Ruling:
1. ORTEGA VS CA
G.R. No. 109248 July 3, 1995
GREGORIO F. ORTEGA, TOMAS O. DEL CASTILLO, JR., and BENJAMIN T. BACORRO vs.
HON. COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION and JOAQUIN L. MISA
Facts:
The law firm of ROSS, LAWRENCE, SELPH and CARRASCOSO was duly registered in the Mercantile Registry
on 4 January 1937 and reconstituted with the Securities and Exchange Commission on 4 August 1948. The
firm name was later changed, ultimately, to BITO, MISA & LOZADA on 19 December 1980. Joaquin L. Misa,
Jesus B. Bito and Mariano M. Lozada associated themselves together, as senior partners with respondents-
appellees Gregorio F. Ortega, Tomas O. del Castillo, Jr., and Benjamin Bacorro, as junior partners.
On February 17, 1988, Ortega withdrew from the firm effective at the end of the said month, and sought
to have a meeting with all of the respondent-appellees with regard to the mechanics of liquidation, and
his interest in the two floors of this building. According to him, the partnership has ceased to be mutually
satisfactory because of the working conditions of the employees, including the assistant attorneys. On 30
June 1988, petitioner filed with this Commission's Securities Investigation and Clearing Department (SICD)
a petition for dissolution and liquidation of partnership.
On 13 July 1988, respondents-appellees filed their opposition to the petition. On 13 July 1988, petitioner
filed his Reply to the Opposition.
Hearing Officer’s decision:
On 31 March 1989, the hearing officer rendered a decision ruling that the petitioner's withdrawal from
the law firm Bito, Misa & Lozada did not dissolve the said law partnership.
SEC en banc’s decision:
On appeal, the SEC en banc reversed the decision of the Hearing Officer and held that the withdrawal of
Attorney Joaquin L. Misa had dissolved the partnership of "Bito, Misa & Lozada." The Commission ruled
that, being a partnership at will, the law firm could be dissolved by any partner at anytime, such as by his
withdrawal therefrom, regardless of good faith or bad faith, since no partner can be forced to continue in
the partnership against his will. It remanded the case to the Hearing Officer for determination of the
respective rights and obligations of the parties.
The parties filed with the appellate court separate appeals. During the pendency of the case with the Court
of Appeals, Attorney Jesus Bito and Attorney Mariano Lozada both died on, respectively, 05 September
1991 and 21 December 1991. The death of the two partners, as well as the admission of new partners, in
the law firm prompted Attorney Misa to renew his application for receivership. He expressed concern over
the to preserve and care for the partnership assets. The other partners opposed the prayer.
CA’s decision: The Court of Appeals AFFIRMED in toto the SEC decision and order appealed from.
Issue:
Whether or not the partnership is a partnership at will and that the withdrawal of Misa dissolved the
partnership regardless of his good or bad faith
Yes. A partnership that does not fix its term is a partnership at will. The law firm "Bito, Misa & Lozada,"
and now "Bito, Lozada, Ortega and Castillo," is indeed such a partnership.
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 partnership4 but that it can result in a liability for damages.
In passing, neither would the presence of a period for its specific duration or the statement of a particular
purpose for its creation prevent the dissolution of any partnership by an act or will of a partner. Among
partners, mutual agency arises and the doctrine of delectus personae allows them to have the power,
although not necessarily the right, to dissolve the partnership. An unjustified dissolution by the partner
can subject him to a possible action for damages.
Additional Points:
The dissolution of a partnership is the change in the relation of the parties caused by any partner ceasing
to be associated in the carrying on, as might be distinguished from the winding up of, the business.8 Upon
its dissolution, the partnership continues and its legal personality is retained until the complete winding
up of its business culminating in its termination.9
The liquidation of the assets of the partnership following its dissolution is governed by various provisions
of the Civil Code; however, an agreement of the partners, like any other contract, is binding among them
and normally takes precedence to the extent applicable over the Code's general provisions.
2. SANTOS VS REYES
Santos vs. Reyes, 368 SCRA 262 (2001)
Facts:
 Sometime in June, 1986, [Petitioner] Fernando Santos and
[Respondent] Nieves Reyes were introduced to each other by one
Meliton Zabat regarding a lending business venture proposed by
Nieves. It was verbally agreed that [petitioner would] act as financier
while [Nieves] and Zabat [would] take charge of solicitation of
members and collection of loan payments.
 It was agreed that the profit sharing would be 70-15-15 Santos –
Nieves – Zabat
  Nieves introduced Cesar Gragera to Santos. Gragera was the
chairman of Monte Maria which the partnership extends loans to
monte maria’s employees. Gragera was entitled for a commission per
thousand paid daily to the business.
 Zabat was expelled to the partnership since it was discovered by
Santos and Nieves that he involves in money lending business that
competes with their partnership.
 Arsenio, husband of Nieves, was admitted to the partnership to take
the place of Zabat as loan investigator.
 The partnership went sour when the petitioner filed a complaint
alleging that Nieves misappropriated funds intended for Gragera. The
petitioner also alleged that the spouses were just his mere
employees which the spouses counters that the complaint was filed
to pre-empt and prevent them from claiming their shares to the
profits of the partnership.
 Petitioner also alleged that it was him and Gragera are partners after
Zabat was expelled and they just employ the services of the
respondents as bookkeeper and credit investigator.
 The RTC ruled that the respondents, Arsenio and Nieves, were
partners not just mere employees of the petitioner.
 CA affirmed the decision of the RTC. The CA ruled that the following
circumstances indicated the existence of a partnership among the
parties: (1) it was Nieves who broached to petitioner the idea of
starting a money-lending business and introduced him to Gragera; (2)
Arsenio received "dividends" or "profit-shares". The partnership
contract was executed after the Agreement with Gragera and
petitioner and thus showed the parties' intention to consider it as a
transaction of the partnership. In their common venture, petitioner
invested capital while respondents contributed industry or services,
with the intention of sharing in the profits of the business.
Issue
Whether or not the spouses Arsenio and Nieves Reyes were partners and
not just mere employees of Santos (petitioner)
Whether or not Santos (petitioner) and Gragera are partners
Held
1. The spouses were partners’ not just mere employees of the petitioner.
SC agreed with both courts.
By the contract of partnership, 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 "Articles of
Agreement" stipulated that the signatories shall share the profits of the
business in a 70-15-15 manner, with petitioner getting the lion's share. This
stipulation clearly proved the establishment of a partnership. the business in
a 70-15-15 manner, with petitioner getting the lion's share.This stipulation
clearly proved the establishment of a partnership.
The functions of the respondents as per agreement were their
responsibilities as partners of the partnership to handle the solicitation and
screening of prospective borrowers, and shall each be responsible in handling
the collection of the loan payments of the borrowers that they each solicited.
Hence they were industrial partners.
2. Gragera and Santos were not partners.
Gragera and petitioner were not partners. The money-lending
activities undertaken with Monte Maria were done in pursuit of the business
for which the partnership between petitioner, Nieves and Zabat (later
Arsenio) was organized. Gragera who represented Monte Maria was merely
paid commissions in exchange for the collection of loans. The commissions
were fixed on gross returns, regardless of the expenses incurred in the
operation of the business. The sharing of gross returns does not in itself
establish a partnership.

3. TOCAO vs CA
TOCAO V. COURT OF APPEALS
G.R. NO. 127405 OCTOBER 4, 2000
Facts:
Private Respondent Nenita Anay, former Marketing Adviser of Technolux Bangkok,
Petitioner William Belo, then VP for operations of Ultra Clean Water Purifier and the
latter’s girlfriend Marjorie Tocao agreed to engage into a joint business venture
involving the importation and local distribution of kitchen wares. To materialize their
stipulation, Belo acted as the capitalist partner wherein he contributed an amount of
P 2.5 Million, Tocao also contributed an amount of money and acted as the president
and general manager of the business, and Anay held the position of VP for sales in
view of her expertise and connection with a kitchenware manufacturer in the USA
named West Bend Company. The three operated under the name of Geminesse
Enterprise which was a sole proprietorship registered with the Bureau of Domestic
Trade under the name of Tocao. In the agreement the following were further
provided:
a. Anay would be entitled to ten (10) percent of the annual net profits of the business;
b. Anay would be entitled to the overriding commission of six percent of the overall
weekly production;
c. Anay would be entitled to thirty percent (30%) of the sales she would make; and
d. Anay would be entitled to two percent (2%) for her demonstration services.
The said joint venture agreement was not reduced in writing since Anay accepted
Belo’s assurances that he was sincere, dependable and honest when it came to
financial commitments.
In 1987, Anay accepted their manufacturer’s invitation to attent a distributor-dealer
meeting in the USA. Upon her return, she learned that Tocao had written a letter to
the Cubao Sales Office to the effect that she was no longer the VP for sales of
Geminesse and that she was now prohibited from holding office and conducting
demonstrations in the offices. In view of the foregoing, Anay attempted to contact
Belo but failed to successfully do so. Hence, the former wrote the latter twice as she
demanded her overriding commission for the months of January and February of
1988 and the audit of the company to determine her share in the net profits.
In April 5, 1988, Anay filed a case for sum of money and damages against Tocao and
Belo. The RTC held in favor of Anay and such ruling was held by the Court of Appeals.
Issue: WON the parties formed a partnership
Held:
Yes, the parties formed a partnership. To be deemed as a juridical personality, a
partnership must fulfill the following requisites:
a. Two or more persons bind themselves to contribute money, property ot industry
to a common fund; and
b. There is an intention on the part of the partners to divide the profits among
themselves.
It is not necessary that a partnership agreement be constituted in a public instrument
unless if the sames involves immovable property or if real rights are are contributed
thereto. It may take any form and regardless of such form, it is perfected by mere
consent (consensual). Hence, an oral contract of partnership is as good as a written
one.
