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THIRD DIVISION

[G.R. No. 136448. November 3, 1999]

LIM TONG LIM, pet i t ioner, vs.PHILIPPINE FISHING GEAR INDUSTRIES,

INC., respondent.

D E C I S I O N

PANGANIBAN, J.:

A partnership may be deemed to exist among parties who agree to borrow money to

pursue a business and to divide the profits or losses that may arise therefrom, even if

it is shown that they have not contributed any capital of their own to a "common

fund." Their contribution may be in the form of credit or industry, not necessarily cash

or fixed assets. Being partners, they are all liable for debts incurred by or on behalf of

the partnership. The liability for a contract entered into on behalf of anunincorporated association or ostensible corporation may lie in a person who may

not have directly transacted on its behalf, but reaped benefits from that contract.

The Case

In the Petition for Review on Certioraribefore us, Lim Tong Lim assails the

November 26, 1998 Decision of the Court of Appeals in CA-GR CV 41477,[1]which

disposed as follows:

WHEREFORE, [there being] no reversible error in the appealed decision, the sameis hereby affirmed.[2]

The decretal portion of the Quezon City Regional Trial Court (RTC) ruling, which was

affirmed by the CA, reads as follows:

WHEREFORE, the Court rules:

1. That plaintiff is entitled to the writ of preliminary attachment issued by this Court on

September 20, 1990;

2. That defendants are jointly liable to plaintiff for the following amounts, subject to

the modifications as hereinafter made by reason of the special and unique facts and

circumstances and the proceedings that transpired during the trial of this case;

a. P532,045.00 representing [the] unpaid purchase price of the fishing nets covered

by the Agreement plus P68,000.00 representing the unpaid price of the floats not

covered by said Agreement;

b. 12% interest per annum counted from date of plaintiffs invoices and computed ontheir respective amounts as follows:

i. Accrued interest of P73,221.00 on Invoice No. 14407 for P385,377.80 dated

February 9, 1990;

ii. Accrued interest of P27,904.02 on Invoice No. 14413 for P146,868.00 dated

February 13, 1990;

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iii. Accrued interest of P12,920.00 on Invoice No. 14426 for P68,000.00 dated

February 19, 1990;

c. P50,000.00 as and for attorneys fees, plus P8,500.00 representing P500.00 per

appearance in court;

d. P65,000.00 representing P5,000.00 monthly rental for storage charges on the nets

counted from September 20, 1990 (date of attachment) to September 12, 1991 (date

of auction sale);

e. Cost of suit.

With respect to the joint liability of defendants for the principal obligation or for the

unpaid price of nets and floats in the amount of P532,045.00 and P68,000.00,

respectively, or for the total amount ofP600,045.00, this Court noted that these items

were attached to guarantee any judgment that may be rendered in favor of the

plaintiff but, upon agreement of the parties, and, to avoid further deterioration of thenets during the pendency of this case, it was ordered sold at public auction for not

less than P900,000.00 for which the plaintiff was the sole and winning bidder. The

proceeds of the sale paid for by plaintiff was deposited in court. In effect, the amount

of P900,000.00 replaced the attached property as a guaranty for any judgment that

plaintiff may be able to secure in this case with the ownership and possession of the

nets and floats awarded and delivered by the sheriff to plaintiff as the highest bidder

in the public auction sale. It has also been noted that ownership of the nets [was]

retained by the plaintiff until full payment [was] made as stipulated in the invoices;hence, in effect, the plaintiff attached its own properties. It [was] for this reason also

that this Court earlier ordered the attachment bond filed by plaintiff to guaranty

damages to defendants to be cancelled and for the P900,000.00 cash bidded and

paid for by plaintiff to serve as its bond in favor of defendants.

From the foregoing, it would appear therefore that whatever judgment the plaintiff

may be entitled to in this case will have to be satisfied from the amount

of P900,000.00 as this amount replaced the attached nets and floats. Considering,

however, that the total judgment obligation as computed above would amount toonly P840,216.92, it would be inequitable, unfair and unjust to award the excess to

the defendants who are not entitled to damages and who did not put up a single

centavo to raise the amount of P900,000.00 aside from the fact that they are not the

owners of the nets and floats. For this reason, the defendants are hereby relieved

from any and all liabilities arising from the monetary judgment obligation enumerated

above and for plaintiff to retain possession and ownership of the nets and floats and

for the reimbursement of the P900,000.00 deposited by it with the Clerk of Court.

SO ORDERED.[3]

The Facts

On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter Yao

entered into a Contract dated February 7, 1990, for the purchase of fishing nets of

various sizes from the Philippine Fishing Gear Industries, Inc. (herein

respondent). They claimed that they were engaged in a business venture with

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Petitioner Lim Tong Lim, who however was not a signatory to the agreement. The

total price of the nets amounted to P532,045. Four hundred pieces of floats

worth P68,000 were also sold to the Corporation.[4]

The buyers, however, failed to pay for the fishing nets and the floats; hence, private

respondent filed a collection suit against Chua, Yao and Petitioner Lim Tong Lim with

a prayer for a writ of preliminary attachment. The suit was brought against the threein their capacities as general partners, on the allegation that Ocean Quest Fishing

Corporation was a nonexistent corporation as shown by a Certification from the

Securities and Exchange Commission.[5]On September 20, 1990, the lower court

issued a Writ of Preliminary Attachment, which the sheriff enforced by attaching the

fishing nets on board F/B Lourdes which was then docked at the Fisheries Port,

Navotas, Metro Manila.

Instead of answering the Complaint, Chua filed a Manifestation admitting his liability

and requesting a reasonable time within which to pay. He also turned over torespondent some of the nets which were in his possession. Peter Yao filed an

Answer, after which he was deemed to have waived his right to cross-examine

witnesses and to present evidence on his behalf, because of his failure to appear in

subsequent hearings. Lim Tong Lim, on the other hand, filed an Answer with

Counterclaim and Crossclaim and moved for the lifting of the Writ of

Attachment.[6]The trial court maintained the Writ, and upon motion of private

respondent, ordered the sale of the fishing nets at a public auction. Philippine Fishing

Gear Industries won the bidding and deposited with the said court the sales proceedsof P900,000.[7]

On November 18, 1992, the trial court rendered its Decision, ruling that Philippine

Fishing Gear Industries was entitled to the Writ of Attachment and that Chua, Yao

and Lim, as general partners, were jointly liable to pay respondent.[8]

The trial court ruled that a partnership among Lim, Chua and Yao existed based (1)

on the testimonies of the witnesses presented and (2) on a Compromise Agreement

executed by the three[9]in Civil Case No. 1492-MN which Chua and Yao had brought

against Lim in the RTC of Malabon, Branch 72, for (a) a declaration of nullity of

commercial documents; (b) a reformation of contracts; (c) a declaration of ownership

of fishing boats; (d) an injunction and (e) damages.[10]The Compromise Agreement

provided:

a) That the parties plaintiffs & Lim Tong Lim agree to have the four (4) vessels sold in

the amount of P5,750,000.00 including the fishing net. This P5,750,000.00 shall be

applied as full payment forP3,250,000.00 in favor of JL Holdings Corporation and/or

Lim Tong Lim;

b) If the four (4) vessel[s] and the fishing net will be sold at a higher price

than P5,750,000.00 whatever will be the excess will be divided into 3: 1/3 Lim Tong

Lim; 1/3 Antonio Chua; 1/3 Peter Yao;

c) If the proceeds of the sale the vessels will be less than P5,750,000.00 whatever

the deficiency shall be shouldered and paid to JL Holding Corporation by 1/3 Lim

Tong Lim; 1/3 Antonio Chua; 1/3 Peter Yao.[11]

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The trial court noted that the Compromise Agreement was silent as to the nature of

their obligations, but that joint liability could be presumed from the equal distribution

of the profit and loss.[12]

Lim appealed to the Court of Appeals (CA) which, as already stated, affirmed the

RTC.

