partnership batch 1

8/12/2019 Partnership Batch 1

1/216

G.R. No. 127405 September 20, 2001

MARJORIE TOCAO and WILLIAM T. BELO,petitioners,vs.COURT OF APPEALS and NENITA A. ANAY,respondent.

R E S O L U T I O N

YNARES-SANTIAGO, J.:

The inherent powers of a Court to amend and control its processes and orders so as

to make them conformable to law and justice includes the right to reverse itself,especially when in its honest opinion it has committed an error or mistake injudgment, and that to adhere to its decision will cause injustice to a party litigant.1

On November 14, 2001, petitioners Marjorie Tocao and William T. Belo filed aMotion for Reconsideration of our Decision dated October 4, 2000. They maintain

that there was no partnership between petitioner Belo, on the one hand, andrespondent Nenita A. Anay, on the other hand; and that the latter being merely an

employee of petitioner Tocao.

After a careful review of the evidence presented, we are convinced that, indeed,petitioner Belo acted merely as guarantor of Geminesse Enterprise. This was

categorically affirmed by respondent's own witness, Elizabeth Bantilan, during her

cross-examination. Furthermore, Bantilan testified that it was Peter Lo who wasthe company's financier. Thus:

Q - You mentioned a while ago the name William Belo. Now, what isthe role of William Belo with Geminesse Enterprise?

A - William Belo is the friend of Marjorie Tocao and he was theguarantor of the company.

Q - What do you mean by guarantor?

A - He guarantees the stocks that she owes somebody who is Peter Loand he acts as guarantor for us. We can borrow money from him.

Q - You mentioned a certain Peter Lo. Who is this Peter Lo?

A - Peter Lo is based in Singapore.


2/216

Q - What is the role of Peter Lo in the Geminesse Enterprise?

A - He is the one fixing our orders that open the L/C.

Q - You mean Peter Lo is the financier?

A - Yes, he is the financier.

Q - And the defendant William Belo is merely the guarantor ofGeminesse Enterprise, am I correct?

A - Yes, sir2

The foregoing was neither refuted nor contradicted by respondent's evidence. Itshould be recalled that the business relationship created between petitioner Tocao

and respondent Anay was an informal partnership, which was not even recordedwith the Securities and Exchange Commission. As such, it was understandable that

Belo, who was after all petitioner Tocao's good friend and confidante, wouldoccasionally participate in the affairs of the business, although never in a formal or

official capacity.3Again, respondent's witness, Elizabeth Bantilan, confirmed thatpetitioner Belo's presence in Geminesse Enterprise's meetings was merely asguarantor of the company and to help petitioner Tocao.4

Furthermore, no evidence was presented to show that petitioner Belo participated

in the profits of the business enterprise. Respondent herself professed lack ofknowledge that petitioner Belo received any share in the net income of the

partnership.5On the other hand, petitioner Tocao declared that petitioner Belo was

not entitled to any share in the profits of Geminesse Enterprise.6With noparticipation in the profits, petitioner Belo cannot be deemed a partner since theessence of a partnership is that the partners share in the profits and losses.7

Consequently, inasmuch as petitioner Belo was not a partner in GeminesseEnterprise, respondent had no cause of action against him and her complaintagainst him should accordingly be dismissed.

As regards the award of damages, petitioners argue that respondent should bedeemed in bad faith for failing to account for stocks of Geminesse Enterprise

amounting to P208,250.00 and that, accordingly, her claim for damages should be

barred to that extent. We do not agree. Given the circumstances surrounding

private respondent's sudden ouster from the partnership by petitioner Tocao, heract of withholding whatever stocks were in her possession and control was


3/216

justified, if only to serve as security for her claims against the partnership.

However, while we do not agree that the same renders private respondent in badfaith and should bar her claim for damages, we find that the said sum of

P208,250.00 should be deducted from whatever amount is finally adjudged in her

favor on the basis of the formal account of the partnership affairs to be submittedto the Regional Trial Court.

WHEREFORE, based on the foregoing, the Motion for Reconsideration of

petitioners is PARTIALLY GRANTED. The Regional Trial Court of Makati ishereby ordered to DISMISS the complaint, docketed as Civil Case No. 88-509, as

against petitioner William T. Belo only. The sum of P208,250.00 shall be deducted

from whatever amount petitioner Marjorie Tocao shall be held liable to payrespondent after the normal accounting of the partnership affairs.

SO ORDERED.

G.R. No. L-4935 May 28, 1954

J. M. TUASON & CO., INC., represented by it Managing PARTNER,GREGORIA ARANETA, INC.,plaintiff-appellee,vs.QUIRINO BOLAOS,defendant-appellant.

Araneta and Araneta for appellee.

Jose A. Buendia for appellant.

REYES, J.:

This is an action originally brought in the Court of First Instance of Rizal, Quezon

City Branch, to recover possesion of registered land situated in barrio Tatalon,Quezon City.

Plaintiff's complaint was amended three times with respect to the extent and

description of the land sought to be recovered. The original complaint described

the land as a portion of a lot registered in plaintiff's name under TransferCertificate of Title No. 37686 of the land record of Rizal Province and ascontaining an area of 13 hectares more or less. But the complaint was amended by

reducing the area of 6 hectares, more or less, after the defendant had indicated theplaintiff's surveyors the portion of land claimed and occupied by him. The second

amendment became necessary and was allowed following the testimony ofplaintiff's surveyors that a portion of the area was embraced in another certificate


4/216

of title, which was plaintiff's Transfer Certificate of Title No. 37677. And still

later, in the course of trial, after defendant's surveyor and witness, Quirino Feria,had testified that the area occupied and claimed by defendant was about 13

hectares, as shown in his Exhibit 1, plaintiff again, with the leave of court,amended its complaint to make its allegations conform to the evidence.

Defendant, in his answer, sets up prescription and title in himself thru "open,

continuous, exclusive and public and notorious possession (of land in dispute)

under claim of ownership, adverse to the entire world by defendant and hispredecessor in interest" from "time in-memorial". The answer further alleges that

registration of the land in dispute was obtained by plaintiff or its predecessors in

interest thru "fraud or error and without knowledge (of) or interest either personalor thru publication to defendant and/or predecessors in interest." The answer

therefore prays that the complaint be dismissed with costs and plaintiff required to

reconvey the land to defendant or pay its value.

After trial, the lower court rendered judgment for plaintiff, declaring defendant tobe without any right to the land in question and ordering him to restore possession

thereof to plaintiff and to pay the latter a monthly rent of P132.62 from January,1940, until he vacates the land, and also to pay the costs.

Appealing directly to this court because of the value of the property involved,defendant makes the following assignment or errors:

I. The trial court erred in not dismissing the case on the ground that the casewas not brought by the real property in interest.

II. The trial court erred in admitting the third amended complaint.

III. The trial court erred in denying defendant's motion to strike.

IV. The trial court erred in including in its decision land not involved in thelitigation.

V. The trial court erred in holding that the land in dispute is covered bytransfer certificates of Title Nos. 37686 and 37677.

Vl. The trial court erred in not finding that the defendant is the true andlawful owner of the land.


5/216

VII. The trial court erred in finding that the defendant is liable to pay the

plaintiff the amount of P132.62 monthly from January, 1940, until hevacates the premises.

VIII. The trial court erred in not ordering the plaintiff to reconvey the land inlitigation to the defendant.

As to the first assigned error, there is nothing to the contention that the presentaction is not brought by the real party in interest, that is, by J. M. Tuason and Co.,Inc. What the Rules of Court require is that an action be brought in the name of,

but not necessarily by, the real party in interest. (Section 2, Rule 2.) In fact the

practice is for an attorney-at-law to bring the action, that is to file the complaint, inthe name of the plaintiff. That practice appears to have been followed in this case,

since the complaint is signed by the law firm of Araneta and Araneta, "counsel for

plaintiff" and commences with the statement "comes now plaintiff, through itsundersigned counsel." It is true that the complaint also states that the plaintiff is

"represented herein by its Managing Partner Gregorio Araneta, Inc.", anothercorporation, but there is nothing against one corporation being represented by

another person, natural or juridical, in a suit in court. The contention that GregorioAraneta, Inc. can not act as managing partner for plaintiff on the theory that it is

illegal for two corporations to enter into a partnership is without merit, for the truerule is that "though a corporation has no power to enter into a partnership, it may

nevertheless enter into a joint venture with another where the nature of that venture

is in line with the business authorized by its charter." (Wyoming-Indiana Oil Gas

Co. vs. Weston, 80 A. L. R., 1043, citing 2 Fletcher Cyc. of Corp., 1082.) There isnothing in the record to indicate that the venture in which plaintiff is represented

by Gregorio Araneta, Inc. as "its managing partner" is not in line with the corporatebusiness of either of them.

