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FIRST DIVISION
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
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 Juan Roque. 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 Erlinda Reyes and Maria Samson on March 19,1970. Petitioners realized a net profit
in the sale made in 1968 in the amount of P165,224.70, while they realized a net profit of P60,000.00 in
the sale made in 1970. The corresponding capital gains taxes were paid by petitioners in 1973 and 1974
by availing of the tax amnesties granted in the said years.
However, in a letter 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 as alleged 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 formed an 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 the National Internal Revenue Code
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that the unregistered partnership was
subject to corporate income tax as distinguished from profits derived from the partnership by them which
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 income tax 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 of March 30, 1987,
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affirmed the
decision and action taken by respondent commissioner with costs against petitioners.
It ruled that on the basis of the principle enunciated in Evangelista
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an 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-ownership between the petitioners, there
was no adequate basis for the conclusion that they thereby formed an unregistered partnership which
made "hem liable for corporate income tax under the Tax Code.
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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 THAT PETITIONERS FORMED AN UNREGISTERED PARTNERSHIP
SUBJECT TO CORPORATE INCOME TAX, AND THAT THE BURDEN OF OFFERING 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 EXISTED THUS IGNORING THE REQUIREMENTS LAID DOWN BY LAW THAT
WOULD WARRANT THE PRESUMPTION/CONCLUSION THAT A PARTNERSHIP EXISTS.
C. IN FINDING THAT THE INSTANT CASE IS SIMILAR TO THE EVANGELISTA CASE AND THEREFORE
SHOULD BE DECIDED ALONGSIDE THE EVANGELISTA CASE.
D. IN RULING THAT THE TAX AMNESTY DID NOT RELIEVE THE PETITIONERS FROM PAYMENT OF OTHER
TAXES FOR THE PERIOD COVERED BY SUCH AMNESTY. (pp. 12-13, Rollo.)
The petition is meritorious. The basis of the subject decision of the respondent court is the ruling of this
Court in Evangelista.
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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. They appointed 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 for several 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, among others, 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, otherwise known as the National Internal Revenue Code, as well as to
the residence tax for corporations and the real estate dealers' fixed tax. With respect to the tax on
corporations, the issue hinges on the meaning of the terms corporation and partnership as used in
sections 24 and 84 of said Code, the pertinent 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 the preceding taxable year from all sources by every corporation
organized in, or existing under the laws of the Philippines, no matter how created or organized but not
including duly registered general co-partnerships (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 en participation), associations or insurance companies, but does not
include duly registered general co-partnerships (companies colectivas).
Article 1767 of the Civil Code of the Philippines provides:
By the contract of partnership two or more persons bind themselves to contribute money, property, or
industry to a common fund, with the intention of dividing the profits among themselves.
Pursuant to this article, the essential elements of a partnership are two, namely: (a) an agreement to
contribute money, property or industry to a common fund; and (b) intent to divide the profits among the
contracting parties. The first element is undoubtedly present in the case at bar, for, admittedly, petitioners
have agreed to, and did, contribute money and property to a common fund. Hence, the issue narrows
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down to their intent in acting as they did. Upon consideration of all the facts and circumstances
surrounding the case, we are fully satisfied that their purpose was 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 a property inherited
by them pro indiviso. They created it purposely. What is more they jointly borrowed a substantial portion
thereof in order to establish said common fund.
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 P100,000.00. On April 3, 1944, they purchased 21 lots for P18,000.00. This
was soon followed, on April 23, 1944, by the acquisition of another real estate for P108,825.00. Five (5)
days later (April 28, 1944), they got a fourth lot for P237,234.14. The number of lots (24) acquired and
transcations undertaken, as well as the brief interregnum between each, particularly the last three
purchases, is strongly indicative of a pattern or common design that was not limited to the conservation
and preservation of the aforementioned common fund or even of the property acquired by petitioners in
February, 1943. In other words, one cannot but perceive a character of habituality peculiar to business
transactions engaged in for purposes of gain.
3. The aforesaid lots were not devoted to residential purposes or to other personal uses, of petitioners
herein. The properties were leased separately to several persons, who, from 1945 to 1948 inclusive, paid
the total sum of P70,068.30 by way of rentals. Seemingly, the lots are still being so let, for petitioners do
not even suggest that there has been any change in the utilization thereof.
4. Since August, 1945, the properties have been under the management of one person, namely, Simeon
Evangelists, with full power to lease, to collect rents, to issue receipts, to bring suits, to sign letters and
