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

EUFEMIA EVANGELISTA, MANUELA EVANGELISTA, and FRANCISCA EVANGELISTA, petitioners,vs.THE COLLECTOR OF INTERNAL REVENUE and THE COURT OF TAX APPEALS, respondents.

Santiago F. Alidio and Angel S. Dakila, Jr., for petitioner.Office of the Solicitor General Ambrosio Padilla, Assistant Solicitor General Esmeraldo Umali and Solicitor Felicisimo R. Rosete for Respondents.

CONCEPCION, J.:

This is a petition filed by Eufemia Evangelista, Manuela Evangelista and Francisca Evangelista, for review of a decision of the Court of Tax Appeals, the dispositive part ofwhich reads:

FOR ALL THE FOREGOING, we hold that the petitioners are liable for the income tax, real estate dealer's tax and the residence tax for the years 1945 to 1949,inclusive, in accordance with the respondent's assessment for the same in the total amount of P6,878.34, which is hereby affirmed and the petition for review filedby petitioner is hereby dismissed with costs against petitioners.

It appears from the stipulation submitted by the parties:

1. That the petitioners borrowed f rom their father the sum of P59,1400.00 which amount together with their personal monies was used by them for the purpose ofbuying real properties,.

2. That on February 2, 1943, they bought from Mrs. Josefina Florentino a lot with an area of 3,713.40 sq. m. including improvements thereon from the sum ofP100,000.00; this property has an assessed value of P57,517.00 as of 1948;

3. That on April 3, 1944 they purchased from Mrs. Josefa Oppus 21 parcels of land with an aggregate area of 3,718.40 sq. m. including improvements thereon forP130,000.00; this property has an assessed value of P82,255.00 as of 1948;

4. That on April 28, 1944 they purchased from the Insular Investments Inc., a lot of 4,353 sq. m. including improvements thereon for P108,825.00. This propertyhas an assessed value of P4,983.00 as of 1948;

5. That on April 28, 1944 they bought form Mrs. Valentina Afable a lot of 8,371 sq. m. including improvements thereon for P237,234.34. This property has anassessed value of P59,140.00 as of 1948;

6. That in a document dated August 16, 1945, they appointed their brother Simeon Evangelista to 'manage their properties with full power to lease; to collect andreceive rents; to issue receipts therefor; in default of such payment, to bring suits against the defaulting tenants; to sign all letters, contracts, etc., for and in theirbehalf, and to endorse and deposit all notes and checks for them;

7. That after having bought the above-mentioned real properties the petitioners had the same rented or leases to various tenants;

8. That from the month of March, 1945 up to an including December, 1945, the total amount collected as rents on their real properties was P9,599.00 while theexpenses amounted to P3,650.00 thereby leaving them a net rental income of P5,948.33;

9. That on 1946, they realized a gross rental income of in the sum of P24,786.30, out of which amount was deducted in the sum of P16,288.27 for expensesthereby leaving them a net rental income of P7,498.13;

10. That in 1948, they realized a gross rental income of P17,453.00 out of the which amount was deducted the sum of P4,837.65 as expenses, thereby leavingthem a net rental income of P12,615.35.

It further appears that on September 24 , 1954 respondent Collector of Internal Revenue demanded the payment of income tax on corporations, real estate dealer' s fixed taxand corporation residence tax for the years 1945-1949, computed, according to assessment made by said officer, as follows:

INCOME TAXES

1945 14.84

1946 1,144.71

1947 10.34

1948 1,912.30

1949 1,575.90

Total including surcharge and compromise P6,157.09

REAL ESTATE DEALER'S FIXED TAX


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1946 P37.50

1947 150.00

1948 150.00

1949 150.00

Total including penalty P527.00

RESIDENCE TAXES OF CORPORATION

1945 P38.75

1946 38.75

1947 38.75

1948 38.75

1949 38.75

Total including surcharge P193.75

TOTAL TAXES DUE P6,878.34.

Said letter of demand and corresponding assessments were delivered to petitioners on December 3, 1954, whereupon they instituted the present case in the Court of TaxAppeals, 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 thepayment of the taxes in question, wi th costs against the respondent.

After appropriate proceedings, the Court of Tax Appeals the above-mentioned decision for the respondent, and a petition for reconsideration and new trial having beensubsequently denied, the case is now before Us for review at the instance of the petitioners.

The issue in this case whether petitioners are subject to the tax on corporations provided for in section 24 of Commonwealth Act. No. 466, otherwise known as the NationalInternal Revenue Code, as well as to the residence tax for corporations and the real estate dealers fixed tax. With respect to the tax on corporations, the issue hinges on themeaning of the terms "corporation" and "partnership," as used in section 24 and 84 of said Code, the pertinent parts of which read:

SEC. 24. Rate of tax on corporations.There shall be levied, assessed, collected, and paid annually upon the total net income received in the preceding taxableyear from all sources by every corporation organized in, or existing under the laws of the Philippines, no matter how created or organized but not including duly

registered general co-partnerships (compaias colectivas), a tax upon such income equal to the sum of the following: . . .

SEC. 84 (b). The term 'corporation' includes partnerships, no matter how created or organized, joint-stock companies, joint accounts (cuentas en participacion),associations or insurance companies, but does not include duly registered general copartnerships. (compaias colectivas).

Article 1767 of the Civil Code of the Philippines provides:

By the contract of partnership two or more persons bind themselves to contribute money, properly, or industry to a common fund, with the intention of dividing theprofits among themselves.

Pursuant to the article, the essential elements of a partnership are two, namely: (a) an agreement to contribute money, property or industry to a common fund; and (b) intent todivide 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, contributemoney and property to a common fund. Hence, the issue narrows down to their intent in acting as they did. Upon consideration of all the facts and circumstances surroundingthe 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:

1. Said common fund was not something they found already in existence. It was not property inherited by them pro indiviso. They created it purposely. What ismore theyjointly borrowed a substantial portion thereof in orderto establish said common fund.

2. They invested the same, not merely not merely in one transaction, but in a seriesof transactions. On February 2, 1943, they bought a lot for P100,000.00. OnApril 3, 1944, they purchased 21 lots for P18,000.00. This was soon followed on April 23, 1944, by the acquisition of another real estate for P108,825.00. Five (5)days later (April 28, 1944), they got a fourth lot for P237,234.14. The number of lots (24) acquired and transactions undertaken, as well as the brief interregnumbetween each, particularly the last three purchases, is strongly indicative of a pattern or common design that was not l imited to the conservation and preservationof the aforementioned common fund or even of the property acquired by the petitioners in February, 1943. In other words, one cannot but perceive a character ofhabitually peculiar to business transactions engaged in the purpose of gain.

3. The aforesaid lots were not devoted to residential purposes, or to other personal uses, of petitioners herein. The properties were leased separately to severalpersons, who, from 1945 to 1948 inclusive, paid the total sum of P70,068.30 by way of rentals. Seemingly, the lots are still being so let, for petitioners do not evensuggest that there has been any change in the utili zation thereof.


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4. Since August, 1945, the properties have been under the management of one person, namely Simeon Evangelista, with full power to lease, to collect rents, toissue receipts, to bring suits, to sign letters and contracts, and to indorse and deposit notes and checks. Thus, the affairs relative to said properties have beenhandled as if the same belonged to a corporation or business and enterprise operated for profit.

5. The foregoing conditions have existed for more than ten (10) years, or, to be exact, over fifteen (15) years, since the first property was acquired, and over twelve(12) years, since Simeon Evangelista became the manager.

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

Although, taken singly, they might not suffice to establish the intent necessary to constitute a partnership, the collective effect of these circumstances is such as to leave noroom for doubt on the existence of said intent in petitioners herein. Only one or two of the aforementioned circumstances were present in the cases cited by petitioners herein,

and, hence, those cases are not in point.

Petitioners insist, however, that they are mere co-owners, not copartners, for, in consequence of the acts performed by them, a legal entity, with a personality independent ofthat of its members, did not come into existence, and some of the characteristics of partnerships are lacking in the case at bar. This pretense was correctly rejected by theCourt of Tax Appeals.

To begin with, the tax in question is one imposed upon "corporations", which, strictly speaking, are distinct and different from "partnerships". When our Internal Revenue Codeincludes "partnerships" among the entities subject to the tax on "corporations", said Code must allude, therefore, to organizations which are not necessarily "partnerships", inthe technical sense of the term. Thus, for instance, section 24 of said Code exempts from the aforementioned tax "duly registered general partnerships which constituteprecisely one of the most typical forms of partnerships in this jurisdiction. Likewise, as defined in section 84(b) of said Code, "the term corporation includes partnerships, nomatter how created or organized." This qualifying expression clearly indicates that a joint venture need not be undertaken in any of the standard forms, or in conformity withthe usual requirements of the law on partnerships, in order that one could be deemed constituted for purposes of the tax on c orporations. Again, pursuant to said section84(b), the term "corporation" includes, among other, joint accounts, (cuentas en participation)" and "associations," none of which has a legal personality of its own,independent of that of its members. Accordingly, the lawmaker could not have regarded that personality as a condition essential to the existence of the partnerships thereinreferred to. In fact, as above stated, "duly registered general copartnerships" which are possessed of the aforementioned personalityhave been expressly excluded bylaw (sections 24 and 84 [b] from the connotation of the term "corporation" It may not be amiss to add that petitioners' allegation to the effect that their liability in connection withthe leasing of the lots above referred to, under the management of one person even if true, on which we express no opinion tends to increasethe similarity between the

nature of their venture and that corporations, and is, therefore, an additional argument in favorof the imposition of said tax on corporations.