In the case at bar, the requisites were sufficiently complied considering that the
parties contributed respectively to the materialization and operation of the said
venture – Belo acted as the capitalist, Tocao contributed money and served as the
president and GM and Anay served as VP who had a share to the venture’s profits
(the commissions received by Anay were only incidental to her position as head
marketer). Additionally, the fact that the agreement was not reduced in writing and
that it was registered as a sole proprietorship does not negate the existence of a
partnership due to the reason that a partnership can be instituted in any form and
that the registration made was only for the company’s trade name.
Re: Innocent Partner
In the case at bar, the SC held that a partner who was excluded wrongfully from a
partnership is an innocent partner. In view of such, the guilty partner must give the
innocent partner his due upon the dissolution of the partnership as well as damages
and share in the profits since the latter is said to possess pecuniary interest in every
existing contract that was incomplete and in the trade name of the co-partnership
and assets at the time he was wrongfully expelled.
Re: Doctrine of Delectus Personae
The unjustified dissolution of a partnership by a partner can subect him/her to action
for damages since, by the mutual agency that arises in a partnership, the Doctrine of
Delectus Personae allows the partners to have the power, although not necessarily
the right to dissolve the partnership.
4. MORAN Jr. vs CA
MORAN VS CA 133 SCRA 88
FACTS
 On February 22, 1971 Pecson and Moran entered into an
agreement whereby both would contribute P15,000 each for the
purpose of printing 95,000 posters (featuring the delegates to the
1971 Constitutional Convention), with Moran actually supervising
the work
 Pecson would receive a commission of P l,000 a month starting on
April 15, 1971 up to December 15, 1971 (8 months)
 Pecson gave Moran P10,000 for which the latter issued a receipt
 The RTC found that by virtue of the partnership agreement entered
into by the parties-plaintiff and defendant(Moran) the plaintiff did
contribute P10,000.00, and another sum of P7,000.00 for the Voice
of the Veteran or Delegate Magazine. Of the expected 95,000
copies of the posters, the defendant was able to print 2,000 copies
only authorized of which, however, were sold at P5.00 each.
Nothing more was done after this and it can be said that the
venture did not really get off the ground. On the other hand, the
plaintiff(Pecson) failed to give his full contribution of P15,000.00.
 The RTC ordered Moran to return to Mariano E. Pecson the sum of
P17,000.00
ISSUES
1. The first question raised in this petition refers to the award of P47,500.00 as
the private respondent's share in the unrealized profits of the partnership.
(SPECULATIVE PROFIT), whether or not this shoukd be awarded
RULING
There is no dispute over the nature of the agreement between the petitioner and the
private respondent. It is a contract of partnership. The rule is, when a partner who
has undertaken to contribute a sum of money fails to do so, he becomes a debtor of
the partnership for whatever he may have promised to contribute (Art. 1786, Civil
Code) and for interests and damages from the time he should have complied with his
obligation (Art. 1788, Civil Code). In this case, there was mutual breach. Private
respondent failed to give his entire contribution in the amount of P15,000.00. He
contributed only P10,000.00. The petitioner likewise failed to give any of the amount
expected of him. He further failed to comply with the agreement to print 95,000
copies of the posters. Instead, he printed only 2,000 copies.
Article 1797 of the Civil Code provides: têñ.£îhqwâ£
The losses and profits shall be distributed in conformity with the
agreement. If only the share of each partner in the profits has been
agreed upon, the share of each in the losses shall be in the same
proportion.
Being a contract of partnership, each partner must share in the profits and losses
of the venture. That is the essence of a partnership. And even with an assurance
made by one of the partners that they would earn a huge amount of profits, in the
absence of fraud, the other partner cannot claim a right to recover the highly
speculative profits. It is a rare business venture guaranteed to give 100% profits. In
this case, on an investment of P15,000.00, the respondent was supposed to earn a
guaranteed P1,000.00 a month for eight months and around P142,500.00 on 95,000
posters costing P2.00 each but 2,000 of which were sold at P5.00 each. The fantastic
nature of expected profits is obvious. We have to take various factors into account.
The failure of the Commission on Elections to proclaim all the 320 candidates of the
Constitutional Convention on time was a major factor. The petitioner undesirable his
best business judgment and felt that it would be a losing venture to go on with the
printing of the agreed 95,000 copies of the posters. Hidden risks in any business
venture have to be considered.
(Gi compare sa case ni Uy vs Puzon):
We awarded compensatory damages in the Uy case because there was a finding that
the constructing business is a profitable one and that the UP construction company
derived some profits from its contractors in the construction of roads and bridges
despite its deficient capital." Besides, there was evidence to show that the
partnership made some profits during the periods from July 2, 1956 to December 31,
1957 and from January 1, 1958 up to September 30, 1959. The profits on two
government contracts worth P2,327,335.76 were not speculative. Furthermore, in
the Uy case, only Puzon failed to give his full contribution while Uy contributed much
more than what was expected of him. (200,000 gihatag kay Uy, coz only puzon failed
to contribute)
It does not follow however that the private respondent is not entitled to recover any
amount from the petitioner. The records show that the private respondent (Pecson)
gave P10,000.00 to the petitioner. The latter (Moran) used this amount for the
printing of 2,000 posters at a cost of P2.00 per poster or a total printing cost of
P4,000.00. The records further show that the 2,000 copies were sold at P5.00 each.
The gross income therefore was P10,000.00. Deducting the printing costs of
P4,000.00 from the gross income of P10,000.00 and with no evidence on the cost of
distribution, the net profits amount to only P6,000.00. This net profit of P6,000.00
should be divided between the petitioner and the private respondent. And since only
P4,000.00 was undesirable by the petitioner in printing the 2,000 copies, the
remaining P6,000.00 should therefore be returned to the private respondent.
5. Navarro vs CA
NAVARRO VS CA
FACTS:
 Olivia V. Yanson and Petitioner Lourdes Navarro were engaged in the
business of Air Freight Service Agency.
 Olivia Yanson supplies the necessary equipment and money used in the
operation of the agency. Atty. Rodolfo Villaflores, Yanson’s brother, was the
Manager thereof while petitioner Lourdes Navarro was the Cashier.
 Yanson brought into their business certain chattels or movables or personal
properties. The said properties are continued to be registered to her name.
 Parties agreed on an equal sharing of whatever proceeds realized from their
business.
 However, on July 23, 1976, herein private respondent Olivia V. Yanson filed
a complaint against petitioner Lourdes Navarro for "Delivery of Personal
Properties With Damages". The complaint incorporated an application for a
writ of replevin.
 RTC approved the replevin.
 Navarro argues that she and private respondent Yanson actually formed a
verbal partnership which was engaged in the business of Air Freight Service
Agency.
 She contended that the decision sustaining the writ of replevin is void since
the properties belonging to the partnership do not actually belong to any of
the parties until the final disposition and winding up of the partnership.
ISSUES:
1. Whether there was a partnership that existed between the parties
2. Whether the properties that were commonly used in the operation of Allied
Air Freight belonged to the alleged partnership business; and the status of
the parties in this transaction of alleged partnership.
RULING: NO!
 Art. 1767. By the contract of partnership two or more persons bind
themselves to contribute money, property, or industry to a common fund,
with the intention of dividing the proceeds among themselves.
 A cursory examination of the evidences presented no proof that a
partnership, whether oral or written had been constituted at the inception
of this transaction. True it is that even up to the filing of this complaint those
movables brought by the plaintiff for the use in the operation of the business
remain registered in her name.
 While there may have been co-ownership or co-possession of some items
and/or any sharing of proceeds by way of advances received by both plaintiff
and the defendant, these are not indicative and supportive of the existence
of any partnership between them.
 Art. 1769 par. 2 provides: 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”.
 There being no partnership that existed, any dissolution, liquidation or
winding up is beside the point.
6. REYES vs CIR
G.R. Nos. L-24020-21 July 29, 1968
FLORENCIO REYES and ANGEL REYES, petitioners,
vs.
COMMISSIONER OF INTERNAL REVENUE and HON. COURT OF TAX APPEALS, respondents.
FACTS:
On October 31, 1950, petitioners, father and son, purchased a lot and building, known as the Gibbs
Building, situated at 671 Dasmariñas Street, Manila, for P835,000.00, of which they paid the sum of
P375,000.00, leaving a balance of P460,000.00, representing the mortgage obligation of the vendors with
the China Banking Corporation, which mortgage obligations were assumed by the vendees. The initial
payment of P375,000.00 was shared equally by petitioners. At the time of the purchase, the building was
leased to various tenants, whose rights under the lease contracts with the original owners, the purchasers,
petitioners herein, agreed to respect. The administration of the building was entrusted to an administrator
who collected the rents; kept its books and records and rendered statements of accounts to the owners;
negotiated leases; made necessary repairs and disbursed payments, whenever necessary, after approval
by the owners; and performed such other functions necessary for the conservation and preservation of
the building. Petitioners divided equally the income of operation and maintenance. The gross income from
rentals of the building amounted to about P90,000.00 annually."
The BIR determined that the tax liability for the years 1951 to 1954 was reduced to P37,128.00 and for the
years 1955 and 1956, to P20,619.00 as income tax due "from the partnership formed" by petitioners. The
assessment was appealed to the CTA.
From the above facts, the respondent CTA applying the appropriate provisions of the National Internal
Revenue Code, the first of which imposes an income tax on corporations "organized in, or existing under
the laws of the Philippines, no matter how created or organized but not including duly registered general
co-partnerships (companias colectivas), ...,"6 a term, which according to the second provision cited,
includes partnerships "no matter how created or organized, ...,"7 and applying the leading case
of Evangelista v. Collector of Internal Revenue,8 sustained the action of respondent Commissioner of
Internal Revenue, but reduced the tax liability of petitioners, as previously noted.
ISSUE: Whether or not the business constitutes a partnership subject to tax like that of a corporation.
HELD:
Yes. The real estate business was in the form of a partnership subject to corporate income tax.
