TOCAO v. CA

G.R. No. 127405; October 4, 2000

FACTS: Private respondent Nenita A. Anay met petitioner William T. Belo, then the vice-president for operations of Ultra Clean Water Purifier, through her former employer in Bangkok. Belo introduced Anay to petitioner Marjorie Tocao, who conveyed her desire to enter into a joint venture with her for the importation and local distribution of kitchen cookwares. Under the joint venture, Belo acted as capitalist, Tocao as president and general manager, and Anay as head of the marketing department and later, vice-president for sales

The parties agreed that Belo's name should not appear in any documents relating to their transactions with West Bend Company. Anay having secured the distributorship of cookware products from the West Bend Company and organized the administrative staff and the sales force, the cookware business took off successfully. They operated under the name of Geminesse Enterprise, a sole proprietorship registered in Marjorie Tocao's name.

The parties agreed further that Anay would be entitled to:

(1) ten percent (10%) of the annual net profits of the business;

(2) overriding commission of six percent (6%) of the overall weekly production;

(3) thirty percent (30%) of the sales she would make; and

(4) two percent (2%) for her demonstration services. The agreement was not reduced to writing on the strength of Belo's assurances that he was sincere, dependable and honest when it came to financial commitments.

On October 9, 1987, Anay learned that Marjorie Tocao had signed a letter addressed to the Cubao sales office to the effect that she was no longer the vice-president of Geminesse Enterprise.

Anay attempted to contact Belo. She wrote him twice to demand her overriding commission for the period of January 8, 1988 to February 5, 1988 and the audit of the company to determine her share in the net profits.

Anay still received her five percent (5%) overriding commission up to December 1987. The following year, 1988, she did not receive the same commission although the company netted a gross sales of P 13,300,360.00.

On April 5, 1988, Nenita A. Anay filed Civil Case No. 88-509, a complaint for sum of money with damages against Marjorie D. Tocao and William Belo before the Regional Trial Court of Makati, Branch 140

The trial court held that there was indeed an "oral partnership agreement between the plaintiff and the defendants. The Court of Appeals affirmed the lower courts decision.

ISSUE: Whether the parties formed a partnership

HELD: Yes, the parties involved in this case formed a partnership

The Supreme Court held that to be considered a juridical personality, a partnership must fulfill these requisites:

(1) two or more persons bind themselves to contribute money, property or industry to a common fund; and

(2) intention on the part of the partners to divide the profits among themselves. It may be constituted in any form; a public instrument is necessary only where immovable property or real rights are contributed thereto.

This implies that since a contract of partnership is consensual, an oral contract of partnership is as good as a written one.

In the case at hand, Belo acted as capitalist while Tocao as president and general manager, and Anay as head of the marketing department and later, vice-president for sales. Furthermore, Anay was entitled to a percentage of the net profits of the business.

Therefore, the parties formed a partnership.

JM TUAZON and CO v. BOLANOS95 PHIL 106

Facts: This is an action to recover possession of registered land situated in Barrio Tatalon, Quezon City. The complaint of plaintiff JM Tuason & Co Inc was amended 3 times with respect to the extent and description of the land sough to be recovered. Originally, the land sought to be recovered was said to be more or less 13 hectares, but it was later amended to 6 hectares, after the defendant had indicated the plaintiff's surveyors the portion of land claimed and occupied by him. The second amendment is that the portion of the said land was covered in another TCT and the 3rd amendment was made after the defendant' surveyor and a witness, Quirino Feria testified that the land occupied by the defendant was about 13 hectares. Defendant raised the defense of prescription and title thru "open, continuous, exclusive and public and notorious possession of land in dispute. He also alleged that the registration of the land was obtained by plaintiff's predecessor through fraud or error.

The lower court rendered judgment in favor of the plaintiff and ordered the defendant to restore possession of the land to the plaintiff, as well as to pay corresponding rent from January 1940 until he vacates the land. On appeal defendant raised a number of assignments or errors in the decision, one of which is that the trial court erred in not dismissing the case on the ground that the case was not brought by the real party in interest.

Issue: Whether or not the lower court erred in not dismissing the case on the ground that it was not brought by the real party in interest? NO

Held: What the Rules of Court require is that an action be broughtin the name of, but not necessarily by, the real party in interest. In fact the practice is for an attorney-at-law to bring the action, that is to file the complaint, in the 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 its undersigned counsel." It is true that the complaint also states that the plaintiff is "represented herein by its Managing Partner Gregorio Araneta, Inc.", another corporation, but there is nothing against one corporation being represented by another person, natural or juridical, in a suit in court. The contention that Gregorio Araneta, Inc. cannot 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 true rule 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."

AGUILA, JR. v. CA

FACTS: In April 1991, the spouses Ruben and FelicidadAbrogarentered into aloan agreementwith a lending firm called A.C. Aguila & Sons, Co., a partnership. The loan was for P200k. To secure the loan, the spouses mortgaged their house and lot located in a subdivision. The terms of the loan further stipulates that in case of non-payment, the property shall be automatically appropriated to the partnership and a deed of sale be readily executed in favor of the partnership. She does have a 90 day redemption period.

Ruben died, and Felicidad failed to make payment. She refused to turn over the property and so the firm filed an ejectment case against her (wherein she lost). She also failed to redeem the property within the period stipulated. She then filed a civil case against Alfredo Aguila, manager of the firm, seeking for the declaration of nullity of the deed of sale. The RTC retained the validity of the deed of sale. The Court of Appeals reversed the RTC. The CA ruled that the sale is void for it is apactum commissorium sale which is prohibited under Art. 2088 of the Civil Code (note the disparity of the purchase price, which is the loan amount, with the actual value of the property which is after all located in a subdivision).

ISSUE:Whether or not the case filed by Felicidad shall prosper.

HELD:No. Unfortunately, the civil case was filed not against the real party in interest. As pointed out by Aguila, he is not the real party in interest but rather it was the partnership A.C. Aguila & Sons, Co. The Rules of Court provide that every action must be prosecuted and defended in the name of the real party in interest. A real party in interest is one who would be benefited or injured by the judgment, or who is entitled to the avails of the suit.Any decision rendered against a person who is not a real party in interest in the case cannot be executed.Hence, a complaint filed against such a person should be dismissed for failure to state a cause of action, as in the case at bar.

Under Art. 1768 of the Civil Code, a partnership has a juridical personality separate and distinct from that of each of the partners. The partners cannot be held liable for the obligations of the partnership unless it is shown that the legal fiction of a different juridical personality is being used for fraudulent, unfair, or illegal purposes.In this case, Felicidad has not shown that A.C. Aguila & Sons, Co., as a separate juridical entity, is being used for fraudulent, unfair, or illegal purposes. Moreover, the title to the subject property is in the name of A.C. Aguila & Sons, Co. It is the partnership, not its officers or agents, which should be impleaded in any litigation involving property registered in its name. A violation of this rule will result in the dismissal of the complaint.

PASCUAL v. COMMISSIONER OF INTERNAL REVENUE

166 SCRA 560 (1988)

Facts: On June 22, 1965, petitioners Mariano Pascual and Renato Dragon bought two (2) parcels of land from Santiago Bernardino, 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 by petitioners in 1968 to Marenir Development Corporation, while the three parcels of land were sold by petitioners to Erlinda Reyes and Maria Samson on March 19, 1970.

Petitioners realized a net profit in the sale made in 1968 in the amount of P165,224.70, while they realized a net profit of P60,000.00 in the sale made in 1970. The corresponding capital gains taxes were paid by petitioners in 1973 and 1974 by availing of the tax amnesties granted in the said years.

However, in a letter of then Acting BIR Commissioner Efren I. Plana, petitioners were assessed and required to pay a total amount of P107,101.70 as alleged deficiency corporate income taxes for the years 1968 and 1970. Petitioners protested the said assessment asserting that they had availed of tax amnesties way back in 1974.

Respondent Commissioner informed petitioners that in the years 1968 and 1970, petitioners as co-owners in the real estate transactions formed an unregistered partnership or joint venture taxable as a corporation under the National Internal Revenue Code.

