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Philex vs CIR

Facts: Petitioner Philex entered into an agreement with Baguio Gold Mining Corporation for the
former to manage the latters mining claim know as the Sto. Mine. The parties agreement was
denominated as Power of Attorney. The mine suffered continuing losses over the years, which
resulted in petitioners withdrawal as manager of the mine. The parties executed a Compromise
Dation in Payment, wherein the debt of Baguio amounted to Php. 112,136,000.00. Petitioner
deducted said amount from its gross income in its annual tax income return as loss on the
settlement of receivables from Baguio Gold against reserves and allowances. BIR disallowed the
amount as deduction for bad debt. Petitioner claims that it entered a contract
of agency evidenced by the power of attorney executed by them and the advances made by
petitioners is in the nature of a loan and thus can be deducted from its gross income. Court of
Tax Appeals (CTA) rejected the claim and held that it is a partnership rather than an agency. CA
affirmed CTA

Issue: Whether or not it is an agency.

Held: No. The lower courts correctly held that the Power of Attorney (PA) is the instrument
material that is material in determining the true nature of the business relationship between
petitioner and Baguio. An examination of the said PA reveals that a partnership or joint venture
was indeed intended by the parties. While a corporation like the petitioner cannot generally enter
into a contract of partnership unless authorized by law or its charter, it has been held that it may
enter into a joint venture, which is akin to a particular partnership. The PA indicates that the
parties had intended to create a PAT and establish a common fund for the purpose. They also
had a joint interest in the profits of the business as shown by the 50-50 sharing of income of the

Moreover, in an agency coupled with interest, it is the agency that cannot be revoked or
withdrawn by the principal due to an interest of a third party that depends upon it or the mutual
interest of both principal and agent. In this case the non-revocation or non-withdrawal under the
PA applies to the advances made by the petitioner who is the agent and not the principal under
the contract. Thus, it cannot be inferred from the stipulation that it is an agency.

Heirs of Jose Lim vs Juliet Villa Lim

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

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

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

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

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

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

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

1.) Cresencia testified that Jose gave Elfledo P50,000.00, as share in the partnership, on a date
that coincided with the payment of the initial capital in the partnership;

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

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

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

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

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

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

Primelink Properties and Development Corporation vs Ma. Clarita Lazatin-Magat

In 1994, Primelink Properties and the Lazatin siblings entered into a joint venture agreement
whereby the Lazatins shall contribute a huge parcel of land and Primelink shall develop the
same into a subdivision. For 4 years however, Primelink failed to develop the said land. So in
1998, the Lazatins filed a complaint to rescind the joint venture agreement with prayer for
preliminary injunction. In said case, Primelink was declared in default or failing to file an answer
and for asking multiple motions for extension. The trial court eventually ruled in favor of the
Lazatins and it ordered Primelink to return the possession of said land to the Lazatins as well as
some improvements which Primelink had so far over the property without the Lazatins paying for
said improvements. This decision was affirmed by the Court of Appeals. Primelink is now
assailing the order; that turning over improvements to the Lazatins without reimbursement is
unjust; that the Lazatins did not ask the properties to be placed under their possession but they
merely asked for rescission.

ISSUE: Whether or not the improvements made by Primelink should also be turned over under
the possession of the Lazatins.

HELD: Yes. In the first place, even though the Lazatins did specifically pray for possession the
same (placing of improvements under their possession) is incidental in the relief they prayed for.
They are therefore entitled possession over the parcel of land plus the improvements made
thereon made by Primelink.
In this jurisdiction, joint ventures are governed by the laws of partnership. Under the laws of
partnership, when a partnership is dissolved, as in this case when the trial court rescinded the
joint venture agreement, the innocent party has the right to wind up the partnership affairs.

With the rescission of the JVA on account of petitioners fraudulent acts, all authority of any
partner to act for the partnership is terminated except so far as may be necessary to wind up
the partnership affairs or to complete transactions begun but not yet finished. On dissolution,
the partnership is not terminated but continues until the winding up of partnership affairs is
completed. Winding 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 Lazatins acquired possession of the lands and the
improvements thereon, the said lands and improvements remained partnership property, subject
to the rights and obligations of the parties, inter se, of the creditors and of third parties and
subject to the outcome of the settlement of the accounts between the parties, absent any
agreement of the parties in their JVA to the contrary (here no agreement in the JVA as to
winding up). Until the partnership accounts are determined, it cannot be ascertained how much
any of the parties is entitled to, if at all.