Under the Internal Revenue Laws of the United States, "corporations" are taxed differently from "partnerships". By specific provisions of said laws, such "corporations" include"associations, joint-stock companies and insurance companies." However, the term "association" is not used in the aforementioned laws.

. . . in any narrow or technical sense. It includes any organization, created for the transaction of designed affairs, or the attainment of some object, which like acorporation, continues notwithstanding that its members or participants change, and the affairs of which, like corporate affairs, are conducted by a single individuala committee, a board, or some other group, acting in a representative capacity. It is immaterial whether such organization is created by an agreement, adeclaration of trust, a statute, or otherwise. It includes a voluntary association, a joint-stock corporation or company, a 'business' trusts a 'Massachusetts' trust, a'common law' trust, and 'investment' trust (whether of the fixed or the management type), an interinsuarance exchange operating through an attorney in fact, apartnership association, and any other type of organization (by whatever name known) which is not, wi thin the meaning of the Code, a trust or an estate, or apartnership. (7A Mertens Law of Federal Income Taxation, p. 788; emphasis supplied.).

Similarly, the American Law.

. . . provides its own conceptof a partnership, under the term 'partnership 'it includes not only a partnership as known at common law but, as well, a syndicate,

group, pool,joint venture or other unincorporated organizations which carries on any business financial operation, or venture, and which is not, within the meaningof the Code, a trust, estate, or a corporation. . . (7A Merten's Law of Federal Income taxation, p. 789; emphasis supplied.)

The term 'partnership' includes a syndicate, group, pool, joint venture or other unincorporated organization, through or by means of which any business, financialoperation, or venture is carried on , . . .. ( 8 Merten's Law of Federal Income Taxation, p. 562 Note 63; emphasis supplied.) .

For purposes of the tax on corporations, our National Internal Revenue Code, includes these partnershipswith the exception only of duly registered general copartnershipswithin 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 aresubject to the income tax for corporations.

As regards the residence of tax for corporations, section 2 of Commonwealth Act No. 465 provides in part:

Entities liable to residence tax.-Every corporation, no matter how created or organized, whether domestic or resident foreign, engaged in or doing business in thePhilippines shall pay an annual residence tax of five pesos and an annual additional tax which in no case, shall exceed one thousand pesos, in accordance withthe following schedule: . . .

The term 'corporation' as used in this Act includes joint-stock company,partnership, joint account (cuentas en participacion), association or insurance company, nomatter how created or organized. (emphasis supplied.)

Considering that the pertinent part of this provision is analogous to that of section 24 and 84 (b) of our National Internal Revenue Code (commonwealth Act No. 466), and thatthe latter was approved on June 15, 1939, the day immediately after the approval of said Commonwealth Act No. 465 (June 14, 1939), it is apparent that the terms"corporation" and "partnership" are used in both statutes with substantially the same meaning. Consequently, petitioners are subject, also, to the residence tax forcorporations.

Lastly, the records show that petitioners have habitually engaged in leasing the properties above mentioned for a period of over twelve years, and that the yearly gross rentalsof said properties from June 1945 to 1948 ranged from P9,599 to P17,453. Thus, they are subject to the tax provided in section 193 (q) of our National Internal RevenueCode, for "real estate dealers," inasmuch as, pursuant to section 194 (s) thereof:

'Real estate dealer' includes any person engaged in the business of buying, selling, exchanging, leasing, or renting property or his own account as principalandholding himself out as a full or part time dealer in real estate or as an owner of rental property or properties rented or offered to rent for an aggregate amount ofthree thousand pesos or more a year. . . (emphasis supplied.)


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Wherefore, the appealed decision of the Court of Tax appeals is hereby affirmed with costs against the petitioners herein. It is so ordered.

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

BAUTISTA ANGELO, J., concurring:

I agree with the opinion that petitioners have actually contributed money to a common fund with express purpose of engaging in real estate business for profit. The series oftransactions which they had undertaken attest to this. This appears in the following portion of the decision:

2. They invested the same, not merely in one transaction, but in a series of transactions. On February 2, 1943, they bought a lot for P100,000. On April 3, 1944,they purchase 21 lots for P18,000. This was soon followed on April 23, 1944, by the acquisition of another real state for P108,825. Five (5) days later (April 28,1944), they got a fourth lot for P237,234.14. The number of lots (24) acquired and transactions undertaken, as well as the brief interregnum between each,particularly the last three purchases, is strongly indicative of a pattern or common design that was not limited to the conservation and preservation of theaforementioned common fund or even of the property acquired by the petitioner in February, 1943, In other words, we cannot but perceive a characterof habituallypeculiar to businesstransactions engaged in for purposes of gain.

I wish however to make to make the following observation:

Article 1769 of the new Civil Code lays down the rule for determining when a transaction should be deemed a partnership or a co-ownership. Said article paragraphs 2 and 3,provides:

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

(3) The sharing of gross returns does not of itself establish partnership, whether or not the person sharing them have a joint or common right or interest in anyproperty from which the returns are derived;

From the above it appears that the fact that those who agree to form a co-ownership shared or do not share any profits made by the use of property held in common does notconvert their venture into a partnership. Or the sharing of the gross returns does not of itself establish a partnership whether or not the persons sharing therein have a joint orcommon right or interest in the property. This only means that, aside from the circumstance of profit, the presence of other elements constituting partnership is necessary,such as the clear intent to form a partnership, the existence of a judicial personality different from that of the individual partners, and the freedom to transfer or assign anyinterest in the property by one with the consent of the others (Padilla, Civil Code of the Philippines Annotated, Vol. I, 1953 ed., pp. 635- 636).

It is evident that an isolated transaction whereby two or more persons contribute funds to buy certain real estate for profit in the absence of other circumstances showing acontrary intention cannot be considered a partnership.

Persons who contribute property or funds for a common enterprise and agree to share the gross returns of that enterprise in p roportion to their contribution, butwho severally retain the title to their respective contribution, are not thereby rendered partners. They have no common stock or capital, and no community ofinterest as principal proprietors in the business itself which the proceeds derived. (Elements of the law of Partnership by Floyd R. Mechem, 2n Ed., section 83, p.74.)

A joint venture purchase of land, by two, does not constitute a copartnership in respect thereto; nor does not agreement to share the profits and loses on the saleof land create a partnership; the parties are only tenants in common. (Clark vs. Sideway, 142 U.S. 682, 12 S Ct. 327, 35 L. Ed., 1157.)

Where plaintiff, his brother, and another agreed to become owners of a single tract of reality, holding as tenants in common, and to divide the profits of disposing oit, the brother and the other not being entitled to share in plaintiff's commissions, no partnership existed as between the parties, whatever relation may have beenas to third parties. (Magee vs. Magee, 123 N. E. 6763, 233 Mass. 341.)

In order to constitute a partnership inter sesethere must be: (a) An intent to form the same; (b) generally a participating in both profits and losses; (c) and such acommunity of interest, as far as third persons are concerned as enables each party to make contract, manage the business, and dispose of the whole property.(Municipal Paving Co. vs Herring, 150 P. 1067, 50 Ill. 470.)

The common ownership of property does not itself create a partnership between the owners, though they may use it for purpose of making gains; and they may,without becoming partners, agree among themselves as to the management and use of such property and the application of the proceeds therefrom. (Spurlock vs.Wilson, 142 S. W. 363, 160 No. App. 14.)

This is impliedly recognized in the following portion of the decision: "Although, taken singly, they might not suffice to establish the intent necessary to constitute a partnership,the collective effect of these circumstances (referring to the series of transactions) such as to leave no room for doubt on the existence of said intent in petitioners herein."

G.R. No. 78133 October 18, 1988

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

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

The Solicitor General for respondents


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GANCAYCO, J. :

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

On June 22, 1965, petitioners bought two (2) parcels of land from Santiago Bernardino, et al. and on May 28, 1966, they bought another three (3) parcels of land from JuanRoque. The first two parcels of land were sold by petitioners in 1968 toMarenir Development Corporation, while the three parcels of land were sold by petitioners to ErlindaReyes 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 ofP60,000.00 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 saidyears.

However, in a letter dated March 31, 1979 of then Acting BIR Commissioner Efren I. Plana, petitioners were assessed and required to pay a total amount of P107,101.70 asalleged deficiency corporate income taxes for the years 1968 and 1970.