Issue: Whether or not respondent is correct in its presumptive determination that petitioners formed an unregistered partnership thus subject to corporate income tax. NO

Ruling: There is no evidence that petitioners entered into an agreement to contribute money, property or industry to a common fund, and that they intended to divide the profits among themselves. Respondent commissioner and/ or his representative just assumed these conditions to be present on the basis of the fact that petitioners purchased certain parcels of land and became co-owners thereof. In Evangelista, there was a series of transactions where petitioners purchased twenty-four (24) lots showing that the purpose was not limited to the conservation or preservation of the common fund or even the properties acquired by them. The character of habituality peculiar to business transactions engaged in for the purpose of gain was present. Reliance of the lower court to the case of Evangelista v. Collector is untenable. In order to constitute a partnership inter sese there must be: (a) An intent to form the same; (b) generally 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.There is no adequate basis to support the proposition that they thereby formed an unregistered partnership. The two isolated transactions whereby they purchased properties and sold the same a few years thereafter did not thereby make them partners.OA v. THE COMMISSIONER OF INTERNAL REVENUEG.R. No. L-19342 May 25, 1972Facts: Julia Bunales died on March 23, 1944, leaving as heirs her surviving spouse. Lorenzo T. Oa and her five children. Lorenzo T. Oa, the surviving spouse was appointed administrator of the estate of said deceased. A partition was thereafter approved by the Court. The Court also appointed Lorenzo, upon petition to the CFI of Manila, to be appointed guardian of the persons and property of Luz, Virginia and Lorenzo, Jr., who were minors at the time.

Although the project of partition was approved by the Court on May 16, 1949. no attempt was made to divide the properties therein listed. Instead, the properties remained under the management of Lorenzo T. Oa who used said properties in business by leasing or selling them and investing the income derived therefrom and the proceeds from the sales thereof in real properties and securities. As a result, petitioners properties and investments gradually increased from P105,450.00 in 1949 to P480.005.20 in 1956. However, petitioners did not actually receive their shares in the yearly income. The income was always left in the hands of Lorenzo T. Oa who, as heretofore pointed out, invested them in real properties and securities.

On the basis of the foregoing facts, respondent (Commissioner of Internal Revenue) decided that petitioners formed an unregistered partnership and therefore, subject to the corporate income tax, pursuant to Section 24, in relation to Section 84(b), of the Tax Code. Accordingly, he assessed against the petitioners the amounts of P8,092.00 and P13,899.00 as corporate income taxes for 1955 and 1956, respectively. The defense of petitioners revolved mainly in the contention that they are co-owners of the properties inherited from Julia Buales and the profits derived therefrom rather than having formed a partnership.

Issue: Whether or not it was proper to consider petitioners as an unregistered partnership. YES

Ruling: The first thing that has struck the Court is that whereas petitioners predecessor in interest died way back on March 23, 1944 and the project of partition of her estate was judicially approved as early as May 16, 1949, and presumably petitioners have been holding their respective shares in their inheritance since those dates admittedly under the administration or management of the head of the family, the widower and father Lorenzo T. Oa, the assessment in question refers to the later years 1955 and 1956. We believe this point to be important because, apparently, at the start, or in the years 1944 to 1954, the respondent Commissioner of Internal Revenue did treat petitioners as co-owners, not liable to corporate tax, and it was only from 1955 that he considered them as having formed an unregistered partnership.

Under the management of Lorenzo T. Oa who used said properties in business by leasing or selling them and investing the income derived therefrom and the proceeds from the sales thereof in real properties and securities, as a result of which said properties and investments steadily increased yearly from P87,860.00 in land account and P17,590.00 in building account in 1949 to P175,028.68 in investment account, P135,714.68 in land account and P169,262.52 in building account in 1956. And all these became possible because, admittedly, petitioners never actually received any share of the income or profits from Lorenzo T. Oa, and instead, they allowed him to continue using said shares as part of the common fund for their ventures, even as they paid the corresponding income taxes on the basis of their respective shares of the profits of their common business as reported by the said Lorenzo T. Oa.

It is thus incontrovertible that petitioners did not, contrary to their contention, merely limit themselves to holding the properties inherited by them. Indeed, it is admitted that during the material years herein involved, some of the said properties were sold at considerable profit, and that with said profit, petitioners engaged, thru Lorenzo T. Oa, in the purchase and sale of corporate securities. It is likewise admitted that all the profits from these ventures were divided among petitioners proportionately in accordance with their respective shares in the inheritance. In these circumstances, it is Our considered view that from the moment petitioners allowed not only the incomes from their respective shares of the inheritance but even the inherited properties themselves to be used by Lorenzo T. Oa as a common fund in undertaking several transactions or in business, with the intention of deriving profit to be shared by them proportionally, such act was tantamount to actually contributing such incomes to a common fund and, in effect, they thereby formed an unregistered partnership within the purview of the abovementioned provisions of the Tax Code.

GATCHALIAN v. COLLECTOR OF INTERNAL REVENUE

67 Phil. 666 (1939)Facts: Plaintiffs (15 persons), in order to enable them to purchase one sweepstakes ticket valued at two pesos (P2), subscribed and paid each varied amounts aggregating 2 pesos. The said ticket was registered in the name of Jose Gatchalian and Company . The above-mentioned ticket bearing No. 178637 won one of the third prizes in the amount of 50, 000. Jose Gatchalian was required by income tax examiner Alfredo David to file the corresponding income tax return covering the prize won by Jose Gatchalian & Company. The Collector of Internal Revenue collected the tax under section 10 of Act No. 2833, as last amended by section 2 of Act No. 3761, reading as follows:"SEC. 10. (a) There shall be levied, assessed, collected, and paid annually upon the total net income received in the preceding calendar year from all sources by every corporation, joint-stock company, partnership, joint account (cuenta en participacin), association or insurance company, organized in the Philippine Islands, no matter how created or organized, but not including duly registered general copartnerships (compaias colectivas), a tax of three per centum upon such income;Issue: Whether or not the plaintiffs formed a partnership, or merely a community of property without a personality of its own; in the first case it is admitted that the partnership thus formed is liable for the payment of income tax, whereas if there was merely a community of property, they are exempt from such payment.Held: There is no doubt that if the plaintiffs merely formed a community of property the latter is exempt from the payment of income tax under the law. But according to the stipulated facts the plaintiffs organized a partnership of a civil nature because each of them put up money to buy a sweepstakes ticket for the sole purpose of dividing equally the prize which they may win, as they did in fact in the amount of P50,000 (article 1665, Civil Code). The partnership was not only formed, but upon the organization thereof and the winning of the prize, Jose Gatchalian personally appeared in the office of the Philippine Charity Sweepstakes, in his capacity as co-partner, as such collected the prize, the office issued the check for P50,000 in favor of Jose Gatchalian and company, and the said partner, in the same capacity, collected the said check. All these circumstances repel the idea that the plaintiffs organized and formed a community of property only. Having organized and constituted a partnership of a civil nature, the 'said entity is the one bound to pay the income tax which the defendant collected.OBILLOS, JR. v. COMMISSIONER OF INTERNAL REVENUE139 SCRA 436 (1985)Facts: On 2 March 1973, Jose Obillos, Sr. completed payment to Ortigas & Co Ltd. on two lots located at Greenhills, San Juan, Rizal. The next day, he transferred his rights to his four children (petitioners) to enable them to build their residences. The company sold the two lots to petitioners, and the torrens title issued to them show that they were co-owners of the two lots. In 1974, petitioners resold the lots to Walled City Securities Corporation and Olga Cruz and divided among themselves the profit. They treated the profit as capital gain and paid an income tax on one-half thereof. In 1980, or a day before the expiration of the five-year prescriptive period, the CIR required the petitioners to pay corporate income tax on the total profit, in addition to individual income tax on their shares thereof. A total of Php 127,781.76 was ordered to be paid by the petitioners, including the corporate income tax, 50% fraud surcharge, accumulated interest, income taxes and distributive dividend. Such was ordered by the Commissioner, acting on the theory that the four petitioners had formed an unregistered partnership or joint venture.

Issue: Whether or not the petitioners formed an unregistered partnership by the act of selling the two lots, of which they were co-owners. NORuling: It is wrong to consider petitioners as having formed a partnership under Article 1767 of the Civil Code simply because they allegedly contributed money to buy the two lots, resold the same and divided the profit among themselves. They were co-owners, pure and simple. The petitioners were not engaged in any joint venture by reason of that isolated transaction.

