Aurelio Litonjua Jr vs Eduardo Litonjua Sr. et al Aurelio and Eduardo are brothers.

In 1973, Aurelio alleged that Eduardo entered into a contract of partnership with him. Aurelio showed as evidence a letter sent to him by Eduardo that the latter is allowing Aurelio to manage their family business if Eduardo!s away" and in e#change thereof he will be giving Aurelio $1 million or 1%& e'uity, whichever is higher. A memorandum was subse'uently made for the said partnership agreement. (he memorandum this time stated that in e#change of Aurelio, who )ust got married, retaining his share in the family business movie theatres, shipping and land development" and some other immovable properties, he will be given $1 *illion or 1%& e'uity in all these businesses and those to be subse'uently ac'uired by them whichever is greater. In 199+ however, the relationship between the brothers went sour. And so Aurelio demanded an accounting and the li'uidation of his share in the partnership. Eduardo did not heed and so Aurelio sued Eduardo. ISSUE: ,hether or not there e#ists a partnership. HELD: -o. (he partnership is void and legally none#istent. (he documentary evidence presented by Aurelio, i.e. the letter from Eduardo and the *emorandum, did not prove partnership. (he 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 'uibbling that said letter does not meet the public instrumentation re'uirements e#acted under Article 1771 how partnership is constituted" of the .ivil .ode. *oreover, being unsigned and doubtless referring to a partnership involving more than $3,%%%.%% in money or property, said letter cannot be presented for notari/ation, let alone registered with the 0ecurities and E#change .ommission 0E.", as called for under the Article 177+ capitali/ation of a partnership" of the .ode. And inasmuch as the inventory re'uirement under the succeeding Article 1773 goes into the matter of validity when immovable property is contributed to the partnership, the ne#t logical point of in'uiry turns on the nature of Aurelio!s contribution, if any, to the supposed partnership.

(he *emorandum 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 *emorandum. Article 1773 of the .ivil .ode re'uires that if immovable property is contributed to the partnership an inventory shall be had and attached to the contract. Lim vs. Philippine Fishing ear Industries In!.

" # $%&''() % *ovem+er $,,,Fa!ts: 1n behalf of 21cean 3uest 4ishing .orporation,2 Antonio .hua and $eter 5ao entered into a .ontract dated 7 4ebruary 199%, for the purchase of fishing nets of various si/es from the $hilippine 4ishing 6ear Industries, Inc. $46I". (hey claimed that they were engaged in a business venture with 7im (ong 7im, who however was not a signatory to the agreement. (he total price of the nets amounted to $83+,%98. 9%% pieces of floats worth $:;,%%% were also sold to the .orporation. (he buyers, however, failed to pay for the fishing nets and the floats< hence, $46I filed a collection suit against .hua, 5ao and 7im (ong 7im with a prayer for a writ of preliminary attachment. (he suit was brought against the three in their capacities as general partners, on the allegation that 21cean 3uest 4ishing .orporation2 was a none#istent corporation as shown by a .ertification from the 0ecurities and E#change .ommission. 1n +% 0eptember 199%, the lower court issued a ,rit of $reliminary Attachment, which the sheriff enforced by attaching the fishing nets on board 4=> 7ourdes which was then doc?ed at the 4isheries $ort, -avotas, *etro *anila. Instead of answering the .omplaint, .hua filed a *anifestation admitting his liability and re'uesting a reasonable time within which to pay. @e also turned over to $46I some of the nets which were in his possession. $eter 5ao filed an Answer, after which he was deemed to have waived his right to crossA e#amine witnesses and to present evidence on his behalf, because of his failure to appear in subse'uent hearings. 7im (ong 7im, on the other hand, filed an Answer with .ounterclaim and .rossclaim and moved for the lifting of the ,rit of Attachment.

(he trial court maintained the ,rit, and upon motion of $46I, ordered the sale of the fishing nets at a public auction. $46I won the bidding and deposited with the said court the sales proceeds of $9%%,%%%. 1n 1; -ovember 199+, the trial court rendered its Becision, ruling that $46I was entitled to the ,rit of Attachment and that .hua, 5ao and 7im, as general partners, were )ointly liable to pay $46I. (he trial court ruled that a partnership among 7im, .hua and 5ao e#isted based 1" on the testimonies of the witnesses presented and +" on a .ompromise Agreement e#ecuted by the three in .ivil .ase 199+A*- which .hua and 5ao had brought against 7im in the C(. of *alabon, >ranch 7+, for a" a declaration of nullity of commercial documents< b" a reformation of contracts< c" a declaration of ownership of fishing boats< d" an in)unction and e" damages. 7im appealed to the .ourt of Appeals .A" which, affirmed the C(.. 7im filed the $etition for Ceview on .ertiorari. 7im argues, among others, that under the doctrine of corporation by estoppel, liability can be imputed only to .hua and 5ao, and not to him. Issue: ,hether 7im should be held )ointly liable with .hua and 5ao. Held: .hua, 5ao and 7im had decided to engage in a fishing business, which they started by buying boats worth $3.38 million, financed by a loan secured from Desus 7im who was 7im (ong 7im!s brother. In their .ompromise Agreement, they subse'uently revealed their intention to pay the loan with the proceeds of the sale of the boats, and to divide e'ually among them the e#cess or loss. (hese boats, the purchase and the repair of which were financed with borrowed money, fell under the term 2common fund2 under Article 17:7. (he contribution to such fund need not be cash or fi#ed assets< it could be an intangible li?e credit or industry. (hat the parties agreed that any loss or profit from the sale and operation of the boats would be divided e'ually among them also shows that they had indeed formed a partnership. (he partnership e#tended not only to the purchase of the boat, but also to that of the nets and the floats. (he fishing nets and the floats, both essential to fishing, were obviously ac'uired in furtherance of their business. It would have been inconceivable for 7im to