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

In a reply of August 22, 1979, respondent Commissioner informed petitioners that in the years 1968 and 1970, petitioners as co -owners in the real estate transactions formedan unregistered partnership or joint venture taxable as a corporation under Section 20(b) and its income was subject to the taxes prescribed under Section 24, both of theNational Internal Revenue Code 1that the unregistered partnership was subject to corporate income tax as distinguished from profits derived from the partnership by themwhich is subject to individual income tax; and that the availment of tax amnesty under P.D. No. 23, as amended, by petitioners relieved petitioners of their individual incometax liabilities but did not relieve them from the tax liability of the unregistered partnership. Hence, the petitioners were required to pay the deficiency income tax assessed.

Petitioners filed a petition for review with the respondent Court of Tax Appeals docketed as CTA Case No. 3045. In due course, the respondent court by a majority decision ofMarch 30, 1987, 2affirmed the decision and action taken by respondent commissioner with costs against petitioners.

It ruled that on the basis of the principle enunciated in Evangelista3an unregistered partnership was in fact formed by petitioners which like a corporation was subject to

corporate income tax distinct from that imposed on the partners.

In a separate dissenting opinion, Associate Judge Constante Roaquin stated that considering the circumstances of this case, although there might in fact be a co-ownershipbetween the petitioners, there was no adequate basis for the conclusion that they thereby formed an unregistered partnership which made "hem liable for corporate incometax under the Tax Code.

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

A. IN HOLDING AS PRESUMPTIVELY CORRECT THE DETERMINATION OF THE RESPONDENT COMMISSIONER, TO THE EFFECT THATPETITIONERS FORMED AN UNREGISTERED PARTNERSHIP SUBJECT TO CORPORATE INCOME TAX, AND THAT THE BURDEN OFOFFERING EVIDENCE IN OPPOSITION THERETO RESTS UPON THE PETITIONERS.

B. IN MAKING A FINDING, SOLELY ON THE BASIS OF ISOLATED SALE TRANSACTIONS, THAT AN UNREGISTERED PARTNERSHIP EXISTEDTHUS IGNORING THE REQUIREMENTS LAID DOWN BY LAW THAT WOULD WARRANT THE PRESUMPTION/CONCLUSION THAT APARTNERSHIP EXISTS.

C. IN FINDING THAT THE INSTANT CASE IS SIMILAR TO THE EVANGELISTA CASE AND THEREFORE SHOULD BE DECIDED ALONGSIDETHE EVANGELISTA CASE.

D. IN RULING THAT THE TAX AMNESTY DID NOT RELIEVE THE PETITIONERS FROM PAYMENT OF OTHER TAXES FOR THE PERIODCOVERED 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 this Court in Evangelista. 4

In the said case, petitioners borrowed a sum of money from their father which together with their own personal funds they used in buying several real properties. Theyappointed their brother to manage their properties with full power to lease, collect, rent, issue receipts, etc. They had the real properties rented or leased to various tenants forseveral years and they gained net profits from the rental income. Thus, the Collector of Internal Revenue 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 the tax on corporations provided for in section 24 of Commonwealth Act No. 466, otherwiseknown as the National Internal Revenue Code, as well as to the residence tax for corporations and the real estate dealers' fi xed tax. With respect to thetax on corporations, the issue hinges on the meaning of the terms corporation and partnership as used in sections 24 and 84 of said Code, thepertinent parts of which read:

Sec. 24. Rate of the tax on corporations.There shall be levied, assessed, collected, and paid annually upon the total net income received in thepreceding taxable year from all sources by every corporation organized in, or existing under the laws of the Philippines, no matter how created ororganized but not including duly registered general co-partnerships (companies collectives), a tax upon such income equal to the sum of the following:...

Sec. 84(b). The term "corporation" includes partnerships, no matter how created or organized, joint-stock companies, joint accounts (cuentas enparticipation), associations or insurance companies, but does not include duly registered general co-partnerships (companies colectivas).


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Persons who contribute property or funds for a common enterprise and agree to share the gross returns of that enterprise in proportion to theircontribution, but who severally retain the title to their respective contribution, are not thereby rendered partners. They have no common stock or capitaland no community of interest as principal proprietors in the business itself which the proceeds derived. (Elements of the Law of Partnership by Flord D.Mechem 2nd Ed., section 83, p. 74.)

A joint purchase of land, by two, does not constitute a co-partnership in respect thereto; nor does an agreement to share the profits and losses on thesale of land create a partnership; the parties are only tenants in common. (Clark vs. Sideway, 142 U.S. 682,12 Ct. 327, 35 L. Ed., 1157.)

Where plaintiff, his brother, and another agreed to become owners of a single tract of realty, holding as tenants in common, and to divide the profits ofdisposing of it, the brother and the other not being entitled to share in plaintiffs commission, no partnership existed as between the three parties,whatever their relation may have been as to thi rd parties. (Magee vs. Magee 123 N.E. 673, 233 Mass. 341.)

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) andsuch a community of interest, as far as third persons are concerned as enables each party to make contract, manage the business, and dispose of thewhole property.-Municipal Paving Co. vs. Herring 150 P. 1067, 50 III 470.)

The common ownership of property does not itself create a partnership between the owners, though they may use it for the purpose of making gains;and they may, without becoming partners, agree among themselves as to the management, and use of such property and the application of theproceeds therefrom. (Spurlock vs. Wilson, 142 S.W. 363,160 No. App. 14.) 6

The sharing of returns does not in itself establish a partnership whether or not the persons sharing therein have a joint or common right or interest in the property. There mustbe a clear intent to form a partnership, the existence of a juridical personality different from the individual partners, and the freedom of each party to transfer or assign thewhole property.

In the present case, there is clear evidence of co-ownership between the petitioners. There is no adequate basis to support the proposition that they thereby formed anunregistered partnership. The two isolated transactions whereby they purchased properties and sold the same a few years thereafter did not thereby make them partners.They shared in the gross profits as co- owners and paid their capital gains taxes on their net profits and availed of the tax amnesty thereby. Under the circumstances, theycannot be considered to have formed an unregistered partnership which is thereby liable for corporate income tax, as the respondent commissioner proposes.

And even assuming for the sake of argument that such unregistered partnership appears to have been formed, since there is no such existing unregistered partnership with adistinct personality nor with assets that can be held liable for said deficiency corporate income tax, then petitioners can be held individually liable as partners for this unpaidobligation of the partnership p. 7However, as petitioners have availed of the benefits of tax amnesty as individual taxpayers in these transactions, they are thereby relieved ofany further tax liability arising therefrom.

WHEREFROM, the petition is hereby GRANTED and the decision of the respondent Court of Tax Appeals of March 30, 1987 is hereby REVERSED and SET ASIDE andanother decision is hereby rendered relieving petitioners of the corporate income tax liability in this case, without pronouncement as to costs.

SO ORDERED.

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

Narvasa, J., took no part.

G.R. No. 136448 November 3, 1999

LIM TONG LIM, petitioner,vs.PHILIPPINE FISHING GEAR INDUSTRIES, INC., respondent.

PANGANIBAN, J. :

A partnership may be deemed to exist among parties who agree to borrow money to pursue a business and to divide the profits or losses that may arise therefrom, even if it isshown that they have not contributed any capital of their own to a "common fund." Their contribution may be in the form of credit or industry, not necessarily cash or fixedassets. Being partner, they are all liable for debts incurred by or on behalf of the partnership. The liability for a contract entered into on behalf of an unincorporated associationor ostensible corporation may lie in a person who may not have directly transacted on its behalf, but reaped benefits from that contract.

The Case

In the Petition for Review on Certioraribefore us, Lim Tong Lim assails the November 26, 1998 Decision of the Court of Appeals in CA-GR CV41477, 1which disposed as follows:

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

The decretal portion of the Quezon City Regional Trial Court (RTC) ruling, which was affirmed by the CA, reads as follows:

WHEREFORE, the Court rules:


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1. That plaintiff is entitled to the writ of preliminary attachment issued by this Court on September 20, 1990;

2. That defendants are jointly liable to plaintiff for the following amounts, subject to the modifications as hereinafter made by reason of the special andunique facts and circumstances and the proceedings that transpired during the t rial of this case;

a. P532,045.00 representing [the] unpaid purchase price of the fishing nets covered by the Agreement plus P68,000.00representing the unpaid price of the floats not covered by said Agreement;

b. 12% interestper annum counted from date of plaintiff's invoices and computed on their respective amounts as follows:

i. Accrued interest of P73,221.00 on Invoice No. 14407 for P385,377.80 dated February 9, 1990;

ii. Accrued interest for P27,904.02 on Invoice No. 14413 for P146,868.00 dated February 13, 1990;

iii. Accrued interest of P12,920.00 on Invoice No. 14426 for P68,000.00 dated February 19, 1990;

c. P50,000.00 as and for attorney's fees, plus P8,500.00 representing P500.00 per appearance in court;

d. P65,000.00 representing P5,000.00 monthly rental for storage charges on the nets counted from September 20, 1990 (dateof attachment) to September 12, 1991 (date of auction sale);

e. Cost of suit.