Errors II, III, and IV, referring to the admission of the third amended complaint,

may be answered by mere reference to section 4 of Rule 17, Rules of Court, whichsanctions such amendment. It reads:

Sec. 4.Amendment to conform to evidence.When issues not raised by thepleadings are tried by express or implied consent of the parties, they shall be

treated in all respects, as if they had been raised in the pleadings. Such

amendment of the pleadings as may be necessary to cause them to conform

to the evidence and to raise these issues may be made upon motion of anyparty at my time, even of the trial of these issues. If evidence is objected toat the trial on the ground that it is not within the issues made by the


6/216

pleadings, the court may allow the pleadings to be amended and shall be so

freely when the presentation of the merits of the action will be subservedthereby and the objecting party fails to satisfy the court that the admission of

such evidence would prejudice him in maintaining his action or defense

upon the merits. The court may grant a continuance to enable the objectingparty to meet such evidence.

Under this provision amendment is not even necessary for the purpose of rendering

judgment on issues proved though not alleged. Thus, commenting on the provision,Chief Justice Moran says in this Rules of Court:

Under this section, American courts have, under the New Federal Rules ofCivil Procedure, ruled that where the facts shown entitled plaintiff to relief

other than that asked for, no amendment to the complaint is necessary,

especially where defendant has himself raised the point on which recovery isbased, and that the appellate court treat the pleadings as amended to conform

to the evidence, although the pleadings were not actually amended. (IMoran, Rules of Court, 1952 ed., 389-390.)

Our conclusion therefore is that specification of error II, III, and IV are withoutmerit..

Let us now pass on the errors V and VI. Admitting, though his attorney, at the

early stage of the trial, that the land in dispute "is that described or represented in

Exhibit A and in Exhibit B enclosed in red pencil with the name Quirino Bolaos,"defendant later changed his lawyer and also his theory and tried to prove that theland in dispute was not covered by plaintiff's certificate of title. The evidence,

however, is against defendant, for it clearly establishes that plaintiff is theregistered owner of lot No. 4-B-3-C, situate in barrio Tatalon, Quezon City, with

an area of 5,297,429.3 square meters, more or less, covered by transfer certificate

of title No. 37686 of the land records of Rizal province, and of lot No. 4-B-4,situated in the same barrio, having an area of 74,789 square meters, more or less,

covered by transfer certificate of title No. 37677 of the land records of the same

province, both lots having been originally registered on July 8, 1914 under originalcertificate of title No. 735. The identity of the lots was established by the testimony

of Antonio Manahan and Magno Faustino, witnesses for plaintiff, and the identity

of the portion thereof claimed by defendant was established by the testimony of his

own witness, Quirico Feria. The combined testimony of these three witnessesclearly shows that the portion claimed by defendant is made up of a part of lot 4-B-3-C and major on portion of lot 4-B-4, and is well within the area covered by the


7/216

two transfer certificates of title already mentioned. This fact also appears admittedin defendant's answer to the third amended complaint.

As the land in dispute is covered by plaintiff's Torrens certificate of title and wasregistered in 1914, the decree of registration can no longer be impugned on the

ground of fraud, error or lack of notice to defendant, as more than one year hasalready elapsed from the issuance and entry of the decree. Neither court the decree

be collaterally attacked by any person claiming title to, or interest in, the land prior

to the registration proceedings. (Sorogon vs. Makalintal,145 Off. Gaz., 3819.)Nor could title to that land in derogation of that of plaintiff, the registered owner,

be acquired by prescription or adverse possession. (Section 46, Act No. 496.)

Adverse, notorious and continuous possession under claim of ownership for theperiod fixed by law is ineffective against a Torrens title. (Valiente vs. Judge of CFI

of Tarlac,2etc., 45 Off. Gaz., Supp. 9, p. 43.) And it is likewise settled that the

right to secure possession under a decree of registration does not prescribed.(Francisco vs. Cruz, 43 Off. Gaz., 5105, 5109-5110.) A recent decision of thisCourt on this point is that rendered in the case ofJose Alcantara et al., vs. Marianoet al., 92 Phil., 796. This disposes of the alleged errors V and VI.

As to error VII, it is claimed that `there was no evidence to sustain the finding that

defendant should be sentenced to pay plaintiff P132.62 monthly from January,1940, until he vacates the premises.' But it appears from the record that that

reasonable compensation for the use and occupation of the premises, as stipulated

at the hearing was P10 a month for each hectare and that the area occupied by

defendant was 13.2619 hectares. The total rent to be paid for the area occupiedshould therefore be P132.62 a month. It is appears from the testimony of J. A.

Araneta and witness Emigdio Tanjuatco that as early as 1939 an action ofejectment had already been filed against defendant. And it cannot be supposed that

defendant has been paying rents, for he has been asserting all along that the

premises in question 'have always been since time immemorial in open,

continuous, exclusive and public and notorious possession and under claim ofownership adverse to the entire world by defendant and his predecessors ininterest.' This assignment of error is thus clearly without merit.

Error No. VIII is but a consequence of the other errors alleged and needs forfurther consideration.

During the pendency of this case in this Court appellant, thru other counsel, hasfiled a motion to dismiss alleging that there is pending before the Court of FirstInstance of Rizal another action between the same parties and for the same cause


8/216

and seeking to sustain that allegation with a copy of the complaint filed in said

action. But an examination of that complaint reveals that appellant's allegation isnot correct, for the pretended identity of parties and cause of action in the two suits

does not appear. That other case is one for recovery of ownership, while the

present one is for recovery of possession. And while appellant claims that he isalso involved in that order action because it is a class suit, the complaint does not

show that such is really the case. On the contrary, it appears that the action seeksrelief for each individual plaintiff and not relief for and on behalf of others. Themotion for dismissal is clearly without merit.

Wherefore, the judgment appealed from is affirmed, with costs against theplaintiff.

G.R. No. 127347 November 25, 1999

ALFREDO N. AGUILA, JR., petitioner,vs.HONORABLE COURT OF APPEALS and FELICIDAD S. VDA. DEABROGAR, respondents.

MENDOZA, J.:

This is a petition for review on certiorari of the decision1

of the Court ofAppeals, dated November 29, 1990, which reversed the decision of theRegional Trial Court, Branch 273, Marikina, Metro Manila, dated April 11,1995. The trial court dismissed the petition for declaration of nullity of adeed of sale filed by private respondent Felicidad S. Vda. de Abrogaragainst petitioner Alfredo N. Aguila, Jr.

The facts are as follows:

Petitioner is the manager of A.C. Aguila & Sons, Co., a partnership

engaged in lending activities. Private respondent and her late husband,Ruben M. Abrogar, were the registered owners of a house and lot, coveredby Transfer Certificate of Title No. 195101, in Marikina, Metro Manila. On

April 18, 1991, private respondent, with the consent of her late husband,and A.C. Aguila & Sons, Co., represented by petitioner, entered into aMemorandum of Agreement, which provided:


9/216

(1) That the SECOND PARTY [A.C. Aguila & Sons, Co.] shallbuy the above-described property from the FIRST PARTY[Felicidad S. Vda. de Abrogar], and pursuant to this agreement,a Deed of Absolute Sale shall be executed by the FIRSTPARTY conveying the property to the SECOND PARTY for andin consideration of the sum of Two Hundred Thousand Pesos(P200,000.00), Philippine Currency;

(2) The FIRST PARTY is hereby given by the SECOND PARTYthe option to repurchase the said property within a period ofninety (90) days from the execution of this memorandum ofagreement effective April 18, 1991, for the amount of TWOHUNDRED THIRTY THOUSAND PESOS (P230,000.00);

(3) In the event that the FIRST PARTY fail to exercise heroption to repurchase the said property within a period of ninety(90) days, the FIRST PARTY is obliged to deliver peacefully thepossession of the property to the SECOND PARTY withinfifteen (15) days after the expiration of the said 90 day graceperiod;

(4) During the said grace period, the FIRST PARTY obligesherself not to file any lis pendens or whatever claims on theproperty nor shall be cause the annotation of say claim at the

back of the title to the said property;

(5) With the execution of the deed of absolute sale, the FIRSTPARTY warrants her ownership of the property and shalldefend the rights of the SECOND PARTY against any partywhom may have any interests over the property;

