G.R. No.

L-49982 April 27, 1988

ELIGIO ESTANISLAO, JR., petitioner,

vs.
THE HONORABLE COURT OF APPEALS, REMEDIOS ESTANISLAO, EMILIO and LEOCADIO
SANTIAGO, respondents.

Petitioner Eligio and Respondents Remedios, Emilio and Leocadio are brothers and sisters who are co-owners of certain
lots at the corner of Annapolis and Aurora Blvd., QuezonCity which were then being leased to the Shell Company of the
Philippines Limited (SHELL).

They agreed to open and operate a gas station thereat to be known as Estanislao Shell Service Station with an initial
investment of P15,000.00 to be taken from the advance rentals due to them from SHELL for the occupancy of the said
lots owned in common by them.

A joint affidavit was executed by them on April 11, 1966 which was prepared by Atty. Democrito Angeles. They
agreed to help their brother, petitioner herein, by allowing him to operate and manage the gasoline service
station of the family.

They negotiated with SHELL.

For practical purposes and in order not to run counter to the company's policy of appointing only one dealer, it was agreed
that petitioner would apply for the dealership.

Respondent Remedios helped in managing the business with petitioner from May 3, 1966 up to February 16, 1967.

On May 26, 1966, the parties herein entered into an Additional Cash Pledge Agreement with SHELL wherein it was
reiterated that the P15,000.00 advance rental shall be deposited with SHELL to cover advances of fuel to petitioner as
dealer with a proviso that said agreement "cancels and supersedes the Joint Affidavit dated 11 April 1966 executed
by the co-owners."

For sometime, the petitioner submitted financial statements regarding the operation of the business to private
respondents, but therafter petitioner failed to render subsequent accounting.

Hence through Atty. Angeles, a demand was made on petitioner to render an accounting of the profits.

The financial report of December 31, 1968 shows that the business was able to make a profit of P 87,293.79 and that by
the year ending 1969, a profit of P 150,000.00 was realized.

Thus, on August 25, 1970 private respondents filed a complaint in the Court of First Instance of Rizal against Eligio

The trial court dismissed the complaint and counterclaim

TC reversed

CA decided in against petitioner

ISSUE: W/N there is a partnership built between petitioner and private respondents. YEEEeeesss

In the aforesaid Joint Affidavit, it is clearly stipulated by the parties that the P 15,000.00 advance rental due to them from
SHELL shall augment their "capital investment" in the operation of the gasoline station, which advance rentals shall be
credited as rentals from May 25, 1966 up to four and one-half months or until 10 October 1966, more or less covering said
P 15,000.00.

In the subsequent document entitled "Additional Cash Pledge Agreement" the private respondents and petitioners
assigned to SHELL the monthly rentals due them commencing the 24th of May 1966 until such time that the monthly
rentals accumulated equal P 15,000.00 which private respondents agree to be a cash deposit of petitioner in favor of
SHELL to increase his credit limit as dealer. As above-stated it provided therein that "This agreement, therefore, cancels
and supersedes the Joint Affidavit dated 11 April 1966 executed by the CO-OWNERS."

Petitioner contends that because of the said stipulation cancelling and superseding that previous Joint Affidavit, whatever
partnership agreement there was in said previous agreement had thereby been abrogated.

We find no merit in this argument. Said cancelling provision was necessary for the Joint Affidavit speaks of P15,000.00
advance rentals starting May 25, 1966 while the latter agreement also refers to advance rentals of the same amount
starting May 24, 1966.

There is, therefore, a duplication of reference to the P 15,000.00 hence the need to provide in the subsequent document
that it "cancels and supersedes" the previous one.

True it is that in the latter document, it is silent as to the statement in the Joint Affidavit that the P 15,000.00 represents
the "capital investment" of the parties in the gasoline station business and it speaks of petitioner as the sole dealer, but
this is as it should be for in the latter document SHELL was a signatory and it would be against its policy if in the
agreement it should be stated that the business is a partnership with private respondents and not a sole proprietorship of
petitioner.

Moreover other evidence in the record shows that there was in fact such partnership agreement between the parties. This
is attested by the testimonies of private respondent Remedies Estanislao and Atty. Angeles.

Petitioner submitted to private respondents periodic accounting of the business. Petitioner gave a written authority to
private respondent Remedies Estanislao, his sister, to examine and audit the books of their "common business' aming
negosyo).

Respondent Remedios assisted in the running of the business.

There is no doubt that the parties hereto formed a partnership when they bound themselves to contribute money to a
common fund with the intention of dividing the profits among themselves.

The sole dealership by the petitioner and the issuance of all government permits and licenses in the name of petitioner
was in compliance with the afore-stated policy of SHELL and the understanding of the parties of having only one dealer of
the SHELL products.

WHEREFORE, the judgment appealed from is AFFIRMED in toto with costs against petitioner. This decision is
immediately executory and no motion for extension of time to file a motion for reconsideration shag be entertained.