contracts, and to indorse and deposit notes and checks. Thus, the affairs relative to said properties have
been handled as if the same belonged to a corporation or business 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 Evangelists became
the manager.
6. Petitioners have not testified or introduced any evidence, either on their purpose in creating the set up
already adverted to, or on the causes for its continued existence. They did not even try to offer an
explanation therefor.
Although, taken singly, they might not suffice to establish the intent necessary to constitute a
partnership, the collective effect of these circumstances is such as to leave no room for doubt on the
existence of said intent in petitioners herein. Only one or two of the aforementioned circumstances were
present in the cases cited by petitioners herein, and, hence, those cases are not in point.
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In the present case, there is no evidence that petitioners entered into an agreement to contribute money,
property or industry to a common fund, and that they intended to divide the profits among themselves.
Respondent commissioner and/ or his representative just assumed these conditions to be present on the
basis of the fact that petitioners purchased certain parcels of land and became co-owners thereof.
In Evangelists, there was a series of transactions where petitioners purchased twenty-four (24)
lots showing that the purpose was not limited to the conservation or preservation of the common fund or
even the properties acquired by them. The character of habituality peculiar to business transactions
engaged in for the purpose of gain was present.
In the instant case, petitioners bought two (2) parcels of land in 1965. They did not sell the same nor
make any improvements thereon. In 1966, they bought another three (3) parcels of land from one seller.
It was only 1968 when they sold the two (2) parcels of land after which they did not make any additional
or new purchase. The remaining three (3) parcels were sold by them in 1970. The transactions were
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isolated. The character of habituality peculiar to business transactions for the purpose of gain was not
present.
In Evangelista, the properties were leased out to tenants for several years. The business was under the
management of one of the partners. Such condition existed for over fifteen (15) years. None of the
circumstances are present in the case at bar. The co-ownership started only in 1965 and ended in 1970.
Thus, in the concurring opinion of Mr. Justice Angelo Bautista in Evangelista he said:
I wish however 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 itself establish a partnership, whether such co-owners or co-
possessors do or do not share any profits made by the use of the property;
(3) The sharing of gross returns does not of itself establish a partnership, whether or not the persons
sharing them have a joint or common right or interest in any property from which the returns are derived;
From the above it appears that the fact that those who agree to form a co- ownership share or do not
share any profits made by the use of the property held in common does not convert their venture into a
partnership. Or the sharing of the gross returns does not of itself establish a partnership whether or not
the persons sharing therein have a joint or common right or interest in the property. This only means
that, aside from the circumstance of profit, the presence of other elements constituting partnership is
necessary, such as the clear intent to form a partnership, the existence of a juridical personality different
from that of the individual partners, and the freedom to transfer or assign any interest in the property by
one with the consent of the others(Padilla, Civil Code of the Philippines Annotated, Vol. I, 1953 ed., pp.
635-636)
It is evident that an isolated transaction whereby two or more persons contribute funds to buy certain real
estate for profit in the absence of other circumstances showing a contrary intention cannot be considered
a partnership.
Persons who contribute property or funds for a common enterprise and agree to share the gross returns of
that enterprise in proportion to their contribution, but who severally retain the title to their respective
contribution, are not thereby rendered partners. They have no common stock or capital, and no
community of interest as principal proprietors in the business itself which the proceeds derived. (Elements
of the Law of Partnership by 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 the sale 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 of disposing 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 third 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) and such a community of interest, as far as third
persons are concerned as enables each party to make contract, manage the business, and dispose of the
whole property.-Municipal Paving Co. vs. Herring 150 P. 1067, 50 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
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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.)
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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 must be 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 the whole 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 an unregistered partnership. The two isolated
transactions whereby they purchased properties and sold the same a few years thereafter did not thereby
make them partners. 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, they cannot 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 a distinct 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 unpaid obligation of the partnership p.
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However, as petitioners have availed of
the benefits of tax amnesty as individual taxpayers in these transactions, they are thereby relieved of any
further tax liability arising there from.
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 and another 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.