(6) All expenses for documentation and other incidentalexpenses shall be for the account of the FIRST PARTY;

(7) Should the FIRST PARTY fail to deliver peacefulpossession of the property to the SECOND PARTY after theexpiration of the 15-day grace period given in paragraph 3above, the FIRST PARTY shall pay an amount equivalent toFive Percent of the principal amount of TWO HUNDREDPESOS (P200.00) or P10,000.00 per month of delay as and forrentals and liquidated damages;


10/216

(8) Should the FIRST PARTY fail to exercise her option torepurchase the property within ninety (90) days period above-mentioned, this memorandum of agreement shall be deemedcancelled and the Deed of Absolute Sale, executed by theparties shall be the final contract considered as enteredbetween the parties and the SECOND PARTY shall proceed totransfer ownership of the property above described to its namefree from lines and encumbrances. 2

On the same day, April 18, 1991, the parties likewise executed a deed ofabsolute sale, 3dated June 11, 1991, wherein private respondent, with theconsent of her late husband, sold the subject property to A.C. Aguila &Sons, Co., represented by petitioner, for P200,000,00. In a special power ofattorney dated the same day, April 18, 1991, private respondent authorized

petitioner to cause the cancellation of TCT No. 195101 and the issuance ofa new certificate of title in the name of A.C. Aguila and Sons, Co., in theevent she failed to redeem the subject property as provided in theMemorandum of Agreement. 4

Private respondent failed to redeem the property within the 90-day periodas provided in the Memorandum of Agreement. Hence, pursuant to thespecial power of attorney mentioned above, petitioner caused thecancellation of TCT No. 195101 and the issuance of a new certificate oftitle in the name of A.C. Aguila and Sons, Co. 5

Private respondent then received a letter dated August 10, 1991 from Atty.Lamberto C. Nanquil, counsel for A.C. Aguila & Sons, Co., demanding thatshe vacate the premises within 15 days after receipt of the letter andsurrender its possession peacefully to A.C. Aguila & Sons, Co. Otherwise,the latter would bring the appropriate action in court. 6

Upon the refusal of private respondent to vacate the subject premises, A.C.Aguila & Sons, Co. filed an ejectment case against her in the MetropolitanTrial Court, Branch 76, Marikina, Metro Manila. In a decision, dated April 3,1992, the Metropolitan Trial Court ruled in favor of A.C. Aguila & Sons, Co.on the ground that private respondent did not redeem the subject propertybefore the expiration of the 90-day period provided in the Memorandum of

Agreement. Private respondent appealed first to the Regional Trial Court,Branch 163, Pasig, Metro Manila, then to the Court of Appeals, and later tothis Court, but she lost in all the cases.


11/216

Private respondent then filed a petition for declaration of nullity of a deed ofsale with the Regional Trial Court, Branch 273, Marikina, Metro Manila onDecember 4, 1993. She alleged that the signature of her husband on thedeed of sale was a forgery because he was already dead when the deedwas supposed to have been executed on June 11, 1991.

It appears, however, that private respondent had filed a criminal complaintfor falsification against petitioner with the Office of the Prosecutor ofQuezon City which was dismissed in a resolution, dated February 14, 1994.

On April 11, 1995, Branch 273 of RTC-Marikina rendered its decision:

Plaintiff's claim therefore that the Deed of Absolute Sale is aforgery because they could not personally appear before Notary

Public Lamberto C. Nanquil on June 11, 1991 because herhusband, Ruben Abrogar, died on May 8, 1991 or one monthand 2 days before the execution of the Deed of Absolute Sale,while the plaintiff was still in the Quezon City Medical Centerrecuperating from wounds which she suffered at the samevehicular accident on May 8, 1991, cannot be sustained. TheCourt is convinced that the three required documents, to wit:the Memorandum of Agreement, the Special Power of Attorney,and the Deed of Absolute Sale were all signed by the parties onthe same date on April 18, 1991. It is a common and accepted

business practice of those engaged in money lending toprepare an undated absolute deed of sale in loans of moneysecured by real estate for various reasons, foremost of which isthe evasion of taxes and surcharges. The plaintiff neverquestioned receiving the sum of P200,000.00 representing herloan from the defendant. Common sense dictates that anestablished lending and realty firm like the Aguila & Sons, Co.would not part with P200,000.00 to the Abrogar spouses, whoare virtual strangers to it, without the simultaneous

accomplishment and signing of all the required documents,more particularly the Deed of Absolute Sale, to protect itsinterest.

xxx xxx xxx


12/216

WHEREFORE, foregoing premises considered, the case incaption is hereby ORDERED DISMISSED, with costs againstthe plaintiff.

On appeal, the Court of Appeals reversed. It held:

The facts and evidence show that the transaction betweenplaintiff-appellant and defendant-appellee is indubitably anequitable mortgage. Article 1602 of the New Civil Code findsstrong application in the case at bar in the light of the followingcircumstances.

First: The purchase price for the alleged sale with right torepurchase is unusually inadequate. The property is a two

hundred forty (240) sq. m. lot. On said lot, the residential houseof plaintiff-appellant stands. The property is inside asubdivision/village. The property is situated in Marikina which isalready part of Metro Manila. The alleged sale took place in1991 when the value of the land had considerably increased.

For this property, defendant-appellee pays only a measlyP200,000.00 or P833.33 per square meter for both the land andfor the house.

Second: The disputed Memorandum of Agreement specificallyprovides that plaintiff-appellant is obliged to deliver peacefullythe possession of the property to the SECOND PARTY withinfifteen (15) days after the expiration of the said ninety (90) daygrace period. Otherwise stated, plaintiff-appellant is to retainphysical possession of the thing allegedly sold.

In fact, plaintiff-appellant retained possession of the property"sold" as if they were still the absolute owners. There was noprovision for maintenance or expenses, much less for payment

of rent.

Third: The apparent vendor, plaintiff-appellant herein, continuedto pay taxes on the property "sold". It is well-known thatpayment of taxes accompanied by actual possession of theland covered by the tax declaration, constitute evidence of


13/216

great weight that a person under whose name the real taxeswere declared has a claim of right over the land.

It is well-settled that the presence of even one of thecircumstances in Article 1602 of the New Civil Code is sufficientto declare a contract of sale with right to repurchase anequitable mortgage.

Considering that plaintiff-appellant, as vendor, was paid a pricewhich is unusually inadequate, has retained possession of thesubject property and has continued paying the realty taxes overthe subject property, (circumstances mentioned in par. (1) (2)and (5) of Article 1602 of the New Civil Code), it must beconclusively presumed that the transaction the parties actually

entered into is an equitable mortgage, not a sale with right torepurchase. The factors cited are in support to the finding thatthe Deed of Sale/Memorandum of Agreement with right torepurchase is in actuality an equitable mortgage.

Moreover, it is undisputed that the deed of sale with right ofrepurchase was executed by reason of the loan extended bydefendant-appellee to plaintiff-appellant. The amount of loanbeing the same with the amount of the purchase price.

xxx xxx xxx

Since the real intention of the party is to secure the payment ofdebt, now deemed to be repurchase price: the transaction shallthen be considered to be an equitable mortgage.

Being a mortgage, the transaction entered into by the parties isin the nature of apactum commissoriumwhich is clearlyprohibited by Article 2088 of the New Civil Code. Article 2088 ofthe New Civil Code reads:

Art. 2088. The creditor cannot appropriate thethings given by way of pledge or mortgage, ordispose of them. Any stipulation to the contrary isnull and void.


14/216

The aforequoted provision furnishes the two elements forpactum commissoriumto exist: (1) that there should be apledge or mortgage wherein a property is pledged ormortgaged by way of security for the payment of principalobligation; and (2) that there should be a stipulation for anautomatic appropriation by the creditor of the thing pledged andmortgaged in the event of non-payment of the principalobligation within the stipulated period.

In this case, defendant-appellee in reality extended aP200,000.00 loan to plaintiff-appellant secured by a mortgageon the property of plaintiff-appellant. The loan was payablewithin ninety (90) days, the period within which plaintiff-appellant can repurchase the property. Plaintiff-appellant will

pay P230,000.00 and not P200,000.00, the P30,000.00 excessis the interest for the loan extended. Failure of plaintiff-appelleeto pay the P230,000.00 within the ninety (90) days period, theproperty shall automatically belong to defendant-appellee byvirtue of the deed of sale executed.