After referring to another section of the National Internal Revenue Code, which explicitly provides that the
term corporation "includes partnerships" and then to Article 1767 of the Civil Code of the Philippines,
defining what a contract of partnership is, the opinion goes on to state that "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.
Hence, the issue narrows down to their intent in acting as they did. Upon consideration of all the facts and
circumstances surrounding the case, the Court was fully satisfied that their purpose was to engage in real
estate transactions for monetary gain and then divide the same among themselves.
In support of the above conclusion, reference was made to the following circumstances, namely, the
common fund being created purposely not something already found in existence, the investment of the
same not merely in one transaction but in a series of transactions; the lots thus acquired not being devoted
to residential purposes or to other personal uses of petitioners in that case; such properties having been
under the management of one person with full power to lease, to collect rents, to issue receipts, to bring
suits, to sign letters and contracts and to endorse notes and checks; the above conditions having existed
for more than 10 years since the acquisition of the above properties; and no testimony having been
introduced as to the purpose "in creating the set up already adverted to, or on the causes for its continued
existence."11 The conclusion that emerged had all the imprint of inevitability. Thus: "Although, taken
singly, they might not suffice to establish the intent necessary to constitute a partnership, the collective
effect of these circumstances is such as to leave no room for doubt on the existence of said intent in
petitioners herein.”
In the light of the above, it cannot be said that the respondent CTA decided the matter incorrectly. There
is no warrant for the assertion that it failed to apply the settled law to uncontroverted facts. Its decision
cannot be successfully assailed. Moreover, an observation made in Alhambra Cigar & Cigarette
Manufacturing Co. v. Commissioner of Internal Revenue,17 is well-worth recalling. Thus: "Nor as a matter
of principle is it advisable for this Court to set aside the conclusion reached by an agency such as the Court
of Tax Appeals which is, by the very nature of its functions, dedicated exclusively to the study and
consideration of tax problems and has necessarily developed an expertise on the subject, unless, as did
not happen here, there has been an abuse or improvident exercise of its authority."
8. Ona vs CIR
LORENZO OÑA V CIR
GR No. L -19342 | May 25, 1972 | J. Barredo
Facts:
Julia Buñales died leaving as heirs her surviving spouse, Lorenzo Oña and her five children. A civil case was
instituted for the settlement of her state, in which Oña was appointed administrator and later on the
guardian of the three heirs who were still minors when the project for partition was approved. This shows
that the heirs have undivided ½ interest in 10 parcels of land, 6 houses and money from the War Damage
Commission.
Although the project of partition was approved by the Court, no attempt was made to divide the properties
and they remained under the management of Oña who used said properties in business by leasing or
selling them and investing the income derived therefrom and the proceeds from the sales thereof in real
properties and securities. As a result, petitioners’ properties and investments gradually increased.
Petitioners returned for income tax purposes their shares in the net income but they did not actually
receive their shares because this left with Oña who invested them.
Based on these facts, CIR decided that petitioners formed an unregistered partnership and therefore,
subject to the corporate income tax, particularly for years 1955 and 1956. Petitioners asked for
reconsideration, which was denied hence this petition for review from CTA’s decision.
Issue:
W/N there was a co-ownership or an unregistered partnership
W/N the petitioners are liable for the deficiency corporate income tax
Held:
Unregistered partnership. The Tax Court found that instead of actually distributing the estate of the
deceased among themselves pursuant to the project of partition, the heirs allowed their properties to
remain under the management of Oña and let him use their shares as part of the common fund for their
ventures, even as they paid corresponding income taxes on their respective shares.
Yes. For tax purposes, the co-ownership of inherited properties is automatically converted into an
unregistered partnership the moment the said common properties and/or the incomes derived therefrom
are used as a common fund with intent to produce profits for the heirs in proportion to their respective
shares in the inheritance as determined in a project partition either duly executed in an extrajudicial
settlement or approved by the court in the corresponding testate or intestate proceeding. The reason is
simple. From the moment of such partition, the heirs are entitled already to their respective definite shares
of the estate and the incomes thereof, for each of them to manage and dispose of as exclusively his own
without the intervention of the other heirs, and, accordingly, he becomes liable individually for all taxes in
connection therewith. If after such partition, he allows his share to be held in common with his co-heirs
under a single management to be used with the intent of making profit thereby in proportion to his share,
there can be no doubt that, even if no document or instrument were executed, for the purpose, for tax
purposes, at least, an unregistered partnership is formed.
For purposes of the tax on corporations, our National Internal Revenue Code includes these
partnerships —
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… (8
Merten’s Law of Federal Income Taxation, p. 562 Note 63; emphasis ours.)
with the exception only of duly registered general copartnerships — within the purview of the term
“corporation.” It is, therefore, clear to our mind that petitioners herein constitute a partnership, insofar
as said Code is concerned, and are subject to the income tax for corporations. Judgment affirmed.
9. Obillos Jr. vs CIR
G.R. No. L-68118 October 29, 1985
JOSE P. OBILLOS, JR., SARAH P. OBILLOS, ROMEO P. OBILLOS and REMEDIOS P.
OBILLOS, brothers and sisters, petitioners
vs.
COMMISSIONER OF INTERNAL REVENUE and COURT OF TAX APPEALS, respondents
Facts:
On March 2, 1973 Jose Obillos, Sr. bought two lots with areas of 1,124 and 963 square
meters of located at Greenhills, San Juan, Rizal. The next day he transferred his rights
to his four children, the petitioners, to enable them to build their residences. The
Torrens titles issued to them showed that they were co-owners of the two lots.
In 1974, or after having held the two lots for more than a year, the petitioners resold
them to the Walled City Securities Corporation and Olga Cruz Canada for the total
sum of P313,050. They derived from the sale a total profit of P1z34, 341.88 or
P33,584 for each of them. They treated the profit as a capital gain and paid an income
tax on one-half thereof or of P16,792.

In April, 1980, the Commissioner of Internal Revenue required the four petitioners to
pay corporate income tax on the total profit of P134,336 in addition to individual
income tax on their shares thereof. The petitioners are being held liable for deficiency
income taxes and penalties totalling P127,781.76 on their profit of P134,336, in
addition to the tax on capital gains already paid by them.
The Commissioner acted on the theory that the four petitioners had formed an
unregistered partnership or joint venture The petitioners contested the assessments.
Two Judges of the Tax Court sustained the same. Hence, the instant appeal.
Issue:
Whether or not the petitioners had indeed formed a partnership or joint venture and
thus liable for corporate tax.
Held:
The Supreme Court held that the petitioners should not be considered to have
formed a partnership just because they allegedly contributed P178,708.12 to buy the
two lots, resold the same and divided the profit among themselves. To regard so
would result in oppressive taxation and confirm the dictum that the power to tax
involves the power to destroy. That eventuality should be obviated.
As testified by Jose Obillos, Jr., they had no such intention. They were co-owners pure
and simple. To consider them as partners would obliterate the distinction between a
co-ownership and a partnership. The petitioners were not engaged in any joint
venture by reason of that isolated transaction.
*Article 1769(3) of the Civil Code provides that "the sharing of gross returns does
not of itself establish a partnership, whether or not the persons sharing them have
a joint or common right or interest in any property from which the returns are
derived". There must be an unmistakable intention to form a partnership or joint
venture.*
Their original purpose was to divide the lots for residential purposes. If later on they
found it not feasible to build their residences on the lots because of the high cost of
construction, then they had no choice but to resell the same to dissolve the co-
ownership. The division of the profit was merely incidental to the dissolution of the
co-ownership which was in the nature of things a temporary state. It had to be
terminated sooner or later.
They did not contribute or invest additional ' capital to increase or expand the
properties, nor was there an unmistakable intention to form partnership or joint
venture.
WHEREFORE, the judgment of the Tax Court is reversed and set aside. The
assessments are cancelled. No costs.
10. Bastida vs Menzi
Bastida vs Menzi
Facts:
Bastida offered to assign to Menzi & Co. his contract with Phil Sugar Centrals
Agency and to supervise the mixing of the fertilizer and to obtain other orders
for 50 % of the net profit that Menzi & Co., Inc., might derive therefrom. J. M.
Menzi (gen. manager of Menzi & Co.) accepted the offer. The agreement
between the parties was verbal and was confirmed by the letter of Menzi to
the plaintiff on January 10, 1922. Pursuant to the verbal agreement, the
defendant corporation on April 27, 1922 entered into a written contract with the
plaintiff, marked Exhibit A, which is the basis of the present action. Still, the
fertilizer business as carried on in the same manner as it was prior to the
written contract, but the neta profit that the plaintiff herein shall get would only
be 35%. The intervention of the plaintiff was limited to supervising the mixing
of the fertilizers in the bodegas of Menzi. Prior to the expiration of the contract
(April 27, 1927), the manager of Menzi notified the plaintiff that the contract for
his services would not be renewed. Subsequently, when the contract expired,
Menzi proceeded to liquidate the fertilizer business in question. The plaintiff
refused to agree to this. It argued, among others, that the written contract
entered into by the parties is a contract of general regular commercial
partnership, wherein Menzi was the capitalist and the plaintiff the industrial
partner.
Issue: Is the relationship between the petitioner and Menzi that of partners?
Held:
The relationship established between the parties was not that of partners, but
that of employer and employee, whereby the plaintiff was to receive 35% of
the net profits of the fertilizer business of Menzi in compensation for his
services for supervising the mixing of the fertilizers. Neither the provisions of
the contract nor the conduct of the parties prior or subsequent to its execution
justified the finding that it was a contract of copartnership. The written contract
was, in fact, a continuation of the verbal agreement between the parties,
whereby the plaintiff worked for the defendant corporation for onehalf of the
net profits derived by the corporation form certain fertilizer contracts.
