G.R. No.

L-12541

August 28, 1959

ROSARIO U. YULO, assisted by her husband JOSE C. YULO, plaintiffsappellants,

vs.
YANG CHIAO SENG, defendant-appellee.
Facts:

Yang Chiao Seng proposed to form a partnership with Rosario Yulo to run and
operate a theatre on the premises occupied by Cine Oro, Plaza Sta. Cruz,
Manila, w/ the ff. principal conditions:
o (1) Yang guarantees Yulo a monthly participation of P3,000;
o (2) partnership shall be for a period of 2 years and 6 months with the
condition that if the land is expropriated, rendered impracticable for
business, owner constructs a permanent building, then Yulos right to
lease and partnership ceases even if period agreed upon has not yet
expired;
o (3) Yulo is authorized to personally conduct business in the lobby of the
building; and
o (4) after Dec 31, 1947, all improvements placed by partnership shall
belong to Yulo but if partnership is terminated before lapse of 1 and
years, Yang shall have right to remove improvements.
Parties established, Yang and Co. Ltd., to exist from July 1, 1945 Dec 31,
1947.
In June 1946, they executed a supplementary agreement extending the
partnership for 3 years from 1/1/1948 to 12/31/1951.
The land on which the theater was constructed was leased by Yulo from
owners, Emilia Carrion and Maria Carrion Santa Marina for an indefinite period
but that after 1 year, such lease may be cancelled by either party upon 90day notice.
In April 1949, the owners notified Yulo of their desire to cancel the
lease contract come July.
Yulo and husband brought a civil action to declare the lease for a indefinite
period.
Owners brought their own civil action for ejectment upon Yulo and Yang.
CFI: Two cases were heard jointly; Complaint of Yulo and Yang was dismissed
declaring contract of lease terminated.
CA: Affirmed
In 1950, Yulo demanded from Yang her share in the profits of the
business.

Yang answered saying he had to suspend payment because of pending

ejectment suit.
Yulo filed action in 1954, alleging the existence of a partnership
between them and that Yang has refused to pay her shares.
Defendants Position:
Lease not partnership; partnership was adopted as a subterfuge to get
around the prohibition contained in the contract of lease between the owners
and the plaintiff against the sublease of the property.
Trial Court dismissed the case.
o No partnership was created b/w them because defendant has not
actually contributed the sum mentioned in the Articles of Partnership
or any other amount.
o The agreement is a lease because plaintiff didnt share either in the
profits or in the losses of the business as required by Art 1769 (CC) and
because plaintiff was granted a guaranteed participation in the
profits belies the supposed existence of a partnership.
Issue: Whether the agreement is a contract a lease.
HELD: YES. Lease Agreement.

The agreement was a sublease not a partnership. The following are the
requisites of partnership:
o (1) two or more persons who bind themselves to contribute money,
property or industry to a common fund;
o (2) the intention to divide the profits among themselves (Art1761)
Plaintiff did not furnish the supposed P20,000 capital nor did she do
anything in the management of the theatre.
Neither has she demanded from defendant any accounting of the expenses
and earnings of the business.
She was absolutely silent with respect to any of the acts that a
partner should have done; all she did was to receive her share of
P3,000 a month which cannot be interpreted in any manner than a
payment for the use of premises which she had leased from the
owners.