Clearly, the agreement entered into by the parties is in thenature ofpactum commissorium. Therefore, the deed of saleshould be declared void as we hereby so declare to be invalid,for being violative of law.

xxx xxx xxx

WHEREFORE, foregoing considered, the appealed decision ishereby REVERSED and SET ASIDE. The questioned Deed ofSale and the cancellation of the TCT No. 195101 issued infavor of plaintiff-appellant and the issuance of TCT No. 267073issued in favor of defendant-appellee pursuant to thequestioned Deed of Sale is hereby declared VOID and ishereby ANNULLED. Transfer Certificate of Title No. 195101 ofthe Registry of Marikina is hereby ordered REINSTATED. Theloan in the amount of P230,000.00 shall be paid within ninety(90) days from the finality of this decision. In case of failure topay the amount of P230,000.00 from the period therein stated,the property shall be sold at public auction to satisfy the


15/216

mortgage debt and costs and if there is an excess, the same isto be given to the owner.

Petitioner now contends that: (1) he is not the real party in interest but A.C.Aguila & Co., against which this case should have been brought; (2) thejudgment in the ejectment case is a bar to the filing of the complaint fordeclaration of nullity of a deed of sale in this case; and (3) the contractbetween A.C. Aguila & Sons, Co. and private respondent is apacto deretro sale and not an equitable mortgage as held by the appellate court.

The petition is meritorious.

Rule 3, 2 of the Rules of Court of 1964, under which the complaint in thiscase was filed, provided that "every action must be prosecuted and

defended in the name of the real party in interest." A real party in interest isone who would be benefited or injured by the judgment, or who is entitledto the avails of the suit. 7This ruling is now embodied in Rule 3, 2 of the1997 Revised Rules of Civil Procedure. Any decision rendered against aperson who is not a real party in interest in the case cannot be executed. 8Hence, a complaint filed against such a person should be dismissed forfailure to state a cause of action. 9

Under Art. 1768 of the Civil Code, a partnership "has a juridical personalityseparate and distinct from that of each of the partners." The partners

cannot be held liable for the obligations of the partnership unless it isshown that the legal fiction of a different juridical personality is being usedfor fraudulent, unfair, or illegal purposes. 10In this case, private respondenthas not shown that A.C. Aguila & Sons, Co., as a separate juridical entity,is being used for fraudulent, unfair, or illegal purposes. Moreover, the titleto the subject property is in the name of A.C. Aguila & Sons, Co. and theMemorandum of Agreement was executed between private respondent,with the consent of her late husband, and A.C. Aguila & Sons, Co.,represented by petitioner. Hence, it is the partnership, not its officers oragents, which should be impleaded in any litigation involving propertyregistered in its name. A violation of this rule will result in the dismissal ofthe complaint. 11We cannot understand why both the Regional Trial Courtand the Court of Appeals sidestepped this issue when it was squarelyraised before them by petitioner.


16/216

Our conclusion that petitioner is not the real party in interest against whomthis action should be prosecuted makes it unnecessary to discuss the otherissues raised by him in this appeal.

WHEREFORE, the decision of the Court of Appeals is hereby REVERSEDand the complaint against petitioner is DISMISSED.

SO ORDERED.

G.R. No. 126881 October 3, 2000

HEIRS OF TAN ENG KEE,petitioners,vs.

COURT OF APPEALS and BENGUET LUMBER COMPANY, representedby its President TAN ENG LAY,respondents.

DE LEON, JR., J.:

In this petition for review on certiorari, petitioners pray for the reversal of the

Decision1dated March 13, 1996 of the former Fifth Division2of the Court ofAppeals in CA-G.R. CV No. 47937, the dispositive portion of which states:

THE FOREGOING CONSIDERED, the appealed decision is hereby setaside, and the complaint dismissed.

The facts are:

Following the death of Tan Eng Kee on September 13, 1984, Matilde Abubo, thecommon-law spouse of the decedent, joined by their children Teresita, Nena,

Clarita, Carlos, Corazon and Elpidio, collectively known as herein petitionersHEIRS OF TAN ENG KEE, filed suit against the decedent's brother TAN ENG

LAY on February 19, 1990. The complaint,3docketed as Civil Case No. 1983-R in

the Regional Trial Court of Baguio City was for accounting, liquidation and

winding up of the alleged partnership formed after World War II between Tan Eng

Kee and Tan Eng Lay. On March 18, 1991, the petitioners filed an amendedcomplaint4impleading private respondent herein BENGUET LUMBERCOMPANY, as represented by Tan Eng Lay. The amended complaint wasadmitted by the trial court in its Order dated May 3, 1991.5

The amended complaint principally alleged that after the second World War, TanEng Kee and Tan Eng Lay, pooling their resources and industry together, entered
http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt1http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt1http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt2http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt2http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt3http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt3http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt3http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt4http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt4http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt4http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt5http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt5http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt5http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt5http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt4http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt3http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt2http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt1


17/216

into a partnership engaged in the business of selling lumber and hardware and

construction supplies. They named their enterprise "Benguet Lumber" which theyjointly managed until Tan Eng Kee's death. Petitioners herein averred that the

business prospered due to the hard work and thrift of the alleged partners.

However, they claimed that in 1981, Tan Eng Lay and his children caused theconversion of the partnership "Benguet Lumber" into a corporation called

"Benguet Lumber Company." The incorporation was purportedly a ruse to depriveTan Eng Kee and his heirs of their rightful participation in the profits of the

business. Petitioners prayed for accounting of the partnership assets, and thedissolution, winding up and liquidation thereof, and the equal division of the net

assets of Benguet Lumber.

After trial, Regional Trial Court of Baguio City, Branch 7 rendered judgment6on

April 12, 1995, to wit:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered:

a) Declaring that Benguet Lumber is a joint venture which is akin to aparticular partnership;

b) Declaring that the deceased Tan Eng Kee and Tan Eng Lay are joint

adventurers and/or partners in a business venture and/or particularpartnership called Benguet Lumber and as such should share in the profits

and/or losses of the business venture or particular partnership;

c) Declaring that the assets of Benguet Lumber are the same assets turned

over to Benguet Lumber Co. Inc. and as such the heirs or legal

representatives of the deceased Tan Eng Kee have a legal right to share insaid assets;

d) Declaring that all the rights and obligations of Tan Eng Kee as jointadventurer and/or as partner in a particular partnership have descended to theplaintiffs who are his legal heirs.

e) Ordering the defendant Tan Eng Lay and/or the President and/or GeneralManager of Benguet Lumber Company Inc. to render an accounting of allthe assets of Benguet Lumber Company, Inc. so the plaintiffs know theirproper share in the business;

f) Ordering the appointment of a receiver to preserve and/or administer theassets of Benguet Lumber Company, Inc. until such time that said
http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt6http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt6http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt6http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt6


18/216

corporation is finally liquidated are directed to submit the name of any

person they want to be appointed as receiver failing in which this Court willappoint the Branch Clerk of Court or another one who is qualified to act assuch.

g) Denying the award of damages to the plaintiffs for lack of proof exceptthe expenses in filing the instant case.

h) Dismissing the counter-claim of the defendant for lack of merit.

SO ORDERED.

Private respondent sought relief before the Court of Appeals which, on March 13,

1996, rendered the assailed decision reversing the judgment of the trial court.Petitioners' motion for reconsideration7was denied by the Court of Appeals in aResolution8dated October 11, 1996.

Hence, the present petition.

As a side-bar to the proceedings, petitioners filed Criminal Case No. 78856 againstTan Eng Lay and Wilborn Tan for the use of allegedly falsified documents in a

judicial proceeding. Petitioners complained that Exhibits "4" to "4-U" offered bythe defendants before the trial court, consisting of payrolls indicating that Tan Eng

Kee was a mere employee of Benguet Lumber, were fake, based on the

discrepancy in the signatures of Tan Eng Kee. They also filed Criminal Cases Nos.78857-78870 against Gloria, Julia, Juliano, Willie, Wilfredo, Jean, Mary andWilly, all surnamed Tan, for alleged falsification of commercial documents by a

private individual. On March 20, 1999, the Municipal Trial Court of Baguio City,Branch 1, wherein the charges were filed, rendered judgment9dismissing the cases

for insufficiency of evidence.