Ruling of the Court of Appeals

In affirming the trial court, the CA held that petitioner was a partner of Chua and Yao

in a fishing business and may thus be held liable as a such for the fishing nets and

floats purchased by and for the use of the partnership. The appellate court ruled:

The evidence establishes that all the defendants including herein appellant Lim Tong

Lim undertook a partnership for a specific undertaking, that is for commercial fishing

x x x. Obviously, the ultimate undertaking of the defendants was to divide the profits

among themselves which is what a partnership essentially is x x x. By a contract ofpartnership, two or more persons bind themselves to contribute money, property or

industry to a common fund with the intention of dividing the profits among themselves

(Article 1767, New Civil Code).[13]

Hence, petitioner brought this recourse before this Court.[14]

The Issues

In his Petition and Memorandum, Lim asks this Court to reverse the assailed

Decision on the following grounds:

I THE COURT OF APPEALS ERRED IN HOLDING, BASED ON A COMPROMISE

AGREEMENT THAT CHUA, YAO AND PETITIONER LIM ENTERED INTO IN A

SEPARATE CASE, THAT A PARTNERSHIP AGREEMENT EXISTED AMONG

THEM.

II SINCE IT WAS ONLY CHUA WHO REPRESENTED THAT HE WAS ACTING

FOR OCEAN QUEST FISHING CORPORATION WHEN HE BOUGHT THE NETS

FROM PHILIPPINE FISHING, THE COURT OF APPEALS WAS UNJUSTIFIED IN

IMPUTING LIABILITY TO PETITIONER LIM AS WELL.

III THE TRIAL COURT IMPROPERLY ORDERED THE SEIZURE AND

ATTACHMENT OF PETITIONER LIMS GOODS.

In determining whether petitioner may be held liable for the fishing nets and floats

purchased from respondent, the Court must resolve this key issue: whether by their

acts, Lim, Chua and Yao could be deemed to have entered into a partnership.

This Courts Ruling

The Petition is devoid of merit.

First and Second Issues: Existence of a Partnership and Pet i t ioner 's Liabi l i ty

In arguing that he should not be held liable for the equipment purchased from

respondent, petitioner controverts the CA finding that a partnership existed between

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him, Peter Yao and Antonio Chua. He asserts that the CA based its finding on the

Compromise Agreement alone. Furthermore, he disclaims any direct participation in

the purchase of the nets, alleging that the negotiations were conducted by Chua and

Yao only, and that he has not even met the representatives of the respondent

company. Petitioner further argues that he was a lessor, not a partner, of Chua and

Yao, for the "Contract of Lease" dated February 1, 1990, showed that he had merely

leased to the two the main asset of the purported partnership -- the fishing boat F/BLourdes. The lease was for six months, with a monthly rental of P37,500 plus 25

percent of the gross catch of the boat.

We are not persuaded by the arguments of petitioner. The facts as found by the two

lower courts clearly showed that there existed a partnership among Chua, Yao and

him, pursuant to Article 1767 of the Civil Code which provides:

Article 1767 - By the contract of partnership, two or more persons bind themselves to

contribute money, property, or industry to a common fund, with the intention ofdividing the profits among themselves.

Specifically, both lower courts ruled that a partnership among the three existed

based on the following factual findings:[15]

(1) That Petitioner Lim Tong Lim requested Peter Yao who was engaged in

commercial fishing to join him, while Antonio Chua was already Yaos partner;

(2) That after convening for a few times, Lim Chua, and Yao verbally agreed to

acquire two fishing boats, the FB Lourdes and the FB Nelson for the sum of P3.35

million;

(3) That they borrowed P3.25 million from Jesus Lim, brother of Petitioner Lim Tong

Lim, to finance the venture.

(4) That they bought the boats from CMF Fishing Corporation, which executed a

Deed of Sale over these two (2) boats in favor of Petitioner Lim Tong Lim only to

serve as security for the loan extended by Jesus Lim;

(5) That Lim, Chua and Yao agreed that the refurbishing , re-equipping, repairing, dry

docking and other expenses for the boats would be shouldered by Chua and Yao;

(6) That because of the unavailability of funds, Jesus Lim again extended a loan to

the partnership in the amount of P1 million secured by a check, because of which,

Yao and Chua entrusted the ownership papers of two other boats, Chuas FB Lady

Anne Mel and Yaos FB Tracy to Lim Tong Lim.

(7) That in pursuance of the business agreement, Peter Yao and Antonio Chua

bought nets from Respondent Philippine Fishing Gear, in behalf of "Ocean Quest

Fishing Corporation," their purported business name.

(8) That subsequently, Civil Case No. 1492-MN was filed in the Malabon RTC,

Branch 72 by Antonio Chua and Peter Yao against Lim Tong Lim for (a) declaration

of nullity of commercial documents; (b) reformation of contracts; (c) declaration of

ownership of fishing boats; (4) injunction; and (e) damages.

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(9) That the case was amicably settled through a Compromise Agreement executed

between the parties-litigants the terms of which are already enumerated above.

From the factual findings of both lower courts, it is clear that Chua, Yao and Lim had

decided to engage in a fishing business, which they started by buying boats

worth P3.35 million, financed by a loan secured from Jesus Lim who was petitioners

brother. In their Compromise Agreement, they subsequently revealed their intentionto pay the loan with the proceeds of the sale of the boats, and to divide equally

among them the excess or loss. These boats, the purchase and the repair of which

were financed with borrowed money, fell under the term common fund under Article

1767. The contribution to such fund need not be cash or fixed assets; it could be an

intangible like credit or industry. That the parties agreed that any loss or profit from

the sale and operation of the boats would be divided equally among them also shows

that they had indeed formed a partnership.

Moreover, it is clear that the partnership extended not only to the purchase of theboat, but also to that of the nets and the floats. The fishing nets and the floats, both

essential to fishing, were obviously acquired in furtherance of their business. It would

have been inconceivable for Lim to involve himself so much in buying the boat but

not in the acquisition of the aforesaid equipment, without which the business could

not have proceeded.

Given the preceding facts, it is clear that there was, among petitioner, Chua and Yao,

a partnership engaged in the fishing business. They purchased the boats, which

constituted the main assets of the partnership, and they agreed that the proceeds

from the sales and operations thereof would be divided among them.

We stress that under Rule 45, a petition for review like the present case should

involve only questions of law. Thus, the foregoing factual findings of the RTC and the

CA are binding on this Court, absent any cogent proof that the present action is

embraced by one of the exceptions to the rule.[16]In assailing the factual findings of

the two lower courts, petitioner effectively goes beyond the bounds of a petition for

review under Rule 45.

Compromise Agreement Not the Sole Basis of Partnership

Petitioner argues that the appellate courts sole basis for assuming the existence of a

partnership was the Compromise Agreement. He also claims that the settlement was

entered into only to end the dispute among them, but not to adjudicate their

preexisting rights and obligations. His arguments are baseless. The Agreement was

but an embodiment of the relationship extant among the parties prior to its execution.

A proper adjudication of claimants rights mandates that courts must review andthoroughly appraise all relevant facts. Both lower courts have done so and have

found, correctly, a preexisting partnership among the parties. In implying that the

lower courts have decided on the basis of one piece of document alone, petitioner

fails to appreciate that the CA and the RTC delved into the history of the document

and explored all the possible consequential combinations in harmony with law, logic

and fairness. Verily, the two lower courts factual findings mentioned above nullified

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petitioners argument that the existence of a partnership was based only on the

Compromise Agreement.

Petit ioner Was a Partner, Not a Lessor

We are not convinced by petitioners argument that he was merely the lessor of the

boats to Chua and Yao, not a partner in the fishing venture. His argument allegedly

finds support in the Contract of Lease and the registration papers showing that he

was the owner of the boats, including F/B Lourdeswhere the nets were found.

