo vs. Santiago under their partnership agreement? It impresses us further th
facts had no standing in court to ask for any part of the land and in fact he does not Del Rosario & Del Rosario and Block, Johnston and Greenbaum f
do so; his only legal right is to ask for what is in effect an accounting with F. V. Arias for appellants Jo Ibec and Go Tayco.
reference to its improvements and income as of 1917 when Sabert became the No appearance for petitioner and appellee.
trustee of the estate on behalf of Kiel. Jose A. Espiritu and Felipe Ysmael as amici curiae.

As we have already intimated, we do not think that Kiel is entitled to any share in MALCOLM, J.:
the land itself, but we are of the opinion that he has clearly shown his right to one-
half of the value of the improvements and personal property on the land as to the Following the presentation of an application to be adjudged an
date upon which he left the plantation. Such improvements and personal property "Sociedad Mercantil, Teck Seing & Co., Ltd.," the creditors, the
include buildings, coconut palms, and other plantings, cattle and other animals, Company, Piñol & Company, Riu Hermanos, and W. H. Anderso
implements, fences, and other constructions, as well as outstanding collectible a motion in which the Court was prayed to enter an order: "(A
credits, if any, belonging to the partnership. The value of these improvements and individual partners as described in paragraph 5 parties to this
of the personal property cannot be ascertained from the record and the case must require each of said partners to file an inventory of his proper
therefore be remanded for further proceedings. required by section 51 of Act No. 1956; and (C) that each of sa
adjudicated insolvent debtors in this proceeding." The trial jud
In resume, we disregard errors 1, 2, and 3, we find well taken, errors 4 and 7, and motion, but, subsequently, on opposition being renewed, deni
we find not well taken, errors 5 and 6. last order that an appeal was taken in accordance with section
Insolvency Law.
The judgment appealed from is set aside and the record is returned to the lower
court where the plaintiff, if he so desires, may proceed further to prove his claim There has been laid before us for consideration and decision a
against the estate of P. S. Sabert. Without costs. So ordered. importance and of some intricacy. The issue in the case relates
of the nature of the mercantile establishment which operated
Johnson, Street, Avanceña, Villamor, Ostrand and Romualdez, JJ., concur. Teck Seing & co., Ltd., and this issue requires us to look into, an
document constituting Teck Seing & Co., Ltd. It reads:
Republic of the Philippines
SUPREME COURT ESCRITURA DE SOCIEDAD MERCANTIL LIMIT
Manila
Sepan todos por la presente:
EN BANC
Que nosotros, Santiago Jo Chung Cang, mayor de edad c
G.R. No. 19892 September 6, 1923 y residente del municipio de Tabogon Provincia de Ceb
Tayco, mayor de edad, comerciante, vecino y residente
TECK SEING AND CO., LTD., petitioner-appellee. Cebu Provincia de Cebu, Islas Filipinas, Yap Gueco, may
SANTIAGO JO CHUNG, ET AL., partners, comerciante, vecino y residente del municipio y Provin
vs. Filipinas, Lim Yogsing, mayor de edad comerciante, vec
PACIFIC COMMERCIAL COMPANY, ET AL., creditors-appellants. municipio de Cebu, Provincia de Cebu, Islas Filipinas, y
edad, comerciante, vecino y residente del municipio de
Bohol, Islas Filipinas, hacemos constar por la presente,
formamos una sociedad mercantil limitada, bajo las leyes vigentes en las Las ganancias que resultaren en cada año comercial, si
Islas Filipinas y para ser registrada de acuerdo con los reglamentos ganancias, no podran ser retiradas pors los accionistas
vigentes del Codigo de Comercio en Filipinas. termino de tres años a contar de la fecha del primer ba
negocio, quedadno por tanto estas ganancias en reserv
Que la razon social se denominara "Teck Seing & Co., Ltd." y tendra su capital aportado opor los accionistas y ampliar por tant
domicilio principal en la Calle Magallanes No. 94, de la Ciudad de Cebu, emprendida por la misma sociedad. Al pasar o expirar e
Provincia de Cebu, Islas Filipinas. años, cada accionista podra retirar o depositar en pode
ganancias que le debiera corresponder durante dicho t
Que el capital social sera de treinta mil pesos (P30,000) moneda legal de las
Islas Filipinas, dividido en cinco acciones de a P6,000 como sigue: Que los accionistas no podran extraer ni disponer en ni
cualesquiera cantidad o cantidades de la sociedad, que