involve himself so much in buying the boat but not in the ac'uisition of the aforesaid e'uipment, without which the business could not have proceeded. (he sale of the boats, as well as the division among the three of the balance remaining after the payment of their loans, proves beyond cavil that 4=> 7ourdes, though registered in his name, was not his own property but an asset of the partnership. It is not uncommon to register the properties ac'uired from a loan in the name of the person the lender trusts, who in this case is 7im (ong 7im himself. After all, he is the brother of the creditor, Desus 7im. It is unreasonable E indeed, it is absurd E for petitioner to sell his property to pay a debt he did not incur, if the relationship among the three of them was merely that of lessorAlessee, instead of partners. As to 7imFs argument that under the doctrine of corporation by estoppel, liability can be imputed only to .hua and 5ao, and not to him< 0ection +1 of the .orporation .ode of the $hilippines provides that 2All persons who assume to act as a corporation ?nowing it to be without authority to do so shall be liable as general partners for all debts, liabilities and damages incurred or arising as a result thereofG $rovided however, (hat when any such ostensible corporation is sued on any transaction entered by it as a corporation or on any tort committed by it as such, it shall not be allowed to use as a defense its lac? of corporate personality. 1ne who assumes an obligation to an ostensible corporation as such, cannot resist performance thereof on the ground that there was in fact no corporation.2 (hus, even if the ostensible corporate entity is proven to be legally none#istent, a party may be estopped from denying its corporate e#istence. 2(he reason behind this doctrine is obvious E an 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 without authority and at their own ris?. And as it is an elementary principle of law that a person who acts as an agent without authority or without a principal is himself regarded as the principal, possessed of all the right and sub)ect to all the liabilities of a principal, a

person acting or purporting to act on behalf of a corporation which has no valid e#istence assumes such privileges and obligations and becomes personally liable for contracts entered into or for other acts performed as such agent.2 (he doctrine of corporation by estoppel may apply to the alleged corporation and to a third party. In the first instance, an unincorporated association, which represented itself to be a corporation, will be estopped from denying its corporate capacity in a suit against it by a third person who relied in good faith on such representation. It cannot allege lac? 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. 1n the other hand, a third party who, ?nowing an association to be unincorporated, nonetheless treated it as a corporation and received benefits from it, may be barred from denying its corporate e#istence in a suit brought against the alleged corporation. In such case, all those who benefited from the transaction made by the ostensible corporation, despite ?nowledge of its legal defects, may be held liable for contracts they impliedly assented to or too? advantage of. (here is no dispute that $46I is entitled to be paid for the nets it sold. (he only 'uestion here is whether 7im should be held )ointly liable with .hua and 5ao. 7im contests such liability, insisting that only those who dealt in the name of the ostensible corporation should be held liable. Although technically it is true that 7im did not directly act on behalf of the corporation< however, having reaped the benefits of the contract entered into by persons with whom he previously had an e#isting relationship, he is deemed to be part of said association and is covered by the scope of the doctrine of corporation by estoppel. AFIS./ I*SU#A*.E ./#P. 3Januar4 25) $,,,6 0 .A %12 S.#A $

filed an HInformation Ceturn of 1rgani/ation E#empt from Income (a#I for the year ending 1978, on the basis of which, it was assessed by the commissioner of Internal Cevenue deficiency corporate ta#es. A protest was filed but denied by the .IC. $etitioners contend that they cannot be ta#ed as a corporation, because a" the reinsurance policies were written by them individually and separately, b" their liability was limited to the e#tent of their allocated share in the original ris?s insured and not solidary, c" there was no common fund, d" the e#ecutive board of the pool did not e#ercise control and management of its funds, unli?e the board of a corporation, e" the pool or clearing house was not and could not possibly have engaged in the business of reinsurance from which it could have derived income for itself. (hey further contend that remittances to *unich are not dividends and to sub)ect it to ta# would be tantamount to an illegal double ta#ation, as it would result to ta#ing the same premium income twice in the hands of the same ta#payer. 4inally, petitioners argue that the government!s right to assess and collect the sub)ect Information Ceturn was filed by the pool on April 19, 197:. 1n the basis of this return, the >IC telephoned petitioners on -ovember 11, 19;1 to give them notice of its letter of assessment dated *arch +7, 19;1. (hus, the petitioners contend that the fiveAyear prescriptive period then provided in the -IC. had already lapsed, and that the internal revenue commissioner was already barred by prescription from ma?ing an assessment. Held: A pool is considered a corporation for ta#ation purposes. .iting the case of Evangelista v. .IC, the court held that 0ec. +9 of the -IC. covered these unregistered partnerships and even associations or )oint accounts, which had no legal personalities apart from individual members. 4urther, the pool is a partnership as evidence by a common fund, the e#istence of e#ecutive board and the fact that while the pool is not in itself, a reinsurer and does not issue any insurance policy, its wor? is indispensable, beneficial and economically useful to the business of the ceding companies and *unich, because without it they would not have received their premiums.

