LIM TONG LIM v.

PHILIPPINE FISHING GEAR INDUSTRIES

G.R. No. 136448. November 3, 1999

Facts:

Antonio Chua and Peter Yao entered into a contract for the purchase of fishing nets from the Philippine
Fishing Gear Industries. They claimed that they were engaged in a business venture with petitioner Lim
Tong Lim. The buyers however failed to pay for the nets and the floats. Private respondent filed a
collection suit against Yao, Chua and Lim Tong Lim with preliminary attachment. Trial court rendered its
decision in favor of Phil. Fishing Gear and that Chua, Yao and Lim, as general partners were jointly liable
to pay respondents. It based its decision on a compromise agreement wherein joint liability was
presumed from the equal distribution of the profit and loss. The Court of Appeals affirmed. Hence, this
petition.

Issue: Whether or not, by their acts, Lim, Chua and Yao could be deemed to have entered into a
partnership. – YES

Held:
There is a partnership between Lim, Chua and Yao. Petitioner Lim requested Yao who was engaged in
commercial fishing to join him, while Antonio Chua was already Yao’s partner. The three verbally agreed
to acquire two fishing boats, FB Lourdes and FB Nelson for the sum of 3.35 million. They also borrowed
3.25 million from Jesus Lim, brother of petitioner Lim Tong Lim. They purchased the boats and later the
nets and floats, which constituted the main asets of the partnership and they agreed to divide tha
proceeds form the sale and operation thereof. The sale of the boats as well as the division among the
three of the balance remaining after the payment of their loans prove that F/B Lourdes was not his own
property but an asset of the partnership. Although the corporation 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. 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 partners. Having
reaped the benefits of the contract entered into by persons with whom he previously had an existing
relationship he is deemed to be part of said association and is covered by the scope of the doctrine of
corporation by estoppel.

Evangelista, et al. v. CIR, GR No. L-9996, October 15,

1957
Facts:
Herein petitioners seek a review of CTA’s decision holding them liable for income tax, real estate
dealer’s tax and residence tax. As stipulated, petitioners borrowed from their father a certain sum for
the purpose of buying real properties.

Within February 1943 to April 1994, they have bought parcels of land from different persons, the
management of said properties was charged to their brother Simeon evidenced by a document. These
properties were then leased or rented to various tenants.

On September 1954, CIR demanded the payment of income tax on corporations, real estate dealer’s
fixed tax, and corporation residence tax to which the petitioners seek to be absolved from such
payment.

Issue: Whether petitioners are subject to the tax on corporations.

Ruling:
The Court ruled that with respect to the tax on corporations, the issue hinges on the meaning of the
terms “corporation” and “partnership” as used in Section 24 (provides that a tax shall be levied on every
corporation no matter how created or organized except general copartnerships) and 84 (provides that
the term corporation includes among others, partnership) of the NIRC. Pursuant to Article 1767, NCC
(provides for the concept of partnership), its essential elements are: (a) an agreement to contribute
money, property or industry to a common fund; and (b) intent to divide the profits among the
contracting parties.
It is of the opinion of the Court that the first element is undoubtedly present for petitioners have agreed
to, and did, contribute money and property to a common fund. As to the second element, the Court
fully satisfied that their purpose was to engage in real estate transactions for monetary gain and then
divide the same among themselves as indicated by the following circumstances:

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1. The common fund was not something they found already in existence nor a property inherited by
them pro indiviso. It was created purposely, jointly borrowing 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. The number
of lots acquired and transactions undertake 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. In other words, one cannot but perceive a character of habitually
peculiar to business transactions engaged in the purpose of gain;

3. Said properties were not devoted to residential purposes, or to other personal uses, of petitioners
but were leased separately to several persons;

4. They were under the management of one person where the affairs relative to said properties have
been handled as if the same belonged to a corporation or business and enterprise operated for
profit;

5. Existed for more than ten years, or, to be exact, over fifteen years, since the first property was
acquired, and over twelve years, since Simeon Evangelista 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. The collective effect of these
circumstances is such as to leave no room for doubt on the existence of said intent in petitioners
herein.