According to Art. 116 of the Code of Commerce, articles of association by
which two or more persons obligate themselves to place in a common fund
any property, industry, or any of these things, in order to obtain profit, shall be
commercial, no matter what it class may be, provided it has been established
in accordance with the provisions of the Code. However in this case, there was
no common fund. The business belonged to Menzi & Co. The plaintiff was
working for Menzi, and instead of receiving a fixed salary, he was to receive
35% of the net profits as compensation for his services. The phrase in the
written contract “en sociedad con”, which is used as a basis of the plaintiff to
prove partnership in this case, merely means “en reunion con” or in association
with. It is also important to note that although Menzi agreed to furnish the
necessary financial aid for the fertilizer business, it did not obligate itself to
contribute any fixed sum as capital or to defray at its own expense the cost of
securing the necessary credit.
11. Rojas vs Maglana
Facts:
Maglana and Rojas executed their Articles of Co-Partnership called Eastcoast
Development Enterprises (EDE). It was a partnership with an indefinite term
of existence. Maglana shall manage the business affairs while Rojas shall be
the logging superintendant and shall manage the logging operation. They shall
share in all profits and loss equally. Due to difficulties encountered they
decided to avail of the sources of Pahamatong as industrial partners. They
again executed their Articles of Co-Partnership under EDE. The term is 30
years. After sometime Pamahatong sold his interest to Maglana and Rojas
including equipment contributed. After withdrawal of Pamahatong, Maglana
and Rojas continued the partnership. After 3 months, Rojas entered into a
management contract with another logging enterprise. He left and abandoned
the partnership. He even withdrew his equipment from the partnership and was
transferred to CMS. He never told Maglana that he will not be able to comply
with the promised contributions and he will not work as logging superintendent.
Maglana then told Rojas that the latter share will just be 20% of the net profits.
Rojas took funds from the partnership more than his contribution. Thus,
Maglana notified Rojas that he dissolved the partnership.
Issue: What is the nature of the partnership and legal relationship of Maglana
and Rojas after Pahamatong retired from the second partnership
Ruling:
It was not the intention of the partners to dissolve the first partnership, upon
the constitution of the second one, which they unmistakably called “additional
agreement.” Otherwise stated even during the existence of the second
partnership, all business transactions were carried out under the duly
registered articles. No rights and obligations accrued in the name of the
second partnership except in favor of Pahamatong which was fully paid by the
duly registered partnership.
12. Pascual vs CIR
Pascual and Dragon v. CIR, G.R. No. 78133, October 18, 1988
25MAR
[GANCAYCO, J.]
FACTS:
Petitioners bought two (2) parcels of land and a year after, they bought
another three (3) parcels of land. Petitioners subsequently sold the said lots
in 1968 and 1970, and realized net profits. The corresponding capital gains
taxes were paid by petitioners in 1973 and 1974 by availing of the tax
amnesties granted in the said years. However, the Acting BIR Commissioner
assessed and required Petitioners to pay a total amount of P107,101.70 as
alleged deficiency corporate income taxes for the years 1968 and 1970.
Petitioners protested the said assessment asserting that they had availed of
tax amnesties way back in 1974. In a reply, respondent Commissioner
informed petitioners that in the years 1968 and 1970, petitioners as co-
owners in the real estate transactions formed an unregistered partnership or
joint venture taxable as a corporation under Section 20(b) and its income was
subject to the taxes prescribed under Section 24, both of the National Internal
Revenue Code that the unregistered partnership was subject to corporate
income tax as distinguished from profits derived from the partnership by
them which is subject to individual income tax; and that the availment of tax
amnesty under P.D. No. 23, as amended, by petitioners relieved petitioners
of their individual income tax liabilities but did not relieve them from the tax
liability of the unregistered partnership. Hence, the petitioners were required
to pay the deficiency income tax assessed.
ISSUE:
Whether the Petitioners should be treated as an unregistered partnership or
a co-ownership for the purposes of income tax.
RULING:
The Petitioners are simply under the regime of co-ownership and not under
unregistered partnership.
By the contract of partnership 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 (Art. 1767, Civil Code of
the Philippines). In the present case, there is no evidence that petitioners
entered into an agreement to contribute money, property or industry to a
common fund, and that they intended to divide the profits among
themselves. The sharing of returns does not in itself establish a partnership
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 partnership,
the existence of a juridical personality different from the individual partners,
and the freedom of each party to transfer or assign the whole property.
Hence, there is no adequate basis to support the proposition that they
thereby formed an unregistered partnership. The two isolated transactions
whereby they purchased properties and sold the same a few years thereafter
did not thereby make them 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 thereby. Under the circumstances, they cannot be
considered to have formed an unregistered partnership which is thereby
liable for corporate income tax, as the respondent commissioner proposes.
13. Evangelista vs CIR
EUFEMIA EVANGELISTA & FRANCISCA EVANGELISTA vs CIR & CA
FACTS:
 Petitioners borrowed from their farther 59, 140.00 which amount together
with their personal monies and was used by them for purpose of buying real
properties.
 August 16, 1945, they appointed their brother Simeon Evangelista to
“manage their properties with full power to lease; collect and receive rents;
to issue receipts therefor; in default of such payment, to bring suits against
the defaulting tenants; to sign letters, contracts, etc., for and in their behalf,
and to endorse and deposit all notes and checks for them;
 They realized rental income from the said properties for the period 1945-
1949.
 September 24, 1954, CIR demanded the payment of income tax on
corporations, real estate dealer’s fixed tax and corporation residence tax for
the years 1945-1949.
 Said letter of demand and corresponding assessments were delivered to
petitioners on December 3, 1945, whereupon they instituted the present
case in the Court of Tax Appeals with a prayer that “the decision of the
respondents contained in this letter of demand dated September 24, 1954”
be reversed, and they be absolved from the payment of the taxes in
question, with costs against the respondent.
 CTA denied their petition and subsequent MR and New Trials were denied.
ISSUES: 1. WON petitioners have formed a partnership;
2. WON they are subject to the tax corporations provided for in Section 24
of the Commonwealth Act No. 466, as well as residence tax for corporations and
real estate dealers fixed tax.
RULING:
1. YES! Art. 1767 of the Civil Code provides: By the contract of
partnership, 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.
 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.
Upon consideration of all the facts and circumstances surrounding the case,
we are fully satisfied that their purpose was to engage in real estate transactions for
monetary gain and divide the same among themselves.
Although, taken singly, they might not suffice to establish the intent
necessary to constitute a partnership, the collective effect of these circumstances is
such as to leave no room for doubt on the existence of said petitioners herein. Only
one or two of the aforementioned circumstances were present in the cases cited by
petitioners herein, and, hence, those cases are not on point.
The Court of Tax Appeals correctly rejected the pretense that petitioners are
mere co-owners, not copartners.
2. For purposes of the tax on corporations, our National Internal Revenue
Code, includes these partnerships- with the exception only of duly registered general
copartnerships – within the purview of the term “corporation.” It is therefore, clear
to our mind that petitioner’s herein constituted partnership, insofar as said Code is
concerned and are subject to the income tax for corporations.
14. SARDANE Vs. CA
SARDANE VS. COURT OF APPEALS
FACTS:
Petitioner Sardane is the owner of a Sardane Trucking Services. One day
Sardane borrowed money from the other guy by making promises and issuing
several promissory notes. On the due date the other guy wanted his money
back but instead of paying Sardane apologized for his failure to pay on time,
and he promised the other guy that he would pay him next time. After so
many failed attempts to collect his money – the other guy got mad and finally
decided to seek the intervention of the court. Now after so many failed
attempts to collect the promised payment, the other guy, Mr.Acojedo
(Private Respondent), with so much hate on his heart, finally filed a collection
case against Sardane. Even during the scheduled date of the trial, Sardane, as
usual he did not show up. On motion by the petitioner(herein private
respondent), the Court issued an order declaring the Sardane in default and
eventually after presentation of evidence ex parte, the court rendered
judgment by default in favor of the petitioner. Sardane then appealed to
the CFI, 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 the other guy. The CFI, believing the arguments of Sardane, ruled on his
favor thereby reversing the decision of the lower court by dismissing the
complaint and ordered the plaintiff-appellee Acojedo to pay said defendant-
appellant P500.00 for moral damages
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. Under similar facts, this Court in the early
case of Fortis vs. Gutierrez Hermanos, denied the claim of the plaintiff therein
that he was a partner in the business of the defendant. The same rule was
reiterated in Bastida vs. Menzi & Co., Inc., et al. which involved the same
factual and legal milieu.
15. CIR vs SUTER
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
WILLIAM J. SUTER and THE COURT OF TAX APPEALS, respondents.
Facts principles of our law. The limited partnership's separate individuality makes it
A limited partnership, named "William J. Suter 'Morcoin' Co., Ltd.," was formed on impossible to equate its income with that of the component members. True, section
30 September 1947 by herein respondent William J. Suter as the general partner, 24 of the Internal Revenue Code merges registered general co-partnerships
and Julia Spirig and Gustav Carlson, as the limited partners. The firm engaged, (compañias colectivas) with the personality of the individual partners for income tax
among other activities, in the importation, marketing, distribution and operation of purposes. But this rule is exceptional in its disregard of a cardinal tenet of our
automatic phonographs, radios, television sets and amusement machines, their partnership laws, and can not be extended by mere implication to limited
parts and accessories.’ partnerships.
In 1948, however, general partner Suter and limited partner Spirig got married and,
thereafter, on 18 December 1948, limited partner Carlson sold his share in the 16. Magalona vs Pesayco
partnership to Suter and his wife. The limited partnership had been filing its income
tax returns as a corporation, without objection by the herein petitioner,
Commissioner of Internal Revenue, until in 1959 when the latter, in an assessment, Magalona v. Pesayco, G.R. No. 39607
consolidated the income of the firm and the individual incomes of the partners-
spouses Suter and Spirig resulting in a determination of a deficiency income tax [G.R. No. 39607. February 6, 1934.]
against respondent Suter in the amount of P2,678.06 for 1954 and P4,567.00 for
1955.