Fa!ts: A4I0.1 and 9% other nonAlife insurance companies entered into a 3uota 0hare Ceinsurance (reaties with *unich, a nonAresident foreign insurance corporation, to cover for All Cis? Insurance $olicies over machinery erection, brea?down and boiler e#plosion. (he treaties re'uired petitioners to form a pool, to which A4I0.1 and the others complied. 1n April 19, 197:, the pool of machinery insurers submitted a financial statement and

As to the claim of double ta#ation, the pool is a ta#able entity distinct from the individual corporate entities of the ceding companies. (he ta# on its income is obviously different from the ta# on the dividends received by the said companies. .learly, there is no double ta#ation. As to the argument on prescription, the prescriptive period was totaled under the 0ection 333 of the -IC., because the ta#payer cannot be located at the address given in the information return filed and for which reason there was delay in sending the assessment. 4urther, the law clearly states that the prescriptive period will be suspended only if the ta#payer informs the .IC of any change in the address. E0A* ELIS7A) E7. AL. 0S. I*7E#*AL #E0E*UE) E7. AL. ./LLE.7/# /F

.ourt o8 7a9 Appeals: (he petitioners are liable. -o e#planation for such in the case" Petitioners: (hey are mere coAowners, not coApartners, for, in conse'uence of the acts performed by them, a legal entity, with a personality independent of that of its members, did not come into e#istence, and some of the characteristics of partnerships are lac?ing in the case at bar. Held: (he petitioners are liable to pay the ta# on corporations provided for in 0ec. +9 of the .ommonwealth Act -o. 9::, otherwise ?nown as the -ational Internal Cevenue .ode. According to 0ec. ;9 of the same statute, Hthe term Jcorporation! includes partnerships, no matter how created or organi/ed, )ointA stoc? companies, )oint accounts, associations or insurance companies, but does not include duly registered general coApartnerships.I Also, Article 17:7 of the .ivil .ode providesG H>y 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.I $ursuant to this article, the essential elements o8 a partnership are two, namelyG 3$6 an agreement to contribute money, property or industry to a common fund< and +" intent to divide the profits among the contracting parties. (he first element is undoubtedly present in the case at bar, for, admittedly, the petitioners have agreed to, and did, contribute money and property to a common fund. Also, it can be said that their purpose was to engage in real estate transactions for monetary gain and then divide the same among themselves becauseG 1" they created the common fund purposely< +" they invested the same, not merely in one transaction, but in a series of transactions< 3" the parcels of land that they bought were not devoted to residential purposes, or to other personal uses of the petitioners but were leased separately to several persons< 9" the properties have been under the management of one person, namely 0imeon Evangelista, ma?ing the affairs relative to the said properties appear to have been handled as if the same belonged to a corporation or business enterprise operated for profit< and 8" the petitioners have not testified or introduced any evidence, either on their purpose in creating the set up already adverted to, or on the causes for its continued e#istence. @ence, the petitioners herein constitute a partnership, and in so far as the -ational Internal Cevenue .ode is

concerned, they are sub)ect to the income ta# for corporations.

I.

As regards to the residence ta# for corporations provided 0ec. + of .ommonwealth Act -o. 9:8 1, the terms HcorporationI and HpartnershipI are used in both statutes with substantially the same meaning. .onse'uently, petitioners are sub)ect, also, to the residence ta# for corporations.

II.

Fa!ts: (he petitioners borrowed from their father $h$89,19%.%% which amount together with their personal monies was used by them for the purpose of buying and selling real properties. 4rom 1993 to 1999, they bought +9 parcels of land including the improvements thereon" on four different occasions. In 1998, they appointed their brother 0imeon to manage their properties with full power to lease< to collect and receive rents< to issue receipts therefore< in default of such payment, to bring suits against the defaulting tenant< and to endorse and deposit all notes and chec?s for them. In 199;, their net rental income amounted to $h$1+,:18.38. 1n 0eptember 1989, the respondent .ollector of Internal Cevenue demanded the payment of 1" income ta# on corporations, +" real estate dealer!s fi#ed ta#, and 3" corporation residence ta# for the years 1998A1999, computed according to the assessments made on their properties. >ecause of this, the petitioners filed a case against the respondents in the .ourt of (a# Appeals, praying that the decision of the respondent contained in its letter of demand be reversed and that they be absolved from the payment of the ta#es in 'uestion. Issue: ,hether the petitioners are sub)ect to the ta# on corporations, real estate dealer!s fi#ed ta#, and corporation residence ta#.