His allegation defies logic. In effect, he would like this Court to believe that he

consented to the sale of his own boats to pay a debt of Chua and Yao, with the

excess of the proceeds to be divided amongthe three of them. No lessor would do

what petitioner did. Indeed, his consent to the sale proved that there was a

preexisting partnership among all three.

Verily, as found by the lower courts, petitioner entered into a business agreementwith Chua and Yao, in which debts were undertaken in order to finance the

acquisition and the upgrading of the vessels which would be used in their fishing

business. The sale of the boats, as well as the division among the three of the

balance remaining after the payment of their loans, proves beyond cavil that F/B

Lourdes, though registered in his name, was not his own property but an asset of the

partnership. It is not uncommon to register the properties acquired from a loan in the

name of the person the lender trusts, who in this case is the petitioner himself. After

all, he is the brother of the creditor, Jesus Lim.

We stress that it is unreasonable indeed, it is absurd -- for petitioner to sell his

property to pay a debt he did not incur, if the relationship among the three of them

was merely that of lessor-lessee, instead of partners.

Corporat ion by Estoppel

Petitioner argues that under the doctrine of corporation by estoppel, liability can be

imputed only to Chua and Yao, and not to him. Again, we disagree.

Section 21 of the Corporation Code of the Philippines provides:

Sec. 21. Corporation by estoppel. - All persons who assume to act as a corporation

knowing it to be without authority to do so shall be liable as general partners for all

debts, liabilities and damages incurred or arising as a result thereof: Provided

however, That when any such ostensible corporation is sued on any transaction

entered by it as a corporation or on any tort committed by it as such, it shall not be

allowed to use as a defense its lack of corporate personality.

One who assumes an obligation to an ostensible corporation as such, cannot resist

performance thereof on the ground that there was in fact no corporation.

Thus, even if the ostensible corporate entity is proven to be legally nonexistent, a

party may be estopped from denying its corporate existence. The reason behind this

doctrine is obvious - an unincorporated association has no personality and would be

incompetent to act and appropriate for itself the power and attributes of a corporation

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as provided by law; it cannot create agents or confer authority on another to act in its

behalf; thus, those who act or purport to act as its representatives or agents do so

without authority and at their own risk. And as it is an elementary principle of law that

a person who acts as an agent without authority or without a principal is himself

regarded as the principal, possessed of all the right and subject to all the liabilities of

a principal, a person acting or purporting to act on behalf of a corporation which has

no valid existence assumes such privileges and obligations and becomes personallyliable for contracts entered into or for other acts performed as such agent.[17]

The doctrine of corporation by estoppel may apply to the alleged corporation and to a

third party. In the first instance, an unincorporated association, which represented

itself to be a corporation, will be estopped from denying its corporate capacity in a

suit against it by a third person who relied in good faith on such representation. It

cannot allege lack of personality to be sued to evade its responsibility for a contract it

entered into and by virtue of which it received advantages and benefits.

On the other hand, a third party who, knowing an association to be unincorporated,

nonetheless treated it as a corporation and received benefits from it, may be barred

from denying its corporate existence in a suit brought against the alleged

corporation.In such case, all those who benefited from the transaction made by the

ostensible corporation, despite knowledge of its legal defects, may be held liable for

contracts they impliedly assented to or took advantage of.

There is no dispute that the respondent, Philippine Fishing Gear Industries, is entitled

to be paid for the nets it sold. The only question here is whether petitioner should be

held jointly[18]liable with Chua and Yao. Petitioner contests such liability, insisting

that only those who dealt in the name of the ostensible corporation should be held

liable. Since his name does not appear on any of the contracts and since he never

directly transacted with the respondent corporation, ergo, he cannot be held liable.

Unquestionably, petitioner benefited from the use of the nets found inside F/B

Lourdes, the boat which has earlier been proven to be an asset of the

partnership. He in fact questions the attachment of the nets, because the Writ has

effectively stopped his use of the fishing vessel.

It is difficult to disagree with the RTC and the CA that Lim, Chua and Yao decided to

form a corporation. Although it was never legally formed for unknown reasons, this

fact alone does not preclude the liabilities of the three as contracting parties in

representation of it. Clearly, under the law on estoppel, those acting on behalf of a

corporation and those benefited by it, knowing it to be without valid existence, are

held liable as general partners.

Technically, it is true that petitioner did not directlyacton behalf of the

corporation. However, having reaped the benefits of the contract entered into by

persons with whom he previously had an existing relationship, he is deemed to be

part of said association and is covered by the scope of the doctrine of corporation by

estoppel. We reiterate the ruling of the Court inAlonso v. Villamor:[19]

A litigation is not a game of technicalities in which one, more deeply schooled and

skilled in the subtle art of movement and position , entraps and destroys the other. It

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is, rather, a contest in which each contending party fully and fairly lays before the

court the facts in issue and then, brushing aside as wholly trivial and indecisive all

imperfections of form and technicalities of procedure, asks that justice be done upon

the merits. Lawsuits, unlike duels, are not to be won by a rapiers thrust. Technicality,

when it deserts its proper office as an aid to justice and becomes its great hindrance

and chief enemy, deserves scant consideration from courts. There should be no

vested rights in technicalities.

Third Issue: Val idi ty of At tachment

Finally, petitioner claims that the Writ of Attachment was improperly issued against

the nets. We agree with the Court of Appeals that this issue is now moot and

academic. As previously discussed, F/B Lourdes was an asset of the partnership and

that it was placed in the name of petitioner, only to assure payment of the debt he

and his partners owed. The nets and the floats were specifically manufactured and

tailor-made according to their own design, and were bought and used in the fishingventure they agreed upon. Hence, the issuance of the Writ to assure the payment of

the price stipulated in the invoices is proper. Besides, by specific agreement,

ownership of the nets remained with Respondent Philippine Fishing Gear, until full

payment thereof.

WHEREFORE, the Petition is DENIED and the assailed DecisionAFFIRMED. Costs

against petitioner.

SO ORDERED.

Melo, (Chairman), Purisima, andGonzaga-Reyes, JJ., concur.

Vitug,J., Pls. see concurring opinion.

[1]Penned by J. Portia Alino-Hormachuelos; with the concurrence of JJ. Buenaventura J. Guerrero, Division chairman, and

Presbitero J. Velasco Jr., member.

[2]CA Decision, p. 12; rollo, p. 36.

[3]RTC Decision penned by Judge Maximiano C. Asuncion, pp. 11-12; rollo, pp. 48-49.

[4]CA Decision, pp. 1-2; rollo, pp. 25-26.

[5]Ibid., p. 2; rollo, p. 26.

[6]RTC Decision, p. 2; rollo, p. 39.

[7]Petition, p. 4; rollo, p. 11.

[8]Ibid.

[9]RTC Decision, pp. 6-7; rollo, pp. 43-44.

[10]Respondents Memorandum, pp. 5, 8; rollo, pp. 107, 109.

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[11]CA Decision, pp. 9-10; rollo, pp. 33-34.

[12]RTC Decision, p. 10; rollo, p. 47.

[13]Ibid.

[14]This case was deemed submitted for resolution on August 10, 1999, when this Court received petitioners Memorandum signed

by Atty. Roberto A. Abad. Respondents Memorandum signed by Atty. Benjamin S. Benito was filed earlier on July 27, 1999.

[15]Nos. 1-7 are from CA Decision, p. 9 (rollo, p. 33); No. 8 is from RTC Decision, p. 5 (rollo, p. 42); and No. 9 is from CA Decision,

pp. 9-10 (rollo, pp. 33-34).

[16]See Fuentes v. Court of Appeals, 268 SCRA 703, February 26, 1997.

[17]Salvatierra v.Garlitos, 103 SCRA 757, May 23, 1958, per Felix, J.; citing Fay v.Noble, 7 Cushing [Mass.] 188.