ENCARNACION MAGALONA, ET AL., plaintiffs-appellees, vs. JUAN PESAYCO,
Respondent Suter protested the assessment, and requested its cancellation and defendant-appellant.
withdrawal, as not in accordance with law, but his request was denied. Unable to
secure a reconsideration, he appealed to the Court of Tax Appeals, which court, after
trial, rendered a decision, on 11 November 1965, reversing that of the Commissioner Manuel Polido and Pedro V. Jimenez for appellant.
of Internal Revenue.
Issue:
(a) Whether or not the corporate personality of the William J. Suter "Morcoin" Co.,
Ltd. should be disregarded for income tax purposes, considering that respondent Lutero & Lutero and Ramon Maza for appellees.
William J. Suter and his wife, Julia Spirig Suter actually formed a single taxable unit
and whether or not the partnership was dissolved after the marriage of the partners.
Ruling:
The appellant's view, that by the marriage of both partners the company became a SYLLABUS
single proprietorship, is equally erroneous. The capital contributions of partners
William J. Suter and Julia Spirig were separately owned and contributed by them
before their marriage; and after they were joined in wedlock, such contributions
1. PARTNERSHIP; PROOF OF EXISTENCE OF CONTRACT; FAILURE TO OBJECT.
remained their respective separate property under the Spanish Civil Code (Article
1396): — If a party permits a contract, which the law provides shall be in writing, to
The following shall be the exclusive property of each spouse: be proved, without objection as to the form of the proof, it is just as binding
(a) That which is brought to the marriage as his or her own; .... as if the statute had been complied with.
Thus, the individual interest of each consort in William J. Suter "Morcoin" Co., Ltd.
did not become common property of both after their marriage in 1948.
It being a basic tenet of the Spanish and Philippine law that the partnership has a
juridical personality of its own, distinct and separate from that of its partners (unlike 2. ID.; CIVIL PARTNERSHIP; FORM OF CONTRACT. — "Civil partnerships may
American and English law that does not recognize such separate juridical be established in any form whatever, unless real property or real rights are
personality), the bypassing of the existence of the limited partnership as a taxpayer
can only be done by ignoring or disregarding clear statutory mandates and basic
contributed to the same, in which case a public instrument shall be
necessary." (Article 1667, Civil Code.)
3. ID.; ID.; ID. — "Articles of partnership are not required to be in writing
except in the cases mentioned in article 1667, Civil Code, which controls
article 1280 of the same Code. (Fernandez vs. De la Rosa, 1 Phil., 671.)" (4
Phil. Digest, 3468.)
DECISION
GODDARD, J p:
In the month of September, 1930, the plaintiffs, Encarnacion Magalona, Juan
Sermeno, and the defendant, Juan Pesayco, formed a partnership for the
purpose of catching "semillas de bañgus o aua" in the sea and rivers within
the jurisdiction of the municipality of San Jose, Antique Province, for the year
1931. It was agreed that the defendant should put in a bid for this privilege
and that the partners should each supply one third of the capital in case the
defendant was awarded the desired privilege. The defendant, having had
experience in this line, was to be the manager in case his bid was accepted.
The defendant offered the sum of P5,550.09 for the year ending December
31, 1931. As a deposit of one-fourth of the amount of the bid was required
each of the partners put up one third of this amount. This bid, being the
highest, was accepted by the municipality and the privilege was awarded to
the defendant. The latter entered upon his duties under the contract and
gave an account of two sales of "semillas de bañgus", to Tiburcio Lutero as
representative of the plaintiff Magalona. As the defendant, on April 21, 1931,
had on hand only P410 he wired, Exhibit A, Lutero for sufficient money to
complete the payment of the first quarter which was to be paid within the
first twenty days of the second quarter of the year 1931. This telegram reads
as follows: "Hemos conseguido plazo hasta esta tarde tenemos aqui
cuatrocientos diez gira telegraficamente restante." Lutero immediately sent
P1,000 to the municipal treasurer of San Jose, Antique (Exhibit D).
The defendant managed the business from January 1, 1931, and with the
exception of the two sales above-mentioned, never gave any account of his
catches or sales to his partners, the plaintiffs. In view of this the herein
complaint was filed April 21, 1931, in which it was prayed that a receiver be
appointed by the court to take charge of the funds of the partnership and the
management of its affairs; that the defendant be ordered to render an
account of his management and to pay to the plaintiffs their participation in
the profits thereof; that the defendant be required to turn over to the
receiver all of the funds of the partnership and that the defendant be
condemned to pay the costs.
The plaintiffs put up a bond of P5,000 and a receiver was appointed who also
put up a bond for the same amount.
The receiver took over the management and took possession of all the
devices and implements used in the catching of "semillas de bañgus".
At the trial it was proven that before April 20, 1931, the defendant obtained
and sold a total of 975,000 "semillas de bañgus" the market value of which
was P3 per thousand. The defendant made no report of this nor did he pay
the plaintiffs any part of the P2,925 realized by him on the sales thereof. This
was not denied.
In his two counter-complaints the defendant prays that he be awarded
damages in the sum of P34,700. He denies that there was a partnership and
depends principally upon the fact that the partnership agreement was not in
writing.
The partnership was conclusively proven by the oral testimony of the
plaintiffs and other witnesses, two of whom were Attorneys Lutero and Maza.
The defense made no objection to the questions asked with regard to the
forming of this partnership. This court has held that if a party permits a
contract, which the law provides shall be in writing, to be proved, without
objection as to the form of the proof, it is just as binding as if the statute had
been complied with.
However, we cannot agree with the appellant that one of the requisites of a
partnership agreement, such as the one under consideration, is that it should
be in writing.
Article 1667 of the Civil Code provides that "Civil partnerships may be
established in any form whatever, unless real property or real rights are
contributed to the same, in which case a public instrument shall be
necessary."
"Articles of partnership are not required to be in writing except in the cases
mentioned in article 1667, Civil Code, which controls article 1280 of the same
Code. (Fernandez vs. De la Rosa, 1 Phil., 671.)
"A verbal partnership agreement is valid between the parties even though
more than 1,500 pesetas are involved and can be enforced without bringing
action under article 1279, Civil Code, to compel execution of a written
instrument. (Arts. 1261, 1278-1280, 1667, Civil Code; arts. 116-119, 51 Code
of Commerce.) Thunga Chui vs. Que Bentec, 2 Phil., 561." (4 Phil. Digest,
3468.)
The dispositive part of the decision of the trial court reads as follows:
"Habiendose probado, sin pruebas en contrario, de que el demandado
obtuvo durante su administracion de este negocio, semillas de bañgus por
valor de P2,925 que no dio cuenta ni participacion a sus consocios los
demandantes, el Juzgado declara al demandado en deber a la sociedad,
compuesta por demandantes y demandado, en la suma de P2,925, importe
de 975,000 semillas de bañgus a P3 el millar, y ordena que entregue esta
suma al depositario judicial nombrado, como fondos de dicha sociedad.
"Se sobreseen las contrademandas y se condena en costas al demandado. Asi
se ordena."
This decision is affirmed with costs in both instances against the defendant-
appellant. So ordered.
Malcolm, Villa-Real, Hull, and Imperial, JJ., concur.
18. SEVILLA VS CA
SECOND DIVISION
G.R. No. L-41182-3 April 16, 1988
DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-appellants,
vs.
THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO
S.CANILAO, and SEGUNDINA NOGUERA, respondents-appellees.
FACTS:
Noqguera and the Tourist World Service, Inc. (TWS) entered into a contract
where the latter leased the premises of the former as a branch office. In the
said contract, Sevilla held herself solidarily liable with TWS for a monthly rent.
She also ran the branch pffice which she earned commissions for her efforts.

When TWS was informed that Sevilla was connected with a rival firm, and
since the branch office was anyhow losing, TWS decided to close down its
office. Because of this, the Corporate Secretary of TWS went over to the
branch office and padlocked the premises. When Sevilla and her employees
could not enter the locked premises, she filed a complaint against TWS and
Noguera.
ISSUE: Whether or not Sevilla and TWS were engaged in Partnership.
HELD:
No. The contract was not of partnership but rather that of an Agency. When
Lina agreed to man the TWS’s Ermita Office, she must have done so pursuant
to a contract of Agency. It is the essence of the contract the agent renders
services in representation or on behalf of another. In this case, Sevilla solicited
airline tickets, but she did so for and on behalf of her principal, TWS, for which
she received compensation in the form of commissions.
19. Sunga Chan vs Chua
SUNGA-CHAN VS. LAMBERTO CHUA
FACTS
 lamberto T. Chua (hereafter respondent) filed a complaint against Lilibeth
Sunga Chan (hereafter petitioner Lilibeth) and Cecilia Sunga (hereafter
petitioner Cecilia), daughter and wife of the deceased Jacinto L. Sunga
(hereafter Jacinto), for "Winding Up of Partnership Affairs, Accounting,
Appraisal and Recovery of Shares”
 n 1977, he verbally entered into a partnership with Jacinto in the
distribution of Shellane Liquefied Petroleum Gas (LPG) in Manila, named as
“shellite gas appliance center”, under the name of Jacinto as a sole
proprietorship.
 Chua delivered his contribution at 100,000, while Jacinto also contributed
the same amount, with the intention that the profits would be equally
divided between them. The partnership allegedly had Jacinto as manager,
assisted by Josephine Sy (hereafter Josephine), a sister of the wife
respondent, Erlinda Sy. As compensation, Jacinto would receive a manager's
fee or remuneration of 10% of the gross profit and Josephine would receive
10% of the net profits, in addition to her wages and other remuneration
from the business.
 While Jacinto furnished respondent with the merchandise inventories,
balance sheets and net worth of Shellite from 1977 to 1989, respondent
however suspected that the amount indicated in these documents were
understated and undervalued by Jacinto and Josephine for their own selfish
reasons and for tax avoidance.