7astly, the records show that the petitioners have habitually engaged in leasing the properties for a period of 1+ years, and that the yearly gross rentals of the said properties from 1998 to 199; ranged from $h$9,899.%% to $h$ 17,983.%%. (hus, they are sub)ect to the ta# provided in 0ection 193 '" of our -ational Internal Cevenue .ode, for Hreal estate dealers,I inasmuch as, pursuant to 0ection 199 s" thereofG

HCeal estate dealers include any person engaged in the business of buying, selling, e#changing, leasing, or renting property of his own account as principal and holding himself out as full ro partAtime dealer in real estate or as an owner of rental property or properties rented or offered to rent for an aggregate amount of three thousand pesos or more a year. K K KI L/#E*:/ /;A 0 .I# Fa!ts: Dulia >uLales died leaving as heirs her surviving spouse, 7oren/o 1La and her five children. A civil case was instituted for the settlement of her state, in which 1La was appointed administrator and later on the guardian of the three heirs who were still minors when the pro)ect for partition was approved. (his shows that the heirs have undivided M interest in 1% parcels of land, : houses and money from the ,ar Bamage .ommission.

Entities liable to residence ta#EEvery corporation, no matter how created or organi/ed, whether domestic or resident foreign, engaged in or doing business in the $hilippines shall pay an annual residence ta# of five pesos and an annual additional ta#, which in no case, shall e#ceed one thousand pesos, in accordance with the following scheduleG K K K

Although the pro)ect of partition was approved by the .ourt, no attempt was made to divide the properties and they remained under the management of 1La 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. $etitioners returned for income ta# purposes their shares in the net income but they did not actually receive their shares because this left with 1La who invested them. >ased on these facts, .IC decided that petitioners formed an unregistered partnership and therefore, sub)ect to the corporate income ta#, particularly for years 1988 and 198:. $etitioners as?ed for reconsideration, which was denied hence this petition for review from .(A!s decision. Issue: ,=- there was unregistered partnership a coAownership or an

share to be held in common with his coAheirs under a single management to be used with the intent of ma?ing profit thereby in proportion to his share, there can be no doubt that, even if no document or instrument were e#ecuted, for the purpose, for ta# purposes, at least, an unregistered partnership is formed. 4or purposes of the ta# on corporations, our -ational Internal Cevenue .ode includes these partnerships E (he term HpartnershipI includes a syndicate, group, pool, joint venture or other unincorporated organization, through or by means of which any business, financial operation, or venture is carried on N ; *erten!s 7aw of 4ederal Income (a#ation, p. 8:+ -ote :3< emphasis ours." with the e#ception only of duly registered general coA partnerships E within the purview of the term Hcorporation.I It is, therefore, clear to our mind that petitioners herein constitute a partnership, insofar as said .ode is concerned, and are sub)ect to the income ta# for corporations. Judgment a88irmed. /+illos v .I#

IssueG ,hether or not the petitioners had indeed formed a partnership or )oint venture and thus liable for corporate ta#. HeldG (he 0upreme .ourt held that the petitioners should not be considered to have formed a partnership )ust because they allegedly contributed $17;,7%;.1+ to buy the two lots, resold the same and divided the profit among themselves. (o regard so would result in oppressive ta#ation and confirm the dictum that the power to ta# involves the power to destroy. (hat eventuality should be obviated. As testified by Dose 1billos, Dr., they had no such intention. (hey were coAowners pure and simple. (o consider them as partners would obliterate the distinction between a coAownership and a partnership. (he petitioners were not engaged in any )oint venture by reason of that isolated transaction. K Article 17:9 3" of the .ivil .ode provides that 2the sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a )oint or common right or interest in any property from which the returns are derived2. (here must be an unmista?able intention to form a partnership or )oint venture.K A UILA) J#. 0S. .A Fa!ts: (he petitioner herein is the manager of A... Aguila O 0ons, .o., a partnership engaged in lending activities, while the private respondent and her late husband were the registered owners of a house and lot, covered by a transfer certificate of title. 0ometime in 1991, the private respondent and A... Aguila O 0ons, .o., represented by the petitioner, entered into a *emorandum of Agreement. In this agreement, a deed of absolute sale shall be e#ecuted by the private respondent in favor of A... Aguila O 0ons, .o., giving the former an option to repurchase and obliging the same to deliver peacefully the possession of the property to A... Aguila O 0ons, .o., within 18 days after the e#piration of the said 9% days grace period. ,hen the private respondent failed to redeem the property within the grace period, the petitioner caused the cancellation of the transfer certificate of title under the private respondent!s name and the issuance of a new certificate of title in the name of A... Aguila O 0ons, .o. 0ubse'uently, the private respondent was as?ed to vacate the premises, however she refused. >ecause of this refusal, A... Aguila O 0ons, .o. filed an e)ectment case against her.