[18]The liability is joint if it is not specifically stated that it is solidary, Maramba v. Lozano, 126 Phil 833, June 29, 1967, per

Makalintal, J. See also Article 1207 of the Civil Code, which provides: The concurrence of two or more creditors or of two or more

debtors in one [and] the same obligation does not imply that each one of the former has a right to demand, or that each one of the

latter is bound to render, entire compliance with the prestation. There is a solidary liability only when the obligation expressly so

states, or when the law or the nature of the obligation requires solidarity.

[19]16 Phil. 315, July 26, 1910, per Moreland, J.

Republic of the Philippines

SUPREME COURT

Manila

EN BANC

G.R. No. L-9996 October 15, 1957

EUFEMIA EVANGELISTA, MANUELA EVANGELISTA, and FRANCISCA

EVANGELISTA, petitioners,

vs.

THE COLLECTOR OF INTERNAL REVENUE and THE COURT OF TAX

APPEALS,respondents.

Santiago F. Alidio and Angel S. Dakila, Jr., for petitioner.

Office of the Solicitor General Ambrosio Padilla, Assistant Solicitor General

Esmeraldo Umali and Solicitor Felicisimo R. Rosete for Respondents.

CONCEPCION, J.:

This is a petition filed by Eufemia Evangelista, Manuela Evangelista and Francisca

Evangelista, for review of a decision of the Court of Tax Appeals, the dispositive part

of which reads:

FOR ALL THE FOREGOING, we hold that the petitioners are liable for the income

tax, real estate dealer's tax and the residence tax for the years 1945 to 1949,

inclusive, in accordance with the respondent's assessment for the same in the total

amount of P6,878.34, which is hereby affirmed and the petition for review filed by

petitioner is hereby dismissed with costs against petitioners.

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It appears from the stipulation submitted by the parties:

1. That the petitioners borrowed from their father the sum of P59,1400.00 which

amount together with their personal monies was used by them for the purpose of

buying real properties,.

2. That on February 2, 1943, they bought from Mrs. Josefina Florentino a lot with an

area of 3,713.40 sq. m. including improvements thereon from the sum of

P100,000.00; this property has an assessed value of P57,517.00 as of 1948;

3. That on April 3, 1944 they purchased from Mrs. Josefa Oppus 21 parcels of land

with an aggregate area of 3,718.40 sq. m. including improvements thereon for

P130,000.00; this property has an assessed value of P82,255.00 as of 1948;

4. That on April 28, 1944 they purchased from the Insular Investments Inc., a lot of

4,353 sq. m. including improvements thereon for P108,825.00. This property has an

assessed value of P4,983.00 as of 1948;

5. That on April 28, 1944 they bought form Mrs. Valentina Afable a lot of 8,371 sq. m.

including improvements thereon for P237,234.34. This property has an assessed

value of P59,140.00 as of 1948;

6. That in a document dated August 16, 1945, they appointed their brother Simeon

Evangelista to 'manage their properties with full power to lease; to collect and receive

rents; to issue receipts therefor; in default of such payment, to bring suits against the

defaulting tenants; to sign all letters, contracts, etc., for and in their behalf, and toendorse and deposit all notes and checks for them;

7. That after having bought the above-mentioned real properties the petitioners had

the same rented or leases to various tenants;

8. That from the month of March, 1945 up to an including December, 1945, the total

amount collected as rents on their real properties was P9,599.00 while the expenses

amounted to P3,650.00 thereby leaving them a net rental income of P5,948.33;

9. That on 1946, they realized a gross rental income of in the sum of P24,786.30, out

of which amount was deducted in the sum of P16,288.27 for expenses thereby

leaving them a net rental income of P7,498.13;

10. That in 1948, they realized a gross rental income of P17,453.00 out of the which

amount was deducted the sum of P4,837.65 as expenses, thereby leaving them a

net rental income of P12,615.35.

It further appears that on September 24, 1954 respondent Collector of Internal

Revenue demanded the payment of income tax on corporations, real estate dealer'sfixed tax and corporation residence tax for the years 1945-1949, computed,

according to assessment made by said officer, as follows:

INCOME TAXES

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1945 14.84

1946 1,144.71

1947 10.34

1948 1,912.30

1949 1,575.90

Total including surcharge

and compromise

P6,157.09

REAL ESTATE DEALER'S FIXEDTAX

1946 P37.50

1947 150.00

1948 150.00

1949 150.00

Total including penalty P527.00

RESIDENCE TAXES OF

CORPORATION

1945 P38.75

1946 38.75

1947 38.75

1948 38.75

1949 38.75

Total including surcharge P193.75

TOTAL TAXES DUE P6,878.34.

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Said letter of demand and corresponding assessments were delivered to petitioners

on December 3, 1954, whereupon they instituted the present case in the Court of

Tax Appeals, with a prayer that "the decision of the respondent contained in his letter

of demand dated September 24, 1954" be reversed, and that they be absolved from

the payment of the taxes in question, with costs against the respondent.

After appropriate proceedings, the Court of Tax Appeals the above-mentioneddecision for the respondent, and a petition for reconsideration and new trial having

been subsequently denied, the case is now before Us for review at the instance of

the petitioners.

The issue in this case whether petitioners are subject to the tax on corporations

provided for in section 24 of Commonwealth Act. No. 466, otherwise known as the

National Internal Revenue Code, as well as to the residence tax for corporations and

the real estate dealers fixed tax. With respect to the tax on corporations, the issue

hinges on the meaning of the terms "corporation" and "partnership," as used insection 24 and 84 of said Code, the pertinent parts of which read:

SEC. 24. Rate of tax on corporations.There shall be levied, assessed, collected,

and paid annually upon the total net income received in the preceding taxable year

from all sources by every corporation organized in, or existing under the laws of the

Philippines, no matter how created or organized but not including duly registered

general co-partnerships (compaias colectivas), a tax upon such income equal to the

sum of the following: . . .

SEC. 84 (b). The term 'corporation' includes partnerships, no matter how created or

organized, joint-stock companies, joint accounts (cuentas en participacion),

associations or insurance companies, but does not include duly registered general

copartnerships. (compaias colectivas).

Article 1767 of the Civil Code of the Philippines provides:

By the contract of partnership two or more persons bind themselves to contribute

money, properly, or industry to a common fund, with the intention of dividing theprofits among themselves.

Pursuant to the article, the essential elements of a partnership are two, namely: (a)

an agreement to contribute money, property or industry to a common fund; and (b)

intent to divide the profits among the contracting parties. The first element is

undoubtedly present in the case at bar, for, admittedly, petitioners have agreed to,

and did, contribute money and property to a common fund. Hence, the issue narrows

down to their intent in acting as they did. Upon consideration of all the facts and

circumstances surrounding the case, we are fully satisfied that their purpose was toengage in real estate transactions for monetary gain and then divide the same

among themselves, because:

1. Said common fund was not something they found already in existence. It was not

property inherited by thempro indiviso. They created it purposely. What is more

theyjointly borrowed a substantial portion thereof in orderto establish said common

fund.

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2. They invested the same, not merely not merely in one transaction, but in

a seriesof transactions. On February 2, 1943, they bought a lot for P100,000.00. On

April 3, 1944, they purchased 21 lots for P18,000.00. This was soon followed on April

23, 1944, by the acquisition of another real estate for P108,825.00. Five (5) days

later (April 28, 1944), they got a fourth lot for P237,234.14. The number of lots (24)

acquired and transactions undertaken, as well as the brief interregnum between

each, particularly the last three purchases, is strongly indicative of a pattern orcommon design that was not limited to the conservation and preservation of the

aforementioned common fund or even of the property acquired by the petitioners in

February, 1943. In other words, one cannot but perceive a character of habitually

peculiar to business transactions engaged in the purpose of gain.

3. The aforesaid lots were not devoted to residential purposes, or to other personal

uses, of petitioners herein. The properties were leased separately to several

persons, who, from 1945 to 1948 inclusive, paid the total sum of P70,068.30 by way

of rentals. Seemingly, the lots are still being so let, for petitioners do not even

suggest that there has been any change in the utilization thereof.

