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ART. 1769
evidence, no certificate of partnership, no agreement as to profits
1. G.R. No. 126881 October 3, 2000 and losses, and no time fixed for the duration of the partnership.
HEIRS OF TAN ENG KEE, petitioners, There was even no attempt to submit an accounting corresponding
vs. to the period after the war until Kee's death in 1984.
COURT OF APPEALS and BENGUET LUMBER COMPANY, It had no business book, no written account nor any
represented by its President TAN ENG LAY,respondents. memorandum for that matter and no license mentioning the
DE LEON, JR., J.: existence of a partnership.
FACTS: Also, the trial court determined that Tan Eng Kee and Tan
Eng Lay had entered into a joint venture, which it said is akin to a
Benguet Lumber has been around even before World War particular partnership.
II but during the war, its stocks were confiscated by the Japanese.
After the war, the brothers Tan Eng Lay and Tan Eng Kee pooled A particular partnership is distinguished from a joint adventure, to
their resources in order to revive the business. In 1981, Tan Eng wit:
Lay caused the conversion of Benguet Lumber into a corporation (a) A joint adventure (an American concept similar to our joint
called Benguet Lumber and Hardware Company, with him and his accounts) is a sort of informal partnership, with no firm name and
family as the incorporators. In 1983, Tan Eng Kee died. Thereafter, no legal personality. In a joint account, the participating merchants
the heirs of Tan Eng Kee demanded for an accounting and the can transact business under their own name, and can be
liquidation of the partnership. individually liable therefor.
Tan Eng Lay denied that there was a partnership between (b) Usually, but not necessarily a joint adventure is limited to a
him and his brother. He said that Tan Eng Kee was merely an SINGLE TRANSACTION, although the business of pursuing to a
employee of Benguet Lumber. He showed evidence consisting of successful termination may continue for a number of years; a
Tan Eng Kees payroll; his SSS as an employee and Benguet partnership generally relates to a continuing business of various
Lumber being the employee. As a result of the presentation of said transactions of a certain kind.
evidence, the heirs of Tan Eng Kee filed a criminal case against
Tan Eng Lay for allegedly fabricating those evidence. Said criminal A joint venture "presupposes generally a parity of standing between
case was however dismissed for lack of evidence. the joint co-ventures or partners, in which each party has an equal
proprietary interest in the capital or property contributed, and where
each party exercises equal rights in the conduct of the business.
ISSUE: Whether or not Tan Eng Kee is a partner.

The evidence presented by petitioners falls short of the

quantum of proof required to establish a partnership. In the
absence of evidence, we cannot accept as an established fact that
HELD: No. Tan Eng Kee allegedly contributed his resources to a common fund
There was no partnership whatsoever. Except for a firm for the purpose of establishing a partnership. Besides, it is indeed
name, there was no firm account, no firm letterheads submitted as odd, if not unnatural, that despite the forty years the partnership
ART. 1769
was allegedly in existence, Tan Eng Kee never asked for an (c) As an annuity to a widow or representative of a deceased
accounting. partner;
The essence of a partnership is that the partners share in (d) As interest on a loan, though the amount of payment vary with
the profits and losses .Each has the right to demand an accounting the profits of the business;
as long as the partnership exists. A demand for periodic accounting
(e) As the consideration for the sale of a goodwill of a business or
is evidence of a partnership.
other property by installments or otherwise.
During his lifetime, Tan Eng Kee appeared never to have
made any such demand for accounting from his brother, Tang Eng
Lay. We conclude that Tan Eng Kee was only an employee, not
a partner since they did not present and offer evidence that would 2. PASCUAL and DRAGON v. THE COMMISSIONER OF INTERNAL
show that Tan Eng Kee received amounts of money allegedly REVENUE and COURT OF TAX APPEALS
representing his share in the profits of the enterprise. There being
no partnership, it follows that there is no dissolution, winding up or 166 SCRA 560
liquidation to speak of.
The Supreme Court also noted:
In determining whether a partnership exists, these rules shall apply:
(1) Except as provided by Article 1825, persons who are not On June 22, 1965, petitioners Mariano Pascual and Renato
partners as to each other are not partners as to third persons; Dragon 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
(2) Co-ownership or co-possession does not of itself establish a Juan Roque. Petitioners sold the first two parcels of land in 1968 to
partnership, whether such co-owners or co-possessors do or do Marenir Development Corporation, while the other three parcels of land
not share any profits made by the use of the property;
to Erlinda Reyes and Maria Samson on March 19, 1970. Petitioner
(3) The sharing of gross returns does not of itself establish a realized a net profit in the sale made in 1968 in the amount of P165,
partnership, whether or not the persons sharing them have a joint 224.70, while they realized a net profit of P60, 000 in the sale made in
or common right or interest in any property which the returns are 1970. Petitioners paid the corresponding capital gains taxes in 1973 and
derived; 1974.
(4) The receipt by a person of a share of the profits of a business
is prima facie evidence that he is a partner in the business, but no Respondent Commissioner informed petitioners that in the years
such inference shall be drawn if such profits were received in 1968 and 1970, petitioners as co-owners in the real estate transactions
payment: formed an unregistered partnership or joint venture taxable as a
(a) As a debt by installment or otherwise; corporation under Section 20(b) and its income was subject to the taxes
prescribed under Section 24, both of the National Internal Revenue
(b) As wages of an employee or rent to a landlord; Code; that the unregistered partnership was subject to corporate income
ART. 1769
tax as distinguished from profits derived from the partnership by them In the present case, there is clear evidence of co-ownership
which is subject to individual income tax. between the petitioners. However, there is no adequate basis to support
the proposition that they thereby formed an unregistered partnership.
Petitioners filed a petition for review before the respondent The two isolated transactions whereby they purchased properties and
Court of Tax Appeals (CTA). The CTA affirmed the decision and action sold the same a few years thereafter did not thereby make them
taken by respondent commissioner with costs against petitioners. 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
Issue: thereby. Under the circumstances, they cannot be considered to have
formed an unregistered partnership, which is thereby liable for
Whether by their acts, the petitioners formed an unregistered corporate income tax, as the respondent commissioner proposes.
partnership subjecting them to corporate income tax or their
relationship is merely that of a co-ownership.