,=- the petitioners are liable for the deficiency corporate income ta# Held: Unregistered partnership. (he (a# .ourt found that instead of actually distributing the estate of the deceased among themselves pursuant to the pro)ect of partition, the heirs allowed their properties to remain under the management of 1La and let him use their shares as part of the common fund for their ventures, even as they paid corresponding income ta#es on their respective shares. <es. 4or ta# purposes, the coAownership of inherited properties is automatically converted into an unregistered partnership the moment the said common properties and=or the incomes derived therefrom are used as a common fund with intent to produce profits for the heirs in proportion to their respective shares in the inheritance as determined in a pro)ect partition either duly e#ecuted in an e#tra)udicial settlement or approved by the court in the corresponding testate or intestate proceeding. (he reason is simple. 4rom the moment of such partition, the heirs are entitled already to their respective definite shares of the estate and the incomes thereof, for each of them to manage and dispose of as e#clusively his own without the intervention of the other heirs, and, accordingly, he becomes liable individually for all ta#es in connection therewith. If after such partition, he allows his

Fa!tsG 1n *arch +, 1973 Dose 1billos, 0r. bought two lots with areas of 1,1+9 and 9:3 s'uare meters of located at 6reenhills, 0an Duan, Ci/al. (he ne#t day he transferred his rights to his four children, the petitioners, to enable them to build their residences. (he (orrens titles issued to them showed that they were coA owners of the two lots.In 1979, or after having held the two lots for more than a year, the petitioners resold them to the ,alled .ity 0ecurities .orporation and 1lga .ru/ .anada for the total sum of $313,%8%. (hey derived from the sale a total profit of $139, 391.;; or $33,8;9 for each of them. (hey treated the profit as a capital gain and paid an income ta# on oneAhalf thereof or of $1:,79+.In April, 19;%, the .ommissioner of Internal Cevenue re'uired the four petitioners to pay corporate income ta# on the total profit of $139,33: in addition to individual income ta# on their shares thereof. (he petitioners are being held liable for deficiency income ta#es and penalties totalling $1+7,7;1.7: on their profit of $139,33:, in addition to the ta# on capital gains already paid by them. (he .ommissioner acted on the theory that the four petitioners had formed an unregistered partnership or )oint venture (he petitioners contested the assessments. (wo Dudges of the (a# .ourt sustained the same. @ence, the instant appeal.

(he *(. ruled in favor of A... Aguila O 0ons, .o., on the ground that the private respondent did not redeem the sub)ect property before the e#piration of the 9%Aday period provided in the *1A. 0he filed an appeal before the C(., but failed again. (hen, she filed a petition for declaration of nullity of a deed of sale with the C(.. 0he alleged that the signature of her husband on the deed of sale was a forgery because he was already to be dead when the deed was supposed to have been e#ecuted. It appears however that the she filed a criminal complaint for falsification against the petitioner. #7.: BE-IEB. (he plaintiff never 'uestioned receiving from A... Aguila O 0ons, .o. the sum of $+%%,%%%.%% representing her loan from the defendant. .ommon sense dictates that an established lending and realty firm li?e Aguila would not part with $hp+%%,%%%.%% to the spouses, who are virtual strangers to it, without simultaneous accomplishment and signing of all the re'uired documents, more particularly the Beed of Absolute 0alem to protect its interest. .A: CEPEC0EB. (he transaction between the parties is indubitably an e'uitable mortgage. .onsidering that the private respondent vendor" was paid the price which is unusually inade'uate +9% s'. m. subdivision lot for only $hp+%%,%%%.%% in the year 1991", has retained possession of the property and has continued paying real ta#es over the sub)ect property. $etitionerG 1. +. @e is not the real party in interest but A... Aguila O 0ons, .o.< (he )udgment in the e)ectment case is a bar to the filing of the complaint for declaration of nullity of a deed of sale in this case< and (he contract between the parties is a pacto de retro sale and not an e'uitable mortgage.

)uridical personality is being used for fraudulent, unfair, or illegal purposes. In this case, the private respondent ahs not shown that A... Aguila O 0ons, .o., as a separate )uridical entity, is being used for fraudulent, unfair or illegal purposes. *oreover, the title to the sub)ect property is in the name of A... Aguila O 0ons, .o. and the *1A was e#ecuted between the private respondent, with the consent of her husband, and A... Aguila O 0ons, .o., represented by the petitioner. @ence, it is the partnership, not its officers or agents, which should be impleaded in any litigation involving property registered in its name. ,e cannot understand why both the C(. and the .A sidestepped this issue when it was s'uarely raised before them by the petitioner. (he court!s conclusion is that the petitioner is not the real party in interest against whom this action should be prosecuted. It is unnecessary to discuss the other issues raised by him in his appeal. HEI#S /F J/SE LI=) represented +4 ELE*I7/ LI= vs. JULIE7 0ILLA LI= .#. *o. $>2&,1) =ar!h %) 21$1 FA.7S: $etitioners are the heirs of the late Dose 7im Dose". (hey filed a .omplaint for $artition, Accounting and Bamages against respondent Duliet Pilla 7im respondent", widow of the late Elfledo 7im Elfledo", who was the eldest son of Dose and .resencia. $etitioners alleged that Dose was the liaison officer of Interwood 0awmill in .agsiay, *auban, 3ue/on. 0ometime in 19;%, Dose, together with his friends Dimmy 5u Dimmy" and -orberto Qy -orberto", formed a partnership to engage in the truc?ing business. Initially, with a contribution of $8%,%%%.%% each, they purchased a truc? to be used in the hauling and transport of lumber of the sawmill. Dose managed the operations of this truc?ing business until his death on August 18, 19;1. (hereafter, DoseFs heirs, including Elfledo, and partners agreed to continue the business under the management of Elfledo. (he shares in the partnership profits and income that formed part of the estate of Dose were held in trust by Elfledo, with petitionersF authority for Elfledo to use, purchase or ac'uire properties using said funds. $etitioners alleged that Elfledo was never a partner or an