4. Since August, 1945, the properties have been under the management of one

person, namely Simeon Evangelista, with full power to lease, to collect rents, to issue

receipts, to bring suits, to sign letters and contracts, and to indorse and deposit notes

and checks. Thus, the affairs relative to said properties have been handled as if the

same belonged to a corporation or business and enterprise operated for profit.

5. The foregoing conditions have existed for more than ten (10) years, or, to be

exact, over fifteen (15) years, since the first property was acquired, and over twelve

(12) years, since Simeon Evangelista became the manager.

6. Petitioners have not testified or introduced any evidence, either on their purpose in

creating the set up already adverted to, or on the causes for its continued existence.

They did not even try to offer an explanation therefor.

Although, taken singly, they might not suffice to establish the intent necessary to

constitute a partnership, the collective effect of these circumstances is such as toleave no room for doubt on the existence of said intent in petitioners herein. Only one

or two of the aforementioned circumstances were present in the cases cited by

petitioners herein, and, hence, those cases are not in point.

Petitioners insist, however, that they are mere co-owners, not copartners, for, in

consequence of the acts performed by them, a legal entity, with a personality

independent of that of its members, did not come into existence, and some of the

characteristics of partnerships are lacking in the case at bar. This pretense was

correctly rejected by the Court of Tax Appeals.

To begin with, the tax in question is one imposed upon "corporations", which, strictly

speaking, are distinct and different from "partnerships". When our Internal Revenue

Code includes "partnerships" among the entities subject to the tax on "corporations",

said Code must allude, therefore, to organizations which are not necessarily

"partnerships", in the technical sense of the term. Thus, for instance, section 24 of

said Code exempts from the aforementioned tax "duly registered general

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partnerships which constitute precisely one of the most typical forms of partnerships

in this jurisdiction. Likewise, as defined in section 84(b) of said Code, "the term

corporation includes partnerships, no matter how created or organized." This

qualifying expression clearly indicates that a joint venture need not be undertaken in

any of the standard forms, or in conformity with the usual requirements of the law on

partnerships, in order that one could be deemed constituted for purposes of the tax

on corporations. Again, pursuant to said section 84(b), the term "corporation"includes, among other, joint accounts, (cuentas en participation)" and

"associations," none of which has a legal personality of its own, independent of that

of its members. Accordingly, the lawmaker could not have regarded that personality

as a condition essential to the existence of the partnerships therein referred to. In

fact, as above stated, "duly registered general copartnerships" which are

possessed of the aforementioned personality have been expressly excluded by

law (sections 24 and 84 [b] from the connotation of the term "corporation" It may not

be amiss to add that petitioners' allegation to the effect that their liability inconnection with the leasing of the lots above referred to, under the management of

one person even if true, on which we express no opinion tends to increasethe

similarity between the nature of their venture and that corporations, and is, therefore,

an additional argument in favorof the imposition of said tax on corporations.

Under the Internal Revenue Laws of the United States, "corporations" are taxed

differently from "partnerships". By specific provisions of said laws, such

"corporations" include "associations, joint-stock companies and insurance

companies." However, the term "association" is not used in the aforementioned laws.

. . . in any narrow or technical sense. It includes any organization, created for the

transaction of designed affairs, or the attainment of some object, which like a

corporation, continues notwithstanding that its members or participants change, and

the affairs of which, like corporate affairs, are conducted by a single individual, a

committee, a board, or some other group, acting in a representative capacity. It is

immaterial whether such organization is created by an agreement, a declaration of

trust, a statute, or otherwise. It includes a voluntary association, a joint-stock

corporation or company, a 'business' trusts a 'Massachusetts' trust, a 'common law'

trust, and 'investment' trust (whether of the fixed or the management type), an

interinsuarance exchange operating through an attorney in fact, a partnership

association, and any other type of organization (by whatever name known) which is

not, within the meaning of the Code, a trust or an estate, or a partnership. (7A

Mertens Law of Federal Income Taxation, p. 788; emphasis supplied.).

Similarly, the American Law.

. . . provides its own conceptof a partnership, under the term 'partnership 'it includes

not only a partnership as known at common law but, as well, a syndicate, group,

pool,joint venture or other unincorporated organizations which carries on any

business financial operation, or venture, and which is not, within the meaning of the

Code, a trust, estate, or a corporation. . . (7A Merten's Law of Federal Income

taxation, p. 789; emphasis supplied.)

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The term 'partnership' includes a syndicate, group, pool,joint venture or other

unincorporated organization, through or by means of which any business, financial

operation, or venture is carried on, . . .. ( 8 Merten's Law of Federal Income Taxation,

p. 562 Note 63; emphasis supplied.) .

For purposes of the tax on corporations, our National Internal Revenue Code,

includes these partnerships

with the exception only of duly registered generalcopartnershipswithin the purview of the term "corporation."It is, therefore, clear to

our mind that petitioners herein constitute a partnership, insofar as said Code is

concerned and are subject to the income tax for corporations.

As regards the residence of tax for corporations, section 2 of Commonwealth Act No.

465 provides in part:

Entities liable to residence tax.-Every corporation, no matter how created or

organized, whether domestic or resident foreign, engaged in or doing business in the

Philippines shall pay an annual residence tax of five pesos and an annual additional

tax which in no case, shall exceed one thousand pesos, in accordance with the

following schedule: . . .

The term 'corporation' as used in this Act includes joint-stock company,partnership,

joint account (cuentas en participacion), association or insurance company, no

matter how created or organized. (emphasis supplied.)

Considering that the pertinent part of this provision is analogous to that of section 24

and 84 (b) of our National Internal Revenue Code (commonwealth Act No. 466), and

that the latter was approved on June 15, 1939, the day immediately after the

approval of said Commonwealth Act No. 465 (June 14, 1939), it is apparent that the

terms "corporation" and "partnership" are used in both statutes with substantially the

same meaning. Consequently, petitioners are subject, also, to the residence tax for

corporations.

Lastly, the records show that petitioners have habitually engaged in leasing the

properties above mentioned for a period of over twelve years, and that the yearlygross rentals of said properties from June 1945 to 1948 ranged from P9,599 to

P17,453. Thus, they are subject to the tax provided in section 193 (q) of our National

Internal Revenue Code, for "real estate dealers," inasmuch as, pursuant to section

194 (s) thereof:

'Real estate dealer' includes any person engaged in the business of buying, selling,

exchanging, leasing, or renting property or his own account as principaland holding

himself out as a full or part time dealer in real estate or as an owner of rental property

or properties rented or offered to rent for an aggregate amount of three thousandpesos or more a year. . . (emphasis supplied.)

Wherefore, the appealed decision of the Court of Tax appeals is hereby affirmed with

costs against the petitioners herein. It is so ordered.

Bengzon, Paras, C.J., Padilla, Reyes, A., Reyes, J.B.L., Endencia and Felix,

JJ.,concur.

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BAUTISTA ANGELO, J., concurring:

I agree with the opinion that petitioners have actually contributed money to a

common fund with express purpose of engaging in real estate business for profit.

The series of transactions which they had undertaken attest to this. This appears in

the following portion of the decision:

2. They invested the same, not merely in one transaction, but in a series of

transactions. On February 2, 1943, they bought a lot for P100,000. On April 3, 1944,

they purchase 21 lots for P18,000. This was soon followed on April 23, 1944, by the

acquisition of another real state for P108,825. Five (5) days later (April 28, 1944),

they got a fourth lot for P237,234.14. The number of lots (24) acquired and

transactions undertaken, as well as the brief interregnum between each, particularly

the last three purchases, is strongly indicative of a pattern or common design that

was not limited to the conservation and preservation of the aforementioned common

fund or even of the property acquired by the petitioner in February, 1943, In other

words, we cannot but perceive a character of habituallypeculiar

to businesstransactions engaged in for purposes of gain.