SECOND DIVISION

[G.R. No. 104404. May 6, 1993.]
SPOUSES TIU PECK and LEE YOK YAN, Petitioners, v. THE HONORABLE COURT OF APPEALS
(Seventeenth Division) and SPOUSES CONCHITA M. RUBIATO and TAN KING, Respondents.
J.P. Villanueva & Associates, for Petitioners.
Estanislao L. Cesa, Jr. for Private Respondents.

SYLLABUS
1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT, LAW BETWEEN THE PARTIES; CASE AT BAR.
There is no question that petitioners and the private respondents voluntarily entered into the
agreement to apportion or divide their businesses, whether as partners or co-owners. That agreement is
the law between them. Contracts shall be obligatory in whatever form they may have been entered into,
provided all the essential requisites for their validity are present. The fact that after signing the
agreement both parties immediately took possession of their respective shares is the most compelling
evidence that there was indeed a binding partition of the properties. Contracts, once perfected, have the
force of law between the parties who are bound to comply therewith in good faith, and neither one may,
without the consent of the other, renege therefrom.

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2. ID.; ID.; CONTRACTS; MAY NOT BE OVERTURNED BY INCONCLUSIVE PROOF. Contracts solemnly
and deliberately entered into may not be overturned by inconclusive proof or by reason of mistake of one
of the parties to which the other in no way has contributed.

3. ID.; ID.; ID.; TITLE THEREOF DOES NOT NECESSARILY DETERMINE ITS NATURE. The title of the
contract does not necessarily determine its true nature.

D E C I S I O N
PADILLA, J.:
This is a petition for review on certiorari of the decision 1 of the Seventeenth Division of respondent
Court of Appeals in CA-G.R. CV No. 24912, dated 11 October 1991, modifying the trial courts judgment.

The antecedent facts of the case are as follows:

In his lifetime, Joaquin Tiu Singco; father of petitioner Tiu Peck, owned and operated the Argentina
Trading, a business engaged in the buying and selling of lumber, hardware and general merchandise in
San Marcelino, Zambales. Helping him run the business were private respondents: Tan King who helped
manage the store and receiving P200.00 a month, while his wife Conchita M. Rubiato did the marketing
and cooking for which work she received a salary of around P180.00 to P240.00 a month. The business
license was, however, in the name of Conchita M. Rubiato.

After the death of Joaquin Tiu Singco in 1974, Tiu Peck took over and continued the business left by his
father. Tan King and Conchita M. Rubiato continued to help him in the management of the said business,
eventually becoming partners thereof.

Sometime in 1983, petitioners and private respondents decided to end their business partnership.
Accordingly, they sought the help of five (5) respected members of the Filipino Chinese Chamber of
Commerce and Industry of Olongapo City (of which petitioners and private respondents are members) to
act as middlemen. Together with the five (5) middlemen, Tiu Peck and Tan King discussed the manner of
their separation and the liquidation of the partnership properties. As a result of the discussion, an
"Agreement on the Apportionment of Partnership Business" was drawn up. Tiu Peck, also known as Lim
Yan Chiao, and Tan King, also known as Tiu To Suan, both signed the Agreement to which the five (5)
middlemen also affixed their signatures as witnesses.

The abovesaid Agreement reads as follows:

"AGREEMENT ON THE APPORTION OF

PARTNERSHIP BUSINESSES

The undersigned LIM YAN CHIAO and TIU TO SUAN hereby agreed to terminate their partnership in
business and apportion(ment) of their lumber and hardware store and piggery farm under following
conditions:

First: The joint business shall be divided and apportioned on a lottery basis.