Also, petitioners’ argument that their being mere coowners did not create a separate legal entity was
rejected because, according to the Court, the tax in question is one imposed upon "corporations",
which, strictly speaking, are distinct and different from "partnerships". When the NIRC includes
"partnerships" among the entities subject to the tax on "corporations", said Code must allude,
therefore, to organizations which are not necessarily "partnerships", in the technical sense of the term.
The qualifying expression found in Section 24 and 84(b) clearly indicates that a joint venture need not be
undertaken in any of the standard forms, or in conformity with the usual requirements of the law on
partnerships, in order that one could be deemed constituted for purposes of the tax on corporations.
Accordingly, the lawmaker could not have regarded that personality as a condition essential to the
existence of the partnerships therein referred to. For purposes of the tax on corporations, NIRC includes
these partnerships - with the exception only of duly registered general co partnerships - within the
purview of the term "corporation." It is, therefore, clear that petitioners herein constitute a partnership,
insofar as said Code is concerned and are subject to the income tax for corporations.

As regards the residence of tax for corporations (Section 2 of CA No. 465), it is analogous to that of
section 24 and 84 (b) of the NIRC. It is apparent that the terms "corporation" and "partnership" are used
in both statutes with substantially the same meaning. Consequently, petitioners are subject, also, to the
residence tax for corporations.
Finally, on the issues of being liable for real estate dealer’s tax, they are also liable for the same because
the records show that they have habitually engaged in leasing said properties whose yearly gross rentals
exceeds P3,000.00 a year.

Estanislao, Jr. v. Court of Appeals

G.R. No. L-49982 April 27, 1988

Facts:
Petitioner and private respondents are brothers and sisters who are co-owners of certain lots 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 P 15,000.00 to be taken from the advance rentals due to them from SHELL. 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. It was agreed that petitioner would apply for the
dealership. Respondent Remedios helped in managing the
business with petitioner.

Later the parties herein entered into an Additional Cash Pledge Agreement with SHELL wherein it was
reiterated that the P 15,000.00 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 executed by the co-owners. ”

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For sometime, the petitioner submitted financial statements regarding the operation of the business to
private respondents, but therafter petitioner failed to render subsequent accounting. Private
respondents filed a complaint in the Court of First Instance of Rizal against petitioner praying among
others that the latter be ordered: (1) to execute a public document embodying all the provisions of the
partnership agreement entered into between plaintiffs and defendant as provided in
Article 1771 of the New Civil Code; (2) to render a formal accounting of the business operation up to the
time the order is issued and that the same be subject to proper audit; (3) to pay the plaintiffs their
lawful shares and participation in the net profits of the business. The trial court dismissed the complaint.
Private respondents moved for reconsideration. The dismissal was set aside and the trial court rendered
in their favor. Petitioner appealed, the appellate court affirmed in toto the decision of the trial
court and denied the subsequent motion for reconsideration.
Hence, this petition for certiorari. Petitioner argued 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.

Issue(s):
Whether or not a partnership exists between members of the same family arising from their joint
ownership of certain properties

Held:
“ We find no merit in [petitioner’s] 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.”

HEIRS OF JOSE LIM, represented by ELENITO LIM vs. JULIET VILLA LIM G.R. No. 172690, March 3, 2010
NACHURA, J.:

FACTS: Petitioners are the heirs of the late Jose Lim (Jose). They filed a Complaint for Partition,
Accounting and Damages against respondent Juliet Villa Lim (respondent), widow of the late Elfledo Lim
(Elfledo), who was the eldest son of Jose and Cresencia.

Petitioners alleged that Jose was the liaison officer of Interwood Sawmill in Cagsiay, Mauban, Quezon.
Sometime in 1980, Jose, together with his friends Jimmy Yu (Jimmy) and Norberto Uy (Norberto),
formed a partnership to engage in the trucking business. Initially, with a contribution of P50,000.00
each, they purchased a truck to be used in the hauling and transport of lumber of the sawmill. Jose
managed the operations of this trucking business until his death on August 15, 1981. Thereafter, Jose's
heirs, including Elfledo, and partners agreed to continue the business under the management of Elfledo.
The shares in the partnership profits and income that formed part of the estate of Jose were held in
trust by Elfledo, with petitioners' authority for Elfledo to use, purchase or acquire properties using said
funds. Petitioners alleged that Elfledo was never a partner or an investor in the business and merely
supervised the purchase of additional trucks using the income from the trucking business of the
partners.

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On May 18, 1995, Elfledo died, leaving respondent as his sole surviving heir. Petitioners claimed that
respondent took over the administration of the aforementioned properties, which belonged to the
estate of Jose, without their consent and approval. Claiming that they are co-owners of the properties,
petitioners required respondent to submit an accounting of all income, profits and rentals received from
the estate of Elfledo, and to surrender the administration thereof. Respondent refused; thus, the filing
of this case.