I wish however to make to make the following observation:

Article 1769 of the new Civil Code lays down the rule for determining when a

transaction should be deemed a partnership or a co-ownership. Said article

paragraphs 2 and 3, provides:

(2) Co-ownership or co-possession does not of itself establish a partnership, whether

such co-owners or co-possessors do or do not share any profits made by the use of

the property;

(3) The sharing of gross returns does not of itself establish partnership, whether or

not the person sharing them have a joint or common right or interest in any property

from which the returns are derived;

From the above it appears that the fact that those who agree to form a co-ownership

shared or do not share any profits made by the use of property held in common does

not convert their venture into a partnership. Or the sharing of the gross returns does

not of itself establish a partnership whether or not the persons sharing therein have a

joint or common right or interest in the property. This only means that, aside from the

circumstance of profit, the presence of other elements constituting partnership is

necessary, such as the clear intent to form a partnership, the existence of a judicial

personality different from that of the individual partners, and the freedom to 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, 1953 ed., pp. 635- 636).

It is evident that an isolated transaction whereby two or more persons contribute

funds to buy certain real estate for profit in the absence of other circumstances

showing a contrary intention cannot be considered a partnership.

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Persons who contribute property or funds for a common enterprise and agree to

share the gross returns of that enterprise in proportion to their contribution, but who

severally retain the title to their respective contribution, are not thereby rendered

partners. They have no common stock or capital, and no community of interest as

principal proprietors in the business itself which the proceeds derived. (Elements of

the law of Partnership by Floyd R. Mechem, 2n Ed., section 83, p. 74.)

A joint venture purchase of land, by two, does not constitute a copartnership in

respect thereto; nor does not agreement to share the profits and loses on the sale of

land create a partnership; the parties are only tenants in common. (Clark vs.

Sideway, 142 U.S. 682, 12 S Ct. 327, 35 L. Ed., 1157.)

Where plaintiff, his brother, and another agreed to become owners of a single tract of

reality, holding as tenants in common, and to divide the profits of disposing of it, the

brother and the other not being entitled to share in plaintiff's commissions, no

partnership existed as between the parties, whatever relation may have been as tothird parties. (Magee vs. Magee, 123 N. E. 6763, 233 Mass. 341.)

In order to constitute a partnership inter sesethere must be: (a) An intent to form the

same; (b) generally a participating in both profits and losses; (c) and such a

community of interest, as far as third persons are concerned as enables each party

to make contract, manage the business, and dispose of the whole property.

(Municipal Paving Co. vs Herring, 150 P. 1067, 50 Ill. 470.)

The common ownership of property does not itself create a partnership between theowners, though they may use it for purpose of making gains; and they may, without

becoming partners, agree among themselves as to the management and use of such

property and the application of the proceeds therefrom. (Spurlock vs. Wilson, 142 S.

W. 363, 160 No. App. 14.)

This is impliedly recognized in the following portion of the decision: "Although, taken

singly, they might not suffice to establish the intent necessary to constitute a

partnership, the collective effect of these circumstances (referring to the series of

transactions) such as to leave no room for doubt on the existence of said intent inpetitioners herein."

G.R. No. L-49982 April 27, 1988

ELIGIO ESTANISLAO, JR., petitioner,

vs.

THE HONORABLE COURT OF APPEALS, REMEDIOS ESTANISLAO, EMILIO

and LEOCADIO SANTIAGO,respondents.

Agustin O. Benitez for petitioner.

Benjamin C. Yatco for private respondents.

GANCAYCO, J.:

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By this petition for certiorari the Court is asked to determine if a partnership exists

between members of the same family arising from their joint ownership of certain

properties.

Petitioner and private respondents are brothers and sisters who are co-owners of

certain lots at the corner of Annapolis and Aurora Blvd., QuezonCity which were then

being leased to the Shell Company of the Philippines Limited (SHELL). They agreedto open and operate a gas station thereat to be known as Estanislao Shell Service

Station with an initial investment of P 15,000.00 to be taken from the advance rentals

due to them from SHELL for the occupancy of the said lots owned in common by

them. A joint affidavit was executed by them on April 11, 1966 which was prepared

byAtty. Democrito Angeles 1They agreed to help their brother, petitioner herein, by

allowing him to operate and manage the gasoline service station of the family. They

negotiated with SHELL. For practical purposes and 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 managing the bussiness

with petitioner from May 3, 1966 up to February 16, 1967.

On May 26, 1966, the parties herein entered into an Additional Cash Pledge

Agreement with SHELL wherein it was reiterated that the P 15,000.00 advance rental

shall be deposited with SHELL to cover advances of fuel to petitioner as dealer with

a proviso that said agreement "cancels and supersedes the Joint Affidavit dated 11

April 1966 executed by the co-owners." 2

For sometime, the petitioner submitted financial statements regarding the operation

of the business to private respondents, but therafter petitioner failed to render

subsequent accounting. Hence through Atty. Angeles, a demand was made on

petitioner to render an accounting of the profits.

The financial report of December 31, 1968 shows that the business was able to

make a profit of P 87,293.79 and that by the year ending 1969, a profit of P

150,000.00 was realized. 3

Thus, on August 25, 1970 private respondents filed a complaint in the Court of FirstInstance of Rizal against petitioner praying among others that the latter be ordered:

1. to execute a public document embodying all the provisions of the partnership

agreement entered into between plaintiffs and defendant as provided in Article 1771

of the New Civil Code;

2. to render a formal accounting of the business operation covering the period from

May 6, 1966 up to December 21, 1968 and from January 1, 1969 up to the time the

order is issued and that the same be subject to proper audit;

3. to pay the plaintiffs their lawful shares and participation in the net profits of the

business in an amount of no less than P l50,000.00 with interest at the rate of 1% per

month from date of demand until full payment thereof for the entire duration of the

business; and

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4. to pay the plaintiffs the amount of P 10,000.00 as attorney's fees and costs of the

suit (pp. 13-14 Record on Appeal.)

After trial on the merits, on October 15, 1975, Hon. Lino Anover who was then the

temporary presiding judge of Branch IV of the trial court, rendered judgment

dismissing the complaint and counterclaim and ordering private respondents to pay

petitioner P 3,000.00 attorney's fee and costs. Private respondent filed a motion forreconsideration of the decision. On December 10, 1975, Hon. Ricardo Tensuan who

was the newly appointed presiding judge of the same branch, set aside the aforesaid

derision and rendered another decision in favor of said respondents.

The dispositive part thereof reads as follows:

WHEREFORE, the Decision of this Court dated October 14, 1975 is hereby

reconsidered and a new judgment is hereby rendered in favor of the plaintiffs and as

against the defendant:

(1) Ordering the defendant to execute a public instrument embodying all the

provisions of the partnership agreement entered into between plaintiffs and

defendant as provided for in Article 1771, Civil Code of the Philippines;

(2) Ordering the defendant to render a formal accounting of the business operation

from April 1969 up to the time this order is issued, the same to be subject to

examination and audit by the plaintiff,

(3) Ordering the defendant to pay plaintiffs their lawful shares and participation in thenet profits of the business in the amount of P 150,000.00, with interest thereon at the

rate of One (1%) Per Cent per month from date of demand until full payment thereof;

(4) Ordering the defendant to pay the plaintiffs the sum of P 5,000.00 by way of

attorney's fees of plaintiffs' counsel; as well as the costs of suit. (pp. 161-162. Record

on Appeal).

Petitioner then interposed an appeal to the Court of Appeals enumerating seven (7)

errors allegedly committed by the trial court. In due course, a decision was renderedby the Court of Appeals on November 28,1978 affirming in totothe decision of the

lower court with costs against petitioner. *

A motion for reconsideration of said decision filed by petitioner was denied on

January 30, 1979. Not satisfied therewith, the petitioner now comes to this court by

way of this petition for certiorari alleging that the respondent court erred:

1. In interpreting the legal import of the Joint Affidavit (Exh. 'A') vis-a-vis the

Additional Cash Pledge Agreement (Exhs. "B-2","6", and "L"); and

2. 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.