Second: The collection of accounts receivable to the partnerships (sic) shall be divided into four phases,
such accounts shall be collected by the person who gets the lot, and the collected funds shall be divided
equally by the partners after deducting commissions as follows:

First phase 20% commission
Second phase 30% commission
Third phase 40% commission
Fourth phase 50% commission

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Third: The partnership shall appropriate an amount of funds for the separation of employees of the
partnership, which shall be sole responsibility of the lot winners concerned henceforth.

Fourth: The partnership shall likewise appropriate an amount of funds to the lot winners concerned for
the payment of unpaid taxes and fees.

Fifth: The joint business are estimated of its assets as follows:.

(a) Lumber & Hardware One Million and Six Hundred Thousand Pesos (P1,600,000.00) including
building and lot, and all the merchandise.

(b) Piggery One Million Pesos (P1,000,000.00) including the building and lot and all the goods
including the feeds.

Sixth: The person who win(s) the lot for the lumber and hardware shall give Three Hundred Thousand
Pesos (P300,000.00) to the person who got (sic) the lot for the piggery.

Seventh: This agreement shall take effect upon the lottery.

Done on the 31st day of August on the year of our Lord Nineteen Hundred and Eighty-Three.

(Sgd.) LIM YAN CHIAO (Sgd.) TIU TO SAUNA

Lim Yan Chiao got the lot of the Lumber

Tiu To Suan got the lot of the piggery.

Witnesses:chanrob1es virtual 1aw library

(Sgd.) CHUA PUN SU (Sgd.) CO CHU TONG

(Sgd.) Ting Kok Bin (Sgd.) CHENG SUY LEY

(Sgd.) Ting Kim Yek" 2

Immediately thereafter, Tiu Peck took possession of the lumber and hardware business including the lot
and building as well as the merchandise therein. On the other hand, Tan King and Conchita M. Rubiato
took possession of the piggery business, the lot and all the improvements thereon as well as the hogs.

After three (3) years, or specifically on 21 April 1986, private respondents wrote petitioners demanding
partition of the same properties subject of the Agreement of 31 August 1983. Eventually, private
respondents filed an action against petitioners for partition of the parcel of land covered by TCT No. T-
24999 where the lumber and hardware business was conducted and the parcel of land covered by Tax
Declaration No. 10985 where the piggery business was located.

After trial, the Regional Trial Court of the Third Judicial Region, Branch 72, Olongapo City, rendered
judgment, declaring, among other things, that the parcels of land covered by Transfer Certificate of Title
No. T-24999 and Tax Declaration No. 10985 are owned in common by the plaintiffs (private respondents)
and the defendants (petitioners) in pro-indiviso equal shares; that the plaintiffs (private respondents) are
the owners of the building covered by Tax Declaration No. 59345 built on the parcel of land covered by
TCT No. T-24999; and ordering plaintiffs and defendants to partition the said parcels of land among
themselves.

Petitioners (as defendants) appealed the above decision to respondent Court of Appeals. On 11 October
1991, respondent Court promulgated the challenged decision modifying the trial courts judgment as
follows:

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"WHEREFORE, the judgment appealed from is modified, to read as follows:

1. The parcel of land covered by Transfer Certificate of Title No. T-24999 (Exhibit A), the building erected
thereon covered by Tax Declaration No. 59345 (Exhibit B), and the parcel of land covered by Tax
Declaration No. 10985 (Exhibit I) are declared owned in common by the plaintiffs spouses Conchita M.
Rubiato and Tan King and the appellants spouses Tiu Peck and Lee Yok Yan, pro-indiviso in equal shares,
which properties are hereby ordered partitioned in accordance with the provisions of Rule 69 of the
Revised Rules of Court, the trial Court to follow the procedure provided therein;

2. The defendants are ordered to return to the plaintiffs the personal belongings kept in the building
covered by Tax Declaration No. 59345 (Exhibit B); and

3. The defendants counterclaim against the plaintiffs is dismissed.

No pronouncement as to costs in this instance.