Their original purpose was to divide the lots for residential purposes. If later on they found it not feasible to build their residences on the lots because of the high cost of construction, then they had no choice but to resell the same to dissolve the co-ownership. The division of the profit was merely incidental to the dissolution of the co-ownership which was in the nature of things a temporary state.Article 1769(3) of the Civil Code provides that "the sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived". There must be an unmistakable intention to form a partnership or joint venture.

EVANGELISTA v. CIR

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

Facts: Petitioners borrowed sum of money from their father and together with their own personal funds they used said money to buy several real properties. They then appointed their brother (Simeon) as manager of the said real properties with powers and authority to sell, lease or rent out said properties to third persons. They realized rental income from the said properties for the period 1945-1949.

On September 24, 1954 respondent Collector of Internal Revenue demanded the payment of income tax on corporations, real estate dealer's fixed tax and corporation residence tax for the years 1945-1949. The 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. CTA denied their petition and subsequent MR and New Trials were denied. Hence this petition.

Issue: Whether or not petitioners have formed a partnership and consequently, 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.

Held: YES. 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. Upon consideration of all the facts and circumstances surrounding the case, we are fully satisfied that their purpose was to engage in real estate transactions for monetary gain and then divide the same among themselves, because of the following observations, among others: (1) Said common fund was not something they found already in existence; (2) They invested the same, not merely in one transaction, but in a series of transactions; (3) The aforesaid lots were not devoted to residential purposes, or to other personal uses, of petitioners herein.

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 to leave no room for doubt on the existence of said intent in petitioners herein.

For purposes of the tax on corporations, our National Internal Revenue Code, includes these partnerships with the exception only of duly registered general copartnerships within 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.

AFISCO INSURANCE CORP. et al. vs. COURT OF APPEALS

G.R. No. 112675.January 25, 1999DOCTRINE:Unregistered Partnerships and associations are considered as corporations for tax purposes Under the old internal revenue code, A tax is hereby imposed upon the taxable net income received during each taxable year from all sources by every corporation organized in, or existing under the laws of the Philippines, no matter how created or organized, xxx. Ineludibly, the Philippine legislature included in the concept of corporations those entities that resembled them such as unregistered partnerships and associations.

Insurance pool in the case at bar is deemed a partnership or association taxable as a corporation In the case at bar, petitioners-insurance companies formed a Pool Agreement, or an association that would handle all the insurance businesses covered under their quota-share reinsurance treaty and surplus reinsurance treaty with Munich is considered a partnership or association which may be taxed as a corporation.

Double Taxation is not Present in the Case at Bar Double taxation means taxing the same person twice by the same jurisdiction for the same thing. In the instant case, the insurance pool is a taxable entity distince from the individual corporate entities of the ceding companies. The tax on its income is obviously different from the tax on the dividends received by the companies. There is no double taxation.

FACTS:The petitioners are 41 non-life domestic insurance corporations. They issued risk insurance policies for machines. The petitioners in 1965 entered into aQuota Share Reinsurance Treaty and a Surplus Reinsurance Treatywith the Munchener Ruckversicherungs-Gesselschaft (hereafter called Munich), a non-resident foreign insurance corporation.The reinsurance treaties required petitioners to form a pool, which they complied with.

In 1976, the pool of machinery insurers submitted a financial statement and filed an Information Return of Organization Exempt from Income Tax for 1975. On the basis of this, the CIR assessed a deficiency ofP1,843,273.60, and withholding taxes in the amount ofP1,768,799.39 andP89,438.68 on dividends paid to Munich and to the petitioners, respectively.

The Court of Tax Appeal sustained the petitioner's liability. The Court of Appeals dismissed their appeal.

The CA ruled in that the pool of machinery insurers was a partnership taxable as a corporation, and that the latters collection of premiums on behalf of its members, the ceding companies, was taxable income.

ISSUE/S:1. Whether or not the pool is taxable as a corporation.

2. Whether or not there is double taxation.

HELD:1) Yes: Pool taxable as a corporation

Argument of Petitioner: The reinsurance policies were written by them individually and separately, and that their liability was limited to the extent of their allocated share in the original risks thus reinsured. Hence, the pool did not act or earn income as a reinsurer. Its role was limited to its principal function of allocating and distributing the risk(s) arising from the original insurance among the signatories to the treaty or the members of the pool based on their ability to absorb the risk(s) ceded[;] as well as the performance of incidental functions, such as records, maintenance, collection and custody of funds, etc.

Argument of SC: According to Section 24 of the NIRC of 1975:

SEC. 24.Rate of tax on corporations.--(a)Tax on domestic corporations.--A tax is hereby imposed upon the taxable net income received during each 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-partnership (compaias colectivas), general professional partnerships, private educational institutions, and building and loan associations xxx.

Ineludibly, the Philippine legislature included in the concept of corporations those entities that resembled them such as unregistered partnerships and associations. Interestingly, the NIRCs inclusion of such entities in the tax on corporations was made even clearer by the Tax Reform Act of 1997 Sec. 27 read together with Sec. 22 reads:

SEC. 27.Rates of Income Tax on Domestic Corporations.--(A)In General.--Except as otherwise provided in this Code, an income tax of thirty-five percent (35%) is hereby imposed upon the taxable income derived during each taxable year from all sources within and without the Philippines by every corporation, as defined in Section 22 (B) of this Code, and taxable under this Title as a corporation xxx.

SEC. 22.--Definition.--When used in this Title:

xxxxxxxxx

(B)The termcorporationshall include partnerships, no matter how created or organized, joint-stock companies, joint accounts (cuentas en participacion), associations, or insurance companies, but does not include general professional partnerships [or] a joint venture or consortium formed for the purpose of undertaking construction projects or engaging in petroleum, coal, geothermal and other energy operations pursuant to an operating or consortium agreement under a service contract without the Government.General professional partnerships are partnerships formed by persons for the sole purpose of exercising their common profession, no part of the income of which is derived from engaging in any trade or business.

Thus, the Court inEvangelista v. Collector of Internal Revenueheld that Section 24 covered these unregistered partnerships and even associations or joint accounts, which had no legal personalities apart from their individual members.

Furthermore, Pool Agreement or an association that would handle all the insurance businesses covered under their quota-share reinsurance treaty and surplus reinsurance treaty with Munich may be considered a partnership because it contains the following elements: (1) The pool has a common fund, consisting of money and other valuables that are deposited in the name and credit of the pool. This common fund pays for the administration and operation expenses of the pool. (2) The pool functions through an executive board, which resembles the board of directors of a corporation, composed of one representative for each of the ceding companies. (3) While, the pool itself is not a reinsurer and does not issue any policies; its work is indispensable, beneficial and economically useful to the business of the ceding companies and Munich, because without it they would not have received their premiums pursuant to the agreement with Munich. Profit motive or business is, therefore, the primordial reason for the pools formation.

TORRES v. CA

FACTS: In 1969, sisters Antonia Torres and Emeteria Baring entered into a joint venture agreement with Manuel Torres. Under the agreement, the sisters agreed to execute a deed of sale in favor Manuel over a parcel of land, the sisters received no cash payment from Manuel but the promise of profits (60% for the sisters and 40% for Manuel) said parcel of land is to be developed as a subdivision.

Manuel then had the title of the land transferred in his name and he subsequently mortgaged the property. He used the proceeds from the mortgage to start building roads, curbs and gutters. Manuel also contracted an engineering firm for the building of housing units. But due to adverse claims in the land, prospective buyers were scared off and the subdivisionprojecteventually failed.

The sisters then filed a civil case against Manuel for damages equivalent to 60% of the value of the property, which according to the sisters, is whats due them as per the contract.

The lower court ruled in favor of Manuel and the Court of Appeals affirmed the lower court.

The sisters then appealed before the Supreme Court where they argued that there is no partnership between them and Manuel because the joint venture agreement is void.

ISSUE:Whether or not there exists a partnership.

HELD:Yes. The joint venture agreement the sisters entered into with Manuel is a partnership agreement whereby they agreed to contribute property (their land) which was to be developed as a subdivision. While on the other hand, though Manuel did not contribute capital, he is an industrial partner for his contribution for general expenses and other costs. Furthermore, the income from the saidprojectwould be divided according to the stipulated percentage (60-40). Clearly, the contract manifested the intention of the parties toforma partnership.Further still, the sisters cannot invoke their right to the 60% value of the property and at the same time deny the same contract which entitles them to it.