Santiago Jo Chung Cang . . . . . . . . . . . . . P6,000.00 por los mismos, para atender sus gastos particulares ni
alguno sobre la cantidad que intenen disponer o extrae
Go Tayco . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000.00
El accionista Sr. Lim Yogsing tendra a su cargo, en unio
Yap Gueco . . . . . . . . . . . . . . . . . . . . . . . . 6,000.00 Jocson Jo, la administracion de la Compañia, quienes po
indistintamente la firma social, quedando por consiguie
Jo Ybec . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000.00 amobs para hacer en nombre de ella toda calse de oper
Lim Yogsing . . . . . . . . . . . . . . . . . . . . . . . 6,000.00 especulaciones mercantiles, practicando judicial y extra
cuantos actos se requieran para el bien de la sociedad,
Total . . . . . . . . . . . . . . . . . . . . . . 30,000.00 procuradores o abogados para reclamaciones y cobro d
proponer ante los tribunales las demandas, convenios,
excepciones procdentes. En caso de ausencia, enfermed
Que la duracion de la sociedad sera la de seis años, a contar de la fecha de
impedimento del accionista administrador Sr. Lim Yogs
esta escritura, pudiendo prorrogarse este tiempo a discrecion unanime de
conferir poder general o especial al accionista que crea
todos los accionistas.
que en union del administrador auxiliar Sr. Vicente Jocs
ambos administrar convenientemente los negocios de l
El objeto de la sociedad sera la compra y venta de mercaderias en general.
administradores podran tener los empleados necesario
debieran percibir dichos empleados por servicios rend
El administrador o administradores de la sociedad podran, previa
conformidad de los accionistas, establecer cuantas sucursales o
Que ambos administradores podran disponer de mil dis
establecimientos considere necesarios para facilitar sus negocios y el
pesos (P1,200) moneda filipina, anualmente, para sus g
mayor desarrollo del comercio a que se dedica la sociedad, verificando
siendo dicha cantidad de P1,200 la que corresponde a c
todas las operaciones que crean convenientes para el fomento de su capital.
administradores, como emolumentos o salarios que se
por sus trabajos en la administracion de la sociedad. En
Las ganancias o perdidas que resultaren durante cada año comercial, se
accionistas podran disponer cada fin de añola gratificac
distribuiran proporcionalmente entre los accionistas, de acuerdo con el
concedera a cada administrador, si los negocios del año
capital aportado por cada uno de los mismos.
justifiquen la concesion de una gratificacion especial, aparte del salario En el Municipio de Cebu, de la Provincia antes mencion
aqui dispuesto y especificado. octubre de 1919, A.D., ante mi, Notario Publico que sub
comprecieron personalmente Santiago Jo Chung Cang,
Que pasado el termino de seis años, y es de la conveniencia de los Gueco, Lim Yogsing y Jo Ybec, representado este ultimo
accionistas la continuacion del negocio de esta sociedad, dicho termino sera segun autorizacion hecha en telegrama de fecha 27 de s
prorrogado por igual numero de años, sin necesidas del otorgamiento de que se me ha presentado en este mismo acto, de quiene
ulteriores escrituras, quedando la presente en vigor hasta el termino conozco por ser las mismas personas que otorgaron el
dispuesto por todos los accionistas. documento, ratificando ant emi su contenido y manifes
un acto de su libre y voluntario otorgamiento. El Sr. San
Que las diferencias que pudieran suscitarse entre los accionistas, bien sea me exhibio su cedula personal expedida en Cebu, Cebu,
por razon de lo estipulado en esta en ella comprendidos, se procurara septiembre de 1919 bajo el No. H77742, Go Tayco tamb
arreglar entre los mismos amistosa y extrajudicialmente, y si no se suya expedida en Cebu, Cebu, I.F., el dia 9 de octubre de
consiguiere un arreglo de este modo, dichos accionistas nombraran un G2042490, Yap Gueco tambien me exhibio la suya expe
arbitro, cuya resolucion estan todos obligados y por la presente se I.F. el dia 20 de enero de 1919 bajo el No. F1452296, Li
comprometen y se obligan a acatarla en todas sus partes, renunciando me exhibio la suya expedida en Cebu, Cebu, I.F., el dia 2
ulteriores recursos. 1919 bajo el No. F1455662, y Ho Seng Sian representan
exhibio su cedula personal expedida en Cebu, Cebu, I.f.
En cuyos terminos dejamos formalizada esta escritura de sociedad de 1919 bajo el No. F1453733.
mercantillimitada, y prometemos cumplirla fiel y estrictamente segun los
pactos que hemos establecido. Ante mi,