SO ORDERED." 3

Undaunted, petitioners are now before us seeking a review of respondent courts decision and assigning
the following errors to said court:

"A. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN DISREGARDING THE RESULT OF THE
PARTITION AGREEMENT ENTITLED AGREEMENT ON THE APPORTION (SIC) OF PARTNERSHIP
BUSINESSES BY DECLARING THE PROPERTIES SUBJECT THEREIN AGAIN AS OWNED IN COMMON BY
THE PETITIONERS AND RESPONDENT PRO INDIVISO AND ORDERING A NEW PARTITION UNDER RULE 69
THUS SUPERSEDING AND VIOLATING THE BINDING AGREEMENT THAT WERE (SIC) ALREADY EXECUTED
AND CONSUMMATED BY AND BETWEEN THE CO-OWNERS, WHICH TOOK EFFECT THREE YEARS AGO,
BEFORE THE RESPONDENT FILED THE PETITION FOR PARTITION.

B. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN DISREGARDING THE PRINCIPLE THAT
THE CONTRACT ONCE PERFECTED HAS THE FORCE OF LAW BETWEEN THE PARTIES WITH WHICH THEY
ARE BOUND TO COMPLY IN GOOD FAITH AND NEITHER ONE OF THE PARTIES WITHOUT THE CONSENT
OF THE OTHER RENEGE ON (SIC) THEREFROM.

C. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN COMPLETELY IGNORING THE PRINCIPLE
OF EQUITY APPLICABLE IN THE CASE AT BAR IN ORDER TO PROTECT THE VESTED RIGHTS THAT
ACCRUED TO THE PETITIONERS WHEN THE PARTIES HAD ACTUALLY IMPLEMENTED AND EXECUTED THE
PARTITION AGREEMENT, AND WHO HAD EXERCISE(D) OWNERSHIP OR ACTS OF STRICT DOMINION
OVER THE PROPERTIES ALLOTED TO EACH BY VIRTUE OF THE AGREEMENT.

D. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN COMPLETELY IGNORING THE PRINCIPLE
OF ESTOPPEL APPLICABLE AGAINST THE RESPONDENT THAT HAS BARRED THEM FROM QUESTIONING
THE BINDING FORCE AND EFFECT OF THE AGREEMENT." 4

The foregoing recital of errors may be reduced to two (2) principal issues.

The first issue concerns the alleged business partnership between Tiu Peck on the one hand and the
spouses Tan King and Conchita M. Rubiato on the other.

We agree with the resolution of the respondent court on this issue.

"To begin with, it cannot be said that there was a business partnership between the appellants on the
one hand and the appellees on the other, absent the required public instrument constituting the
partnership, immovable properties having been contributed by the parties (Article 1771, Civil Code) and
recording thereof in the Securities and Exchange Commission (Article 1772, Civil Code).

Nonetheless, the parties may be deemed as co-owners of the real properties and the businesses they are
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engaged in mentioned in the agreement aforequoted (Exhibits 62 and 63). (Underscoring supplied).

But the parties be (they) partners or co-owners as the case may be, the parcel of land mentioned in the
agreement (Exhibits 62 and 63) where the lumber and hardware business was conducted, covered by
TCT No. 24999 (Exhibit A), and the building erected thereon covered by Tax Declaration No. 59345
(Exhibit B); and the parcel of land where their piggery business was located, covered by Tax Declaration
No. 10985 (Exhibit I), including the building and lot and all the goods including the feeds therein belong
to appellants on the one hand and appellees on the other." 5

Following the abovequoted ratiocination of respondent court, we expected it to then rule on the validity
and binding effect of the partition of the subject properties between the two (2) contending parties as co-
owners. Unfortunately, it diverted from the trend of its position when it disregarded the real intention of
the parties which was to divide the businesses and properties owned by them in common. Respondent
court itself perceived this intention when it stated:

". . . Such is the import of their agreement where appellant Tiu Peck and appellee Tan King agreed to
terminate their partnership in business and apportion their lumber and hardware business valued
P1,600,000, including (the) building and lot, and all the merchandise and piggery valued P1,000,000,
`including the building and lot and all the goods including the feeds (Exhibits 62 and 63)." 6 (Emphasis
supplied).