At any rate, the failure of the partnership cannot be blamed on the sisters, nor can it be blamed to Manuel (the sisters on their appeal did not show evidence as to Manuels fault in the failure of the partnership). The sisters must then bear their loss (which is 60%). Manuel does not bear the loss of the other 40% because as an industrial partner he is exempt from losses.

LIM TONG LIM v. PHIL. FISHING GEAR INDUSTRIES

FACTS: It was established that Lim Tong Lim requested Peter Yao to engage in commercial fishing with him and one Antonio Chua. The three agreed to purchase twofishing boatsbut since they do not have the money they borrowed from one Jesus Lim (brother of Lim Tong Lim). They again borrowed money and they agreed to purchase fishing nets and other fishing equipments. Now, Yao and Chua represented themselves as acting in behalf of Ocean Quest Fishing Corporation (OQFC) they contracted with Philippine Fishing GearIndustries(PFGI) for the purchase of fishing nets amounting to more than P500k.

They were however unable to pay PFGI and so they were sued in their own names because apparently OQFC is a non-existent corporation. Chua admitted liability and asked for some time to pay. Yao waived his rights. Lim Tong Lim however argued that hes not liable because he was not aware that Chua and Yao represented themselves as a corporation; that the two acted without his knowledge and consent.

ISSUE:Whether or not Lim Tong Lim is liable.

HELD:Yes. 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. In their Compromise Agreement, they subsequently revealed their intention to pay the loan with the proceeds of the sale of the boats, and to divide equally among them the excess or loss. These boats, the purchase and the repair of which were financed with borrowed money, fell under the term common fund under Article 1767. The contribution to such fund need not be cash or fixed assets; it could be an intangible like credit or industry. That the parties agreed that 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.

Lim Tong Lim cannot argue that the principle of corporation by estoppels can only be imputed to Yao and Chua. Unquestionably, Lim Tong Lim benefited from the use of the nets found in his boats, the boat which has earlier been proven to be an asset of the partnership. Lim, Chua and Yao decided toforma 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.AGAD v. MABOLO and AGAD CO.23 SCRA 1223 (1968)

Facts: Petitioner Mauricio Agad claims that he and defendant Severino Mabato are partners in a fishpond business to which they contributed P1000 each. As managing partner, Mabato yearly rendered the accounts of the operations of the partnership. However, for the years 1957-1963, defendant failed to render the accounts despite repeated demands. Petitioner filed a complaint against Mabato to which a copy of the public instrument evidencing their partnership is attached. Aside from the share of profits (P14,000) and attorneys fees (P1000), petitioner prayed for the dissolution of the partnership and winding up of its affairs.

Mabato denied the existence of the partnership alleging that Agad failed to pay his P1000 contribution. He then filed a motion to dismiss on the ground of lack of cause of action. The lower court dismissed the complaint finding a failure to state a cause of action predicated upon the theory that the contract of partnership is null and void, pursuant to Art. 1773 of our Civil Code, because an inventory of the fishpond referred in said instrument had not been attached thereto.Art. 1771. A partnership may be constituted in any form, except where immovable property or real rights are contributed thereto, in which case a public instrument shall be necessary.Art. 1773. A contract of partnership is void, whenever immovable property is contributed thereto, if inventory of said property is not made, signed by the parties; and attached to the public instrument.Issue: Whether or not immovable property or real rights have been contributed to the partnership. NO

Ratio: Based on the copy of the public instrument attached in the complaint, the partnership was established to operate a fishpond", and not to "engage in a fishpond business. Thus, Mabatos contention that it is really inconceivable how a partnership engaged in the fishpond business could exist without said fishpond property (being) contributed to the partnership is without merit. Their contributions were limited to P1000 each and neither a fishpond nor a real right thereto was contributed to the partnership.

Therefore, Article 1773 of the Civil Code finds no application in the case at bar. Case remanded to the lower court for further proceedings.

YU v. NLRC

G.R. No. 97212; June 30, 1993

FACTS: Petitioner Benjamin Yu was formerly the Assistant General Manager of the marble quarrying and export business operated by a registered partnership with the firm name of "Jade Mountain Products Company Limited" ("Jade Mountain"). The partnership was originally organized on 28 June 1984 with Lea Bendal and Rhodora Bendal as general partners and Chiu Shian Jeng, Chen Ho-Fu and Yu Chang, all citizens of the Republic of China (Taiwan), as limited partners.Sometime in 1988, without the knowledge of Benjamin Yu, the general partners Lea Bendal and Rhodora Bendal sold and transferred their interests in the partnership to private respondent Willy Co and to one Emmanuel Zapanta. Mr. Yu Chang, a limited partner, also sold and transferred his interest in the partnership to Willy Co. Between Mr. Emmanuel Zapanta and himself, private respondent Willy Co acquired the great bulk of the partnership interest. The partnership now constituted solely by Willy Co and Emmanuel Zapanta continued to use the old firm name of Jade Mountain, though they moved the firm's main office from Makati to Mandaluyong, Metropolitan Manila

Petitioner was informed by Willy Co that the latter had bought the business from the original partners and that it was for him to decide whether or not he was responsible for the obligations of the old partnership, including petitioner's unpaid salaries. Petitioner was in fact not allowed to work anymore in the Jade Mountain business enterprise. His unpaid salaries remained unpaid.

On 21 December 1988, Benjamin Yu filed a complaint for illegal dismissal and recovery of unpaid salaries accruing from November 1984 to October 1988

ISSUE: Whether the partnership which had hired petitioner Yu as Assistant General Manager had been extinguished and replaced by a new partnership composed of Willy Co and Emmanuel Zapanta

HELD: Yes, the partnership which hired Yu was extinguished and replaced by a new partnership.

In the case at bar, just about all of the partners had sold their partnership interests (amounting to 82% of the total partnership interest) to Mr. Willy Co and Emmanuel Zapanta. The record does not show what happened to the remaining 18% of the original partnership interest. The acquisition of 82% of the partnership interest by new partners, coupled with the retirement or withdrawal of the partners who had originally owned such 82% interest, was enough to constitute a new partnership

In the ordinary course of events, the legal personality of the expiring partnership persists for the limited purpose of winding up and closing of the affairs of the partnership.

In other words, the new partnership simply took over the business enterprise owned by the preceding partnership, and continued using the old name of Jade Mountain Products Company Limited, without winding up the business affairs of the old partnership, paying off its debts, liquidating and distributing its net assets, and then re-assembling the said assets or most of them and opening a new business enterprise.

The new partnership itself which continued the business of the old, dissolved, one, are liable for the debts of the preceding partnership.

ROJAS v. MAGLANA

Facts:Maglana and Rojas executed their Articles of Co-Partnership called Eastcoast Development Enterprises (EDE). It was a partnership with an indefinite term of existence. Maglana shall manage the business affairs while Rojas shall be the logging superintendant and shall manage the logging operation. They shall share in all profits and loss equally. Due to difficulties encountered they decided to avail of the sources of Pahamatong as industrial partners. They again executed their Articles of Co-Partnership under EDE. The term is 30 years. After sometime Pamahatong sold his interest to Maglana and Rojas including equipment contributed. After withdrawal of Pamahatong, Maglana and Rojas continued the partnership. After 3 months, Rojas entered into a management contract with another logging enterprise. He left and abandoned the partnership. He even withdrew his equipment from the partnership and was transferred to CMS. He never told Maglana that he will not be able to comply with the promised contributions and he will not work as logging superintendent. Maglana then told Rojas that the latter share will just be 20% of the net profits. Rojas took funds from the partnership more than his contribution. Thus, Maglana notified Rojas that he dissolved the partnership.