Petitioner Josefina Realubit entered into a Joint Venture Agreement with Francis Eric
Amaury Biondo, a French national, for the operation of an ice manufacturing business. With
Josefina as the industrial partner and Biondo as the capitalist partner, the parties agreed that
they would each receive 40% of the net profit, with the remaining 20% to be used for the
payment of the ice making machine which was purchased for the business. For and in
consideration of the sum of P500,000.00, however, Biondo subsequently executed a Deed of
Assignment transferring all his rights and interests in the business in favor of respondent Eden
Jaso, the wife of respondent Prosencio Jaso.With Biondos eventual departure from the country,
the Spouses Jaso caused their lawyer to send Josefina a letter apprising her of their acquisition
of said Frenchmans share in the business and formally demanding an accounting and inventory
thereof as well as the remittance of their portion of its profits.

Faulting Josefina with unjustified failure to heed their demand, the Spouses Jaso
commenced the instant suit for specific performance, accounting, examination, audit and
inventory of assets and properties, dissolution of the joint venture, appointment of a receiver
and damages. The said complaint alleged that the Spouses Realubit had no gainful occupation or
business prior to their joint venture with Biondo and that aside from appropriating for
themselves the income of the business, they have fraudulently concealed the funds and assets
thereof thru their relatives, associates or dummies. The Spouses Realubit claimed that they have
been engaged in the tube ice trading business under a single proprietorship even before their
dealings with Biondo.

The RTC rendered its Decision discounting the existence of sufficient evidence from which
the income, assets and the supposed dissolution of the joint venture can be adequately
reckoned. Upon the finding, however, that the Spouses Jaso had been nevertheless subrogated
to Biondos rights in the business in view of their valid acquisition of the latters share as capitalist
partner. On appeal before the CA, the foregoing decision was set aside

upon the following findings that the Spouses Jaso validly acquired Biondos share in the business
which had been transferred to and continued its operations and not dissolved as claimed by the
Spouses Realubit.


1. Whether there was a valid assignment or rights to the joint venture

2. Whether the joint venture is a contract of partnership
3. Whether Jaso acquired the title of being a partner based on the Deed of Assignment

1. Yes. As a public document, the Deed of Assignment Biondo executed in favor of Eden not
only enjoys a presumption of regularity but is also considered prima facie evidence of the facts
therein stated. A party assailing the authenticity and due execution of a notarized document is,
consequently, required to present evidence that is clear, convincing and more than merely
preponderant. In view of the Spouses Realubits failure to discharge this onus, we find that both
the RTC and the CA correctly upheld the authenticity and validity of said Deed of
Assignment upon the combined strength of the above-discussed disputable presumptions and
the testimonies elicited from Edenand Notary Public Rolando Diaz.

2. Yes. Generally understood to mean an organization formed for some temporary purpose,
a joint venture is likened to a particular partnership or one which has for its object determinate
things, their use or fruits, or a specific undertaking, or the exercise of a profession or vocation.
The rule is settled that joint ventures are governed by the law on partnerships which are, in
turn, based on mutual agency or delectus personae.

3. No. It is evident that the transfer by a partner of his partnership interest does not make
the assignee of such interest a partner of the firm, nor entitle the assignee to interfere in the
management of the partnership business or to receive anything except the assignees profits. The
assignment does not purport to transfer an interest in the partnership, but only a future
contingent right to a portion of the ultimate residue as the assignor may become entitled to
receive by virtue of his proportionate interest in the capital. Since a partners interest in the
partnership includes his share in the profits, we find that the CA committed no reversible error in
ruling that the Spouses Jaso are entitled to Biondos share in the profits, despite Juanitas lack of
consent to the assignment of said Frenchmans interest in the joint venture. Although Eden did
not, moreover, become a partner as a consequence of the assignment and/or acquire the right to
require an accounting of the partnership business, the CA correctly granted her prayer for
dissolution of the joint venture conformably with the right granted to the purchaser of a
partners interest under Article 1831 of the Civil Code.

Sunga Chan v. Chua

On June 22, 1992, respondent Lamberto T. Chua filed a complaint against petitioners, Lilibeth
Sunga Sunga Chan and Cecilia Sunga, daughter and wife, respectively of the deceased Jacinto L.
Sunga, for winding up of Partnership Affairs, accounting, appraisal and recovery of Shares and
Damages with Writ of Preliminary Attachment with the Regional Trial Court, Branch 11,
Zamboanga del Norte.

Respondent alleged that in 1977, he verbally entered into a partnership with Jacinto in the
distribution of Shellane Liquefied Petroleum Gas (LPG) in Manila with initial capital contribution of
Php100,000.00 each, with the intention that the profits would be equally divided between them.
For business convenience, respondent and Jacinto agreed to register the business name of their
partnership SHELLITE GAS APPLIANCE CENTER under the name of Jacinto as sole proprietorship.