In their assignment of errors, petitioners claim that:

I

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THATTHERE WAS NO PARTNERSHIP BETWEEN THE LATE TAN ENG

KEE AND HIS BROTHER TAN ENG LAY BECAUSE: (A) THERE WAS

NO FIRM ACCOUNT; (B) THERE WAS NO FIRM LETTERHEADS

SUBMITTED AS EVIDENCE; (C) THERE WAS NO CERTIFICATE OFPARTNERSHIP; (D) THERE WAS NO AGREEMENT AS TO PROFITS
http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt7http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt7http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt8http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt8http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt9http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt9http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt9http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt9http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt8http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt7


19/216

AND LOSSES; AND (E) THERE WAS NO TIME FIXED FOR THEDURATION OF THE PARTNERSHIP (PAGE 13, DECISION).

II

THE HONORABLE COURT OF APPEALS ERRED IN RELYINGSOLELY ON THE SELF-SERVING TESTIMONY OF RESPONDENT

TAN ENG LAY THAT BENGUET LUMBER WAS A SOLEPROPRIETORSHIP AND THAT TAN ENG KEE WAS ONLY ANEMPLOYEE THEREOF.

III

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THATTHE FOLLOWING FACTS WHICH WERE DULY SUPPORTED BY

EVIDENCE OF BOTH PARTIES DO NOT SUPPORT THE EXISTENCE

OF A PARTNERSHIP JUST BECAUSE THERE WAS NO ARTICLES OF

PARTNERSHIP DULY RECORDED BEFORE THE SECURITIES ANDEXCHANGE COMMISSION:

a. THAT THE FAMILIES OF TAN ENG KEE AND TAN ENGLAY WERE ALL LIVING AT THE BENGUET LUMBERCOMPOUND;

b. THAT BOTH TAN ENG LAY AND TAN ENG KEE WERECOMMANDING THE EMPLOYEES OF BENGUET LUMBER;

c. THAT BOTH TAN ENG KEE AND TAN ENG LAY WERESUPERVISING THE EMPLOYEES THEREIN;

d. THAT TAN ENG KEE AND TAN ENG LAY WERE THE ONES

DETERMINING THE PRICES OF STOCKS TO BE SOLD TO THEPUBLIC; AND

e. THAT TAN ENG LAY AND TAN ENG KEE WERE THE ONESMAKING ORDERS TO THE SUPPLIERS (PAGE 18, DECISION).

IV

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THATTHERE WAS NO PARTNERSHIP JUST BECAUSE THE CHILDREN OF


20/216

THE LATE TAN ENG KEE: ELPIDIO TAN AND VERONICA CHOI,

TOGETHER WITH THEIR WITNESS BEATRIZ TANDOC, ADMITTEDTHAT THEY DO NOT KNOW WHEN THE ESTABLISHMENT

KNOWN IN BAGUIO CITY AS BENGUET LUMBER WAS STARTEDAS A PARTNERSHIP (PAGE 16-17, DECISION).

V

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THATTHERE WAS NO PARTNERSHIP BETWEEN THE LATE TAN ENG

KEE AND HIS BROTHER TAN ENG LAY BECAUSE THE PRESENT

CAPITAL OR ASSETS OF BENGUET LUMBER IS DEFINITELYMORE THAN P3,000.00 AND AS SUCH THE EXECUTION OF A

PUBLIC INSTRUMENT CREATING A PARTNERSHIP SHOULD HAVE

BEEN MADE AND NO SUCH PUBLIC INSTRUMENT ESTABLISHEDBY THE APPELLEES (PAGE 17, DECISION).

As a premise, we reiterate the oft-repeated rule that findings of facts of the Courtof Appeals will not be disturbed on appeal if such are supported by the evidence.10

Our jurisdiction, it must be emphasized, does not include review of factual issues.Thus:

Filing of petition with Supreme Court.A party desiring to appeal by

certiorari from a judgment or final order or resolution of the Court of

Appeals, the Sandiganbayan, the Regional Trial Court or other courtswhenever authorized by law, may file with the Supreme Court a verifiedpetition for review on certiorari. The petition shall raise only questions oflaw which must be distinctly set forth.11[emphasis supplied]

Admitted exceptions have been recognized, though, and when present, may compel

us to analyze the evidentiary basis on which the lower court rendered judgment.Review of factual issues is therefore warranted:

(1) when the factual findings of the Court of Appeals and the trial court are

contradictory;

(2) when the findings are grounded entirely on speculation, surmises, orconjectures;

(3) when the inference made by the Court of Appeals from its findings offact is manifestly mistaken, absurd, or impossible;
http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt10http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt10http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt10http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt11http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt11http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt11http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt11http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt10


21/216

(4) when there is grave abuse of discretion in the appreciation of facts;

(5) when the appellate court, in making its findings, goes beyond the issues

of the case, and such findings are contrary to the admissions of bothappellant and appellee;

(6) when the judgment of the Court of Appeals is premised on amisapprehension of facts;

(7) when the Court of Appeals fails to notice certain relevant facts which, ifproperly considered, will justify a different conclusion;

(8) when the findings of fact are themselves conflicting;

(9) when the findings of fact are conclusions without citation of the specificevidence on which they are based; and

(10) when the findings of fact of the Court of Appeals are premised on theabsence of evidence but such findings are contradicted by the evidence onrecord.12

In reversing the trial court, the Court of Appeals ruled, to wit:

We note that the Court a quoover extended the issue because while theplaintiffs mentioned only the existence of a partnership, the Court in turnwent beyond that by justifying the existence of a joint venture.

When mention is made of a joint venture, it would presuppose parity ofstanding between the parties, equal proprietary interest and the exercise bythe parties equally of the conduct of the business, thus:

xxx xxx xxx

We have the admission that the father of the plaintiffs was not a partner of

the Benguet Lumber before the war. The appellees however argued that(Rollo, p. 104; Brief, p. 6) this is because during the war, the entire stocks ofthe pre-war Benguet Lumber were confiscated if not burned by the Japanese.

After the war, because of the absence of capital to start a lumber and

hardware business, Lay and Kee pooled the proceeds of their individual

businesses earned from buying and selling military supplies, so that thecommon fund would be enough to form a partnership, both in the lumber
http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt12http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt12http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt12http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt12


22/216

and hardware business. That Lay and Kee actually established the Benguet

Lumber in Baguio City, was even testified to by witnesses. Because of thepooling of resources, the post-war Benguet Lumber was eventually

established. That the father of the plaintiffs and Lay were partners, is

obvious from the fact that: (1) they conducted the affairs of the businessduring Kee's lifetime, jointly, (2) they were the ones giving orders to the

employees, (3) they were the ones preparing orders from the suppliers, (4)their families stayed together at the Benguet Lumber compound, and (5) alltheir children were employed in the business in different capacities.

xxx xxx xxx

It is obvious that there was no partnership whatsoever. Except for a firm

name, there was no firm account, no firm letterheads submitted as evidence,

no certificate of partnership, no agreement as to profits and losses, and notime fixed for the duration of the partnership. There was even no attempt to

submit an accounting corresponding to the period after the war until Kee'sdeath in 1984. It had no business book, no written account nor any

memorandum for that matter and no license mentioning the existence of apartnership [citation omitted].

Also, the exhibits support the establishment of only a proprietorship. The

certification dated March 4, 1971, Exhibit "2", mentioned co-defendant Lay

as the only registered owner of the Benguet Lumber and Hardware. His

application for registration, effective 1954, in fact mentioned that hisbusiness started in 1945 until 1985 (thereafter, the incorporation). The

deceased, Kee, on the other hand, was merely an employee of the BenguetLumber Company, on the basis of his SSS coverage effective 1958, Exhibit

"3". In the Payrolls, Exhibits "4" to "4-U", inclusive, for the years 1982 to1983, Kee was similarly listed only as an employee; precisely, he was on the

payroll listing. In the Termination Notice, Exhibit "5", Lay was mentionedalso as the proprietor.

xxx xxx xxx

We would like to refer to Arts. 771 and 772, NCC, that a partner [sic] maybe constituted in any form, but when an immovable is constituted, the

execution of a public instrument becomes necessary. This is equally true ifthe capitalization exceeds P3,000.00, in which case a public instrument is

also necessary, and which is to be recorded with the Securities and Exchange


23/216

Commission. In this case at bar, we can easily assume that the business

establishment, which from the language of the appellees, prospered (pars. 5& 9, Complaint), definitely exceeded P3,000.00, in addition to the

accumulation of real properties and to the fact that it is now a compound.

The execution of a public instrument, on the other hand, was neverestablished by the appellees.