Issue:What is the nature of the partnership and legal relationship of Maglana and Rojas after Pahamatong retired from the second partnership

Ruling: It was not the intention of the partners to dissolve the first partnership, upon the constitution of the second one, which they unmistakably called additional agreement. Otherwise stated even during the existence of the second partnership, all business transactions were carried out under the duly registered articles. No rights and obligations accrued in the name of the second partnership except in favor of Pahamatong which was fully paid by the duly registered partnership. SANTOS v. REYES

G.R. No. 135813. October 25, 2001

Facts: In June 1986, Fernando Santos, Nieves Reyes and Melton Zabat orally agreed to form a partnership a lending business. Santos contributed 70% (as financier) while Reyes and Zabat shared 30% (as industrial partners). Later, Reyes introduced Cesar Gragera whom they would provide loans to Grageras corporation particularly its employees. In return Gragera shall have a commission based on the loan payments. The partners decided on August 1986 to have a written agreement but they found out that Zabat engaged in a competitor venture thus expelled him. The two had Arsenio Reyes (husband of Nieves) replaced Zabat.However, Santos accused the Spouses of not remitting the loans payments. He argued that the couple were only his employees and there was a special arrangement between him and Gragera. The trial court and the Court of Appeals ruled against Santos.

Issue: Whether or not there was a partnership formed between Santos and the Spouses Reyes

Held: YES. The original partnership with Zabat continued even after the expulsion of the latter from the partnership because there was no intent to dissolve the (partnership) relationship.

[Respondents] were industrial partners of [petitioner]. . . . Nieves herself provided the initiative in the lending activities with Monte Maria. In consonance with the agreement between appellant, Nieves and Zabat (later replaced by Arsenio), [respondents] contributed industry to the common fund with the intention of sharing in the profits of the partnership. [Respondents] provided services without which the partnership would not have [had] the wherewithal to carry on the purpose for which it was organized and as such [were] considered industrial partners (Evangelista v. Abad Santos, 51 SCRA 416 [1973]).While concededly,the partnership between [petitioner,] Nieves and Zabat was technically dissolved by the expulsion of Zabat therefrom, the remaining partners simply continued the business of the partnership without undergoing the procedure relative to dissolution. Instead, they invited Arsenio to participate as a partner in their operations. There was therefore, no intent to dissolve the earlierpartnership. The partnership between [petitioner,] Nieves and Arsenio simply took over and continued the business of the former partnership with Zabat, one of the incidents of which was the lending operations with Monte Maria.

MORAN JR. v. COURT OF APPEALS

133 SCRA 88 (1984)

Facts: Moran and Pecson agreed to contribute P15 000 each for the purpose of printing 95,000 posters of the delegates to the then 1971 Constitutional Commission. It was further agreed that Pecson will receive a commission of P 1000 a month and that the partnership is to be liquidated on December 15, 1971.Pecson partially fulfilled his obligation when he issued P10k in favor of the partnership. He gave the P10k to Moran as the managing partner. Moran however did not add anything and, instead, he only used P4k out of the P10k in printing 2,000 posters. He only printed 2,000 posters. All the posters were sold for a total of P10k.Pecson sued Moran. The trial court ordered Moran to pay Pecson damages. The Court of Appeals affirmed the decision but modified the same as it ordered Moran to pay P47.5k for unrealized profit; P8k for Pecsons monthly commissions; P7k as return of investment because the venture never took off; plus interest.Issue: Whether or not the Court of Appeals erred in holding Moran liable to respondent Pecson in the sum of P47,500 as the supposed expected profits due him.Ruling: The first question raised in this petition refers to the award of P47,500.00 as the private respondent's share in the unrealized profits of the partnership. The award of speculative damages has no basis in fact and law.The rule is, when a partner who has undertaken to contribute a sum of money fails to do so, he becomes a debtor of the partnership for whatever he may have promised to contribute (Art. 1786, Civil Code) and for interests and damages from the time he should have complied with his obligation (Art. 1788, Civil Code. In this case, there was mutual breach. Private respondent failed to give his entire contribution in the amount of P15,000.00. He contributed only P10,000.00. The petitioner likewise failed to give any of the amount expected of him. He further failed to comply with the agreement to print 95,000 copies of the posters. Instead, he printed only 2,000 copies.There is no evidence whatsoever that the partnership between the petitioner and the private respondent would have been a profitable venture. In fact, it was a failure doomed from the start. There is therefore no basis for the award of speculative damages in favor of the private respondentBeing a contract of partnership, each partner must share in the profits and losses of the venture. That is the essence of a partnership. And even with an assurance made by one of the partners that they would earn a huge amount of profits, in the absence of fraud, the other partner cannot claim a right to recover the highly speculative profits

Bastida vs Menzi & Co.

Facts: Bastida offered to assign to Menzi & Co. his contract with Phil Sugar Centrals Agency and to supervise the mixing of the fertilizer and to obtain other orders for 50 % of the net profit that Menzi & Co., Inc., might derive therefrom. J. M. Menzi (gen. manager of Menzi & Co.) accepted the offer. The agreement between the parties was verbal and was confirmed by the letter of Menzi to the plaintiff on January 10, 1922. Pursuant to the verbal agreement, the defendant corporation on April 27, 1922 entered into a written contract with the plaintiff, marked Exhibit A, which is the basis of the present action. Still, the fertilizer business as carried on in the same manner as it was prior to the written contract, but the net profit that the plaintiff herein shall get would only be 35%. The intervention of the plaintiff was limited to supervising the mixing of the fertilizers in the bodegas of Menzi. Prior to the expiration of the contract (April 27, 1927), the manager of Menzi notified the plaintiff that the contract for his services would not be renewed. Subsequently, when the contract expired, Menzi proceeded to liquidate the fertilizer business in question. The plaintiff refused to agree to this. It argued, among others, that the written contract entered into by the parties is a contract of general regular commercial partnership, wherein Menzi was the capitalist and the plaintiff the industrial partner.

Issue: Whether the relationship between the petitioner and Menzi is that of partners?

Held: The relationship established between the parties was not that of partners, but that of employer and employee, whereby the plaintiff was to receive 35% of the net profits of the fertilizer business of Menzi in compensation for his services for supervising the mixing of the fertilizers. Neither the provisions of the contract nor the conduct of the parties prior or subsequent to its execution justified the finding that it was a contract of copartnership.

The written contract was, in fact, a continuation of the verbal agreement between the parties, whereby the plaintiff worked for the defendant corporation for one-half of the net profits derived by the corporation form certain fertilizer contracts.

According to Art. 116 of the Code of Commerce, articles of association by which two or more persons obligate themselves to place in a common fund any property, industry, or any of these things, in order to obtain profit, shall be commercial, no matter what it class may be, provided it has been established in accordance with the provisions of the Code.

However in this case, there was no common fund. The business belonged to Menzi & Co.

The plaintiff was working for Menzi, and instead of receiving a fixed salary, he was to receive 35% of the net profits as compensation for his services. The phrase in the written contract en sociedad con, which is used as a basis of the plaintiff to prove partnership in this case, merely means en reunion con or in association with.

It is also important to note that although Menzi agreed to furnish the necessary financial aid for the fertilizer business, it did not obligate itself to contribute any fixed sum as capital or to defray at its own expense the cost of securing the necessary credit.

HEIRS OF TAN ENG KEE v. COURT OF APPEALS

341 SCRA 740 (2000)

Facts: The heirs of Tan Eng Kee filed a suit against the decedents brother Tan Eng Lay. The complaint alleged that after the Second World War, the brothers, pooling their resources and industry together, entered into a partnership engaged in the selling of lumber and hardware and construction supplies. They named their enterprise Benguet Lumber which they jointly managed until Tan Kees death. Petitioners 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 the conversion of the partnership Benguet Lumber into a corporation called Benguet Lumber Company. The incorporation was purportedly a ruse to deprive Tan Eng Kee and his heirs of their rightful participation in the profits of the business. Petitioners prayed for accounting of the partnership assets, and the dissolution, and winding up of the alleged partnership formed after the World War II between Tan Eng Kee and Tan Eng Lay. The Regional Trial court found that Benguet Lumber is a joint venture which is akin to a particular partnership, and declared that the assets of Benguet Lumber are the same assets turned over to Benguet lumber Co. and as such the heirs or legal representatives of the deceased Tan Eng Kee have a legal right to share in the said assets. The Court of Appeals reversed the judgment of the Trial Court.Issue: Whether or not a partnership existed between Tan Eng Kee and Tan Eng Lay NO

Ruling: 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 among themselves. The best evidence of the partnerships existence 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 parties from complying with the provisions of the New Civil Code when it took effect on August 30, 1950. 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 falls short of the quantum of proof required to establish a partnership.It is indeed odd, if not unnatural, that despite the forty years the partnership was allegedly in existence, Tan Eng Kee never asked for an accounting. The essence of a partnership is that the partners share in the profits and losses. Each has the right to demand an accounting as long as the partnership exists. A demand for periodic accounting is evidence of a partnership. During his lifetime, Tan Eng Kee appeared never to have made any such demand for accounting from his brother.