En testimonio de todo lo cual, firmamos en la Ciudad de Cebu, Provincia de (Fdo.) "F.V.ARIAS

Cebu, Islas Filipinas, hoy 31 de octubre de mil novecientos diez y nueve. "Notario Publico
"Hasta el 1.º de enero
(Fdos.) "LIM YOGSING
"Jo YBec por Ho Seng Sian "Asiento No. 157
"SANTIAGO JO CHUNG CANG Pagina No. 95 de mi
"GO TAYCO Registro Notarial
"YAP GUECO Serie 1919
Libro 2.º
Firnando en presencia de:
(Fdos.) "ATILANO LEYSON Presentado a las diez y cuarenta y tres minutos de la m
"JULIO DIAZ el asiento No. 125, pagina 9 del Tomo 1.º del Libro Diar
febrero de 1920.
"ESTADOS UNIDOS DE AMERCA
"ISLAS FILIPINAS (Fdo.) "QUIRICO ABE
"PROVINCIA DE CEBU
 [SELLO] "Registrador Mercantil Ex- the protection of laws permitting the creation of limited partn
Officio" substantially full compliance with such laws. A limited partner
complied with the law of its creation is not considered a limite
but a general partnership in which all the members are liable.
Inscrito el documento que preced al folio 84 hoja No. 188, inscripcion 1.a of Partnership, p. 412; Gilmore, Partnership, pp. 499, 595; 20 R
del Tomo 3.º del Libro Registro de Sociedades Mercantiles. Cebu, 11 de
febrero de 1920. Honorarios treinta pesos con cincuenta centavos. Art. 197, The contention of the creditors and appellants is that the partn
Ley No. 2711, Codigo Administrativo. established a general partnership.