Petitioners question the correctness of the finding of the Trial Court and the Court of Appeals
that a partnership existed in the absence of any written document to show partnership between
respondent and Jacinto from 1977 until Jacintos death.


Whether or not respondent Lamberto Chua and Jacinto L. Sunga has entered into a partnership?


Yes. The court ruled that a partnership may be constituted in any form, except where immovable
property or real rights are contributed thereto, in which case a public instrument shall be
necessary. Also, Article 1772 of the Civil Code requires that partnership with a capital of
Php3,000.00 or more must register with the Securities and Exchange Commission, however this
registration requirement is not mandatory. Article 1768 of the Civil Code explicitly provides that
the partnership retains its juridical personality even if it fails register. The failure to register the
contract of partnership does not invalidate the same as among the partners, so long as the
contract has the essential requisites, because the main purpose of registration is to give notice
to third parties, and it can be assumed that the members themselves knew of the contents of
their contract.

Villareal vs Ramirez

FACTS: Villareal, C. Jose and J. Jose formed a partnership for the operation of a restaurant and
catering business under the name Aquarius Food House and Catering Services, each
contributing 250K. Ramirez was later added, contributing 250K as well. After some time, one of
them (J. Jose) withdrew from the partnership; his capital contribution was refunded to him in
cash by agreement of the partners.

Without prior knowledge of respondents, petitioners closed down the restaurant, allegedly
because of increased rental. On March 1, 1987, The respondent spouses wrote petitioners,
saying that they were no longer interested in continuing their partnership or in reopening the
restaurant, and that they were accepting the latters offer to return their capital contribution.
The repeated oral and written requests were, however, left unheeded

Before the RTC, respondents subsequently filed a Complaintfor the collection of a sum of money
from petitioners. the RTC ruled in favor of the respondents, ordering petitioners to pay damages
and AF and costs.

The CA sustained the lower courts decision, and made a computation on the petitioners liability
to respondents:

Capital, at dissolution: **P1,000,000.00

Less: liability to creditors 240,658.00

Amount to be distributed to partners 759,342.00

Over: Number of partners 3

Each partners share at dissolution 253,114.00

** which is erroneous, as this is the capital at the BEGINNING of the partnership. Hence this

ISSUE: WON the CA computation was erroneous

HELD: We hold that respondents have no right to demand from petitioners the return of their
equity share. YES. Generally, in the pursuit of a partnership business, its capital is either
increased by profits earned or decreased by losses sustained. It does not remain static and
unaffected by the changing fortunes of the business. In the computation of the amount to be
refunded to respondents, The CA did not consider:

1. The omission of any provision for the depreciationof the furniture and the equipment.

2. The amortization of the goodwill is not reflected

3. The capitalization amount paid by the partnership to J. Jose when he withdrew from the

Because of the above-mentioned transactions, the partnership capital was actually reduced.

But the disposition is without prejudice to proper proceedings for the accounting, the liquidation
and the distribution of the remaining partnership assets, if any

Guy v. Gacott, 2016

Gacott secured a favorable judgment against QSC in a complaint for damages before RTC Puerto
Princesa. During execution, he learned that QSC was not a corporation but a general partnership
with Mr. Guy as a partner and its general manager. The sheriff then attached Guy's vehicle by
virtue of a Notice of Attachment/Levy upon Personalty.
The SC held that a partner must be separately and distinctly impleaded before he can be bound
by a judgment. It is non sequitur that a suit against a partnership is necessarily a suit
impleading each and every partner. A partnership has a separate legal personality from the
partners. Art. 1816, NCC states that the partners' obligation with respect to partnership liabilities
is subsidiary in nature. They shall only be liable with their property after the partnership assets
have been exhausted.
Since Guy was not the judgment debtor in the case before the RTC, his levied vehicle was


The present case stems from the complaint filed by Antonieta Jarantilla against Buenaventura
Remotigue, Cynthia Remotigue, Federico Jarantilla, Jr., Doroteo Jarantilla and Tomas Jarantilla,
for the accounting of the assets and income of the co-ownership, for its partition and the
delivery of her share corresponding to eight percent (8%), and for damages. Antonieta claimed
that in 1946, she had entered into an agreement with the defendants to engage in business
through the execution of a document denominated as "Acknowledgement of Participating
Capital. Antonieta also alleged that she had helped in the management of the business they co-
owned without receiving any salary. Antonieta further claimed co-ownership of certain properties
(the subject real properties) in the name of the defendants since the only way the defendants
could have purchased these properties were through the partnership as they had no other
source of income. The respondents did not deny the existence and validity of the"
Acknowledgement of Participating Capital" and in fact used this as evidence to support their
claim that Antonietas 8% share was limited to the businesses enumerated therein. The
respondents denied using the partnerships income to purchase the subject real properties.
During the course of the trial at the RTC, petitioner Federico Jarantilla, Jr., who was one of
theoriginal defendants, entered into a compromise agreement with Antonieta Jarantilla wherein
he supported Antonietas claims and asserted that he too was entitled to six percent (6%) of the
supposed partnership in the same manner as Antonieta was.