It should be noted that private respondent Conchita M. Rubiato initiated the move to terminate the so-
called partnership when she informed Tiu Peck that since their children were already grown-up, it was a
propitious time for them to separate their businesses. To this proposal, Tiu Peck agreed. With the help of
five (5) respected middlemen, they drew up on 31 August 1983 the Agreement on the Apportionment of
Partnership Businesses which they all signed. There can be no doubt, therefore, that the two (2) parties
wanted to go their separate ways in their business and to get their respective shares of the properties
which they owned in common when they drew up and executed the 31 August 1983 agreement.

This brings us to the second issue: whether or not the agreement of 31 August 1983 is valid and binding
between the petitioners and private respondents.

There is no question that petitioners and the private respondents voluntarily entered into the agreement
to apportion or divide their businesses, whether as partners or co-owners. That agreement is the law
between them. Contracts shall be obligatory in whatever form they may have been entered into,
provided all the essential requisites for their validity are present. 7 The fact that after signing the
agreement both parties immediately took possession of their respective shares is the most compelling
evidence that there was indeed a binding partition of the properties. Contracts, once perfected, have the
force of law between the parties who are bound to comply therewith in good faith, and neither one may,
without the consent of the other, renege therefrom. 8

And, as held by respondent court, even though petitioner Lee Yok Yan and respondent Conchita M.
Rubiato were not actual signatories to the agreement, nonetheless, such agreement is persuasive for or
against them. Indeed, private respondents have no justification to refuse delivery of TCT No. T-24999 to
petitioners after they agreed to the partition and consequently took possession of the piggery business
and operated it for three (3) years before changing their minds and seeking a new partition. It has not
been explained by them as perhaps explanation is not possible why it took them three (3) years
before they decided for another partition of the same properties subject of their agreement on 31 August
1983.

". . . Contracts solemnly and deliberately entered into may not be overturned by inconclusive proof or by
reason of mistake of one of the parties to which the other in no way has contributed." 9

The respondent court, in our view, erred in ordering another partition after ruling that there is no
partnership but a co-ownership of the real properties and businesses between the petitioners and private
respondents.

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Moreover, the title of the contract does not necessarily determine its true nature.

"The acts of the contracting parties, subsequent to, and in connection with, the performance of the
contract must be considered in the interpretation of the contract . . . To determine the nature of a
contract, courts do not have or are not bound to rely upon the name or title given it by the contracting
parties . . . but the way the contracting parties do or perform their respective obligations, stipulated or
agreed upon may be shown and inquired into, and should such performance conflict with the name or
title given the contract by the parties, the former must prevail over the latter." 10

WHEREFORE, in view of the foregoing, the decision appealed from ordering the partition of the properties
in question is hereby SET ASIDE. Accordingly:chanrob1es virtual 1aw library

1. the partition of the properties subject of the Agreement On the Apportionment of Partnership
Businesses, dated 31 August 1983, is hereby declared valid and binding between petitioners and the
private respondents;

2. Transfer Certificate of Title No. T-24999 (Exhibit A) covering the lot of the lumber and hardware
business as well as Tax Declaration No. 59345 covering the building thereon are hereby ordered
consolidated in the name of petitioners;

3. the Register of Deeds of Zambales is hereby ordered to issue a new Transfer Certificate of Title in the
names of petitioners Tiu Peck and Lee Yok Yan in lieu of TCT No. T-24999, Book No. T-230, page 199;
and

4. the lot covered by Tax Declaration No. 10985 and all improvements therein devoted to the piggery
business are declared properties of the private respondents; and

5. the petitioners are ordered to return to private respondents the personal belongings kept in the
building covered by Tax Declaration No. 59345 (Exhibit B).

Cost against private respondents.

SO ORDERED.

Narvasa, C.J., Regalado and Nocon, JJ., concur.

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