With respect to the joint liability of defendants for the principal obligation or for the unpaid price of nets and floats in the amount ofP532,045.00 and P68,000.00, respectively, or for the total amount P600,045.00, this Court noted that these i tems were attached toguarantee any judgment that may be rendered in favor of the plaintiff but, upon agreement of the parties, and, to avoid further deteriorationof the nets during the pendency of this case, it was ordered sold at public auction for not less than P900,000.00 for which the plaintiff wasthe sole and winning bidder. The proceeds of the sale paid for by plaintiff was deposited in court. In effect, the amount of P900,000.00replaced the attached property as a guaranty for any judgment that plaintiff may be able to secure in this case with the ownership andpossession of the nets and floats awarded and delivered by the sheriff to plaintiff as the highest bidder in the public auction sale. It has alsobeen noted that ownership of the nets [was] retained by the plaintiff until full payment [was] made as stipulated in the invoices; hence, ineffect, the plaintiff attached its own properties. It [was] for this reason also that this Court earlier ordered the attachment bond filed byplaintiff to guaranty damages to defendants to be cancelled and for the P900,000.00 cash bidded and paid for by plaintiff to serve as itsbond in favor of defendants.

From the foregoing, it would appear therefore that whatever judgment the plaintiff may be entitled to in this case will have to be satisfiedfrom the amount of P900,000.00 as this amount replaced the attached nets and floats. Considering, however, that the total judgmentobligation as computed above would amount to only P840,216.92, it would be inequitable, unfair and unjust to award the excess to thedefendants who are not entitled to damages and who did not put up a single centavo to raise the amount of P900,000.00 aside from thefact that they are not the owners of the nets and floats. For this reason, the defendants are hereby relieved from any and all liabilitiesarising from the monetary judgment obligation enumerated above and for plaintiff to retain possession and ownership of the nets and floatsand for the reimbursement of the P900,000.00 deposited by it with the Clerk of Court.

SO ORDERED.3

The Facts

On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter Yao entered into a Contract dated February 7, 1990, for the purchase of fishing nets of varioussizes from the Philippine Fishing Gear Industries, Inc. (herein respondent). They claimed that they were engaged in a business venture with Petitioner Lim Tong Lim, whohowever was not a signatory to the agreement. The total price of the nets amounted to P532,045. Four hundred pieces of floats worth P68,000 were also sold to theCorporation. 4

The buyers, however, failed to pay for the fishing nets and the floats; hence, private respondents filed a collection suit against Chua, Yao and Petitioner Lim Tong Lim with aprayer for a writ of preliminary attachment. The suit was brought against the three in their capacities as general partners, on the allegation that "Ocean Quest FishingCorporation" was a nonexistent corporation as shown by a Certification from the Securities and Exchange Commission. 5On September 20, 1990, the lower court issued aWrit of Preliminary Attachment, which the sheriff enforced by attaching the fishing nets on board F/B Lourdes which was then docked at the Fisheries Port, Navotas, MetroManila.

Instead of answering the Complaint, Chua filed a Manifestation admitting his liability and requesting a reasonable time within which to pay. He also turned over to respondent

some of the nets which were in his possession. Peter Yao filed an Answer, after which he was deemed to have waived his right to cross-examine witnesses and to presentevidence on his behalf, because of his failure to appear in subsequent hearings. Lim Tong Lim, on the other hand, filed an Answer with Counterclaim and Crossclaim andmoved for the lifting of the Writ of Attachment. 6The trial court maintained the Writ, and upon motion of private respondent, ordered the sale of the fishing nets at a publicauction. Philippine Fishing Gear Industries won the bidding and deposited with the said court the sales proceeds of P900,000.

7

On November 18, 1992, the trial court rendered its Decision, ruling that Philippine Fishing Gear Industries was entitled to the Writ of Attachment and that Chua, Yao and Lim,as general partners, were jointly liable to pay respondent.

8

The trial court ruled that a partnership among Lim, Chua and Yao existed based (1) on the testimonies of the witnesses presented and (2) on a Compromise Agreementexecuted by the three 9in Civil Case No. 1492-MN which Chua and Yao had brought against Lim in the RTC of Malabon, Branch 72, for (a) a declaration of nullity ofcommercial documents; (b) a reformation of contracts; (c) a declaration of ownership of fishing boats; (d) an injunction and (e) damages.

10The Compromise Agreement

provided:

a) That the parties plaintiffs & Lim Tong Lim agree to have the four (4) vessels sold in the amount of P5,750,000.00 includingthe fishing net. This P5 ,750,000.00 shall be applied as full payment for P3,250,000.00 in favor of JL Holdings Corporationand/or Lim Tong Lim;


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b) If the four (4) vessel[s] and the fishing net will be sold at a higher price than P5,750,000.00 whatever will be the excess willbe divided into 3: 1/3 Lim Tong Lim; 1/3 Antonio Chua; 1/3 Peter Yao;

c) If the proceeds of the sale the vessels will be less than P5,750,000.00 whatever the deficiency shall be shouldered and pa idto JL Holding Corporation by 1/3 Lim Tong Lim; 1/3 Antonio Chua; 1/3 Peter Yao. 11

The trial court noted that the Compromise Agreement was silent as to the nature of their obligations, but that joint liability could be presumed from the equal distribution of theprofit and loss. 21

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

Ruling of the Court of Appeals

In affirming the trial court, the CA held that petitioner was a partner of Chua and Yao in a fishing business and may thus be held liable as a such for the fishing nets and floatspurchased by and for the use of the partnership. The appellate court ruled:

The evidence establishes that all the defendants including herein appellant Lim Tong Lim undertook a partnership for a specific undertaking, that is forcommercial fishing . . . . Oviously, the ultimate undertaking of the defendants was to divide the profits among themselves which is what a partnershipessentially is . . . . By a contract of partnership, two or more persons bind themselves to contribute money, property or industry to a common fund withthe intention of dividing the profits among themselves (Article 1767, New Civil Code). 13

Hence, petitioner brought this recourse before this Court. 14

The Issues

In his Petition and Memorandum, Lim asks this Court to reverse the assailed Decision on the following grounds:

I THE COURT OF APPEALS ERRED IN HOLDING, BASED ON A COMPROMISE AGREEMENT THAT CHUA, YAO AND PETITIONER LIMENTERED INTO IN A SEPARATE CASE, THAT A PARTNERSHIP AGREEMENT EXISTED AMONG THEM.

II SINCE IT WAS ONLY CHUA WHO REPRESENTED THAT HE WAS ACTING FOR OCEAN QUEST FISHING CORPORATION WHEN HEBOUGHT THE NETS FROM PHILIPPINE FISHING, THE COURT OF APPEALS WAS UNJUSTIFIED IN IMPUTING LIABILITY TO PETITIONER LIMAS WELL.

III THE TRIAL COURT IMPROPERLY ORDERED THE SEIZURE AND ATTACHMENT OF PETITIONER LIM'S GOODS.

In determining whether petitioner may be held liable for the fishing nets and floats from respondent, the Court must resolve this key issue: whether by their acts, Lim, Chuaand Yao could be deemed to have entered into a partnership.

This Court's Ruling

The Petition is devoid of merit.

First and Second Issues:

Existence of a Partnership

and Petitioner's Liability

In arguing that he should not be held l iable for the equipment purchased from respondent, petitioner controverts the CA finding that a partnership existed between him, PeterYao and Antonio Chua. He asserts that the CA based its finding on the Compromise Agreement alone. Furthermore, he disclaims any direct participation in the purchase ofthe nets, alleging that the negotiations were conducted by Chua and Yao only, and that he has not even met the representatives of the respondent company. Petitioner furtherargues that he was a lessor, not a partner, of Chua and Yao, for the "Contract of Lease " dated February 1, 1990, showed that he had merely leased to the two the main assetof the purported partnership the fishing boat F/B Lourdes. The lease was for six months, with a monthly rental of P37,500 plus 25 percent of the gross catch of the boat.

We are not persuaded by the arguments of petitioner. The facts as found by the two lower courts clearly showed that there existed a partnership among Chua, Yao and him,

pursuant to Article 1767 of the Civil Code which provides:

Art. 1767By the contract of partnership, two or more persons bind themselves to contribute money, property, or industry to a common fund, with theintention of dividing the profits among themselves.

Specifically, both lower courts ruled that a partnership among the three existed based on the following factual findings: 15

(1) That Petitioner Lim Tong Lim requested Peter Yao who was engaged in commercial fishing to join him, while Antonio Chua was already Yao'spartner;

(2) That after convening for a few times, Lim, Chua, and Yao verbally agreed to acquire two fishing boats, the FB Lourdesand theFB Nelsonfor thesum of P3.35 million;

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


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(4) That they bought the boats from CMF Fishing Corporation, which executed a Deed of Sale over these two (2) boats in favor of Petitioner Lim TongLim only to serve as security for the loan extended by Jesus Lim;

(5) That Lim, Chua and Yao agreed that the refurbishing, re-equipping, repairing, dry docking and other expenses for the boats would be shouldered byChua and Yao;

(6) That because of the "unavailability o f funds," Jesus Lim again extended a loan to the partnership in the amount of P1 million secured by a check,because of which, Yao and Chua entrusted the ownership papers of two other boats, Chua's FB Lady Anne Meland Yao's FBTracy to Lim Tong Lim.