Whether or not the partnership subject of the Acknowledgement of Participating Capital funded
the subject real properties.

Under Article 1767 of the Civil Code, there are two essential elements in a contract of
(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, all the parties in this case have agreed to, and did,
contribute money and property to a common fund. Hence, the issue narrows down to their intent
in acting as they did. It is not denied that all the parties in this case have agreed to contribute
capital to a common fund to be able to later on share its profits. They have admitted this fact,
agreed to its veracity, and even submitted one common documentary evidence to prove such
partnership - the Acknowledgement of Participating Capital. The petitioner himself claims his
share to be 6%, as stated in the Acknowledgement of Participating Capital. However, petitioner
fails to realize that this document specifically enumerated the businesses covered by the
partnership: Manila Athletic Supply, Remotigue Trading in Iloilo City and Remotigue Trading in
Cotabato City. Since there was a clear agreement that the capital the partners contributed went
to the three businesses, then there is no reason to deviate from such agreement and go beyond
the stipulations in the document. There is no evidence that the subject real properties were
assets of the partnership referred to in the Acknowledgement of Participating Capital. Petition

Ortega vs. CA
On December 19, 1980, respondent Misa associated himself together, as senior partner with
petitioners Ortega, del Castillo, Jr., and Bacorro, as junior partners. On Feb. 17, 1988,
respondent Misa wrote a letter stating that he is withdrawing and retiring from the firm and
asking for a meeting with the petitioners to discuss the mechanics of the liquidation. On June 30,
1988, petitioner filed a petition to the Commision's Securities Investigation and Clearing
Department for the formal dissolution and liquidation of the partnership. On March 31, 1989, the
hearing officer rendered a decision ruling that the withdrawal of the petitioner has not dissolved
the partnership. On appeal, the SEC en banc reversed the decision and was affirmed by the
Court of Appeals. Hence, this petition.

Whether or not the Court of Appeals has erred in holding that the partnership is a partnership at
will and whether or not the Court of Appeals has erred in holding that the withdrawal of private
respondent dissolved the partnership regardless of his good or bad faith


No. The SC upheld the ruling of the CA regarding the nature of the partnership. The SC further
stated that a partnership that does not fix its term is a partnership at will. The birth and life of a
partnership at will is predicated on the mutual desire and consent of the partners. The right to
choose with whom a person wishes to associate himself is the very foundation and essence of
that partnership. Its continued existence is, in turn, dependent on the constancy of that mutual
resolve, along with each partner's capability to give it, and the absence of a cause for dissolution
provided by the law itself. Verily, any one of the partners may, at his sole pleasure, dictate a
dissolution of the partnership at will. He must, however, act in good faith, not that the
attendance of bad faith can prevent the dissolution of the partnership but that it can result in a
liability for damages

Lim vs Ph Fishing Gear

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

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

ISSUE: Whether or not Lim Tong Lim is liable.

HELD: Yes. From the factual findings of both lower courts, it is clear that Chua, Yao and Lim had
decided to engage in a fishing business, which they started by buying boats worth P3.35 million,
financed by a loan secured from Jesus Lim. In their Compromise Agreement, they subsequently
revealed their intention to pay the loan with the proceeds of the sale of the boats, and to divide
equally among them the excess or loss. These boats, the purchase and the repair of which were
financed with borrowed money, fell under the term common fund under Article 1767. The
contribution to such fund need not be cash or fixed assets; it could be an intangible like credit or
industry. That the parties agreed that any loss or profit from the sale and operation of the boats
would be divided equally among them also shows that they had indeed formed a partnership.

Lim Tong Lim cannot argue that the principle of corporation by estoppels can only be imputed to
Yao and Chua. Unquestionably, Lim Tong Lim benefited from the use of the nets found in his
boats, the boat which has earlier been proven to be an asset of the partnership. Lim, Chua and
Yao decided to form a corporation. Although it was never legally formed for unknown reasons,
this fact alone does not preclude the liabilities of the three as contracting parties in
representation of it. Clearly, under the law on estoppel, those acting on behalf of a corporation
and those benefited by it, knowing it to be without valid existence, are held liable as general