investor in the business and merely supervised the purchase of additional truc?s using the income from the truc?ing business of the partners. 1n *ay 1;, 1998, Elfledo died, leaving respondent as his sole surviving heir. $etitioners claimed that respondent too? over the administration of the aforementioned properties, which belonged to the estate of Dose, without their consent and approval. .laiming that they are coA owners of the properties, petitioners re'uired respondent to submit an accounting of all income, profits and rentals received from the estate of Elfledo, and to surrender the administration thereof. Cespondent refused< thus, the filing of this case. Cespondent traversed petitionersF allegations and claimed that Elfledo was himself a partner of -orberto and Dimmy. Cespondent also alleged that when Dose died in 19;1, he left no ?nown assets, and the partnership with Dimmy and -orberto ceased upon his demise. Cespondent also stressed that Dose left no properties that Elfledo could have held in trust. Cespondent maintained that all the properties involved in this case were purchased and ac'uired through her and her husband!s )oint efforts and hard wor?, and without any participation or contribution from petitioners or from Dose. ISSUEG ,hether or not a partnership e#ists.

3.

Held: (he petition is meritorious. A real party in interest is one who would be benefited or in)ured by the )udgment, or who is entitled to the avails of the suit. *oreover, under Article 17:; of the -ew .ivil .ode, a partnership Hhas a )uridical personality separate and distinct from that of each of the partners.I (he partners cannot be held liable for the obligations of the partnership unless it is shown that the legal fiction of a different

HELDG 5E0. A partnership e#ists when two or more persons agree to place their money, effects, labor, and s?ill in lawful commerce or business, with the understanding that there shall be a proportionate sharing of the profits and losses among them. A contract of partnership is defined by the .ivil .ode as one where 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.

(he following circumstances tend to prove that Elfledo was himself the partner of Dimmy and -orbertoG 1" .resencia testified that Dose gave Elfledo $8%,%%%.%%, as share in the partnership, on a date that coincided with the payment of the initial capital in the partnership< +"

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 were registered in the name of Elfledo< 9" Dimmy 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 8" none of the petitioners, as heirs of Dose, the alleged partner, demanded periodic accounting from Elfledo during his lifetime. Lili+eth Sunga?.han vs Lam+erto .hua On August 31, 2012 usiness Organization ! "artnership, Agency, #rust ! "rescription ! $emand for an accounting ! Oral "artnership In 1977, .hua and Dacinto 0unga verbally agreed to form a partnership for the sale and distribution of 0hellane 7$6s. (heir business was very profitable but in 19;9 Dacinto died. Qpon Dacinto!s death, his daughter 7ilibeth too? over the business as well as the business assets. .hua then demanded for an accounting but 7ilibeth ?ept on evading him. In 199+ however, 7ilibeth gave .hua $+%%?. 0he said that the same represents a partial payment< that the rest will come after she finally made an accounting. 0he never made an accounting so in 199+, .hua filed a complaint for H,inding Qp of $artnership Affairs, Accounting, Appraisal and Cecovery of 0hares and Bamages with ,rit of $reliminary AttachmentI against 7ilibeth. 7ilibeth in her defense argued among others that .hua!s action has prescribed. ISSUE: ,hether or not .hua!s claim is barred by prescription. HELD: -o. (he action for accounting filed by .hua three 3" years after Dacinto!s death was well within the prescribed period. (he .ivil .ode provides that an action to enforce an oral contract prescribes in si# :" years while the right to demand an accounting for a partner!s interest as against the person continuing the