(7) That in pursuance of the business agreement, Peter Yao and Antonio Chua bought nets from Respondent Philippine Fishing Gear, in behalf of"Ocean Quest Fishing Corporation," their purported business name.

(8) That subsequently, Civil Case No. 1492-MN was filed in the Malabon RTC, Branch 72 by Antonio Chua and Peter Yao against Lim Tong Lim for (a)declaration of nullity of commercial documents; (b) reformation of contracts; (c) declaration of ownership of fishing boats; (4) injunction; and (e)damages.

(9) That the case was amicably settled through a Compromise Agreement executed between the parties-li tigants the terms of which are alreadyenumerated above.

From the factual findings of both lower courts, it is clear that Chua, Yao and Lim had decided to engage in a fishing business, which they started by buying boats worth P3.35million, financed by a loan secured from Jesus Lim who was petitioner's brother. In their Compromise Agreement, they subsequently revealed their intention to pay the loanwith 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 withborrowed 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 orindustry. 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 formeda partnership.

Moreover, it is clear that the partnership extended not only to the purchase of the boat, but also to that of the nets and the floats. The fishing nets and the floats, both essentiato fishing, were obviously acquired in fu rtherance of their business. It would have been inconceivable for Lim to involve himself so much in buying the boat but not in the

acquisition of the aforesaid equipment, without which the business could not have proceeded.

Given the preceding facts, it is clear that there was, among petitioner, Chua and Yao, a partnership engaged in the fishing business. They purchased the boats, whichconstituted the main assets of the partnership, and they agreed that the proceeds from the sales and operations thereof would be divided among them.

We stress that under Rule 45, a petition for review like the present case should involve only questions of law. Thus, the foregoing factual findings of the RTC and the CA arebinding on this Court, absent any cogent proof that the present action is embraced by one of the exceptions to the rule. 16In assailing the factual findings of the two lowercourts, petitioner effectively goes beyond the bounds of a petition for review under Rule 45.

Compromise Agreement

Not the Sole Basis of Partnership

Petitioner argues that the appellate court's sole basis for assuming the existence of a partnership was the Compromise Agreement. He also claims that the settlement wasentered into only to end the dispute among them, but not to adjudicate their preexisting rights and obligations. His arguments are baseless. The Agreement was but an

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

A proper adjudication of claimants' rights mandates that courts must review and thoroughly appraise all relevant facts. Both lower courts have done so and have found,correctly, a preexisting partnership among the parties. In implying that the lower courts have decided on the basis of one piece of document alone, petitioner fails to appreciatethat the CA and the RTC delved into the history of the document and explored all the possible consequential combinations in harmony with law, logic and fairness. Verily, thetwo lower courts' factual findings mentioned above nullified petitioner's argument that the existence of a partnership was based only on the Compromise Agreement.

Petitioner Was a Partner,

Not a Lessor

We are not convinced by petitioner's argument that he was merely the lessor of the boats to Chua and Yao, not a partner in the fishing venture. His argument allegedly findssupport in the Contract of Lease and the registration papers showing that he was the owner of the boats, including F/B Lourdeswhere the nets were found.

His allegation defies logic. In effect, he would like this Court to believe that he consented to the sale of his own boats to pay a debt of Chua and Yao, with the excess of the

proceeds to be divided among the three of them. No lessor would do what petitioner did. Indeed, his consent to the sale proved that there was a preexisting partnershipamong all three.

Verily, as found by the lower courts, petitioner entered into a business agreement with Chua and Yao, in which debts were undertaken in order to finance the acquisition andthe upgrading of the vessels which would be used in their fishing business. The sale of the boats, as well as the division among the three of the balance remaining after thepayment of their loans, proves beyond cavil that F/B Lourdes, though registered in his name, was not his own property but an asset of the partnership. It is not uncommon toregister the properties acquired from a loan in the name of the person the lender trusts, who in this case is the petitioner himself. After all, he is the brother of the creditor,Jesus Lim.

We stress that it is unreasonableindeed, it is absurdfor petitioner to sell his property to pay a debt he did not incur, if the relationship among the three of them wasmerely that of lessor-lessee, instead of partners.

Corporation by Estoppel

Petitioner argues that under the doctrine of corporation by estoppel, liability can be imputed only to Chua and Yao, and not to him. Again, we disagree.


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Sec. 21 of the Corporation Code of the Philippines provides:

Sec. 21. Corporation by estoppel.All persons who assume to act as a corporation knowing it to be without authority to do so shall be liable asgeneral partners for all debts, liabilities and damages incurred or arising as a result thereof: Provided however,That when any such ostensiblecorporation is sued on any transaction entered by it as a corporation or on any tort committed by it as such, i t shall not be allowed to use as a defenseits lack of corporate personality.

One who assumes an obligation to an ostensible corporation as such, cannot resist performance thereof on the ground that there was in fact nocorporation.

Thus, even if the ostensible corporate entity is proven to be legally nonexistent, a party may be estopped from denying its corporate existence. "The reason behind thisdoctrine is obviousan unincorporated association has no personality and would be incompetent to act and appropriate for itself the power and attributes of a corporation as

provided by law; it cannot create agents or confer authority on another to act in its behalf; thus, those who act or purport to act as its representatives or agents do so withoutauthority and at their own risk. And as it is an elementary principle of law that a person who acts as an agent without authority or without a principal is himself regarded as theprincipal, possessed of all the right and subject to all the liabilities of a principal, a person acting or purporting to act on behalf of a corporation which has no valid existenceassumes such privileges and obligations and becomes personally liable for contracts entered into or for other acts performed as such agent. 17

The doctrine of corporation by estoppel may apply to the alleged corporation and to a third party. In the first instance, an unincorporated association, which represented itselfto be a corporation, will be estopped from denying its corporate capacity in a suit against it by a third person who relied in good faith on such representation. It cannot allegelack of personality to be sued to evade its responsibility for a contract it entered into and by virtue of which it received advantages and benefits.

On the other hand, a third party who, knowing an association to be unincorporated, nonetheless treated it as a corporation and received benefits from it, may be barred fromdenying its corporate existence in a suit brought against the alleged corporation. In such case, all those who benefited from the transaction made by the ostensiblecorporation, despite knowledge of its legal defects, may be held liable for contracts they impliedly assented to or took advantage of.

There is no dispute that the respondent, Philippine Fishing Gear Industries, is entitled to be paid for the nets it sold. The only question here is whether petitioner should beheld jointly 18liable with Chua and Yao. Petitioner contests such liability, insisting that only those who dealt in the name of the ostensible corporation should be held liable.Since his name does not appear on any of the contracts and since he never directly t ransacted with the respondent corporation, ergo, he cannot be held liable.

Unquestionably, petitioner benefited from the use of the nets found inside F/B Lourdes, the boat which has earlier been proven to be an asset of the partnership. He in factquestions the attachment of the nets, because the Writ has effectively stopped his use of the fishing vessel.

It is difficult to disagree with the RTC and the CA that Lim, Chua and Yao decided to form a corporation. Although it was never legally formed for unknown reasons, this factalone 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 andthose benefited by it, knowing it to be without valid existence, are held liable as general partners.

Technically, it is true that petitioner did not directly act on behalf of the corporation. However, having reaped the benefits of the contract entered into by persons with whom hepreviously had an existing relationship, he is deemed to be part of said association and is covered by the scope of the doctrine of corporation by estoppel. We reiterate theruling of the Court inAlonso v. Villamor:

19

A litigation is not a game of technicalities in which one, more deeply schooled and skilled in the subtle art of movement and position, entraps anddestroys the other. It is, rather, a contest in which each contending party fully and fairly lays before the court the facts in issue and then, brushing asideas wholly trivial and indecisive all imperfections of form and technicalities of procedure, asks that justice be done upon the merits. Lawsuits, unlikeduels, are not to be won by a rapier's thrust. Technicality, when it deserts its proper office as an aid to justice and becomes its great hindrance andchief enemy, deserves scant consideration from courts. There should be no vested rights in technicalities.

Third Issue:

Validity of Attachment

Finally, petitioner claims that the Writ of Attachment was improperly issued against the nets. We agree with the Court of Appeals that this issue is now moot and academic. Aspreviously discussed, F/B Lourdeswas an asset of the partnership and that it was placed in the name of petitioner, only to assure payment of the debt he and his partnersowed. The nets and the floats were specifically manufactured and tailor-made according to their own design, and were bought and used in the fishing venture they agreedupon. Hence, the issuance of the Writ to assure the payment of the price stipulated in the invoices is proper. Besides, by specific agreement, ownership of the nets remainedwith Respondent Philippine Fishing Gear, until full payment thereof.

WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioner.

SO ORDERED.

Melo, Purisima and Gonzaga-Reyes, JJ., concur.

Vitug, J., pls. see concurring opinion.

Separate Opinions

VITUG, J., concurring opinion;

I share the views expressed in the ponencia of an esteemed colleague, Mr. Justice Artemio V. Panganiban, particularly the finding that Antonio Chua, Peter Yao and petitioneLim Tong Lim have incurred the liabilities of general partners. I merely would wish to elucidate a bit, albeit briefly, the liability of partners in a general partnership.

When a person by his act or deed represents himself as a partner in an existing partnership or with one or more persons not actual partners, he is deemed an agent of suchpersons consenting to such representation and in the same manner, if he were a partner, with respect to persons who rely upon the representation. 1The association formed


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by Chua, Yao and Lim, should be, as it has been deemed, a de factopartnership with all the consequent obligations for the purpose of enforcing the rights of third persons.The liability of general partners (in a general partnership as so opposed to a limited partnership) is laid down in Article 1816 2which posits that all partners shall be liableprorata beyond the partnership assets for all the contracts which may have been entered into in its name, under its signature, and by a person authorized to act for thepartnership. This rule is to be construed along with other provisions of the Civil Code which postulate that the partners can be held solidarilyliable with the partnershipspecifically in these instances (1) where, by any wrongful act or omission of any partner acting in the ordinary course of the business of the partnership or with the authorityof his co-partners, loss or injury is caused to any person, not being a partner in the partnership, or any penalty is incurred, the partnership is liable therefor to the same extentas the partner so acting or omitting to act; (2) where one partner acting within the scope of his apparent authority receives money or property of a third person and misappliesit; and (3) where the partnership in the course of its business receives money or property of a third person and the money or property so received is misapplied by any partnerwhile it is in the custody of the partnership

3consistently with the rules on the nature of civil liability in delicts and quasi-delicts.

G.R. No. L-41182-3 April 16, 1988

DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-appellants,vs.THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO S.CANILAO, and SEGUNDINA NOGUERA, respondents-appellees.

SARMIENTO , J. :

The petitioners invoke the provisions on human relations of the Civil Code in this appeal by certiorari. The facts are beyond dispute:

xxx xxx xxx

On the strength of a contract (Exhibit A for the appellant Exhibit 2 for the appellees) entered into on Oct. 19, 1960 by and between Mrs. SegundinaNoguera, party of the first part; the Tourist World Service, Inc., represented by Mr. Eliseo Canilao as party of the second part, and hereinafter referredto as appellants, the Tourist World Service, Inc. leased the premises belonging to the party of the first part at Mabini St., Manila for the former-s use asa branch office. In the said contract the party of the third part held herself solidarily liable with the party of the part for the prompt payment of themonthly rental agreed on. When the branch office was opened, the same was run by the herein appellant Una 0. Sevilla payable to Tourist WorldService Inc. by any airline for any fare brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla and 3% was to be withheld by theTourist World Service, Inc.

On or about November 24, 1961 (Exhibit 16) the Tourist World Service, Inc. appears to have been informed that Lina Sevilla was connected with a rivafirm, the Philippine Travel Bureau, and, since the branch office was anyhow losing, the Tourist World Service considered closing down its office. Thiswas firmed up by two resolutions of the board of directors of Tourist World Service, Inc. dated Dec. 2, 1961 (Exhibits 12 and 13), the first abolishing theoffice of the manager and vice-president of the Tourist World Service, Inc., Ermita Branch, and the second,authorizing the corporate secretary toreceive the properties of the Tourist World Service then located at the said branch office. It further appears that on Jan. 3, 1962, the contract with theappellees for the use of the Branch Of fice premises was terminated and while the effectivity thereof was Jan. 31, 1962, the appellees no longer used it.As a matter of fact appellants used it since Nov. 1961. Because of this, and to comply with the mandate of the Tourist World Service, the corporatesecretary Gabino Canilao went over to the branch office, and, finding the premises locked, and, being unable to contact Lina Sevilla, he padlocked thepremises on June 4, 1962 to protect the interests of the Tourist World Service. When neither the appellant Lina Sevilla nor any of her employees couldenter the locked premises, a complaint wall filed by the herein appellants against the appellees with a prayer for the issuance of mandatory preliminaryinjunction. Both appellees answered with counterclaims. For apparent lack of interest of the parties therein, the trial court ordered the dismissal of thecase without prejudice.

The appellee Segundina Noguera sought reconsideration of the order dismissing her counterclaim which the court a quo, in an order dated June 8,1963, granted permitting her to present evidence in support of her counterclaim.

On June 17,1963, appellant Lina Sevilla refiled her case against the herein appellees and after the issues were joined, the reinstated counterclaim ofSegundina Noguera and the new complaint of appellant Lina Sevilla were jointly heard following which the court a quo ordered both cases dismiss forlack of merit, on the basis of which was elevated the instant appeal on the following assignment of errors:

I. THE LOWER COURT ERRED EVEN IN APPRECIATING THE NATURE OF PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA'S COMPLAINT.

II. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT MRS. LINA 0. SEVILA'S ARRANGEMENT (WITH APPELLEE TOURIST WORLDSERVICE, INC.) WAS ONE MERELY OF EMPLOYER-EMPLOYEE RELATION AND IN FAILING TO HOLD THAT THE SAID ARRANGEMENT WASONE OF JOINT BUSINESS VENTURE.

III. THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA IS ESTOPPED FROM DENYING THAT SHEWAS A MERE EMPLOYEE OF DEFENDANT-APPELLEE TOURIST WORLD SERVICE, INC. EVEN AS AGAINST THE LATTER.

IV. THE LOWER COURT ERRED IN NOT HOLDING THAT APPELLEES HAD NO RIGHT TO EVICT APPELLANT MRS. LINA O. SEVILLA FROMTHE A. MABINI OFFICE BY TAKING THE LAW INTO THEIR OWN HANDS.

V. THE LOWER COURT ERRED IN NOT CONSIDERING AT .ALL APPELLEE NOGUERA'S RESPONSIBILITY FOR APPELLANT LINA O.SEVILLA'S FORCIBLE DISPOSSESSION OF THE A. MABINI PREMISES.

VI. THE LOWER COURT ERRED IN FINDING THAT APPELLANT APPELLANT MRS. LINA O. SEVILLA SIGNED MERELY AS GUARANTOR FORRENTALS.

On the foregoing facts and in the light of the errors asigned the issues to be resolved are:

1. Whether the appellee Tourist World Service unilaterally disco the telephone line at the branch office on Ermita;

2. Whether or not the padlocking of the office by the Tourist World Service was actionable or not; and


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3. Whether or not the lessee to the office premises belonging to the appellee Noguera was appellees TWS or TWS and the appellant.

In this appeal, appealant Lina Sevilla claims that a joint bussiness venture was entered into by and between her and appellee TW S with offices at theErmita branch office and that she was not an employee of the TWS to the end that her relationship with TWS was one of a joint business ventureappellant made declarations showing:

1. Appellant Mrs. Lina 0. Sevilla, a prominent figure and wife of an eminent eye, ear and nose specialist as well as a imediatelycolumnist had been in the travel business prior to the establishment of the joint business venture with appellee Tourist WorldService, Inc. and appellee Eliseo Canilao, her compadre, she being the godmother of one of his children, with her own clientelecoming mostly from her own social circle (pp. 3-6 tsn. February 16,1965).

2. Appellant Mrs. Sevilla was signatory to a lease agreement dated 19 October 1960 (Exh. 'A') covering the premises at A.

Mabini St., she expressly warranting and holding [sic] herself 'solidarily' liable with appellee Tourist World Service, Inc. for theprompt payment of the monthly rentals thereof to other appellee Mrs. Noguera (pp. 14-15, tsn. Jan. 18,1964).

3. Appellant Mrs. Sevilla did not receive any salary from appellee Tourist World Service, Inc., which had its own, separate officelocated at the Trade & Commerce Building; nor was she an employee thereof, having no participation in nor connection withsaid business at the Trade & Commerce Building (pp. 16-18 tsn Id.).

4. Appellant Mrs. Sevilla earned commissions for her own passengers, her own bookings her own business (and not for any ofthe business of appellee Tourist World Service, Inc.) obtained from the airline companies. She shared the 7% commissionsgiven by the airline companies giving appellee Tourist World Service, Lic. 3% thereof aid retaining 4% for herself (pp. 18tsn.Id.)

5. Appellant Mrs. Sevilla likewise shared in the expenses of maintaining the A. Mabini St. office, paying for the salary of anoffice secretary, Miss Obieta, and other sundry expenses, aside from desicion the office furniture and supplying some of ficefurnishings (pp. 15,18 tsn. April 6,1965), appellee Tourist World Service, Inc. shouldering the rental and other expenses inconsideration for the 3% split in the co procured by appellant Mrs. Sevilla (p. 35 tsn Feb. 16,1965).