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 ordinary employee of Benguet Lumber, as it was then called. Exhibits 4 to 4-U in fact shows that Tan Eng Kee received sums as wages of an employee.In connection therewith, Article 1769 of the Civil Code provides:

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

XXX

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

(a) As a debt by installment or otherwise;

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

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

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

(e) As the consideration for the sale of a goodwill of a business or other property by installments or otherwise.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 money allegedly 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 the business between themselves, which is one of the essential features of a partnership.

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 stocks were 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 not extended to its ordinary employees.

Even the aforesaid circumstances, when taken together are not persuasive indicia of a partnership. They only tend to show that Tan Eng Kee was involved in the 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 above the rank-and-file employees. He would have enjoyed liberties otherwise unavailable were he not kin, such as his residence in the Benguet Lumber Company 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, the circumstances proffered by petitioners do not provide a logical nexus to the conclusion desired; these are not inconsistent with the powers and duties of a manager, even in a business organized and run as informally as Benguet Lumber Company.

ESTANISLAO, JR. v. COURT OF APPEALS

Facts: The petitioner and private respondents are brothers and sisters who are co-owners of certain lots at the in Quezon City which were then being leased to SHELL. They agreed to open and operate a gas station thereat to be known as Estanislao Shell Service Station with an initial investment of PhP15,000.00 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. The respondents agreed to help their brother, petitioner therein, by allowing him to operate and manage the gasoline service station of the family. In order not to run counter to the companys policy of appointing only one dealer, it was agreed that petitioner would apply for the dealership. Respondent Remedios helped in co-managing the business with petitioner from May 1966 up to February 1967.

On May 1966, the parties entered into an Additional Cash Pledge Agreement with SHELL wherein it was reiterated that the P15,000.00 advance rental shall be deposited with SHELL to cover advances of fuel to petitioner as dealer with a proviso that said agreement cancels and supersedes the Joint Affidavit.

For some time, the petitioner submitted financial statement regarding the operation of the business to the private respondents, but thereafter petitioner failed to render subsequent accounting. Hence , the private respondents filed a complaint against the petitioner praying among others that the latter be ordered:

(1)To execute a public document embodying all the provisions of the partnership agreement they entered into;

(2)To render a formal accounting of the business operation veering 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; and

(4)To pay the plaintiffs attorneys fees and costs of the suit.

Issue: Can a partnership exist between members of the same family arising from their joint ownership of certain properties?

Held: There is no merit in the petitioners contention that because of the stipulation cancelling and superseding the previous joint affidavit, whatever partnership agreement there was in said previous agreement had thereby been abrogated. Said cancelling provision was necessary for the Joint Affidavit speaks of P15,000.00 advance rental starting May 25, 1966 while the latter agreement also refers to advance rentals of the same amount starting May 24, 1966. There is therefore a duplication of reference to the P15,000.00 hence the need to provide in the subsequent document that it cancels and supercedes the previous none. Indeed, it is true that the latter document is silent as to the statement in the Join Affidavit that the value represents the capital investment of the parties in the business and it speaks of the petitioner as the sole dealer, but this is as it should be for in the latter document, SHELL was a signatory and it would be against their policy if in the agreement it should be stated that the business is a partnership with private respondents and not a sole proprietorship of the petitioner.

Furthermore, there are other evidences in the record which show that there was in fact such partnership agreement between parties. The petitioner submitted to the private respondents periodic accounting of the business and gave a written authority to the private respondent Remedios Estanislao to examine and audit the books of their common business (aming negosyo). The respondent Remedios, on the other hand, assisted in the running of the business. Indeed, the parties hereto formed a partnership when they bound themselves to contribute money in a common fund with the intention of dividing the profits among themselves. SY v. CAFACTS:Sometime in 1958, private respondent Jaime Sahot[5] started working as a truck helper for petitioners family-owned trucking business named Vicente Sy Trucking. In 1965, he became a truck driver of the same family business, renamed T. Paulino Trucking Service, later 6Bs Trucking Corporation in 1985, and thereafter known as SBT Trucking Corporation since 1994. Throughout all these changes in names and for 36 years, private respondent continuously served the trucking business of petitioners. When Sahot was 59 years old, he incurred several absences due to various ailments. Particularly causing him pain was his left thigh, which greatly affected the performance of his task as a driver. He inquired about his medical and retirement benefits with the Social Security System (SSS) on April 25, 1994, but discovered that his premium payments had not been remitted by his employer.Sahot filed a week-long leave to get medical attention. He was treated for EOR, presleyopia, hypertensive retinopathy G II and heart enlargement. Because of such, Belen Paulino of the SBT Trucking Service management told him to file a formal request for extension of his leave. When Sahot applied for an extended leave, he was threatened of termination of employment should he refuse to go back to work. Eventually, Sahot was dismissed from employment which prompted the latter to file an illegal dismissal case with the NLRC. For their part, petitioners admitted they had a trucking business in the 1950s but denied employing helpers and drivers. They contend that private respondent was not illegally dismissed as a driver because he was in fact petitioners industrial partner. They add that it was not until the year 1994, when SBT Trucking Corporation was established, and only then did respondent Sahot become an employee of the company, with a monthly salary that reached P4,160.00 at the time of his separation. The NLRC and the CA ruled that Sahot was an employee of the petitioner.

ISSUE:Whether Sahot is an industrial partner

RULING: No. Article 1767 of the Civil Code states that in a contract of partnership two or more persons bind themselves to contribute money, property or industry to a common fund, with the intention of dividing the profits among themselves. Not one of these circumstances is present in this case. No written agreement exists to prove the partnership between the parties. Private respondent did not contribute money, property or industry for the purpose of engaging in the supposed business. There is no proof that he was receiving a share in the profits as a matter of course, during the period when the trucking business was under operation. Neither is there any proof that he had actively participated in the management, administration and adoption of policies of the business. Thus, the NLRC and the CA did not err in reversing the finding of the Labor Arbiter that private respondent was an industrial partner from 1958 to 1994. On this point, the Court affirmed the findings of the appellate court and the NLRC. Private respondent Jaime Sahot was not an industrial partner but an employee of petitioners from 1958 to 1994. The existence of an employer-employee relationship is ultimately a question of fact and the findings thereon by the NLRC, as affirmed by the Court of Appeals, deserve not only respect but finality when supported by substantial evidence. Substantial evidence is such amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.

HEIRS OF JOSE LIM v. LIM

FACTS: In 1980, theheirsof Jose Lim alleged that Jose Lim entered into a partnership agreement with Jimmy Yu and Norberto Uy.The threecontributed P50,000.00 each and used the funds to purchase a truck to start their trucking business. A year later however, Jose Lim died. The eldest son of Jose Lim, Elfledo Lim, took over the trucking business and under his management, the trucking business prospered. Elfledo was able to but real properties in his name. From one truck, he increased it to 9 trucks, all trucks were in his name however. He also acquired other motor vehicles in his name.

In 1993, Norberto Uy was killed. In 1995, Elfledo Lim died of a heart attack. Elfledos wife, Juliet Lim, took over the properties but she intimated to Jimmy and theheirsof Norberto that she could not go on with the business. So the properties in the partnership were divided among them.

Now the otherheirsof Jose Lim, represented by Elenito Lim, required Juliet to do an accounting of all income, profits, and properties from the estate of Elfledo Lim as they claimed that they are co-owners thereof. Juliet refused hence they sued her.

Theheirsof Jose Lim argued that Elfledo Lim acquired his properties from the partnership that Jose Lim formed with Norberto and Jimmy. In court, Jimmy Yu testified that Jose Lim was the partner and not Elfledo Lim. Theheirstestified that Elfledo was merely the driver of Jose Lim.

ISSUE:Who is the partner between Jose Lim and Elfledo Lim?

HELD:It is Elfledo Lim based on the evidence presented regardless of Jimmy Yus testimony in court that Jose Lim was the partner. If Jose Lim was the partner, then the partnership would have been dissolved upon his death (in fact, though the SC did not say so, I believe it should have been dissolved upon Norbertos death in 1993). A partnership is dissolved upon the death of the partner. Further, no evidence was presented as to the articles of partnership or contract of partnership between Jose, Norberto and Jimmy. Unfortunately, there is none in this case, because the alleged partnership was never formally organized.