(Fdo.) "QUIRICO ABETO Article 125 of the Code of Commerce provides that the articles
[SELLO] "Registrador Mercantil Ex- copartnership must estate the names, surnames, and domicile
Officio" firm name; the names, and surnames of the partners to whom
the firm and the use of its signature is instrusted; the capital w
contributes in cash, credits, or property, stating the value give
Proceeding by process of elimination, it is self-evident that Teck Seing & Co., Ltd.,
basis on which their appraisement is to be made; the duration
is not a corporation. Neither is it contended by any one that Teck Seing & Co., Ltd.,
copartnership; and the amounts which, in a proper case, are to
is accidental partnership denominated cuenta en participacion(joint account
managing partner annually for his private expenses, while the
association).
of the Code provides that the general copartnership must tran
the name of all its members, of several of them, or of one only.
Counsel for the petitioner and appellee described his client in once place in his
document before us, it will be noted that all of the requiremen
opposition to the motion of the creditors as "una verdadera sociedad anonima" (a
been met, with the sole exception of that relating to the compo
true sociedad anonima). The provisions of the Code of Commerce relating
name. We leave consideration of this phase of the case for late
to sociedades anonimas were, however, repealed by section 191 of the Corporation
Law (Act No. 1459), with the exceptions the sociedades anonimas lawfully
The remaining possibility is the revised contention of counsel
organized at the time of the passage of the Corporation Law were recognized,
to the effect that Teck Seing & Co., Ltd., is "una sociedad merca
which is not our case.
solamente" (only a de facto commercial association), and that t
Supreme court in the case of Hung-Man-Yoc vs. Kieng-Chiong-
The document providing for the partnership contract purported to form "una
498), is controlling. It was this argument which convinced the
sociedad mercantil limitada," and counsel for the petitioner's first contention was
gave effect to his understanding of the case last cited and whic
that Teck Seing & Co., Ltd., was not "una sociedad regular colectiva, ni siquiera
given serious attention.
comanditaria, sino una sociedad mercantil limitada." Let us see if the partnership
contract created a "sociedad en comandita," or, as it is known in English, and will
The decision in Hung-Man-Yoc vs. Kieng-Chiong-Seng, supra, d
hereafter be spoken of, "a limited partnership."
firm Kieng-Chiong-Seng was not organized by means of any pu
the partnership had not been recorded in the mercantile regis
To establish a limited partnership there must be, at least, one general partner and
Chiong-Seng was not proven to be the firm name, but rather th
the name of the least one of the general partners must appear in the firm name.
partnership. The conclusion then was, that the partnership in
(Code of Commerce, arts. 122 [2], 146, 148.) But neither of these requirements
merely de facto and that, therefore, giving effect to the provisio
have been fulfilled. The general rule is, that those who seek to avail themselves of
the Code of Commerce, the right of action was against the persons in charge of the copartnership which merely lacks a legal firm name in order t
management of the association. partnership de jure.