 Upon Jacinto's death in the later part of 1989, his surviving wife, petitioner
Cecilia and particularly his daughter, petitioner Lilibeth, took over the
operations, control, custody, disposition and management of Shellite
without respondent's consent. Despite respondent's repeated demands
upon petitioners for accounting, inventory, appraisal, winding up and
restitution of his net shares in the partnership, petitioners failed to comply.
Petitioner Lilibeth allegedly continued the operations of Shellite, converting
to her own use and advantage its properties.
 On January 30, 1993, petitioners filed their Answer with Compulsory
Counter-claims, contending that they are not liable for partnership shares,
unreceived income/profits, interests, damages and attorney's fees
ISSUE
Whether or not a partnership may only be shown and established through a written
document, so as to render inadmissible the testimonies of respondent and his
witness proving the existence of partnership, inadmissible?
RULING
No. A partnership may be constituted in any form, except where immovable property
of real rights are contributed thereto, in which case a public instrument shall
necessary.6 Hence, based on the intention of the parties, as gathered from the facts
and ascertained from their language and conduct, a verbal contract of partnership
may arise.7 The essential profits that must be proven to that a partnership was agreed
upon are (1) mutual contribution to a common stock, and (2) a joint interest in the
profits.8
Understandably so, in view of the absence of the written contract of partnership
between respondent and Jacinto, respondent resorted to the introduction of
documentary and testimonial evidence to prove said partnership.
The crucial issue to settle then is to whether or not the "Dead Man's Statute" applies
to this case so as to render inadmissible respondent's testimony and that of his
witness, Josephine.
The "Dead Man's Statute" provides that if one party to the alleged transaction is
precluded from testifying by death, insanity, or other mental disabilities, the
surviving party is not entitled to the undue advantage of giving his own
uncontradicted and unexplained account of the transaction.9 But before this rule can
be successfully invoked to bar the introduction of testimonial evidence, it is necessary
that:
"1. The witness is a party or assignor of a party to case or persons in whose
behalf a case in prosecuted.
2. The action is against an executor or administrator or other representative
of a deceased person or a person of unsound mind;
3. The subject-matter of the action is a claim or demand against the estate
of such deceased person or against person of unsound mind;
4. His testimony refers to any matter of fact of which occurred before the
death of such deceased person or before such person became of unsound
mind."10
Two reasons forestall the application of the "Dead Man's Statute" to this case.
First, petitioners filed a compulsory counterclaim 11 against respondents in their
answer before the trial court, and with the filing of their counterclaim, petitioners
themselves effectively removed this case from the ambit of the "Dead Man's
Statute".12 Well entrenched is the rule that when it is the executor or administrator
or representatives of the estates that sets up the counterclaim, the plaintiff, herein
respondent, may testify to occurrences before the death of the deceased to defeat
the counterclaim.13 Moreover, as defendant in the counterclaim, respondent is not
disqualified from testifying as to matters of facts occurring before the death of the
deceased, said action not having been brought against but by the estate or
representatives of the deceased.14
Second, the testimony of Josephine is not covered by the "Dead Man's Statute" for
the simple reason that she is not "a party or assignor of a party to a case or persons
in whose behalf a case is prosecuted." Records show that respondent offered the
testimony of Josephine to establish the existence of the partnership between
respondent and Jacinto. Petitioners' insistence that Josephine is the alter ego of
respondent does not make her an assignor because the term "assignor" of a party
means "assignor of a cause of action which has arisen, and not the assignor of a right
assigned before any cause of action has arisen." 15 Plainly then, Josephine is merely a
witness of respondent, the latter being the party plaintiff.
We are not convinced by petitioners' allegation that Josephine's testimony lacks
probative value because she was allegedly coerced coerced by respondent, her
brother-in-law, to testify in his favor, Josephine merely declared in court that she was
requested by respondent to testify and that if she were not requested to do so she
would not have testified. We fail to see how we can conclude from this candid
admission that Josephine's testimony is involuntary when she did not in any way
categorically say that she was forced to be a witness of respondent.
Also, the fact that Josephine is the sister of the wife of respondent does not diminish
the value of her testimony since relationship per se, without more, does not affect
the credibility of witnesses.16
Petitioners' reliance alone on the "Dead Man's Statute" to defeat respondent's claim
cannot prevail over the factual findings of the trial court and the Court of Appeals
that a partnership was established between respondent and Jacinto. Based not only
on the testimonial evidence, but the documentary evidence as well, the trial court
and the Court of Appeals considered the evidence for respondent as sufficient to
prove the formation of partnership, albeit an informal one.
Re prescription: No prescription. the action for accounting filed by respondents
three (3) years after Jacinto's death was well within the prescribed period. The Civil
Code provides that an action to enforce an oral contract prescribes in six (6)
years20 while the right to demand an accounting for a partner's interest as against the
person continuing the business accrues at the date of dissolution, in the absence of
any contrary agreement.21 Considering that the death of a partner results in the
dissolution of the partnership 22 , in this case, it was Jacinto's death that respondent
as the surviving partner had the right to an account of his interest as against
petitioners. It bears stressing that while Jacinto's death dissolved the partnership, the
dissolution did not immediately terminate the partnership. The Civil Code 23 expressly
provides that upon dissolution, the partnership continues and its legal personality is
retained until the complete winding up of its business, culminating in its
termination.24
23. Lyons vs C.W. Rosenstock
E.S LYONS vs C.W. ROSENSTOCK
FACTS:
 Henry W. Esler had been a resident of the City of Manila where he was
engaged in buying, selling, and administering real estate.
 E. S. Lyons joined with him, the profits being shared by the two in equal
parts.
 April 1919, Lyons went on leave to the United States and was gone for
nearly a year and a half, returning on September 21, 1920.
 On the eve of his departure, Elser made a written statement showing
that Lyons was, at that time, half owner with Elser of three particular
pieces of real property. Concurrently with this act, Lyons, executed in
 favor of Elser a general power of attorney empowering him to manage
and dispose of said properties at will and to represent Lyons fully and
amply to the mutual advantage of both.
 In 1920, Elser was drawn to a piece of land, containing about 1,500,000
square meters, near the City of Manila. The property, which will be
herein referred to as the San Juan Estate, was offered by its owners for
570,000 with an initial payment of 150,000.
 Elser raised 120,000 from his own funds. The remainder is to be obtained
by a loan of 50,000 from Uy Siuliong.
 The loan was secured through Uy Cho Yee and in order to get the money,
it was necessary for Elser not only to give a personal note signed by
himself and his two associates in the projected enterprise, but also by
Fidelity & Surety Company.
 In order to obtain the signature of Fidelity and Surety Company, Elser
had to execute a mortgage on one of the properties owned by him and
Lyons of Carriedo Street.
 July 21, 1920, Lyons wrote a letter from New York thanking Elser for his
offer to take Lyons into his new project and adding that from the
standpoint of making money, he had passed up a good thing.
 Elser relieved the Carriedo property of the encumbrance which he had
placed upon it and requested the Fidelity and Surety Company to allow
him to substitute another property for it.
 However, the release of the old mortgage and the recording of the new
were never registered because in September 1920, when Lyons returned
to Manila, he allowed the mortgage to remain on the Carriedo property.
 On 1921, Elser was able to pay the note executed by him to Uy Siolong
which enabled the release of the Carriedo Property.
ISSUE: WON Lyons, as half owner of the Carriedo property, involuntarily became the
owner of co-partner of an undivided interest in the San Juan Estate, which was
acquired partly by the money obtained through an encumbrance placed on the
Carriedo property.
RULING: NO!
Under the law prevailing in this jurisdiction, a trust does not ordinarily attach
with respect to property acquired by a person who uses money belonging to another.
(Martinez v Martinez, 1 Phil 647)
There was clearly no general relation of partnership, under the Article 1678
of the Civil Code. It is clear that Esler, in buying the San Juan Estate, was not acting
for any partnership composed of himself and Lyons, and the law cannot be distorted
into a proposition which would make Lyons a participant in this deal contrary to his
express determination.
It is to be noted that no money belonging to Lyons or any partnership
composed of Esler and Lyons was in fact used by Esler in the purchase of the San Juan
Estate.
xxx ---- xxx ---- xxx ---- xxx ---- xxx ---- xxx ---- xxx ---- xxx ---- xxx ---- xxx ---- xxx ---- xxx
---- xxx ---- xxx ---- x
PRINCIPAL AND AGENT; RATIFICATION OF ACT OFAGENT; RIGHTS INCIDENT TO
OWNERSHIP.—Whereon of two individuals who had been associated in certain real
estate deals, owing a sum of money to his associate, invested it in the shares of a new
company promoted by himself, and this action was ratified by the associate, to whom
the shares were accordingly issued, no legal or equitable rights, other than those
ordinarily incident to ownership, can be deduced from the transaction in favor of the
owner thus acquiring such shares.
ID.; AGENT'S LIABILITY FOR INTEREST ON, MONEYOF HIS CONSTITUENT.—Under
article 1724 of the Civil Code and article 264 of the Code of Commerce, an agent is
liable for interest on funds belonging to his principal(constituent) which have been
applied by the agent to unauthorized uses.
EQUITY; TRUSTS; FOLLOWING TRUST FUNDS;WHEN CASE GOVERNED BY ORDINARY
RULE OFCIVIL LIABILITY.—The doctrine developed in the courts of England and the
United States relative to the pursuing of trust funds is conversant with rights
deducible from the application, by a person in a trust relation with another, of
specific property belonging to such other person to some unauthorized purpose. The
fact that one of two coöwners subjects their joint property to a contingent liability
which results in no damage does not create a trust in favor of the other, and the
liability thereby incurred must be determined in conformity with the principles of the
civil law properly applicable to the case.