And then in 1981, the business was incorporated and the incorporators were

only Lay and the members of his family. There is no proof either that thecapital assets of the partnership, assuming them to be in existence, were

maliciously assigned or transferred by Lay, supposedly to the corporation

and since then have been treated as a part of the latter's capital assets,contrary to the allegations in pars. 6, 7 and 8 of the complaint.

These are not evidencessupporting the existence of a partnership:

1) That Kee was living in a bunk house just across the lumber store, and then

in a room in the bunk house in Trinidad, but within the compound of thelumber establishment, as testified to by Tandoc; 2) that both Lay and Kee

were seated on a table and were "commanding people" as testified to by the

son, Elpidio Tan; 3) that both were supervising the laborers, as testified to byVictoria Choi; and 4) that Dionisio Peralta was supposedly being told by

Kee that the proceeds of the 80 pieces of the G.I. sheets were added to thebusiness.

Partnership presupposes the following elements [citation omitted]: 1) acontract, either oral or written. However, if it involves real property or where

the capital is P3,000.00 or more, the execution of a contract is necessary; 2)the capacity of the parties to execute the contract; 3) money property or

industry contribution; 4) community of funds and interest, mentioning

equality of the partners or one having a proportionate share in the benefits;and 5) intention to divide the profits, being the true test of the partnership.

The intention to join in the business venture for the purpose of obtaining

profits thereafter to be divided, must be established. We cannot see theseelements from the testimonial evidence of the appellees.

As can be seen, the appellate court disputed and differed from the trial court which

had adjudged that TAN ENG KEE and TAN ENG LAY had allegedly entered intoa joint venture. In this connection, we have held that whether a partnership exists is

a factual matter; consequently, since the appeal is brought to us under Rule 45, we


24/216

cannot entertain inquiries relative to the correctness of the assessment of the

evidence by the court a quo.13Inasmuch as the Court of Appeals and the trial courthad reached conflicting conclusions, perforce we must examine the record todetermine if the reversal was justified.

The primordial issue here is whether Tan Eng Kee and Tan Eng Lay were partnersin Benguet Lumber. A contract of partnership is defined by law as one where:

. . . two or more persons bind themselves to contribute money, property, orindustry to a common fund, with the intention of dividing the profits among

themselves.

Two or more persons may also form a partnership for the exercise of a

profession.14

Thus, in order to constitute a partnership, it must be established that (1) two

or more persons bound themselves to contribute money, property, or

industry to a common fund, and (2) they intend to divide the profits amongthemselves.15The agreement need not be formally reduced into writing,

since statute allows the oral constitution of a partnership, save in twoinstances: (1) when immovable property or real rights are contributed,16and

(2) when the partnership has a capital of three thousand pesos or more.17Inboth cases, a public instrument is required.18An inventory to be signed by

the parties and attached to the public instrument is also indispensable to the

validity of the partnership whenever immovable property is contributed tothe partnership.19

The trial court determined that Tan Eng Kee and Tan Eng Lay had entered into ajoint venture, which it said is akin to a particular partnership.20A particularpartnership is distinguished from a joint adventure, to wit:

(a) A joint adventure (an American concept similar to our joint accounts) is a

sort of informal partnership, with no firm name and no legal personality. In a

joint account, the participating merchants can transact business under their

own name, and can be individually liable therefor.

(b) Usually, but not necessarily a joint adventure is limited to a SINGLE

TRANSACTION, although the business of pursuing to a successfultermination may continue for a number of years; a partnership generally

relates to a continuing business of various transactions of a certain kind.21
http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt13http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt13http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt13http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt14http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt14http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt14http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt15http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt15http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt15http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt16http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt16http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt16http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt17http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt17http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt17http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt18http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt18http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt18http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt19http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt19http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt19http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt20http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt20http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt20http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt21http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt21http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt21http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt21http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt20http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt19http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt18http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt17http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt16http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt15http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt14http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt13


25/216

A joint venture "presupposes generally a parity of standing between the joint co-

ventures or partners, in which each party has an equal proprietary interest in thecapital or property contributed, and where each party exercises equal rights in the

conduct of the business."22Nonetheless, in Aurbach, et. al. v. Sanitary Wares

Manufacturing Corporation, et. al.,23we expressed the view that a joint venturemay be likened to a particular partnership, thus:

The legal concept of a joint venture is of common law origin. It has no

precise legal definition, but it has been generally understood to mean anorganization formed for some temporary purpose. (Gates v. Megargel, 266

Fed. 811 [1920]) It is hardly distinguishable from the partnership, since their

elements are similarcommunity of interest in the business, sharing ofprofits and losses, and a mutual right of control. (Blackner v. McDermott,

176 F. 2d. 498, [1949]; Carboneau v. Peterson, 95 P.2d., 1043 [1939];

Buckley v. Chadwick, 45 Cal. 2d. 183, 288 P.2d. 12 289 P.2d. 242 [1955]).The main distinction cited by most opinions in common law jurisdiction isthat the partnership contemplates a general business with some degree of

continuity, while the joint venture is formed for the execution of a singletransaction, and is thus of a temporary nature. (Tufts v. Mann. 116 Cal. App.

170, 2 P. 2d. 500 [1931]; Harmon v. Martin, 395 Ill. 595, 71 NE 2d. 74

[1947]; Gates v. Megargel 266 Fed. 811 [1920]). This observation is not

entirely accurate in this jurisdiction, since under the Civil Code, apartnership may be particular or universal, and a particular partnership may

have for its object a specific undertaking. (Art. 1783, Civil Code). It wouldseem therefore that under Philippine law, a joint venture is a form of

partnership and should thus be governed by the law of partnerships. The

Supreme Court has however recognized a distinction between these twobusiness forms, and has held that although a corporation cannot enter into a

partnership contract, it may however engage in a joint venture with others.(At p. 12, Tuazon v. Bolaos, 95 Phil. 906 [1954]) (Campos and Lopez-Campos Comments, Notes and Selected Cases, Corporation Code 1981).

Undoubtedly, the best evidence would have been the contract of partnership itself,

or the articles of partnership but there is none. The alleged partnership, though,was never formally organized. In addition, petitioners point out that the New Civil

Code was not yet in effect when the partnership was allegedly formed sometime in

1945, although the contrary may well be argued that nothing prevented the partiesfrom complying with the provisions of the New Civil Code when it took effect on

August 30, 1950. But all that is in the past. The net effect, however, is that we areasked to determine whether a partnership existed based purely on circumstantial
http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt22http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt22http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt23http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt23http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt23http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt23http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt22


26/216

evidence. A review of the record persuades us that the Court of Appeals correctly

reversed the decision of the trial court. The evidence presented by petitioners fallsshort of the quantum of proof required to establish a partnership.

Unfortunately for petitioners, Tan Eng Kee has passed away. Only he, aside from

Tan Eng Lay, could have expounded on the precise nature of the businessrelationship between them. In the absence of evidence, we cannot accept as an

established fact that Tan Eng Kee allegedly contributed his resources to a common

fund for the purpose of establishing a partnership. The testimonies to that effect ofpetitioners' witnesses is directly controverted by Tan Eng Lay. It should be noted

that it is not with the number of witnesses wherein preponderance lies;24the quality

of their testimonies is to be considered. None of petitioners' witnesses couldsuitably account for the beginnings of Benguet Lumber Company, except perhaps

for Dionisio Peralta whose deceased wife was related to Matilde Abubo.25He

stated that when he met Tan Eng Kee after the liberation, the latter asked theformer to accompany him to get 80 pieces of G.I. sheets supposedly owned by bothbrothers.26Tan Eng Lay, however, denied knowledge of this meeting or of the

conversation between Peralta and his brother.27Tan Eng Lay consistently testifiedthat he had his business and his brother had his, that it was only later on that his

said brother, Tan Eng Kee, came to work for him. Be that as it may, co-ownership

or co-possession (specifically here, of the G.I. sheets) is not an indicium of theexistence of a partnership.28

Besides, it is indeed odd, if not unnatural, that despite the forty years the

partnership was allegedly in existence, Tan Eng Kee never asked for anaccounting. The essence of a partnership is that the partners share in the profits and

losses.29Each has the right to demand an accounting as long as the partnershipexists.30We have allowed a scenario wherein "[i]f excellent relations exist among

the partners at the start of the business and all the partners are more interested in

seeing the firm grow rather than get immediate returns, a deferment of sharing in

the profits is perfectly plausible."31But in the situation in the case at bar, thedeferment, if any, had gone on too long to be plausible. A person is presumed totake ordinary care of his concerns.32As we explained in another case:

In the first place, plaintiff did not furnish the supposed P20,000.00 capital.