SO ORDERED.
G.R. No. L-9996 October 15, 1957

EUFEMIA EVANGELISTA, MANUELA EVANGELISTA, and FRANCISCA EVANGELISTA, petitioners,

vs.
THE COLLECTOR OF INTERNAL REVENUE and THE COURT OF TAX APPEALS, respondents.

Santiago F. Alidio and Angel S. Dakila, Jr., for petitioner.

Office of the Solicitor General Ambrosio Padilla, Assistant Solicitor General Esmeraldo Umali and Solicitor Felicisimo R.
Rosete for Respondents.

CONCEPCION, J.:

Petitioners borrowed from their father the sum of P59,1400.00 which amount together with their personal monies was
used by them for the purpose of buying real properties,.

The petitioner bought the ff from different sellers:

A lot including improvements thereon

21 parcels of land

Lot from Insular Investments

Another lot

A document dated August 16, 1945, they appointed their brother Simeon Evangelista to 'manage their properties with full
power to lease; to collect and receive rents; to issue receipts therefor; in default of such payment, to bring suits against
the defaulting tenants; to sign all letters, contracts, etc., for and in their behalf, and to endorse and deposit all notes and
checks for them;

After having bought the above-mentioned real properties the petitioners had the same rented or leases to various tenants

Collector of Internal Revenue demanded the payment of income tax on corporations, real estate dealer's fixed tax and
corporation residence tax for the years 1945-1949

Court of Tax Appeals ruled in favor of CIR

ISSUE: W/N petitioners are subject to the tax on corporations as well as to the residence tax for corporations and the real
estate dealers fixed tax. YEEEEEsss

National Internal Revenue Code:

SEC. 24. Rate of 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
(compañias colectivas), 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 participacion), associations or insurance companies, but does not include duly registered
general copartnerships. (compañias 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, properly, or industry to a common fund, with the intention of dividing the profits among
themselves.

Pursuant to the 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.

We are fully satisfied that their purpose was to engage in real estate transactions for monetary gain and then divide the
same among themselves

The common fund was not something they found already in existence.

They jointly borrowed a substantial portion thereof in order to establish said common fund.

They invested the same, not merely not merely in one transaction, but in a series of transactions.

The number of lots (24) acquired and transactions 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 the petitioners

The aforesaid lots were not devoted to residential purposes, or to other personal uses, of petitioners herein.

Properties have been under the management of one person, namely Simeon Evangelista. Thus, the affairs relative to said
properties have been handled as if the same belonged to a corporation or business and enterprise operated for profit.

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 Evangelista became the manager.

The collective effect of these circumstances is such as to leave no room for doubt on the existence of said intent in
petitioners herein.

Petitioners insist, however, that they are mere co-owners, not copartners, for, in consequence of the acts performed by
them, a legal entity, with a personality independent of that of its members, did not come into existence, and some of the
characteristics of partnerships are lacking in the case at bar. This pretense was correctly rejected by the Court of Tax
Appeals.

The term 'partnership' 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

For purposes of the tax on corporations, our National Internal Revenue Code, includes these partnerships — with the
exception only of duly registered general co-partnerships — within the purview of the term "corporation."

As regards the residence of tax for corporations, section 2 of Commonwealth Act No. 465 provides in part: Entities liable
to residence tax.-Every corporation, no matter how created or organized, whether domestic or resident foreign, engaged
in or doing business in the Philippines shall pay an annual residence tax of five pesos and an annual additional tax which
in no case, shall exceed one thousand pesos, in accordance with the following schedule: the term 'corporation' as used in
this Act includes joint-stock company, partnership, joint account (cuentas en participacion), association or insurance
company, no matter how created or organized.

Lastly, the records show that petitioners have habitually engaged in leasing the properties above mentioned for a period
of over twelve years, and that the yearly gross rentals of said properties from June 1945 to 1948 ranged from P9,599 to
P17,453.

Thus, they are subject to the tax provided in section 193 (q) of our National Internal Revenue Code, for "real estate
dealers," inasmuch as, pursuant to section 194 (s) thereof: 'Real estate dealer' includes any person engaged in the
business of buying, selling, exchanging, leasing, or renting property or his own account as principal and holding himself
out as a full or part time 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. . .
Wherefore, the appealed decision of the Court of Tax appeals is hereby affirmed with costs against the petitioners herein.
It is so ordered.

Bengzon, Paras, C.J., Padilla, Reyes, A., Reyes, J.B.L., Endencia and Felix, JJ., concur.

BAUTISTA ANGELO, J., concurring:

I agree with the opinion that petitioners have actually contributed money to a common fund with express purpose of
engaging in real estate business for profit.

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 of 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 partnership, whether or not the person 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 shared or do not share any profits
made by the use of 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 judicial 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

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.

This is impliedly recognized in the following portion of the decision: "Although, taken singly, they might not suffice to
establish the intent necessary to constitute a partnership, the collective effect of these circumstances (referring to the
series of transactions) such as to leave no room for doubt on the existence of said intent in petitioners herein."