Respondent traversed petitioners' allegations and claimed that Elfledo was himself a partner of
Norberto and Jimmy. Respondent also alleged that when Jose died in 1981, he left no known assets, and
the partnership with Jimmy and Norberto ceased upon his demise. Respondent also stressed
that Jose left no properties that Elfledo could have held in trust. Respondent maintained that all the
properties involved in this case were purchased and acquired through her and her husband’s joint
efforts and hard work, and without any participation or contribution from petitioners or from Jose.

ISSUE: Whether or not a partnership exists.

HELD: YES. A partnership exists when two or more persons agree to place their money, effects, labor,
and skill in lawful commerce or business, with the understanding that there shall be a proportionate
sharing of the profits and losses among them. A contract of partnership is defined by the Civil Code as
one where 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.

The following circumstances tend to prove that Elfledo was himself the partner of Jimmy and Norberto:
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 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 petitioners, as heirs of Jose, the alleged partner, demanded periodic accounting
from Elfledo during his lifetime

SEVILLA v. CA
G.R. Nos. L-41182-3; April 15, 1988
Ponente: J. Sarmiento

FACTS:

On Oct. 19, 1960, the Tourist World Service, Inc. leased an office at Mabini St., Manila for the former's
use as a branch office. When the branch office was opened, the same was run by the herein appellant
Lina O. Sevilla payable to Tourist World Service Inc. by any airline for any fare brought in on the efforts
of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla and 3% was to be withheld by the Tourist World Service,
Inc.

On or about November 24, 1961, the Tourist World Service, Inc. appears to have been informed that
Lina Sevilla was connected with a rival firm, the Philippine Travel Bureau, and, since the branch office
was anyhow losing, the Tourist World Service considered closing down its office.

This was firmed up by two resolutions of the board of directors of Tourist World Service, Inc. dated Dec.
2, 1961, the first abolishing the office of the manager and vice-president of the Tourist World Service,
Inc., Ermita Branch, and the second, authorizing the corporate secretary to receive the properties of the
Tourist World Service then located at the said branch office. It further appears that on Jan. 3, 1962, the
contract with the appellees for the use of the Branch Office premises was terminated and while the
effectivity thereof was Jan. 31, 1962, the appellees no longer used it. As a matter of fact appellants used
it since Nov. 1961. Because of this, and to comply with the mandate of the Tourist World Service, the
corporate secretary Gabino Canilao went over to the branch office, and, finding the premises locked,
and, being unable to contact Lina Sevilla, he padlocked the premises on June 4, 1962 to protect the
interests of the Tourist World Service.

Rojas, RG 4
When neither the appellant Lina Sevilla nor any of her employees could enter the locked premises, a
complaint was filed by the herein appellants against the appellees with a prayer for the issuance of
mandatory preliminary injunction. Both appellees answered with counterclaims. For apparent lack of
interest of the parties therein, the trial court ordered the dismissal of the case without prejudice.

ISSUE:
Whether the act of Tourist World Service in abolishing its Ermita branch proper

HELD:

No, the act of Tourist World Service in abolishing its Ermita branch is not proper.

The Supreme Court held that when the petitioner, Lina Sevilla, agreed to manage Tourist World Service,
Inc.'s Ermita office, she must have done so pursuant to a contract of agency.

In the case at bar, Sevilla solicited airline fares, but she did so for and on behalf of her principal, Tourist
World Service, Inc. As compensation, she received 4% of the proceeds in the concept of commissions.
And as we said, Sevilla herself, based on her letter of November 28, 1961, presumed her principal's
authority as owner of the business undertaking. We are convinced, considering the circumstances and
from the respondent Court's recital of facts, that the parties had contemplated a principal-agent
relationship, rather than a joint management or a partnership.

But unlike simple grants of a power of attorney, the agency that we hereby declare to be compatible
with the intent of the parties, cannot be revoked at will. The reason is that it is one coupled with an
interest, the agency having been created for the mutual interest of the agent and the principal.
Accordingly, the revocation complained of should entitle the petitioner, Lina Sevilla, to damages

6- TORRES v. COURT OF APPEALS G.R. No. 134559

December 9, 1999
Facts:

 Sisters Antonia Torres and Emeteria Baring, herein petitioners, entered into a "joint venture
agreement" with Respondent Manuel Torres for the development of a parcel of land into a
subdivision.
 Pursuant to the contract, they executed a Deed of Sale covering the said parcel of land in favor
of respondent, who then had it registered in his name.
 By mortgaging the property, respondent obtained from Equitable Bank a loan of P40,000
which, under the Joint Venture Agreement, was to be used for the development of the
subdivision.
 The project did not push through, and the land was subsequently foreclosed by the bank.
 According to petitioners, the project failed because of respondents lack of funds or means and
skills. They add that respondent used the loan not for the development of the subdivision, but
in furtherance of his own company, Universal Umbrella Company.
 They filed the present civil case which, upon respondent's motion, was later dismissed by the
trial court in an Order dated September 6, 1982. On appeal, however, the appellate court
remanded the case for further proceedings. Thereafter, the RTC issued its assailed Decision,
which, as earlier stated, was affirmed by the CA.
CA:
 In affirming the trial court, the Court of Appeals held that petitioners and respondent had
formed a partnership for the development of the subdivision.
 Thus, they must bear the loss suffered by the partnership in the same proportion as their share
in the profits stipulated in the contract.

Issue: Whether or not there was a contract of partnership – YES

Ratio:
 Under the Agreement, petitioners would contribute property to the partnership in the form of
land which was to be developed into a subdivision; while respondent would give, in addition to
his industry, the amount needed for general expenses and other costs.

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  Furthermore, the income from the said project would be divided according to the stipulated
percentage.

 Clearly, the contract manifested the intention of the parties to form a partnership

 Petitioners also contend that the Joint Venture Agreement is void under Article 1422 of the
Civil Code, because it is the direct result of an earlier illegal contract, which was for the sale of
the land without valid consideration. This argument is puerile. The Joint Venture Agreement
clearly states that the consideration for the sale was the expectation of profits from the
subdivision project. Its first stipulation states that petitioners did not actually receive payment
for the parcel of land sold to respondent. Consideration, more properly denominated as cause,
can take different forms, such as the prestation or promise of a thing or service by another.

7- SARDANE VS. COURT OF APPEALS

FACTS:

 Petitioner brought an action in the collection of a sum of P5,217.25 based on promissory notes
executed by the herein private respondent in favor of the herein petitioner.
 Petitioner based his right to collect on the promissory notes executed by respondent on different
dates. It has been established in the trial court that on many occasions, the petitioner demanded
the payment of the total amount of P5,217.25.
 The failure of the private respondent to pay the said amount prompted the petitioner to seek
the services of lawyer who made a letter (Exhibit 1) formally demanding the return of the sum
loaned.
 Because of the failure of the private respondent to heed the demands extrajudicially made by
the petitioner, the latter was constrained to bring an action for collection of sum of money.

RTC:

 During the scheduled day for trial, private respondent failed to appear and to file an answer.
 On motion of petitioner, he was granted to present evidence ex parte.
 Private respondent filed a motion to lift the order of default which was granted by the City Court
 On the first issue, the then Court of First Instance held that "the pleadings of the parties
herein put in issue the imperfection or ambiguity of the documents in question", hence "the
appellant can avail of the parol evidence rule to prove his side of the case, that is, the said
amount taken by him from appellee is or was not his personal debt to appellee, but
expenses of the partnership between him and appellee."
 Consequently, said trial court concluded that the promissory notes involved were merely
receipts for the contributions to said partnership and, therefore, upheld the claim that there
was ambiguity in the promissory notes, hence parol evidence was allowable to vary or
contradict the terms of the represented loan contract.

Court of Appeals – Reversed - held, that even if evidence aliunde other than the promissory notes
may be admitted to alter the meaning conveyed thereby, still the evidence is insufficient to prove that
a partnership existed between the private parties hereto.

ISSUE:

 Whether or not a partnership existed?

HELD:

NONE .The fact that he had received 50% of the net profits does not conclusively establish that he was a
partner of the private respondent herein. Article 1769(4) of the Civil Code is explicit that while 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, no such inference shall be drawn if such profits were received in payment as wages of an
employee. Furthermore, herein petitioner had no voice in the management of the affairs of the basnig.

There are other considerations noted by respondent Court which negate herein petitioner's pretension
that he was a partner and not a mere employee indebted to the present private respondent. Thus, in
an action for damages filed by herein private respondent against the North Zamboanga Timber Co.,
Inc. arising from the operations of the business, herein petitioner did not ask to be joined as a party
plaintiff. Also, although he contends that herein private respondent is the treasurer of the alleged

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partnership, yet it is the latter who is demanding an accounting. The advertence of the Court of First
Instance to the fact that the casco bears the name of herein petitioner disregards the finding of the
respondent Court that it was just a concession since it was he who obtained the engine used in the
Sardaco from the Department of Local Government and Community Development. Further, the use
by the parties of the pronoun "our" in referring to "our basnig, our catch", "our deposit", or "our boseros"
was merely indicative of the camaraderie and not evidentiary of a partnership, between them.

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