6. It was the understanding between them that appellant Mrs. Sevilla would be given the title of branch manager forappearance's sake only (p. 31 tsn. Id.), appellee Eliseo Canilao admit that it was just a title for dignity (p. 36 tsn. June 18, 1965-testimony of appellee Eliseo Canilao pp. 38-39 tsn April 61965-testimony of corporate secretary Gabino Canilao (pp- 2-5,Appellants' Reply Brief)

Upon the other hand, appellee TWS contend that the appellant was an employee of the appellee Tourist World Service, Inc. and as such wasdesignated manager.

1

xxx xxx xxx

The trial court2held for the private respondent on the premise that the private respondent, Tourist World Service, Inc., being the true lessee, it was within its prerogative toterminate the lease and padlock the premises. 3It likewise found the petitioner, Lina Sevilla, to be a mere employee of said Tourist World Service, Inc. and as such, she wasbound by the acts of her employer. 4The respondent Court of Appeal 5rendered an affirmance.

The petitioners now claim that the respondent Court, in sustaining the lower court, erred. Specifically, they state:

I

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN HOLDING THAT "THE PADLOCKING OF THE PREMISESBY TOURIST WORLD SERVICE INC. WITHOUT THE KNOWLEDGE AND CONSENT OF THE APPELLANT LINA SEVILLA ... WITHOUT NOTIFYING MRS. LINA O.SEVILLA OR ANY OF HER EMPLOYEES AND WITHOUT INFORMING COUNSEL FOR THE APPELLANT (SEVILIA), WHO IMMEDIATELY BEFORE THE PADLOCKINGINCIDENT, WAS IN CONFERENCE WITH THE CORPORATE SECRETARY OF TOURIST WORLD SERVICE (ADMITTEDLY THE PERSON WHO PADLOCKED THE SAIDOFFICE), IN THEIR ATTEMP AMICABLY SETTLE THE CONTROVERSY BETWEEN THE APPELLANT (SEVILLA) AND THE TOURIST WORLD SERVICE ... (DID NOT)ENTITLE THE LATTER TO THE RELIEF OF DAMAGES" (ANNEX "A" PP. 7,8 AND ANNEX "B" P. 2) DECISION AGAINST DUE PROCESS WHICH ADHERES TO THERULE OF LAW.

II

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING APPELLANT SEVILLA RELIEF BECAUSE SHEHAD "OFFERED TO WITHDRAW HER COMP PROVIDED THAT ALL CLAIMS AND COUNTERCLAIMS LODGED BY BOTH APPELLEES WERE WITHDRAWN." (ANNEX"A" P. 8)

III

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING-IN FACT NOT PASSING AND RESOLVING-APPELLANT SEVILLAS CAUSE OF ACTION FOUNDED ON ARTICLES 19, 20 AND 21 OF THE CIVIL CODE ON RELATIONS.

IV

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING APPEAL APPELLANT SEVILLA RELIEF YETNOT RESOLVING HER CLAIM THAT SHE WAS IN JOINT VENTURE WITH TOURIST WORLD SERVICE INC. OR AT LEAST ITS AGENT COUPLED WITH AN INTERESTWHICH COULD NOT BE TERMINATED OR REVOKED UNILATERALLY BY TOURIST WORLD SERVICE INC. 6

As a preliminary inquiry, the Court is asked to declare the true nature of the relation between Lina Sevilla and Tourist World Service, Inc. The respondent Court of see fit torule on the question, the crucial issue, in its opinion being "whether or not the padlocking of the premises by the Tourist World Service, Inc. without the knowledge and consen


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of the appellant Lina Sevilla entitled the latter to the relief of damages prayed for and whether or not the evidence for the said appellant supports the contention that theappellee Tourist World Service, Inc. unilaterally and without the consent of the appellant disconnected the telephone lines of the Ermita branch office of the appellee TouristWorld Service, Inc.7Tourist World Service, Inc., insists, on the other hand, that Lina SEVILLA was a mere employee, being "branch manager" of its Ermita "branch" office andthat inferentially, she had no say on the lease executed with the private respondent, Segundina Noguera. The petitioners contend, however, that relation between the betweenparties was one of joint venture, but concede that "whatever might have been the true relationship between Sevilla and Tourist World Service,"the Rule of Law enjoinedTourist World Service and Canilao from taking the law into their own hands, 8in reference to the padlocking now questioned.

The Court finds the resolution of the issue material, for if, as the private respondent, Tourist World Service, Inc., maintains, that the relation between the parties was in thecharacter of employer and employee, the courts would have been without jurisdiction to try the case, labor disputes being the exclusive domain of the Court of IndustrialRelations, later, the Bureau Of Labor Relations, pursuant to statutes then in force. 9

In this jurisdiction, there has been no uniform test to determine the evidence of an employer-employee relation. In general, we have relied on the so-called right of control test,"where the person for whom the services are performed reserves a right to control not only the endto be achieved but also the meansto be used in reaching suchend." 10Subsequently, however, we have considered, in addition to the standard of right-of control, the existing economic conditions prevailing between the parties, l ike theinclusion of the employee in the payrolls, in determining the existence of an employer-employee relationship.11

The records will show that the petitioner, Lina Sevilla, was not subject to control by the private respondent Tourist World Service, Inc., either as to the result of the enterpriseor as to the means used in connection therewith. In the first place, under the contract of lease covering the Tourist Worlds Ermita office, she had bound herself in solidumasand for rental payments, an arrangement that would be like claims of a master-servant relationship. True the respondent Court would later minimize her participation in thelease as one of mere guaranty, 12that does not make her an employee of Tourist World, since in any case, a true employee cannot be made to part with his own money inpursuance of his employer's business, or otherwise, assume any liability thereof. In that event, the parties must be bound by some other relation, but certainly notemployment.

In the second place, and as found by the Appellate Court, '[w]hen the branch office was opened, the same was run by the herein appellant Lina O. Sevil la payable to TouristWorld Service, Inc. by any airline for any fare brought in on the effort of Mrs. Lina Sevilla. 13Under these circumstances, it cannot be said that Sevilla was under the control ofTourist World Service, Inc. "as to the means used." Sevilla in pursuing the business, obviously relied on her own gifts and capabilities.

It is further admitted that Sevilla was not in the company's payroll. For her efforts, she retained 4% in commissions from airline bookings, the remaining 3% going to TouristWorld. Unlike an employee then, who earns a fixed salary usually, she earned compensation in fluctuating amounts depending on her booking successes.

The fact that Sevilla had been designated 'branch manager" does not make her, ergo, Tourist W orld's employee. As we said, employment is determined by the right-of-controltest and certain economic parameters. But titles are weak indicators.

In rejecting Tourist World Service, Inc.'s arguments however, we are not, as a consequence, accepting Lina Sevilla's own, that is, that the parties had embarked on a jointventure or otherwise, a partnership. And apparently, Sevilla herself did not recognize the existence of such a relation. In her letter of November 28, 1961, she expressly'concedes your [Tourist World Service, Inc.'s] ri ght to stop the operation of your branch office 14in effect, accepting Tourist World Service, Inc.'s control over the manner inwhich the business was run. A joint venture, including a partnership, presupposes generally a of standing between the joint co-venturers or partners, in which each party hasan equal proprietary interest in the capital or property contributed 15and where each party exercises equal rights in the conduct of the business.16furthermore, the parties didnot hold themselves out as partners, and the building itself was embellished with the electric sign "Tourist World Service, Inc. 17in lieu of a distinct partnership name.

It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to (wo)man the private respondent, Tourist World Service, Inc.'s Ermita office, she must havedone so pursuant to a contract of agency. It is the essence of this contract that the agent renders services "in representation or on behalf of another. 18In the case at bar,Sevilla solicited airline fares, but she did so for and on behalf of her principal, Tourist World Service, Inc. As compensation, she received 4% of the proceeds in the concept ofcommissions. And as we said, Sevilla herself based on her letter of November 28, 1961, pre-assumed her principal's authority as owner of the business undertaking. We areconvinced, considering the circumstances and from the respondent Court's recital of facts, that the ties had contemplated a principal agent relationship, rather than a jointmanagament or a partnership..

But unlike simple grants of a power of attorney, the agency that we hereby declare to be compatible with the intent of the parties, cannot be revoked at will. The reason is thatit is one coupled with an interest, the agency having been created for mutual interest, of the agent and the principal. 19It appears that Lina Sevilla is a bona fidetravel agentherself, and as such, she had acquired an interest in the business entrusted to her. Moreover, she had assumed a personal obligation for the operation thereof, holding herselsolidarily liable for the payment of rentals. She continued the business, using her own name, after Tourist World had stopped further operations. Her interest, obviously, is notto the commissions she earned as a result of her business transactions, but one that extends to the very subject matter of the power of management delegated to her. It is anagency that, as we said, cannot be revoked at the pleasure of the principal. Accordingly, the revocation complained of should entitle the petitioner, Lina Sevilla, to damages.