business accrues at the date of dissolution, in the absence of any contrary agreement. .onsidering that the death of a partner results in the dissolution of the partnership, in this case, it was after Dacinto!s death that .hua as the surviving partner had the right to an account of his interest as against 7ilibeth. It bears stressing that while Dacinto!s death dissolved the partnership, the dissolution did not immediately terminate the partnership. (he .ivil .ode e#pressly provides that upon dissolution, the partnership continues and its legal personality is retained until the complete winding up of its business, culminating in its termination. ./==ISSI/*E# /F I*7E#*AL #E0E*UE 0S. SU7E# Fa!ts: In 1997) A limited partnership, H,illiam D. 0uter J*orcoin! .o., 7td.I, was formed with ,illiam 0uter as general partner, Dulia 0pirig and 6ustav .arlson as limited partners, each contributing to the partnership. In 199;, 0uter married 0pirig and thereafter, .arlson sold his share in the partnership to 0uter and his wife. (he limited partnership had been filing its income ta# returns I(Cs" as a corporation w=o ob)ection from the .IC. 7ater in an assessment, the .IC consolidated the income of the firm and the individual incomes of partnerAspouses resulting in a determination of a deficiency income ta# against 0uter. 0uter protested and re'uested cancellation and withdrawal but was denied by the .IC. 0uter appealed to the .ourt of (a# Appeals w=c reversed .IC!s decision. Issues: 1" 0hould the corporate personality of the partnership be disregarded for income ta# purposes since partnerAspouses form a single ta#able unitR +",as the partnership dissolved after the marriage of partnerAspuses and subse'uent sale of .arlson of his participation in the partnershipR Held: %#A decision affirmed. (he limited partnership was not a universal partnership but a particular one. A universal partnership re'uires either that the ob)ect of the association be all the present property of the partners, as contributed by them to the common fund, or else Hall that the partners may ac'uire by their industry or wor? during the e#istence of the partnershipI. In the instant case, all of the contributions were fi#ed sums of money and neither of them were industrial partners. (hus it was not a partnership that spouses were forbidden to enter under the 1;;9 .ivil .ode.

(he capital contributions of partnerAspouses were separately owned and contributed by them before their marriage< and after they were )oined in wedloc?, such contributions remained their respective separate property under the 0panish .ivil .ode. (hus, the individual interest of each did not become common property of both after their marriage. In this case the limited partnership is not a mere business conduit of the partnerAspouses< it was organi/ed for legitimate business purposes, (he change in its membership brought about by the marriage is not a ground for withdrawing the partnership from coverage under S+9 of the ta# code re'uiring it to pay income ta#. ,hat is ta#able is the income of both spouses in their individual capacities. Aur+a!h vs. Sanitar4 @ares $artnership< Doint Penture< 4oreign and Bomestic .orp" FG (his consolidated petition assailed the decision of the .A directing a certain *A--EC 14 E7E.(I1- 14144I.EC0 I- (@E >1ACB 14 BICE.(1C0K(here are two groups in this case, the 7agdameo group composed of 4ilipino investors and theAmerican 0tandard Inc. A0I" composed of foreign investors.(he A0I 6roup and petitioner 0ala/ar 6.C. -os. 78978A7:" contend that the actual intention of theparties should be viewed strictly on the 2Agreement2 dated August 18,19:+ wherein it is clearly statedthat the partiesF intention was to form a corporation and not a )oint venture. IG (he main issue hinges on who were the duly elected directors of 0aniwares for the year 19;3 during itsannual stoc?holdersF meeting held on *arch ;, 19;3. (o answer this 'uestion the following factorsshould be determinedGK 1" the nature of the business established by the parties whether it was a )oint venture or a corporation and HG ,hile certain provisions of the Agreement would ma?e it appear that the parties theretodisclaim being partners or )oint venturers such disclaimer is directed at third parties and is notinconsistent with, and does not preclude, the e#istence of two distinct groups of stoc?holders in0aniwares one of which the $hilippine Investors" shall constitute the ma)ority, and the other A0Ishall constitute the minority stoc?holder. In any event, theevident intentionof the $hilippineInvestors and A0I in entering into the Agreement is to enter into a )oint venture enterprise

An e#amination of the Agreement shows that certain provisions were inccuded to protect theinterests of A0I as the minority. 4or e#ample, the vote of 7 out of 9 directors is re'uired incertain enumerated corporate acts. A0I is contractually entitled to designate a member of theE#ecutive .ommittee and the vote of this member is re'uired for certain transactions (he Agreement also re'uires a 78& superAma)ority vote for the amendment of the articles andbyAlaws of 0aniwares. A0I is also given the right to designate the president and plant manager.(he Agreement further provides that the sales policy of 0aniwares shall be that which isnormally followed by A0I and that 0aniwares should not e#port 20tandard2 products otherwisethan through A0IFs E#port *ar?eting 0ervices. Qnder the Agreement, A0I agreed to providetechnology and ?nowA how to 0aniwares and the latter paid royalties for the same. (helegal concept of a )oint venture is of common law origin. It has no precise legal definitionbut it has been generally understood to mean anorgani/ation formed for some temporary purpose. It is in fact hardly distinguishable from the partnership, since their elements are similar community of interest in the business, sharing of profits and losses, and a mutual right of control. (he main distinction cited by most opinions in common law )urisdictions is that the partnershipcontemplates a general business with some degree of continuity, while the )oint venture is formedfor the e#ecution of a single transaction, and is thus of a temporary nature. PrimelinA Properties and Development .orporation vs =a. .larita LaBatin?=agat FA.7SG In 1999, $rimelin? $roperties and the 7a/atin siblings entered into a )oint venture agreement whereby the 7a/atins shall contribute a huge parcel of land and $rimelin? shall develop the same into a subdivision. 4or 9 years however, $rimelin? failed to develop the said land. 0o in 199;, the 7a/atins filed a complaint to rescind the )oint venture agreement with prayer for preliminary in)unction. In said case, $rimelin? was declared in default or failing to file an answer and for as?ing multiple motions for e#tension. (he trial court eventually ruled in favor of the 7a/atins and it ordered $rimelin? to return the possession of said land to the 7a/atins as well as some