In the second place, she did not furnish any help or intervention in themanagement of the theatre. In the third place, it does not appear that she has

even demanded from defendant any accounting of the expenses and earningsof the business. Were she really a partner, her first concern should have

been to find out how the business was progressing, whether the expenses
http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt24http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt24http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt24http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt25http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt25http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt25http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt26http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt26http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt26http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt27http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt27http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt27http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt28http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt28http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt28http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt29http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt29http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt29http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt30http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt30http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt30http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt31http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt31http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt32http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt32http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt32http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt32http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt31http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt30http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt29http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt28http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt27http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt26http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt25http://www.lawphil.net/judjuris/juri2000/oct2000/gr_126881_2000.html#fnt24


27/216

were legitimate, whether the earnings were correct, etc. She was absolutely

silent with respect to any of the acts that a partner should have done; all thatshe did was to receive her share of P3,000.00 a month, which cannot be

interpreted in any manner than a payment for the use of the premises which

she had leased from the owners. Clearly, plaintiff had always acted inaccordance with the original letter of defendant of June 17, 1945 (Exh. "A"),

which shows that both parties considered this offer as the real contractbetween them.33[emphasis supplied]

A demand for periodic accounting is evidence of a partnership.34During his

lifetime, Tan Eng Kee appeared never to have made any such demand foraccounting from his brother, Tang Eng Lay.

This brings us to the matter of Exhibits "4" to "4-U" for private respondents,

consisting of payrolls purporting to show that Tan Eng Kee was an ordinaryemployee of Benguet Lumber, as it was then called. The authenticity of these

documents was questioned by petitioners, to the extent that they filed criminalcharges against Tan Eng Lay and his wife and children. As aforesaid, the criminal

cases were dismissed for insufficiency of evidence. Exhibits "4" to "4-U" in factshows that Tan Eng Kee received sums as wages of an employee. In connectiontherewith, Article 1769 of the Civil Code provides:

In determining whether a partnership exists, these rules shall apply:

(1) Except as provided by Article 1825, persons who are not partners as toeach other are not partners as to third persons;

(2) Co-ownership or co-possession does not of itself establish a partnership,whether such co-owners or co-possessors do or do not share any profitsmade by the use of the property;

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

whether or not the persons sharing them have a joint or common right orinterest in any property which the returns are derived;

(4) The receipt by a person of a share of the profits of a business is aprimafacieevidence that he is a partner in the business, but no such inference shallbe drawn if such profits were received in payment:

(a) As a debt by installment or otherwise;


28/216

(b) As wages of an employee or rent to a landlord;

(c) As an annuity to a widow or representative of a deceased partner;

(d) As interest on a loan, though the amount of payment vary with the

profits of the business;

(e) As the consideration for the sale of a goodwill of a business orother property by installments or otherwise.

In the light of the aforequoted legal provision, we conclude that Tan Eng Kee was

only an employee, not a partner. Even if the payrolls as evidence were discarded,petitioners would still be back to square one, so to speak, since they did not present

and offer evidence that would show that Tan Eng Kee received amounts of moneyallegedly representing his share in the profits of the enterprise. Petitioners failed to

show how much their father, Tan Eng Kee, received, if any, as his share in the

profits of Benguet Lumber Company for any particular period. Hence, they failed

to prove that Tan Eng Kee and Tan Eng Lay intended to divide the profits of thebusiness between themselves, which is one of the essential features of apartnership.

Nevertheless, petitioners would still want us to infer or believe the alleged

existence of a partnership from this set of circumstances: that Tan Eng Lay and

Tan Eng Kee were commanding the employees; that both were supervising the

employees; that both were the ones who determined the price at which the stockswere to be sold; and that both placed orders to the suppliers of the Benguet Lumber

Company. They also point out that the families of the brothers Tan Eng Kee and

Tan Eng Lay lived at the Benguet Lumber Company compound, a privilege notextended to its ordinary employees.

However, private respondent counters that:

Petitioners seem to have missed the point in asserting that the above

enumerated powers and privileges granted in favor of Tan Eng Kee, were

indicative of his being a partner in Benguet Lumber for the followingreasons:

(i) even a mere supervisor in a company, factory or store gives orders anddirections to his subordinates. So long, therefore, that an employee's positionis higher in rank, it is not unusual that he orders around those lower in rank.


29/216

(ii) even a messenger or other trusted employee, over whom confidence is

reposed by the owner, can order materials from suppliers for and in behalf ofBenguet Lumber. Furthermore, even a partner does not necessarily have to

perform this particular task. It is, thus, not an indication that Tan Eng Keewas a partner.

(iii) although Tan Eng Kee, together with his family, lived in the lumber

compound and this privilege was not accorded to other employees, the

undisputed fact remains that Tan Eng Kee is the brother of Tan Eng Lay.Naturally, close personal relations existed between them. Whatever

privileges Tan Eng Lay gave his brother, and which were not given the other

employees, only proves the kindness and generosity of Tan Eng Lay towardsa blood relative.

(iv) and even if it is assumed that Tan Eng Kee was quarreling with Tan EngLay in connection with the pricing of stocks, this does not adequately prove

the existence of a partnership relation between them. Even highlyconfidential employees and the owners of a company sometimes argue with

respect to certain matters which, in no way indicates that they are partners asto each other.35

In the instant case, we find private respondent's arguments to be well-taken. Where

circumstances taken singly may be inadequate to prove the intent to form a

partnership, nevertheless, the collective effectof these circumstances may be such

as to support a finding of the existence of the parties' intent.36Yet, in the case atbench, even the aforesaid circumstances when taken together are not persuasive

indiciaof a partnership. They only tend to show that Tan Eng Kee was involved inthe operations of Benguet Lumber, but in what capacity is unclear. We cannot

discount the likelihood that as a member of the family, he occupied a niche abovethe rank-and-file employees. He would have enjoyed liberties otherwise

unavailable were he not kin, such as his residence in the Benguet LumberCompany compound. He would have moral, if not actual, superiority over his

fellow employees, thereby entitling him to exercise powers of supervision. It may

even be that among his duties is to place orders with suppliers. Again, thecircumstances proffered by petitioners do not provide a logical nexus to the

conclusion desired; these are not inconsistent with the powers and duties of amanager, even in a business organized and run as informally as Benguet LumberCompany.


30/216

There being no partnership, it follows that there is no dissolution, winding up orliquidation to speak of. Hence, the petition must fail.

WHEREFORE, the petition is hereby denied, and the appealed decision of theCourt of Appeals is hereby AFFIRMEDin toto. No pronouncement as to costs.

SO ORDERED.

G.R. No. 78133 October 18, 1988

MARIANO P. PASCUAL and RENATO P. DRAGON, petitioners,vs.THE COMMISSIONER OF INTERNAL REVENUE and COURT OF TAXAPPEALS, respondents.

De la Cuesta, De las Alas and Callanta Law Offices for petitioners.

The Solicitor General for respondents

GANCAYCO, J.:

The distinction between co-ownership and an unregistered partnership orjoint venture for income tax purposes is the issue in this petition.

On June 22, 1965, petitioners bought two (2) parcels of land from SantiagoBernardino, et al. and on May 28, 1966, they bought another three (3)parcels of land from Juan Roque. The first two parcels of land were sold bypetitioners in 1968 toMarenir Development Corporation, while the threeparcels of land were sold by petitioners to Erlinda Reyes and MariaSamson on March 19,1970. Petitioners realized a net profit in the salemade in 1968 in the amount of P165,224.70, while they realized a net profitof P60,000.00 in the sale made in 1970. The corresponding capital gains

taxes were paid by petitioners in 1973 and 1974 by availing of the taxamnesties granted in the said years.

However, in a letter dated March 31, 1979 of then Acting BIRCommissioner Efren I. Plana, petitioners were assessed and required topay a total amount of P107,101.70 as alleged deficiency corporate incometaxes for the years 1968 and 1970.


31/216

Petitioners protested the said assessment in a letter of June 26, 1979asserting that they had availed of tax amnesties way back in 1974.

In a reply of August 22, 1979, respondent Commissioner informedpetitioners that in the years 1968 and 1970, petitioners as co-owners in thereal estate transactions formed an unregistered partnership or joint venturetaxable as a corporation under Section 20(b) and its income was subject tothe taxes prescribed under Section 24, both of the National InternalRevenue Code 1that the unregistered partnership was subject to corporateincome tax as distinguished from profits derived from the partnership bythem which is subject to individual income tax; and that the availment of taxamnesty under P.D. No. 23, as amended, by petitioners relieved petitionersof their individual income tax liabilities but did not relieve them from the taxliability of the unregistered partnership. Hence, the petitioners were

required to pay the deficiency income tax assessed.