As we have stated, the respondent Court avoided this issue, confining itself to the telephone disconnection and padlocking incidents. Anent the disconnection issue, it is theholding of the Court of Appeals that there is 'no evidence showing that the Tourist World Service, Inc. disconnected the telephone lines at the branch office. 20Yet, what cannobe denied is the fact that Tourist World Service, Inc. did not take pains to have them reconnected. Assuming, therefore, that it had no hand in the disconnection nowcomplained of, it had clearly condoned it, and as owner of the telephone lines, it must shoulder responsibility therefor.

The Court of Appeals must likewise be held to be in error with respect to the padlocking incident. For the fact that Tourist World Service, Inc. was the lessee named in thelease con-tract did not accord it any authority to terminate that contract without notice to its actual occupant, and to padlock the premises in such fashion. As this Court hasruled, the petitioner, Lina Sevilla, had acquired a personal stake in the business itself, and necessarily, in the equipment pertaining thereto. Furthermore, Sevilla was not astranger to that contract having been explicitly named therein as a third party in charge of rental payments (solidarily with Tourist World, Inc.). She could not be ousted from

possession as summarily as one would eject an interloper.

The Court is satisfied that from the chronicle of events, there was indeed some malevolent design to put the petitioner, Lina Sevilla, in a bad light following disclosures thatshe had worked for a rival fi rm. To be sure, the respondent court speaks of alleged business losses to justify the closure '21but there is no clear showing that Tourist WorldErmita Branch had in fact sustained such reverses, let alone, the fact that Sevilla had moonlit for another company. What the evidence discloses, on the other hand, is thatfollowing such an information (that Sevilla was working for another company), Tourist World's board of directors adopted two resolutions abolishing the office of 'manager" andauthorizing the corporate secretary, the respondent Eliseo Canilao, to effect the takeover of its branch office properties. On January 3, 1962, the private respondents endedthe lease over the branch office premises, incidentally, without notice to her.

It was only on June 4, 1962, and after office hours significantly, that the Ermita office was padlocked, personally by the respondent Canilao, on the pretext that it wasnecessary to Protect the interests of the Tourist World Service. "22It is strange indeed that Tourist World Service, Inc. did not find such a need when it cancelled the lease fivemonths earlier. While Tourist World Service, Inc. would not pretend that it sought to locate Sevilla to inform her of the closure, but surely, it was aware that after office hours,she could not have been anywhere near the premises. Capping these series of "offensives," it cut the office's telephone lines, paralyzing completely its business operations,and in the process, depriving Sevilla articipation therein.


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This conduct on the part of Tourist World Service, Inc. betrays a sinister effort to punish Sevillsa it had perceived to be disloyalty on her part. It is offensive, in any event, toelementary norms of justice and fair play.

We rule therefore, that for i ts unwarranted revocation of the contract of agency, the private respondent, Tourist World Service, Inc., should be sentenced to pay damages.Under the Civil Code, moral damages may be awarded for "breaches of contract where the defendant acted ... in bad faith. 23

We likewise condemn Tourist World Service, Inc. to pay further damages for the moral injury done to Lina Sevilla from its brazen conduct subsequent to the cancellation of thepower of attorney granted to her on the authority of Article 21 of the Civil Code, in relation to Article 2219 (10) thereof

ART. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shallcompensate the latter for the damage.24

ART. 2219. Moral damages25may be recovered in the following and analogous cases:

xxx xxx xxx

(10) Acts and actions refered into article 21, 26, 27, 28, 29, 30, 32, 34, and 35.

The respondent, Eliseo Canilao, as a jo int tortfeasor is likewise hereby ordered to respond for the same damages in a solidary capacity.

Insofar, however, as the private respondent, Segundina Noguera is concerned, no evidence has been shown that she had connived with Tourist World Service, Inc. in thedisconnection and padlocking incidents. She cannot therefore be held liable as a cotortfeasor.

The Court considers the sums of P25,000.00 as and for moral damages,24 P10,000.00 as exemplary damages, 25and P5,000.00 as nominal 26and/or temperate27damages,to be just, fair, and reasonable under the circumstances.

WHEREFORE, the Decision promulgated on January 23, 1975 as well as the Resolution issued on July 31, 1975, by the respondent Court of Appeals is hereby REVERSEDand SET ASIDE. The private respondent, Tourist World Service, Inc., and Eliseo Canilao, are ORDERED jointly and severally to indemnify the petitioner, Lina Sevilla, the sumof 25,00.00 as and for moral damages, the sum of P10,000.00, as and for exemplary damages, and the sum of P5,000.00, as and for nominal and/or temperate damages.

Costs against said private respondents.

SO ORDERED.

Yap (Chairman), Melencio-Herrera, Paras and Padilla, JJ., concur.

G.R. No. 134559 December 9, 1999

ANTONIA TORRES assisted by her husband, ANGELO TORRES; and EMETERIA BARING, petitioners,vs.COURT OF APPEALS and MANUEL TORRES, respondents.

PANGANIBAN, J. :

Courts may not extricate parties from the necessary consequences of their acts. That the terms of a contract turn out to be financially disadvantageous to them will not relievethem of their obligations therein. The lack of an inventory of real property will not ipso factorelease the contracting partners from their respective obligations to each otherarising from acts executed in accordance with their agreement.

The Case

The Petition for Review on Certioraribefore us assails the March 5, 1998 Decision 1of the Court of Appeals 2(CA) in CA-GR CV No. 42378 and its June 25, 1998 Resolutiondenying reconsideration. The assailed Decision affirmed the ruling of the Regional Trial Court (RTC) of Cebu City in Civil Case No. R-21208, which disposed as follows:

WHEREFORE, for all the foregoing considerations, the Court, finding for the defendant and against the plaintiffs, orders the dismissal of the plaintiffscomplaint. The counterclaims of the defendant are likewise ordered dismissed. No pronouncement as to costs. 3

The Facts

Sisters Antonia Torres and Emeteria Baring, herein petitioners, entered into a "joint venture agreement" with Respondent Manuel Torres for the development of a parcel ofland into a subdivision. Pursuant to the contract, they executed a Deed of Sale covering the said parcel of land in favor of respondent, who then had i t registered in his name.By mortgaging the property, respondent obtained from Equitable Bank a loan of P40,000 which, under the Joint Venture Agreement, was to be used for the development ofthe subdivision. 4All three of them also agreed to share the proceeds from the sale of the subdivided lots.

The project did not push through, and the land was subsequently foreclosed by the bank.

According to petitioners, the project failed because of "respondent's lack of funds or means and skills." They add that respondent used the loan not for the development of thesubdivision, but in furtherance of his own company, Universal Umbrella Company.


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On the other hand, respondent alleged that he used the loan to implement the Agreement. With the said amount, he was able to effect the survey and the subdivision of thelots. He secured the Lapu Lapu City Council's approval of the subdivision project which he advertised in a local newspaper. He also caused the construction of roads, curbsand gutters. Likewise, he entered into a contract with an engineering firm for the building of sixty low-cost housing units and actually even set up a model house on one of thesubdivision lots. He did all of these for a total expense of P85,000.

Respondent claimed that the subdivision project failed, however, because petitioners and their relatives had separately caused the annotations of adverse claims on the ti tleto the land, which eventually scared away prospective buyers. Despite his requests, petitioners refused to cause the clearing of the claims, thereby forcing him to give up onthe project. 5

Subsequently, petitioners filed a criminal case for estafa against respondent and his wife, who were however acquitted. Thereafter, they filed the present civil case which,upon respondent's motion, was later dismissed by the trial court in an Order dated September 6, 1982. On appeal, however, the appellate court remanded the case for furtherproceedings. Thereafter, the RTC issued its assailed Decision, which, as earlier stated, was affirmed by the CA.

Hence, this Petition. 6

Ruling of the Court of Appeals

In affirming the trial court, the Court of Appeals held that petitioners and respondent had formed a partnership for the development of the subdivision. Thus, they must bear theloss suffered by the partnership in the same proportion as their share in the profits stipulated in the contract. Disagreeing with the trial court's pronouncement that losses aswell as profits in a joint venture should be distributed equally, 7the CA invoked Article 1797 of the Civil Code which provides:

Art. 1797The losses and profits shall be distributed in conformity with the agreement. If only the share of each partner in the profits has beenagreed upon, the share of each in the losses shall be in the same proportion.

The CA elucidated further:

In the absence of stipulation, the share of each partner in the profits and losses shall be in proportion to what he may have contributed, but the

industrial partner shall not be liable for the losses. As for the profits, the industrial partner shall receive such share as may be just and equitable underthe circumstances. If besides his services he has contributed capital, he shall also receive a share in the profits in proportion to his capital.

The Issue

Petitioners impute to the Court of Appeals the following error:

. . . [The] Court of Appeals erred in concluding that the transaction

. . . between the petitioners and respondent was that of a joint venture/partnership, ignoring outright the provision of Article 1769, and other relatedprovisions of the Civil Code of the Philippines. 8

The Court's Ruling

The Petition is bereft of merit.

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