ID.; ID.; ID.; ID.; CASE AT BAR.—Where two individuals had been jointly associated in
various real estate deals, one of them, while the other was away, bought a valuable
piece of property with a view to the promotion of a suburban development, and as
he expected that his absent former associate would come into this deal and
contribute some capital to the purchase and development of the property, he
subjected a piece of mortgaged property owned by them jointly to a second
mortgage, to secure against loss a surety company which had been induced to sign a
note with the active promoter to secure a loan necessary to complete the first
payment on the property purchased. After the second individual returned to Manila
he consented for this second mortgage (which had been executed under a sufficient
power of attorney) to remain upon the property until it was paid off, as was presently
done. Held, that the use to which the joint property was thus subjected did not create
a trust in favor of the second individual, with the effect of making him a co-partner
in the ownership of the property purchased as aforesaid.

25. Aguila vs CA
AGUILA vs. CA
FACTS:
 Petitioner is the manager of A.C. Aguila & Sons, Co., a partnership engaged
in lending activities. Private respondent and her late husband, Ruben M.
Abrogar, were the registered owners of a house and lot.
 On April 18, 1991, private respondent, with the consent of her late husband,
and A.C. Aguila & Sons, Co., represented by petitioner, entered into a
Memorandum of Agreement
 The MOA provided that AC Aguila and Sons will buy the property from
felicidad, the latter being given 90 days within which to redeem the
property; and upon her failure to do so, she will be obliged to deliver said
property within 15days form the expiration of the 90-day period; and should
the vendor fail to repurchase the property, the moa hall be deemed
cancelled and a doas shall proceed to transfer the property to AC aguila
 In a special power of attorney dated the same day, April 18, 1991, private
respondent authorized petitioner to cause the cancellation of TCT No.
195101 and the issuance of a new certificate of title in the name of A.C.
Aguila and Sons, Co., in the event she failed to redeem the subject property
as provided in the Memorandum of Agreement. 4
 Private respondent failed to redeem the property within the 90-day period
as provided in the Memorandum of Agreement. Hence, pursuant to the
special power of attorney mentioned above, petitioner caused the
cancellation of TCT No. 195101 and the issuance of a new certificate of title
in the name of A.C. Aguila and Sons, Co
 After her loss in the ejectment case filed by AC Aguila, she then filed a
petition for declaration of nullity of a deed of sale with the Regional Trial
Court, Branch 273, Marikina, Metro Manila on December 4, 1993. She
alleged that the signature of her husband on the deed of sale was a forgery
because he was already dead when the deed was supposed to have been
executed on June 11, 1991.
 The RTC dismissed the case, but the CA reversed
ISSUE
Whether or not the petitioner, Alfredo Aguila, is the real party in interest in the
case?
Ruling:
No. Under Art. 1768 of the Civil Code, a partnership "has a juridical personality
separate and distinct from that of each of the partners." The partners cannot be held
liable for the obligations of the partnership unless it is shown that the legal fiction of
a different juridical personality is being used for fraudulent, unfair, or illegal
purposes. 10 In this case, private respondent has not shown that A.C. Aguila & Sons,
Co., as a separate juridical entity, is being used for fraudulent, unfair, or illegal
purposes. Moreover, the title to the subject property is in the name of A.C. Aguila &
Sons, Co. and the Memorandum of Agreement was executed between private
respondent, with the consent of her late husband, and A.C. Aguila & Sons, Co.,
represented by petitioner. Hence, it is the partnership, not its officers or agents,
which should be impleaded in any litigation involving property registered in its name.
A violation of this rule will result in the dismissal of the complaint. 11
26. Rufino Tan vs Ramon Del Rosario
EN BANC
G.R. No. 109289 October 3, 1994
RUFINO R. TAN, petitioner,
vs.
RAMON R. DEL ROSARIO, JR., as SECRETARY OF FINANCE & JOSE U.
ONG, as COMMISSIONER OF INTERNAL REVENUE, respondents.
G.R. No. 109446 October 3, 1994
CARAG, CABALLES, JAMORA AND SOMERA LAW OFFICES, CARLO A.
CARAG, MANUELITO O. CABALLES, ELPIDIO C. JAMORA, JR. and
BENJAMIN A. SOMERA, JR., petitioners,
vs.
RAMON R. DEL ROSARIO, in his capacity as SECRETARY OF FINANCE
and JOSE U. ONG, in his capacity as COMMISSIONER OF INTERNAL
REVENUE, respondents.
FACTS:
These two consolidated special civil actions for prohibition challenge, in G.R.
No. 109289, the constitutionality of Republic Act No. 7496, also commonly
known as the Simplified Net Income Taxation Scheme ("SNIT"), amending
certain provisions of the National Internal Revenue Code and, in G.R. No.
109446, the validity of Section 6, Revenue Regulations No. 2-93, promulgated
by public respondents pursuant to said law.

In G.R. No. 109446, petitioners, assailing Section 6 of Revenue Regulations
No. 2-93, argue that public respondents have exceeded their rule-making
authority in applying SNIT to general professional partnerships.
G.R. No. 109446
The several propositions advanced by petitioners revolve around the question
of whether or not public respondents have exceeded their authority in
promulgating Section 6, Revenue Regulations No. 2-93, to carry out Republic
Act No. 7496.
The questioned regulation reads:
Sec. 6. General Professional Partnership — The general professional
partnership (GPP) and the partners comprising the GPP are covered by R. A.
No. 7496. Thus, in determining the net profit of the partnership, only the direct
costs mentioned in said law are to be deducted from partnership income. Also,
the expenses paid or incurred by partners in their individual capacities in the
practice of their profession which are not reimbursed or paid by the partnership
but are not considered as direct cost, are not deductible from his gross income.
The real objection of petitioners is focused on the administrative interpretation
of public respondents that would apply SNIT to partners in general
professional partnerships. Petitioners cite the pertinent deliberations in
Congress during its enactment of Republic Act No. 7496, also quoted by the
Honorable Hernando B. Perez, minority floor leader of the House of
Representatives, in the latter's privilege speech by way of commenting on the
questioned implementing regulation of public respondents following the
effectivity of the law, thusly:
MR. ALBANO, Now Mr. Speaker, I would like to get the correct impression of
this bill. Do we speak here of individuals who are earning, I mean, who earn
through business enterprises and therefore, should file an income tax return?
MR. PEREZ. That is correct, Mr. Speaker. This does not apply to corporations.
It applies only to individuals.
Other deliberations support this position, to wit:
MR. ABAYA . . . Now, Mr. Speaker, did I hear the Gentleman from Batangas
say that this bill is intended to increase collections as far as individuals are
concerned and to make collection of taxes equitable?
MR. PEREZ. That is correct, Mr. Speaker.
In fact, in the sponsorship speech of Senator Mamintal Tamano on the Senate
version of the SNITS, it is categorically stated, thus:
This bill, Mr. President, is not applicable to business corporations or to
partnerships; it is only with respect to individuals and professionals. (Emphasis
ours)
ISSUE: Whether or not General Professional Partnerships are subject to
income tax.
HELD:
No. General Professional Partnerships are exempt from income tax since the
individual partners are those that are taxable.
The apparent misconception that general professional partnerships are
subject to the payment of income tax or that there is a difference in the tax
treatment between individuals engaged in business or in the practice of their
respective professions and partners in general professional partnerships must
be corrected.
The fact of the matter is that a general professional partnership, unlike an
ordinary business partnership (which is treated as a corporation for income tax
purposes and so subject to the corporate income tax), is not itself an income
taxpayer. The income tax is imposed not on the professional partnership,
which is tax exempt, but on the partners themselves in their individual capacity
computed on their distributive shares of partnership profits.
"Exempt partnerships," upon the other hand, are not similarly identified as
corporations nor even considered as independent taxable entities for income
tax purposes. A general professional partnership is such an example.4 Here,
the partners themselves, not the partnership (although it is still obligated to file
an income tax return [mainly for administration and data]), are liable for the
payment of income tax in their individual capacity computed on their
respective and distributive shares of profits. In the determination of the tax
liability, a partner does so as an individual, and there is no choice on the
matter. In fine, under the Tax Code on income taxation, the general
professional partnership is deemed to be no more than a mere mechanism or
a flow-through entity in the generation of income by, and the ultimate
distribution of such income to, respectively, each of the individual partners.
Section 6 of Revenue Regulation No. 2-93 did not alter, but merely confirmed,
the above standing rule as now so modified by Republic Act.

28. Angeles vs Sec of Justice
OSCAR ANGELES and EMERITA ANGELES, Petitioners,
vs.
THE HON. SECRETARY OF JUSTICE and FELINO MERCADO, Respondents.
Facts
On 19 November 1996, the Angeles spouses filed a criminal complaint for estafa under
Article 315 of the Revised Penal Code against Mercado before the Provincial
Prosecution Office. Mercado is the brother-in-law of the Angeles spouses, being
married to Emerita Angeles’ sister Laura.
The Angeles spouses claimed that Mercado convinced them to enter into a contract of
antichresis, colloquially known as sanglaang-perde, covering eight parcels of land
("subject land") planted with fruit-bearing lanzones trees. The contract of antichresis
was to last for five years with ₱210,000 as consideration. As the Angeles spouses stay
in Manila during weekdays and go to Laguna only on weekends, the parties agreed
that Mercado would administer the lands and complete the necessary paperwork.
The Angeles spouses asked for an accounting from Mercado. Mercado explained that
the subject land earned ₱46,210 in 1993, which he used to buy more lanzones trees;
that the trees bore no fruit in 1994; Mercado gave no accounting for 1995. The Angeles
spouses claim that only after this demand for an accounting did they discover that
Mercado had put the contract of sanglaang-perde over the subject land under Mercado
and his spouse’s names.
In his counter-affidavit, Mercado claimed that there exists an industrial partnership,
colloquially known as sosyo industrial, between him and his spouse as industrial
partners and the Angeles spouses as the financiers. This industrial partnership had
existed since 1991, before the contract of antichresis over the subject land; Mercado
used his and his spouse’s earnings as part of the capital in the business transactions
which he entered into in behalf of the Angeles spouses. It was their practice to enter
into business transactions with other people under the name of Mercado because the
Angeles spouses did not want to be identified as the financiers.