Petitioners filed a petition for review with the respondent Court of TaxAppeals docketed as CTA Case No. 3045. In due course, the respondentcourt by a majority decision of March 30, 1987, 2affirmed the decision andaction taken by respondent commissioner with costs against petitioners.

It ruled that on the basis of the principle enunciated in Evangelista3anunregistered partnership was in fact formed by petitioners which like acorporation was subject to corporate income tax distinct from that imposed

on the partners.

In a separate dissenting opinion, Associate Judge Constante Roaquinstated that considering the circumstances of this case, although there mightin fact be a co-ownership between the petitioners, there was no adequatebasis for the conclusion that they thereby formed an unregisteredpartnership which made "hem liable for corporate income tax under the TaxCode.

Hence, this petition wherein petitioners invoke as basis thereof thefollowing alleged errors of the respondent court:

A. IN HOLDING AS PRESUMPTIVELY CORRECT THEDETERMINATION OF THE RESPONDENT COMMISSIONER,TO THE EFFECT THAT PETITIONERS FORMED ANUNREGISTERED PARTNERSHIP SUBJECT TOCORPORATE INCOME TAX, AND THAT THE BURDEN OF


32/216

OFFERING EVIDENCE IN OPPOSITION THERETO RESTSUPON THE PETITIONERS.

B. IN MAKING A FINDING, SOLELY ON THE BASIS OFISOLATED SALE TRANSACTIONS, THAT ANUNREGISTERED PARTNERSHIP EXISTED THUS IGNORINGTHE REQUIREMENTS LAID DOWN BY LAW THAT WOULDWARRANT THE PRESUMPTION/CONCLUSION THAT APARTNERSHIP EXISTS.

C. IN FINDING THAT THE INSTANT CASE IS SIMILAR TOTHE EVANGELISTA CASE AND THEREFORE SHOULD BEDECIDED ALONGSIDE THE EVANGELISTA CASE.

D. IN RULING THAT THE TAX AMNESTY DID NOT RELIEVETHE PETITIONERS FROM PAYMENT OF OTHER TAXESFOR THE PERIOD COVERED BY SUCH AMNESTY. (pp. 12-13, Rollo.)

The petition is meritorious.

The basis of the subject decision of the respondent court is the ruling of thisCourt in Evangelista. 4

In the said case, petitioners borrowed a sum of money from their fatherwhich together with their own personal funds they used in buying severalreal properties. They appointed their brother to manage their propertieswith full power to lease, collect, rent, issue receipts, etc. They had the realproperties rented or leased to various tenants for several years and theygained net profits from the rental income. Thus, the Collector of InternalRevenue demanded the payment of income tax on a corporation, amongothers, from them.

In resolving the issue, this Court held as follows:

The issue in this case is whether petitioners are subject to thetax on corporations provided for in section 24 ofCommonwealth Act No. 466, otherwise known as the NationalInternal Revenue Code, as well as to the residence tax forcorporations and the real estate dealers' fixed tax. With respectto the tax on corporations, the issue hinges on the meaning of


33/216

the terms corporation and partnership as used in sections 24and 84 of said Code, the pertinent parts of which read:

Sec. 24. Rate of the tax on corporations.There shall belevied, assessed, collected, and paid annually upon the totalnet income received in the preceding taxable year from allsources by every corporation organized in, or existing under thelaws of the Philippines, no matter how created or organized butnot including duly registered general co-partnerships(companies collectives), a tax upon such income equal to thesum of the following: ...

Sec. 84(b). The term "corporation" includes partnerships, nomatter how created or organized, joint-stock companies, joint

accounts (cuentas en participation), associations or insurancecompanies, but does not include duly registered general co-partnerships (companies colectivas).

Article 1767 of the Civil Code of the Philippines provides:

By the contract of partnership two or more persons bindthemselves to contribute money, property, or industry to acommon fund, with the intention of dividing the profits amongthemselves.

Pursuant to this article, the essential elements of a partnershipare two, namely: (a) an agreement to contribute money,

property or industry to a common fund; and (b) intent to dividethe profits among the contracting parties. The first element isundoubtedly present in the case at bar, for, admittedly,petitioners have agreed to, and did, contribute money andproperty to a common fund. Hence, the issue narrows down totheir intent in acting as they did. Upon consideration of all thefacts and circumstances surrounding the case, we are fullysatisfied that their purpose was to engage in real estatetransactions for monetary gain and then divide the same amongthemselves, because:

1. Said common fund was not something they found already inexistence. It was not a property inherited by them pro indiviso.They created it purposely. What is more they jointly borrowed a


34/216

substantial portion thereof in order to establish said commonfund.

2. They invested the same, not merely in one transaction, but ina series of transactions. On February 2, 1943, they bought a lotfor P100,000.00. On April 3, 1944, they purchased 21 lots forP18,000.00. This was soon followed, on April 23, 1944, by theacquisition of another real estate for P108,825.00. Five (5) dayslater (April 28, 1944), they got a fourth lot for P237,234.14. Thenumber of lots (24) acquired and transcations undertaken, aswell as the brief interregnum between each, particularly the lastthree purchases, is strongly indicative of a pattern or commondesign that was not limited to the conservation and preservationof the aforementioned common fund or even of the property

acquired by petitioners in February, 1943. In other words, onecannot but perceive a character of habituality peculiar tobusiness transactions engaged in for purposes of gain.

3. The aforesaid lots were not devoted to residential purposesor to other personal uses, of petitioners herein. The propertieswere leased separately to several persons, who, from 1945 to1948 inclusive, paid the total sum of P70,068.30 by way ofrentals. Seemingly, the lots are still being so let, for petitionersdo not even suggest that there has been any change in the

utilization thereof.

4. Since August, 1945,the properties have been under themanagement of one person, namely, Simeon Evangelists, withfull power to lease, to collect rents, to issue receipts, to bringsuits, to sign letters and contracts, and to indorse and depositnotes and checks. Thus, the affairs relative to said propertieshave been handled as if the same belonged to a corporation orbusiness 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 firstproperty was acquired, and over twelve (12) years, sinceSimeon Evangelists became the manager.


35/216

6. Petitioners have not testified or introduced any evidence,either on their purpose in creating the set up already advertedto, or on the causes for its continued existence. They did noteven try to offer an explanation therefor.

Although, taken singly, they might not suffice to establish theintent necessary to constitute a partnership,the collective effectof these circumstances is such as to leave no room for doubton the existence of said intent in petitioners herein. Only one ortwo of the aforementioned circumstances were present in thecases cited by petitioners herein, and, hence, those cases arenot in point. 5

In the present case, there is no evidence that petitioners entered into an

agreement to contribute money, property or industry to a common fund,and that they intended to divide the profits among themselves. Respondentcommissioner and/ or his representative just assumed these conditions tobe present on the basis of the fact that petitioners purchased certainparcels of land and became co-owners thereof.

In Evangelists, there was a series of transactions where petitionerspurchased twenty-four (24) lotsshowing that the purpose was not limited tothe conservation or preservation of the common fund or even the propertiesacquired by them. The character of habituality peculiar to business

transactions engaged in for the purpose of gain was present.

In the instant case, petitioners bought two (2) parcels of land in 1965. Theydid not sell the same nor make any improvements thereon. In 1966, theybought another three (3) parcels of land from one seller. It was only 1968when they sold the two (2) parcels of land after which they did not makeany additional or new purchase. The remaining three (3) parcels were soldby them in 1970. The transactions were isolated. The character ofhabituality peculiar to business transactions for the purpose of gain was notpresent.

In Evangelista, the properties were leased out to tenants for several years.The business was under the management of one of the partners. Suchcondition existed for over fifteen (15) years. None of the circumstances arepresent in the case at bar. The co-ownership started only in 1965 andended in 1970.


36/216

Thus, in the concurring opinion of Mr. Justice Angelo Bautista inEvangelistahe said:

I wish however to make the following observation Article 1769of the new Civil Code lays down the rule for determining when atransaction should be deemed a partnership or a co-ownership.Said article paragraphs 2 and 3, provides;

(2) Co-ownership or co-possession does not itself establish apartnership, whether such co-owners or co-possessors do or donot share any profits made by the use of the property;

(3) The sharing of

partnership batch 1

Documents