improvements which $rimelin? had so far over the property without the 7a/atins paying for said improvements. (his decision was affirmed by the .ourt of Appeals. $rimelin? is now assailing the order< that turning over improvements to the 7a/atins without reimbursement is un)ust< that the 7a/atins did not as? the properties to be placed under their possession but they merely as?ed for rescission. ISSUE: ,hether or not the improvements made by $rimelin? should also be turned over under the possession of the 7a/atins. HELD: 5es. In the first place, even though the 7a/atins did specifically pray for possession the same placing of improvements under their possession" is incidental in the relief they prayed for. (hey are therefore entitled possession over the parcel of land plus the improvements made thereon made by $rimelin?. In this )urisdiction, )oint ventures are governed by the laws of partnership. Qnder the laws of partnership, when a partnership is dissolved, as in this case when the trial court rescinded the )oint venture agreement, the innocent party has the right to wind up the partnership affairs. ,ith the rescission of the DPA on account of petitioners! fraudulent acts, all authority of any partner to act for the partnership is terminated e#cept so far as may be necessary to wind up the partnership affairs or to complete transactions begun but not yet finished. 1n dissolution, the partnership is not terminated but continues until the winding up of partnership affairs is completed. ,inding up means the administration of the assets of the partnership for the purpose of terminating the business and discharging the obligations of the partnership. It must be stressed, too, that although the 7a/atins ac'uired possession of the lands and the improvements thereon, the said lands and improvements remained partnership property, sub)ect to the rights and obligations of the parties, inter se, of the creditors and of third parties and sub)ect to the outcome of the settlement of the accounts between the parties, absent any agreement of the parties in their DPA to the contrary here no agreement in the DPA as to winding up". Qntil the partnership accounts are determined, it cannot be

ascertained how much any of the parties is entitled to, if at all. #/JAS 0S. =A LA*A FA.7S: *aglana and Co)as e#ecuted their Articles of .oA partnership called HEastcoast Bevelopment EnterpisesI which had an indefinite term of e#istence and was registered with the 0E. and had a (imber 7icense. 1ne of the EBE!s purposes was to apply or secure timber and=or private forest lands and to operate, develop and promote such forests rights and concessions. * shall manage the business affairs while C shall be the logging superintendent. All profits and losses shall be divided share and share ali?e between them. 7ater on, the two availed the services of $ahamotang as industrial partner and e#ecuted another articles of coA partnership with the latter. (he purpose of this second partnership was to hold and secure renewal of timber license and the term of which was fi#ed to 3% years. 0till later on, the three e#ecuted a conditional sale of interest in the partnership wherein * and C shall purchase the interest, share and participation in the partnership of $. It was also agreed that after payment of such including amount of loan secured by $ in favor of the partnership, the two shall become owners of all e'uipment contributed by $. After this, the two continued the partnership without any written agreement or reconstitution of their articles of partnership. 0ubse'uently, C entered into a management contract with .*0 Estate Inc. * wrote him reG his contribution to the capital investments as well as his duties as logging superintendent. C replied that he will not be able to comply with both. * then told C that the latter!s share will )ust be +%& of the net profits. 0uch was the sharing from 1987 to 1989 without complaint or dispute. C too? funds from the partnership more than his contribution. * notified C that he dissolved the partnership. C filed an action against * for the recovery of properties and accounting of the partnership and damages. .FI: the partnership of * and C is after $ retired is one of de facto and at will< the sharing of profits and losses is on the basis of actual contributions< there is no evidence these properties were ac'uired by the partnership funds thus it should not belong to it< neither is entitled to damages< the letter of * in effect dissolved the partnership< sale of forest concession is valid and binding

and should be considered as *!s contribution< C must pay or turn over to the partnership the profits he received from .*0 and pay his personal account to the partnership< * must be paid ;8? which he should!ve received but was not paid to him and must be considered as his contribution. ISSUE: what is the nature of the partnership and legal relationship of *AC after $ retired from the second partnershipR *ay * unilaterally dissolve the partnershipR S.: (here was no intention to dissolve the first partnership upon the constitution of the second as everything else was the same e#cept for the fact that they too? in an industrial partnerG they pursued the same purposes, the capital contributions call for the same amounts, all subse'uent renewals of (imber 7icense were secured in favor of the first partnership, all businesses were carried out under the registered articles. * and C agreed to purchase the interest, share and participation of $ and after, they became owners of the e'uipment contributed by $. >oth considered themselves as partners as per their letters. It is not a partnership de facto or at will as it was e#isting and duly registered. (he letter of * dissolving the partnership is in effect a notice of withdrawal and may be done by e#pressly withdrawing even before e#piration of the period with or without )ustifiable cause. As to the li'uidation of the partnership it shall be divided Hshare and share ali?eI after an accounting has been made. C is not entitled to any profits as he failed to give the amount he had underta?en to contribute thus, had become a debtor of the partnership. * cannot be liable for damages as C abandoned the partnership thru his acts and also too? funds in an amount more than his contribution.