Petitioner relies heavily on the provisions of the Joint Affidavit of April 11, 1966

(Exhibit A) and the Additional Cash Pledge Agreement of May 20, 1966 (Exhibit 6)

which are herein reproduced-

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(a) The joint Affidavit of April 11, 1966, Exhibit A reads:

(1) That we are the Lessors of two parcels of land fully describe in Transfer

Certificates of Title Nos. 45071 and 71244 of the Register of Deeds of Quezon City,

in favor of the LESSEE - SHELL COMPANY OF THE PHILIPPINES LIMITED a

corporation duly licensed to do business in the Philippines;

(2) That we have requested the said SHELL COMPANY OF THE PHILIPPINE

LIMITED advanced rentals in the total amount of FIFTEEN THOUSAND PESOS (P

l5,000.00) Philippine Currency, so that we can use the said amount to augment our

capital investment in the operation of that gasoline station constructed ,by the said

company on our two lots aforesaid by virtue of an outstanding Lease Agreement we

have entered into with the said company;

(3) That the and SHELL COMPANY OF THE PHILIPPINE LIMITED out of its

benevolence and desire to help us in aumenting our capital investment in the

operation of the said gasoline station, has agreed to give us the said amount of P

15,000.00, which amount will partake the nature of ADVANCED RENTALS;

(4) That we have freely and voluntarily agreed that upon receipt of the said amount of

FIFTEEN THOUSAND PESOS (P l6,000.00) from he SHELL COMPANY OF THE

PHILIPPINES LIMITED, the said sum as ADVANCED RENTALS to us be applied as

monthly rentals for the sai two lots under our Lease Agreement starting on the 25th

of May, 1966 until such time that the said of P 15,000.00 be applicable, which time to

our estimate and one-half months from May 25, 1966 or until the 10th of October,1966 more or less;

(5) That we have likewise agreed among ourselves that the SHELL COMPANY OF

THE PHILIPPINES LIMITED execute an instrument for us to sign embodying our

conformity that the said amount that it will generously grant us as requested be

applied as ADVANCED RENTALS; and

(6) FURTHER AFFIANTS SAYETH NOT.,

(b) The Additional Cash Pledge Agreement of May 20,1966, Exhibit 6, is as follows:

WHEREAS, under the lease Agreement dated 13th November, 1963 (identified as

doc. Nos. 491 & 1407, Page Nos. 99 & 66, Book Nos. V & III, Series of 1963 in the

Notarial Registers of Notaries Public Rosauro Marquez, and R.D. Liwanag,

respectively) executed in favour of SHELL by the herein CO-OWNERS and another

Lease Agreement dated 19th March 1964 . . . also executed in favour of SHELL by

CO-OWNERS Remedios and MARIA ESTANISLAO for the lease of adjoining

portions of two parcels of land at Aurora Blvd./ Annapolis, Quezon City, the CO

OWNERS RECEIVE a total monthly rental of PESOS THREE THOUSAND THREE

HUNDRED EIGHTY TWO AND 29/100 (P 3,382.29), Philippine Currency;

WHEREAS, CO-OWNER Eligio Estanislao Jr. is the Dealer of the Shell Station

constructed on the leased land, and as Dealer under the Cash Pledge Agreement

dated llth May 1966, he deposited to SHELL in cash the amount of PESOS TEN

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THOUSAND (P 10,000), Philippine Currency, to secure his purchase on credit of

Shell petroleum products; . . .

WHEREAS, said DEALER, in his desire, to be granted an increased the limit up to P

25,000, has secured the conformity of his CO-OWNERS to waive and assign to

SHELL the total monthly rentals due to all of them to accumulate the equivalent

amount of P 15,000, commencing 24th May 1966, this P 15,000 shall be treated asadditional cash deposit to SHELL under the same terms and conditions of the

aforementioned Cash Pledge Agreement dated llth May 1966.

NOW, THEREFORE, for and in consideration of the foregoing premises,and the

mutual covenants among the CO-OWNERS herein and SHELL, said parties have

agreed and hereby agree as follows:

l. The CO-OWNERS dohere by waive in favor of DEALER the monthly rentals due to

all CO-OWNERS, collectively, under the above describe two Lease Agreements, one

dated 13th November 1963 and the other dated 19th March 1964 to enable DEALER

to increase his existing cash deposit to SHELL, from P 10,000 to P 25,000, for such

purpose, the SHELL CO-OWNERS and DEALER hereby irrevocably assign to

SHELL the monthly rental of P 3,382.29 payable to them respectively as they fall

due, monthly, commencing 24th May 1966, until such time that the monthly rentals

accumulated, shall be equal to P l5,000.

2. The above stated monthly rentals accumulated shall be treated as additional cash

deposit by DEALER to SHELL, thereby in increasing his credit limit from P 10,000 toP 25,000. This agreement, therefore, cancels and supersedes the Joint affidavit

dated 11 April 1966 executed by the CO-OWNERS.

3. Effective upon the signing of this agreement, SHELL agrees to allow DEALER to

purchase from SHELL petroleum products, on credit, up to the amount of P 25,000.

4. This increase in the credit shall also be subject to the same terms and conditions

of the above-mentioned Cash Pledge Agreement dated llth May 1966. (Exhs. "B-2,"

"L," and "6"; emphasis supplied)In the aforesaid Joint Affidavit of April 11, 1966 (Exhibit A), it is clearly stipulated by

the parties that the P 15,000.00 advance rental due to them from SHELL shall

augment their "capital investment" in the operation of the gasoline station, which

advance rentals shall be credited as rentals from May 25, 1966 up to four and one-

half months or until 10 October 1966, more or less covering said P 15,000.00.

In the subsequent document entitled "Additional Cash Pledge Agreement" above

reproduced (Exhibit 6), the private respondents and petitioners assigned to SHELL

the monthly rentals due them commencing the 24th of May 1966 until such time that

the monthly rentals accumulated equal P 15,000.00 which private respondents agree

to be a cash deposit of petitioner in favor of SHELL to increase his credit limit as

dealer. As above-stated it provided therein that "This agreement, therefore, cancels

and supersedes the Joint Affidavit dated 11 April 1966 executed by the CO-

OWNERS."

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Petitioner contends that because of the said stipulation cancelling and superseding

that previous Joint Affidavit, whatever partnership agreement there was in said

previous agreement had thereby been abrogated. We find no merit in this argument.

Said cancelling provision was necessary for the Joint Affidavit speaks of P 15,000.00

advance rentals starting May 25, 1966 while the latter agreement also refers to

advance rentals of the same amount starting May 24, 1966. There is, therefore, a

duplication of reference to the P 15,000.00 hence the need to provide in thesubsequent document that it "cancels and supersedes" the previous one. True it is

that in the latter document, it is silent as to the statement in the Joint Affidavit that the

P 15,000.00 represents the "capital investment" of the parties in the gasoline station

business and it speaks of 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 its policy if in

the agreement it should be stated that the business is a partnership with private

respondents and not a sole proprietorship of petitioner.

Moreover other evidence in the record shows that there was in fact such partnership

agreement between the parties. This is attested by the testimonies of private

respondent Remedies Estanislao and Atty. Angeles. Petitioner submitted to private

respondents periodic accounting of the business. 4Petitioner gave a written authority

to private respondent Remedies Estanislao, his sister, to examine and audit the

books of their "common business' aming negosyo). 5Respondent Remedios assisted

in the running of the business. There is no doubt that the parties hereto formed a

partnership when they bound themselves to contribute money to a common fund with

the intention of dividing the profits among themselves.6The sole dealership by thepetitioner and the issuance of all government permits and licenses in the name of

petitioner was in compliance with the afore-stated policy of SHELL and the

understanding of the parties of having only one dealer of the SHELL products.