But at any rate, the Supreme Court noted that based on the functions performed by Elfledo, he is the actual partner.

The following circumstances tend to prove that Elfledo was himself the partner of Jimmy and Norberto:

1.) Cresencia testified that Jose gave ElfledoP50,000.00, as share in the partnership, on a date that coincided with the payment of the initial capital in the partnership;

2.) Elfledo ran the affairs of the partnership, wielding absolute control, power and authority, without any intervention or opposition whatsoever from any of petitioners herein;

3.) all of the properties, particularly the nine trucks of the partnership, were registered in the name of Elfledo;

4.) Jimmy testified that Elfledo did not receive wages or salaries from the partnership, indicating that what he actually received were shares of the profits of the business;and

5.) none of theheirsof Jose, the alleged partner, demanded periodic accounting from Elfledo during his lifetime. As repeatedly stressed in the case ofHeirs of Tan Eng Kee,a demand for periodic accounting is evidence of a partnership.

Furthermore, petitioners failed to adduce any evidence to show that the real and personal properties acquired and registered in the names of Elfledo and Juliet formed part of the estate of Jose, having been derived from Joses alleged partnership with Jimmy and Norberto.

Elfledo was not just a hired help but one of the partners in the trucking business, active and visible in the running of its affairs from day one until this ceased operations upon his demise. The extent of his control, administration and management of the partnership and its business, the fact that its properties were placed in his name, and that he was not paid salary or other compensation by the partners, are indicative of the fact that Elfledo was a partner and a controlling one at that. It is apparent that the other partners only contributed in the initial capital but had no say thereafter on how the business was ran. Evidently it was through Elfredos efforts and hard work that the partnership was able to acquire more trucks and otherwise prosper. Even the appellant participated in the affairs of the partnership by acting as the bookkeeper sans salary.

ARBES v. POLISTICO

G.R. No. 31057 September 7, 1929

FACTS:

This is an action to bring about liquidation of the funds and property of the association called "Turnuhan Polistico & Co." The plaintiffs were members or shareholders, and the defendants were designated as president-treasurer, directors and secretary of said association.

This case is brought for 2nd time. In the 1st one, the court held then that in an action against the officers of a voluntary association to wind up its affairs and enforce an accounting for money and property in their possessions, it is not necessary that all members of the association be made parties to the action. The court appointed commissioner of Insular Auditor's Office, to examine all the books, documents, and accounts of "Turnuhan Polistico & Co.," and to receive whatever evidence. Commissioner's report show a balance of P24, 607.80 cash on hand. Despite defendants objection to the report, the trial court rendered judgment holding said association is unlawful. And sentenced defendants jointly and severally to return the amount and documents to the plaintiffs and members of the association. The Appellant alleged that the association being unlawful, some charitable institution to whom the partnership funds may be ordered to be turned over, should be included, as a party defendant. Referring to Article 1666 of the Civil Code which provides that A partnership must have a lawful object, and must be established for the common benefit of the partners. When the dissolution of an unlawful partnership is decreed, the profits shall be given to charitable institutions of the domicile of the partnership, or, in default of such, to those of the province.ISSUE: Whether or not charitable institution is a necessary party to this case.

HELD: No. No charitable institution is a necessary party in the present case of determination of the rights of the parties. The action which may arise from said article, in the case of unlawful partnership, is that for the recovery of the amounts paid by the member from those in charge of the administration of said partnership, and it is not necessary for the said parties to base their action to the existence of the partnership, but on the fact that of having contributed some money to the partnership capital. And hence, the charitable institution of the domicile of the partnership, and in the default thereof, those of the province are not necessary parties in this case.

The article cited above permits no action for the purpose of obtaining the earnings made by the unlawful partnership, during its existence as result of the business in which it was engaged, because for the purpose, as Manresa remarks, the partner will have to base his action upon the partnership contract, which is to annul and without legal existence by reason of its unlawful object; and it is self-evident that what does not exist cannot be a cause of action. Hence, paragraph 2 of the same article provides that when the dissolution of the unlawful partnership is decreed, the profits cannot inure to the benefit of the partners, but must be given to some charitable institution. The profits are so applied, and not the contributions, because this would be an excessive and unjust sanction for, as we have seen, there is no reason, in such a case, for depriving the partner of the portion of the capital that he contributed, the circumstances of the two cases being entirely different.

Art. 1807. Every partner must account to the partnership for any benefit, and hold as trustee for it any profits derived by him without the consent of the other partners from any transaction connected with the formation, conduct, or liquidation of the partnership or from any use by him of its property.WOODHOUSE v. HALILI

Facts: Defendant Halili informed Woodhouse, plaintiff, of his desire to invest half a million dollars in the bottling and distribution of Mission Soft Drinks. Woodhouse then relayed this message to Mission Dry Corporation of Los Angeles, USA. Mission Dry Corporation then gave plaintiff a thirty day option on exclusive bottling and distribution rights in the Philippines (Exhibit J).

Thereafter, plaintiff and defendant entered into a written agreement with the ff. pertinent provisions: 1) they shall organize a partnership for the bottling and distributing of Mission soft drinks, with plaintiff, Woodhouse, as industrial partner or manager, and defendant, Halili, as capitalist; 2)defendant was to decide matters of general policy regarding the business, while plaintiff was to attend the operation and development of the bottling plant; 3) plaintiff was to secure Mission soft drinks franchise for and in behalf of the proposed partnership; and 4) plaintiff was to receive 30 percent of the net profits of the business. This contract was signed and the parties to this case then went to the United States to finalize the franchising agreement. Mission Dry Corporation then granted the defendant the exclusive right, license, and authority to produce, bottle, distribute and sell Mission beverages in the Philippines.

When both parties went back to the Philippines, the bottling plant began its operation. At first, plaintiff was given advances, on account of the profits, and allowances which however ceased after two months. Moreover, when plaintiff demanded that the partnership papers be executed, defendant refused to do so and instead suggest that they just enter into a settlement. As no settlement was reached, the plaintiff filed a complaint in the CFI.

In the CFI, plaintiff asks for execution of the contract of partnership, accounting of the profits and a share thereof of 30 percent. Defendant on his defense claims that plaintiff misrepresented himself that he was about to become the owner of an exclusive bottling franchise when in fact franchise was exclusively given to defendant, and that the plaintiff failed to contribute to the exclusive franchise of the partnership. CFI ordered defendant to render an accounting of the profits of the business and to pay plaintiff 15 percent thereof. But it held that the execution of the contract could not be enforced and the defense of fraud was not proved. Unsatisfied with this ruling, both parties appealed to the SC.

Issues: a) W/N plaintiff falsely represented that he had an exclusive franchise to bottle Mission beverages. Yes.

b) W/N this false representation amounts to fraud and may annul the agreement to form a partnership

Held: a) As found by the SC, Exhibit J was used by plaintiff as an instrument with which to bargain with the defendant and to close a deal with him, because if plaintiff claimed that all he had was an option to exclusively bottle and distribute Mission soft drinks in the Philippines, he would have probably lost the deal itself. This is further supported by the fact that when defendant learned that plaintiff did not have an exclusive franchise, he reduced plaintiffs participation in the profit to 15 percent, to which the plaintiff agreed.

b) Article 1270 of the Spanish Civil Code distinguished two kinds of fraud, causal fraud, which may be a ground for the annulment of a contract, and the incidental fraud, which only renders the party who employs it liable for damages.

As founded by the SC the misrepresentation of plaintiff does not amount to causal fraud because it was not the principal inducement that led the plaintiff to enter into the partnership agreement. As it was already noted, both parties expressly agreed that they shall form a partnership.

Lastly, the SC upheld the ruling of the trial court that the defendant may not be compelled against his will to carry out the partnership. The law recognizes the individuals freedom or liberty to do an act he has promised to do or not to do it as he pleases.

LITONJUA, JR. v. LITONJUA, SR.