Issue
Whether a partnership existed between the Angeles spouses and Mercado even
without any documentary proof to sustain its existence;
Ruling
The Angeles spouses’ position that there is no partnership because of the lack of a
public instrument indicating the same and a lack of registration with the Securities and
Exchange Commission ("SEC") holds no water. First, the Angeles spouses contributed
money to the partnership and not immovable property. Second, mere failure to register
the contract of partnership with the SEC does not invalidate a contract that has the
essential requisites of a partnership. The purpose of registration of the contract of
partnership is to give notice to third parties. Failure to register the contract of
partnership does not affect the liability of the partnership and of the partners to third
persons. Neither does such failure to register affect the partnership’s juridical
personality. A partnership may exist even if the partners do not use the words "partner"
or "partnership."
Indeed, the Angeles spouses admit to facts that prove the existence of a partnership:
a contract showing a sosyo industrial or industrial partnership, contribution of money
and industry to a common fund, and division of profits between the Angeles spouses
and Mercado.
28. Heirs of Tan Eng Kee Vs. CA
HEIRS OF TAN ENG KEE vs.CA 341 SCRA 740, G.R. No. 126881, October
3, 2000
FACTS:
After the second World War, Tan EngKee and Tan Eng Lay, pooling their
resources and industry together, entered into a partnership engaged in the
business of selling lumber and hardware and construction supplies. They
named their enterprise "Benguet Lumber" which they jointly managed until Tan
EngKee's death. Petitioners herein averred that the business prospered due
to the hard work and thrift of the alleged partners. However, they claimed that
in 1981, Tan Eng Lay and his children caused the conversion of the
partnership "Benguet Lumber" into a corporation called "Benguet Lumber
Company." The incorporation was purportedly a ruse to deprive Tan EngKee
and his heirs of their rightful participation in the profits of the business.
Petitioners prayed for accounting of the partnership assets, and the
dissolution, winding up and liquidation thereof, and the equal division of the
net assets of Benguet Lumber. The RTC ruled in favor of petitioners, declaring
that Benguet Lumber is a joint venture which is akin to a particular partnership.
The Court of Appeals rendered the assailed decision reversing the judgment
of the trial court.
ISSUE: Whether the deceased Tan EngKee and Tan Eng Lay are joint
adventurers and/or partners in a business venture and/or particular
partnership called Benguet Lumber and as such should share in the profits
and/or losses of the business venture or particular partnership
RULING:
There was no partnership whatsoever. Except for a firm name, there was no
firm account, no firm letterheads submitted as evidence, no certificate of
partnership, no agreement as to profits and losses, and no time fixed for the
duration of the partnership. There was even no attempt to submit an
accounting corresponding to the period after the war until Kee's death in 1984.
It had no business book, no written account nor any memorandum for that
matter and no license mentioning the existence of a partnership. Also, the trial
court determined that Tan EngKee and Tan Eng Lay had entered into a joint
venture, which it said is akin to a particular partnership. A particular partnership
is distinguished from a joint adventure, to wit:(a) A joint adventure (an
American concept similar to our joint accounts) is a sort of informal partnership,
with no firm name and no legal personality. In a joint account, the participating
merchants can transact business under their own name, and can be
individually liable therefor. (b) Usually, but not necessarily a joint adventure is
limited to a SINGLE TRANSACTION, although the business of pursuing to a
successful termination maycontinue for a number of years; a partnership
generally relates to a continuing business of various transactions of a certain
kind. A joint venture "presupposes generally a parity of standing between 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. 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 Tan EngKee allegedly contributed his resources to a common fund
for the purpose of establishing a partnership. Besides, it is indeed odd, if not
unnatural, that despite the forty years the partnership was allegedly in
existence, Tan EngKee never asked for an accounting. The essence of a
partnership is that the partners share in the profits and losses .Each has the
right to demand an accounting as long as the partnership exists. A demand for
periodic accounting is evidence of a partnership. During his lifetime, Tan
EngKee appeared never to have made any such demand for accounting from
his brother, Tang Eng Lay. We conclude that Tan EngKee was only an
employee, not a partner since they did not present and offer evidence that
would show that Tan EngKee received amounts of money allegedly
representing his share in the profits of the enterprise. There being no
partnership, it follows that there is no dissolution, winding up or liquidation to
speak of.
29. Bourns vs Carman
FRANK S. BOURNS,Plaintiff-Appellee, vs. D. M. CARMAN, ET
AL.,Defendants-Appellants
MAPA, J.:
The plaintiff in this action seeks to recover the sum of $437.50, United
Stated currency, balance due on a contract for the sawing of lumber for the
lumber yard of Lo-Chim-Lim. the contract relating to the said work was
entered into by the said Lo-Chim-Lim, acting as in his own name with the
plaintiff, and it appears that the said Lo-Chim-Lim personally agreed to pay
for the work himself. The plaintiff, however, has brought this action against
Lo-Chim-Lim and his codefendants jointly, alleging that, at the time the
contract was made, they were the joint proprietors and operators of the said
lumber yard engaged in the purchase and sale of lumber under the name
and style of Lo-Chim-Lim. Apparently the plaintiff tries to show by the words
above italicized that the other defendants were the partners of Lo-Chim-Lim
in the said lumber-yard business.chanroblesvirtualawlibrary chanrobles
virtual law library
The court below dismissed the action as to the defendants D. M. Carman
and Fulgencio Tan-Tongco on the ground that they were not the partners of
Lo-Chim-Lim, and rendered judgment against the other defendants for the
amount claimed in the complaint with the costs of proceedings. Vicente
Palanca and Go-Tauco only excepted to the said judgment, moved for a new
trial, and have brought the case to this court by bill of
exceptions.chanroblesvirtualawlibrary chanrobles virtual law library
The evidence of record shows, according to the judgment of the court, "That
Lo-Chim-Lim had a certain lumber yard in Calle Lemery of the city of Manila,
and that he was the manager of the same, having ordered the plaintiff to
do some work for him at his sawmill in the city of Manila; and that Vicente
Palanca was his partner, and had an interest in the said business as well as
in the profits and losses thereof . . .," and that Go-Tuaco received part of
the earnings of the lumber yard in the management of which he was
interested.chanroblesvirtualawlibrary chanrobles virtual law library
The court below accordingly found that "Lo-Chim-Lim, Vicente Palanca, Go-
Tuaco had a lumber yard in Calle Lemmery of the city of Manila in the year
1904, and participated in the profits and losses of business and that Lo-
Chim-Lim was managing partner of the said lumber yard." In other words,
coparticipants with the said Lo-Chim-Lim in the business in
question.chanroblesvirtualawlibrary chanrobles virtual law library
Although the evidence upon this point as stated by the by the however, that
is plainly and manifestly in conflict with the above finding of that court. Such
finding should therefore be sustained.chanroblesvirtualawlibrary chanrobles
virtual law library
The question thus raised is, therefore, purely one of law and reduces itself
to determining the real legal nature of the participation which the appellants
had in Lo-Chim-Lim's lumber yard, and consequently their liability toward
the plaintiff, in connection with the transaction which gave rise to the
present suit.chanroblesvirtualawlibrary chanrobles virtual law library
It seems that the alleged partnership between Lo-Chim-Lim and the
appellants was formed by verbal agreement only. At least there is no
evidence tending to show that the said agreement was reduced to writing,
or that it was ever recorded in a public
instrument.chanroblesvirtualawlibrary chanrobles virtual law library
Those who contract with the person under whose name the business of such
partnership of cuentas en participacion is conducted, shall have only a right
of action against such person and not against the other persons interested,
and the latter, on the other hand, shall have no right of action against the
third person who contracted with the manager unless such manager formally
transfers his right to them. (Art 242 of the code Of Commerce.) It follows,
therefore that the plaintiff has no right to demand from the appellants the
payment of the amount claimed in the complaint, as Lo-Chim-Lim was the
only one who contracted with him. the action of the plaintiff lacks, therefore,
a legal foundation and should be accordingly
dismissed.chanroblesvirtualawlibrary chanrobles virtual law library
The judgment appealed from this hereby reversed and the appellants are
absolved of the complaint without express provisions as to the costs of both
instances. After the expiration of twenty days let judgment be entered in
accordance herewith, and ten days thereafter the cause be remanded to the
court below for execution. So
ordered.chanroblesvirtualawlibrary chanrobles virtual law library

Moreover, that partnership had no corporate name. The plaintiff himself Arellano, C.J., Torres, Johnson, Carson, Willard and Tracey, JJ., concur.
alleges in his complaint that the partnership was engaged in business under
the name and style of Lo-Chim-Lim only, which according to the evidence
was the name of one of the defendants. On the other hand, and this is very
important, it does not appear that there was any mutual agreement,
between the parties, and if there were any, it has not been shown what the
agreement was. As far as the evidence shows it seems that the business
was conducted by Lo-Chim-Lim in his own name, although he gave to the
appellants a share was has been shown with certainty. The contracts made
with the plaintiff were made by Lo-Chim-Lim individually in his own name,
and there is no evidence that the partnership over contracted in any other
form. Under such circumstances we find nothing upon which to consider this
partnership other than as a partnership of cuentas en participacion. It may
be that, as a matter of fact, it is something different, but a simple business
and scant evidence introduced by the partnership We see nothing, according
to the evidence, but a simple business conducted by Lo-Chim-Lim
exclusively, in his own name, the names of other persons interested in the
profits and losses of the business nowhere appearing. A partnership
constituted in such a manner, the existence of which was only known to
those who had an interest in the same, being no mutual agreements
between the partners and without a corporate name indicating to the public
in some way that there were other people besides the one who ostensibly
managed and conducted the business, is exactly the accidental partnership
of cuentas en participacion defined in article 239 of the Code of
Commerce.chanroblesvirtualawlibrary chanrobles virtual law library