167 SCRA 524
Regalado, J:
Article 1769 of the new Civil Code lays down the rule for
determining when a transaction should be deemed a partnership or a co- Facts:
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 Nobio Sardane (Sardane), owner of a Sardane Trucking Services,
do or do not share any profits made by the use of the obtained a loan from Romeo Acojedo (Acojedo) as evidenced by six
property; (3) The sharing of gross returns does not of promissory notes. On the due date, Acojedo made extrajudicial demands
itself establish a partnership, whether or not the persons for the payment of the loan in the total amount of P5,217.21 but instead
sharing them have a joint or common right or interest in of paying, Sardane apologized for his failure to pay on time and promised
any property from which the returns are derived. to pay next time. After so many failed attempts to collect his money
Acojedo finally brought an action for collection of sum of money before
The sharing of returns does not in itself establish a partnership the City Court of Dipolog.
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 During the scheduled day for trial, Sardane failed to appear and
partnership, the existence of a juridical personality different from the to file an answer. Upon motion by Acojedo, the City Court of Dipolog
individual partners, and the freedom of each party to transfer or assign issued an order declaring the private respondent in default and allowed
the whole property. the petitioner to present his evidence ex-parte. Based on petitioner's
evidence, the City Court of Dipolog rendered judgment by default in
ART. 1769
favor of the petitioner. However, the order of default was lifted upon demand and the promise to bear the costs of litigation in the event of
motion by Sardane as he was able to file an answer two hours after the the private respondent's failure to pay the amount loaned when
hearing of the evidence presented ex-parte by Acojedo. Based on the demanded extrajudicially did not show any ambiguity or imperfection.
merits, the city court ruled in favor of Acojedo ordering Sardane to pay The documents are clear on their face that a loan was extended by
the total amount of loan and attorneys fees. Acojedo to Sardane. Thus, the parole evidence rule shall not apply.

Sardane then appealed to the Court of First Instance of

Zamboanga del Norte, and he claimed that the promissory notes were
his contribution to the partnership; and that there is no contract of loan;
thus he is not indebted to Acojedo. The CFI ruled that there exists an 4. AFISCO INSURANCE CORP. et al. v. COURT OF APPEALS
imperfection or ambiguity to the documents in question, thus Sardane [January 25, 1999]
can avail of the parole evidence rule to prove his side of the case, that is,
the said amount taken by him from Acojedo was not a loan but, but
expenses of the partnership between him and the latter. CFI ruled on his FACTS:
favor thereby reversing the decision of the lower court by dismissing the
complaint and ordered the Acojedo to pay the former P500.00 each for The petitioners are 41 non-life domestic insurance corporations.
actual damages, moral damages, exemplary damages and attorneys They issued risk insurance policies for machines. The petitioners
in 1965 entered into a Quota Share Reinsurance Treaty and a
fees, as well as costs of the suit. Court of Appeals reversed the decision
Surplus Reinsurance Treaty with the Munchener
of the CFI.
Ruckversicherungs-Gesselschaft (hereafter called Munich), a
non-resident foreign insurance corporation. The reinsurance
Issue: treaties required petitioners to form a pool, which they complied
Whether the promissory notes were intended for payment of a
loan or contribution in a partnership. In 1976, the pool of machinery insurers submitted a financial
statement and filed an Information Return of Organization
Exempt from Income Tax for 1975. On the basis of this, the CIR
Held: assessed a deficiency of P1,843,273.60, and withholding taxes in
the amount of P1,768,799.39 and P89,438.68 on dividends paid
The promissory notes were not receipts of contribution in a to Munich and to the petitioners, respectively.
partnership, but clearly are documents intended for the demand of the
payment of the loan extended by Acojedo to Sardane. It was clearly the The Court of Tax Appeal sustained the petitioner's liability. The
intent of the parties to enter into a contract of loan. Court of Appeals dismissed their appeal.
The CA ruled in that the pool of machinery insurers was a
Contrary to the findings of the CFI, the promissory notes partnership taxable as a corporation, and that the latters
collection of premiums on behalf of its members, the ceding
containing the promise to pay a sum certain in money, payable on
companies, was taxable income.
ART. 1769


Whether or not the Pool Agreement is a partnership, and thereby

taxable as a corporation.


YES. Pool Agreement or an association that would handle all the

insurance businesses covered under their quota-share
reinsurance treaty and surplus reinsurance treaty with Munich
may be considered a partnership because it contains the following
elements: (1) The pool has a common fund, consisting of money
and other valuables that are deposited in the name and credit of
the pool. This common fund pays for the administration and
operation expenses of the pool. (2) The pool functions through an
executive board, which resembles the board of directors of a
corporation, composed of one representative for each of the
ceding companies. (3) While, the pool itself is not a reinsurer and
does not issue any policies; its work is indispensable, beneficial
and economically useful to the business of the ceding companies
and Munich, because without it they would not have received their
premiums pursuant to the agreement with Munich. Profit motive or
business is, therefore, the primordial reason for the pools
WHEREFORE, the petition is DENIED. The Resolutions of the
Court of Appeals dated October 11, 1993 and November 15, 1993
are hereby AFFIRMED. Costs against petitioners.

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