Further, the findings of facts of the respondent court are conclusive in this

proceeding, and its conclusion based on the said facts are in accordancewith the

applicable law.

WHEREFORE, the judgment appealed from is AFFIRMED in toto with costs againstpetitioner. This decision is immediately executory and no motion for extension of time

to file a motion for reconsideration shag beentertained.

SO ORDERED.

Narvasa, Cruz and Grio-Aquino, JJ., concur.

Footnotes

1 Exhibit A.

2 Exhibits 6 and 6-A.

3 Exhibit D.

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* Penned by then Justice Ramon G. Gaviola, Jr., and concurred in by Justices B.S.

de la Fuente and Edgardo Paras, Fourth Division, Court of Appeals.

4 Exhibits D, D-1, D-2, D-3 and D-4.

5 Exhibit E.

6 Article 1767, New Civil Code.

THIRD DIVISION

HEIRS OF JOSE LIM,

represented by ELENITO LIM,

Petitioners,

- versus -

JULIET VILLA LIM,Respondent.

G.R. No. 172690

Present:

CORONA, J.,

Chairperson,

VELASCO, JR.,

NACHURA,

DEL CASTILLO,*and

MENDOZA, JJ.

Promulgated:

March 3, 2010

x------------------------------------------------------------------------------------x

DECISION

NACHURA, J.:

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Before this Court is a Petition for Review on Certiorari[1]under Rule 45 of the Rules

of Civil Procedure, assailing the Court of Appeals (CA) Decision [2]dated June 29,

2005, which reversed and set aside the decision [3]of the Regional Trial Court (RTC)

of Lucena City, dated April 12, 2004.

The facts of the case are as follows:

Petitioners are the heirs of the late Jose Lim (Jose), namely: Jose's widow Cresencia

Palad (Cresencia); and their children Elenito, Evelia, Imelda, Edelyna and Edison, all

surnamed Lim (petitioners), represented by Elenito Lim (Elenito). They filed a

Complaint[4]for Partition, Accounting and Damagesagainst respondent Juliet Villa

Lim (respondent), widow of the late Elfledo Lim (Elfledo), who was the eldest son ofJose and Cresencia.

Petitioners alleged that Jose was the liaison officer of Interwood Sawmill in Cagsiay,

Mauban, Quezon. Sometime in 1980, Jose, together with his friends Jimmy Yu

(Jimmy) and Norberto Uy (Norberto), formed a partnership to engage in the trucking

business. Initially, with a contribution of P50,000.00 each, they purchased a truck to

be used in the hauling and transport of lumber of the sawmill. Jose managed theoperations of this trucking business until his death on August 15, 1981. Thereafter,

Jose's heirs, including Elfledo, and partners agreed to continue the business under

the management of Elfledo. The shares in the partnership profits and income that

formed part of the estate of Jose were held in trust by Elfledo, with petitioners'

authority for Elfledo to use, purchase or acquire properties using said funds.

Petitioners also alleged that, at that time, Elfledo was a fresh commerce graduateserving as his fathers driver in the trucking business. He was never a partner or an

investor in the business and merely supervised the purchase of additional trucks

using the income from the trucking business of the partners. By the time the

partnership ceased, it had nine trucks, which were all registered in Elfledo's name.

Petitioners asseverated that it was also through Elfledos management of the

partnership that he was able to purchase numerous real properties by using the

profits derived therefrom, all of which were registered in his name and that of

respondent. In addition to the nine trucks, Elfledo also acquired five other motor

vehicles.

On May 18, 1995, Elfledo died, leaving respondent as his sole surviving heir.

Petitioners claimed that respondent took over the administration of the

aforementioned properties, which belonged to the estate of Jose, without their

consent and approval. Claiming that they are co-owners of the properties, petitioners

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required respondent to submit an accounting of all income, profits and rentals

received from the estate of Elfledo, and to surrender the administration

thereof. Respondent refused; thus, the filing of this case.

Respondent traversed petitioners' allegations and claimed that Elfledo was himself a

partner of Norberto and Jimmy. Respondent also claimed that per testimony of

Cresencia, sometime in 1980, Jose gave Elfledo P50,000.00 as the latter's capital in

an informal partnership with Jimmy and Norberto. When Elfledo and respondent got

married in 1981, the partnership only had one truck; but through the efforts of Elfledo,

the business flourished. Other than this trucking business, Elfledo, together with

respondent, engaged in other business ventures. Thus, they were able to buy real

properties and to put up their own car assembly and repair business. When Norberto

was ambushed and killed on July 16, 1993, the trucking business started to falter.

When Elfledo died on May 18, 1995 due to a heart attack, respondent talked toJimmy and to the heirs of Norberto, as she could no longer run the business. Jimmy

suggested that three out of the nine trucks be given to him as his share, while the

other three trucks be given to the heirs of Norberto. However, Norberto's wife,

Paquita Uy, was not interested in the vehicles. Thus, she sold the same to

respondent, who paid for them in installments.

Respondent also alleged that when Jose died in 1981, he left no known assets, and

the partnership with Jimmy and Norberto ceased upon his demise. Respondent also

stressed that Jose left no properties that Elfledo could have held in trust. Respondent

maintained that all the properties involved in this case were purchased and acquired

through her and her husbands joint efforts and hard work, and without any

participation or contribution from petitioners or from Jose. Respondent submitted that

these are conjugal partnership properties; and thus, she had the right to refuse to

render an accounting for the income or profits of their own business.

Trial on the merits ensued. On April 12, 2004, the RTC rendered its decision in favorof petitioners, thus:

WHEREFORE, premises considered, judgment is hereby rendered:

1) Ordering the partition of the above-mentioned properties equally between the

plaintiffs and heirs of Jose Lim and the defendant Juliet Villa-Lim; and

2) Ordering the defendant to submit an accounting of all incomes, profits and rentals

received by her from said properties.

SO ORDERED.

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Aggrieved, respondent appealed to the CA.

On June 29, 2005, the CA reversed and set aside the RTC's decision, dismissing

petitioners' complaint for lack of merit. Undaunted, petitioners filed their Motion for

Reconsideration,[5]which the CA, however, denied in its Resolution [6]dated May 8,

2006.

Hence, this Petition, raising the sole question, viz.:

IN THE APPRECIATION BY THE COURT OF THE EVIDENCE SUBMITTED BY

THE PARTIES, CAN THE TESTIMONY OF ONE OF THE PETITIONERS BE GIVEN

GREATER WEIGHT THAN THAT BY A FORMER PARTNER ON THE ISSUE OF

THE IDENTITY OF THE OTHER PARTNERS IN THE PARTNERSHIP? [7]

In essence, petitioners argue that according to the testimony of Jimmy, the sole

surviving partner, Elfledo was not a partner; and that he and Norberto entered into a

partnership with Jose. Thus, the CA erred in not giving that testimony greater weight

than that of Cresencia, who was merely the spouse of Jose and not a party to the

partnership.[8]

Respondent counters that the issue raised by petitioners is not proper in a petition for

review on certiorariunder Rule 45 of the Rules of Civil Procedure, as it would entail

the review, evaluation, calibration, and re-weighing of the factual findings of the CA.

Moreover, respondent invokes the rationale of the CA decision that, in light of the

admissions of Cresencia and Edison and the testimony of respondent, the testimony

of Jimmy was effectively refuted; accordingly, the CA's reversal of the RTC's findings

was fully justified.[9]

We resolve first the procedural matter regarding the propriety of the instant Petition.

Verily, the evaluation and calibration of the evidence necessarily involves

consideration of factual issues an exercise that is not appropriate for a petition for

review on certiorariunder Rule 45. This rule provides that the parties may raise only

questions of law, because the Supreme Court is not a trier of facts. Generally, we are

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