Laying the facts of the case of Hung-Man-Yoc vs. Kieng-Chiong-Seng, supra, side by The civil law and the common law alike seem to point to a diff
side with the facts before us, a marked difference is at once disclosed. In the cited rights of the partners who have failed to comply with the law a
case, the organization of the partnership was not evidenced by any public third persons who have dealt with the partnership.
document; here, it is by a public document. In the cited case, the partnership
naturally could not present a public instrument for record in the mercantile The supreme court of Spain has repeatedly held that notwiths
registry; here, the contract of partnership has been duly registered. But the two obligation of the members to register the articles of associatio
cases are similar in that the firm name failed to include the name of any of the registry, agreements containing all the essential requisites are
partners. the contracting parties, whatever the form adopted, and that, w
register in the commercial registry necessarily precludes the m
We come then to the ultimate question, which is, whether we should follow the enforcing rights acquired by them against third persons, such
decision in Hung-Man-Yoc vs. Kieng-Chiong-Seng, supra, or whether we should prejudice the rights of third persons. (See decisions of Decemb
differentiate the two cases, holding Teck Seing & Co., Ltd., a general copartnership, 25, 1888, November 10, 1890, and January 26, 1900.) The sam
notwithstanding the failure of the firm name to include the name of one of the be applicable to the less formal requisite pertaining to the firm
partners. Let us now notice this decisive point in the case.
The common law is to the same effect. The State of Michigan h
Article 119 of the Code of Commerce requires every commercial association prohibiting the transaction of business under an assumed nam
before beginning its business to state its article, agreements, and conditions in a the real name of the individual conducting the same, unless su
public instrument, which shall be presented for record in the mercantile registry. with the county clerk a certificate setting forth the name unde
Article 120, next following, provides that the persons in charge of the management is to be conducted and the real name of each of the partners, w
of the association who violate the provisions of the foregoing article shall be and post-office addresses, and making a violation thereof a mi
responsible in solidum to the persons not members of the association with whom supreme Court of Michigan said:
they may have transacted business in the name of the association. Applied to the
facts before us, it would seem that Teck Seing & Co., Ltd. has fulfilled the The one object of the act is manifestly to protect the pu
provisions of article 119. Moreover, to permit the creditors only to look to the imposition and fraud, prohibiting persons from concea
person in charge of the management of the association, the partner Lim Yogsing, doing business under an assumed name, making it unla
would not prove very helpful to them. than their real names in transacting business without a
who they are, available for use in courts, and to punish
What is said in article 126 of the Code of Commerce relating to the general the prohibition. The object of this act is not limited to fa
copartnership transacting business under the name of all its members or of collection of debts, or the protection of those giving cre
several of them or of one only, is wisely included in our commercial law. It would business under an assumed name. It is not unilateral in
appear, however, that this provision was inserted more for the protection of the applies to debtor and creditor, contractor and contract
creditors than of the partners themselves. A distinction could well be drawn doing business with those acting under an assumed nam
between the right of the alleged partnership to institute action when failing to live buy or sell, have a right, under the law, to know who th
up to the provisions of the law, or even the rights of the partners as among hold responsible, in case the question of damages for fa
themselves, and the right of a third person to hold responsible a general breach of warranty should arise.
 The general rule is well settled that, where statutes enacted to protect the proved, and there are no articles of association, there is
public against fraud or imposition, or to safeguard the public health or An association, the articles of which have not been regi
morals, contain a prohibition and impose a penalty, all contracts in favor of third persons. 5th. The private pact or agreeme
violation thereof are void. . . . commercial association is governed not by the commer
civil law. 6th. Secret stipulationsexpressed in a public in
As this act involves purely business transactions, and affects only money inserted in the articles of association, do not affect third
interests, we think it should be construed as rendering contracts made in binding on the parties themselves. 7th. An agreement m
violation of it unlawful and unforceable at the instance of the offending party instrument, other than the articles of association, by m
only, but not as designed to take away the rights of innocent parties who may the partners guarantees to another certain profits or se
have dealt with the offenders in ignorance of their having violated the losses, is valid between them, without affecting the asso
statute. (Cashin vs. Pliter [1912], 168 Mich., 386; Ann. Cas. [1913-C, 697.) 8th. Contracts entered into by commercial associations d
are valid when they are voluntarily executed by the parti
The early decision of our Supreme Court in the case of Prautch Scholes & Co. vs. controversy relates to whether or not they complied with
Hernandez [1903], 1 Phil., 705), contains the following pertinent observations:
xxx xxx xxx
Another case may be supposed. A partnership is organized for commercial
purposes. It fails to comply with the requirements of article 119. A creditor The name of the collective merchant is called firm nam
sues the partnership for a debt contracted by it, claiming to hold the new being is distinguished from others, its sphere of ac
partners severally. They answer that their failure to comply with the Code juridical personality better determined, without consti
of Commerce makes them a civil partnership and that they are in character of the general partnership to such an extent a
accordance with article 1698 of the Civil Code only liable jointly. To allow purpose of giving a definition of said kind of a mercanti