FACTS: Aurelioand Eduardo are brothers. In 1973,Aurelioalleged that Eduardo entered into acontract of partnershipwith him.Aurelioshowed as evidence a letter sent to him by Eduardo that the latter is allowingAurelioto manage their family business (if Eduardos away) and in exchange thereof he will be givingAurelioP1 million or 10% equity, whichever is higher. A memorandum was subsequently made for the said partnership agreement. The memorandum this time stated that in exchange ofAurelio, who just got married, retaining his share in the family business (movie theatres, shipping and land development) and some other immovable properties, he will be given P1 Million or 10% equity in all these businesses and those to be subsequently acquired by them whichever is greater.

In 1992 however, the relationship between the brothers went sour. And soAureliodemanded an accounting and the liquidation of his share in the partnership. Eduardo did not heed and soAureliosued Eduardo.

ISSUE:Whether or not there exists a partnership.

HELD:No. The partnership is void and legally nonexistent. The documentary evidence presented byAurelio, i.e. the letter from Eduardo and the Memorandum, did not prove partnership.

The 1973 letter from Eduardo on its face, contains typewritten entries, personal in tone, but is unsigned and undated. As an unsigned document, there can be no quibbling that said letter does not meet the public instrumentation requirements exacted under Article 1771 (how partnership is constituted) of the Civil Code. Moreover, being unsigned and doubtless referring to a partnership involving more than P3,000.00 in money or property, said lettercannot be presented for notarization, let alone registered with the Securities and Exchange Commission (SEC), as called for under the Article 1772 (capitalization of a partnership) of the Code. And inasmuch as the inventory requirement under the succeeding Article 1773 goes into the matter of validity when immovable property is contributed to the partnership, the next logical point of inquiry turns on the nature of Aurelios contribution, if any, to the supposed partnership.

The Memorandum is also not a proof of the partnership for the same is not a public instrument and again, no inventory was made of the immovable property and no inventory was attached to the Memorandum. Article 1773 of the Civil Code requires that if immovable property is contributed to the partnership an inventory shall be had and attached to the contract.

EVANGELISTA & CO. v. ABAD SANTOS

G.R. No. L-31684; June 28, 1973

FACTS: On October 9, 1954 a co-partnership was formed under the name of "Evangelista & Co." On June 7, 1955 the Articles of Co-partnership were amended so as to include herein respondent, Estrella Abad Santos, as industrial partner, with herein petitioners Domingo C. Evangelista, Jr., Leonarda Atienza Abad Santos and Conchita P. Navarro, the original capitalist partners, remaining in that capacity, with a contribution of P17,500 eachOn December 17, 1963 herein respondent filed suit against the three other partners, alleging that the partnership, which was also made a party-defendant, had been paying dividends to the partners except to her; and that notwithstanding her demands the defendants had refused and continued to refuse to let her examine the partnership books or to give her information regarding the partnership affairs or to pay her any share in the dividends declared by the partnership

The defendants, in their answer, denied ever having declared dividends or distributed profits of the partnership; denied likewise that the plaintiff ever demanded that she be allowed to examine the partnership books; and by way of affirmative defense alleged that the amended Articles of Co-partnership did not express the true agreement of the parties, which was that the plaintiff was not an industrial partner; that she did not in fact contribute industry to the partnership.

ISSUE: Whether Abad Santos is entitled to see the partnership books because she is an industrial partner in the partnership

HELD: Yes, Abad Santos is entitled to see the partnership books.

The Supreme Court ruled that according to

ART. 1299. Any partner shall have the right to a formal account as to partnership affairs:

(1)If he is wrongfully excluded from the partnership business or possession of its property by his co-partners;

(2)If the right exists under the terms of any agreement;

(3)As provided by article 1807;

(4)Whenever other circumstances render it just and reasonable."

In the case at hand, the company is estopped from denying Abad Santos as an industrial partner because it has been 8 years and the company never corrected their agreement in order to show their true intentions. The company never bothered to correct those up until Abad Santos filed a complaint.FUE LEUNG v. INTERMEDIATE APPELLATE COURT

G.R. No. 70926 January 31, 1989

Facts: The petitioner asks for the reversal of the decision of the then Intermediate Appellate Court in AC-G.R. No. CV-00881 which affirmed the decision of the then Court of First Instance of Manila, Branch II in Civil Case No. 116725 declaring private respondent Leung Yiu a partner of petitioner Dan Fue Leung in the business of Sun Wah Panciteria and ordering the petitioner to pay to the private respondent his share in the annual profits of the said restaurant. This case originated from a complaint filed by respondent Leung Yiu with the then Court of First Instance of Manila, Branch II to recover the sum equivalent to twenty-two percent (22%) of the annual profits derived from the operation of Sun Wah Panciteria since October, 1955 from petitioner Dan Fue Leung. The Sun Wah Panciteria, a restaurant, located at Florentino Torres Street, Sta. Cruz, Manila, was established sometime in October, 1955. It was registered as a single proprietorship and its licenses and permits were issued to and in favor of petitioner Dan Fue Leung as the sole proprietor. Respondent Leung Yiu adduced evidence during the trial of the case to show that Sun Wah Panciteria was actually a partnership and that he was one of the partners having contributed P4,000.00 to its initial establishment. Furthermore, the private respondent received from the petitioner the amount of P12,000.00 covered by the latter's Equitable Banking Corporation Check No. 13389470-B from the profits of the operation of the restaurant for the year 1974. The petitioner denied having received from the private respondent the amount of P4,000.00. He contested and impugned the genuineness of the receipt. To bolster his contention that he was the sole owner of the restaurant, the petitioner presented various government licenses and permits showing the Sun Wah Panciteria was and still is a single proprietorship solely owned and operated by himself alone. Both the trial court and the appellate court found that the private respondent is a partner of the petitioner in the setting up and operations of the panciteria. While the dispositive portions merely ordered the payment of the respondents share, there is no question from the factual findings that the respondent invested in the business as a partner. Hence, the two courts declared that the private petitioner is entitled to a share of the annual profits of the restaurant. The petitioner, however, claims that this factual finding is erroneous. The petitioner also claims that it was an error for the Hon. Intermediate Appellate Court to interpret or construe 'financial assistance' to mean the contribution of capital by a partner to a partnership;"

Issue: Whether or not the private respondent is a partner of the petitioner in the establishment of Sun Wah Panciteria YES

Ruling: In essence, the private respondent alleged that when Sun Wah Panciteria was established, he gave P4,000.00 to the petitioner with the understanding that he would be entitled to twenty-two percent (22%) of the annual profit derived from the operation of the said panciteria. These allegations, which were proved, make the private respondent and the petitioner partners in the establishment of Sun Wah Panciteria because Article 1767 of the Civil Code provides that "By the contract of partnership two or more persons bind themselves to contribute money, property or industry to a common fund, with the intention of dividing the profits among themselves".Therefore, the lower courts did not err in construing the complaint as one wherein the private respondent asserted his rights as partner of the petitioner in the establishment of the Sun Wah Panciteria, notwithstanding the use of the term financial assistance therein.

LIM TANHU v. RAMOLETE

G.R. No. L-40098; August 29, 1975

FACTS: Tan alleged that she is the widow of Tee Hoon Lim Po Chuan, who was a partner in the commercial partnership, Glory Commercial Company with Antonio Lim Tanhu and Alfonso Ng Sua". Defendant Antonio Lim Tanhu, Alfonso Leonardo Ng Sua, Lim Teck Chuan, and Eng Chong Leonardo, through fraud and machination, took actual and active management of the partnership and although Tee Hoon Lim Po Chuan was the manager of Glory Commercial Company, defendants managed to use the funds of the partnership to purchase lands and buildings in the cities of Cebu, Lapulapu, Mandaue, and the municipalities of Talisay and Minglanilla.

She alleged in her complaint that after the death of Tee Hoon Lim Po Chuan, the defendants, without liquidation, continued the business of Glory Commercial Company, by purportedly organizing a corporation known as the Glory Commercial Company, Incorporated and sometime in the month of November, 1967, defendants, particularly Antonio Lim Tanhu, by means of fraud deceit, and misrepresentations did then and there, induce and convince her to execute a quitclaim of all her rights and interests, in the assets of the partnership of Glory Commercial Company.

Thereafter, in the year 1968-69, the defendants who had earlier promised to liquidate the aforesaid properties and assets in favor, among others of plaintiff and until the middle of the year 1970 when the plaintiff formally demanded from the defendants the accounting of real and personal properties o