such liberty of action would be to permit the parties by a violation of the the case in our Code.
Code to escape a liability which the law has seen fit to impose upon persons
who organized commercial partnership; "Because it would be contrary to Having in mind that these partnerships are prevailingly
all legal principles that the nonperformance of a duty should redound to character, article 126 says that they must transact busi
the benefit of the person in default either intentional or unintentional." of all its members, of some of them, or of one only, the w
(Mercantile Law, Eixala, fourth ed., p. 145.)" (See also Lichauco vs. Lichauco company" to be added in the latter two cases.
[1916], 33 Phil., 350, 360.)
It is rendered impossible for the general partnership to
Dr. Jose de Echavarri y Vivanco, in his Codigo de Comercio, includes the following appropriate to its commercial object; the law wants to
comment after articles 121 and 126 of the Code: the solidary and unlimited responsibility of the membe
partnership with the formation of its name, and impose
From the decisions cited in this and in the previous comments, the personal liberty in its selection, not only by prescribing
following is deduced: 1st. Defects in the organization cannot affect relations also by prohibiting persons not members of the compa
with third persons. 2d. Members who contract with other persons before their names in its firm name under penalty of civil solid
the association is lawfully organized are liable to these persons. 3d. The
intention to form an association is necessary, so that if the intention of Of course, the form required by the Code for the adopti
mutual participation in the profits and losses in a particular business is does not prevent the addition thereto of any other title
 commercial purpose of the association. The reader may see our be derived from the relation, must be disregarded. The partne
commentaries on the mercantile registry about the business names and disguised their identity under a designation distinct from that
firm names of associations, but it is proper to establish here that, while the members of the firm should be penalized, and not the creditor
business name may be alienated by any of the means admitted by the law, it have dealt with the partnership in good faith.
seems impossible to separate the firm names of general partnerships from
the juridical entity for the creation of which it was formed. (Vol. 2, pp. 197, Articles 127 and 237 of the Code of Commerce make all the me
213.) general copartnership liable personally and in solidum with al
the results of the transactions made in the name and for the ac
On the question of whether the fact that the firm name "Teck Seing & Co., Ltd." partnership. Section 51 of the Insolvency Law, likewise, makes
does not contain the name of all or any of the partners as prescribed by the Code the partnership and also all the separate property of each of th
of Commerce prevents the creation of a general partnership, Professor Jose A. other words, if a firm be insolvent, but one or more partners th
Espiritu, as amicus curiæ, states: the creditors may proceed both against the firm and against th
partners, first exhausting the assets of the firm before seizing
My opinion is that such a fact alone cannot and will not be a sufficient cause partners. (Brandenburg of Bankcruptcy, sec. 108; De los Reyes
of preventing the formation of a general partnership, especially if the other Borja [1916], 35 Phil., 757; Involuntary Insolvency of Campos
requisites are present and the requisite regarding registration of the Pacific Commercial Co. [1922], 44 Phil., 916).
articles of association in the Commercial Registry has been complied with,
as in the present case. I do not believe that the adoption of a wrong name is We reach the conclusion that the contract of partnership found
a material fact to be taken into consideration in this case; first, because the hereinbefore quoted established a general partnership or, to b
mere fact that a person uses a name not his own does not prevent him from partnership as this word is used in the Insolvency Law.
being bound in a contract or an obligation he voluntarily entered into;
second, because such a requirement of the law is merely a formal and not Wherefore, the order appealed from is reversed, and the recor
necessarily an essential one to the existence of the partnership, and as long to the court of origin for further proceedings pursuant to the m
as the name adopted sufficiently identity the firm or partnership intended the creditors, in conformity with the provisions of the Insolven
to use it, the acts and contracts done and entered into under such a name special findings as to the costs in this instance, it is ordered.
bind the firm to third persons; and third, because the failure of the partners
herein to adopt the correct name prescribed by law cannot shield them Republic of the Philippines
from their personal liabilities, as neither law nor equity will permit them to SUPREME COURT
utilize their own mistake in order to put the blame on third persons, and Manila
much less, on the firm creditors in order to avoid their personal possibility.
EN BANC
The legal intention deducible from the acts of the parties controls in determining
the existence of a partnership. If they intend to do a thing which in law constitutes G.R. No. L-24193 June 28, 1968
a partnership, they are partners, although their purpose was to avoid the creation
of such relation. Here, the intention of the persons making up Teck Seing & co., Ltd. MAURICIO AGAD, plaintiff-appellant,
was to establish a partnership which they erroneously denominated a limited vs.
partnership. If this was their purpose, all subterfuges resorted to in order to evade SEVERINO MABATO and MABATO and AGAD COMPANY, de
liability for possible losses, while assuming their enjoyment of the advantages to
Angeles, Maskarino and Associates for plaintiff-appellant.
Victorio S. Advincula for defendants-appellees.

CONCEPCION, C.J.:

In this 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.

Alleging that he and defendant Severino Mabato are — pursuant to a public

instrument dated August 29, 1952, copy of which is attached to the complaint as
Annex "A" — 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 therefor.

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.

Subsequently, 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
determination of rights over public lands. After due hearing, the court issued the
order appealed from, granting the motion to dismiss the complaint for failure to