bus. org. case digest (1st set)

7/25/2019 Bus. Org. Case Digest (1st Set)

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PARTNERSHIP IN GENERAL

EN BANC

G.R. No. L-45425 April 29, 1939

JOSE GATCHALIAN, ET AL., plai!i"#-app$lla!#,%#.

THE COLLECTOR O& INTERNAL

RE'EN(E, )$*$)a!-app$ll$$

&a+!#

Plaintifs purchased, in the ordinary course

o business, rom one o the duly authorized agents o

the National Charity Sweepstakes Oce one ticket or

the sum o two pesos Php !"# $he said ticket was

registered in the name o %ose &atchalian ' Company#

$he ticket won third prize in the draw# &atchalian was

re(uired by income ta) e)aminer to *le

the corresponding income ta) return, and made

an assessment against %ose &atchalian ' Companyre(uesting the sum o Php +,--#- to the deputy

pro.incial treasurer o /ulacan# $hey re(uested an

e)emption, but the Collector denied plaintif0s re(uest,

and also reiterated his demand#

$he Collector o 1nternal 2e.enue collected the ta)

under section +3 o 4ct No# !566, as last amended by

section ! o 4ct No# 678+, reading as ollows9

S:C# +3# a" $here shall be le.ied, assessed,

collected, and paid annually upon the total net

income recei.ed in the preceding calendar year

rom all sources by e.ery corporation, ;oint<stock company, partnership, ;oint account

cuenta en participacion", association or

insurance company, organized in the Philippine

1slands, no matter how created or organized,

but not including duly registered general

copartnership compa=ias colecti.as", a ta) o

three per centum upon such income> and a like

ta) shall be le.ied, assessed, collected, and

paid annually upon the total net income

recei.ed in the preceding calendar year rom

all sources within the Philippine 1slands by

e.ery corporation, ;oint<stock company,

partnership, ;oint account cuenta enparticipacion", association, or insurance

company organized, authorized, or e)isting

under the laws o any oreign country,

including interest on bonds, notes, or other

interest<bearing obligations o residents,

corporate or otherwise9 Provided,

however, $hat nothing in this section shall be

construed as permitting the ta)ation o the

income deri.ed rom di.idends or net pro*ts on

which the normal ta) has been paid#

$he gain deri.ed or loss sustained rom the

sale or other disposition by a corporation, ;oint

stock company, partnership, ;oint accoun

cuenta en participacion", association, o

insurance company, or property, real, personal

or mi)ed, shall be ascertained in accordance

with subsections c" and d" o section two o4ct Numbered $wo thousand eight hundred and

thirty<three, as amended by 4ct Numbered

$wenty<nine hundred and twenty<si)#

$he oregoing ta) rate shall apply to the net

income recei.ed by e.ery ta)able corporation

;oint<stock company, partnership, ;oint account

cuenta en participacion", association, o

insurance company in the calendar yea

nineteen hundred and twenty and in each year

thereater#

I##$

?hether the plaintifs ormed a partnership, or merely

a community o property without a personality o its

own> in the *rst case it is admitted that the partnership

thus ormed is liable or the payment o income ta)

whereas i there was merely a community o property

they are e)empt rom such payment#

H$l)

$here is no doubt that i the plaintifs merely

ormed a community o property the latter is e)empt

rom the payment o income ta) under the law# /ut

according to the stipulation acts the plai!i"#orai/$) a par!$r#0ip o a ci.il nature because

each o them put up money to buy a sweepstakes

ticket or the sole purpose o di.iding e(ually the prize

which they may win, as they did in act in the amount

o P@3,333 article +88@, Ci.il Code"# $he partnership

was not only ormed, but upon the organization thereo

and the winning o the prize, %ose &atchalian personally

appeared in the oce o the Philippines Charity

Sweepstakes, in his capacity as co<partner, as such

collection the prize, the oce issued the check o

P@3,333 in a.or o %ose &atchalian ' Company, andthe said partner, in the same capacity, collected the

said check# 4ll these circumstances repel the idea that

the plaintifs organized and ormed a community o

property only#

Aa.ing organized and constituted a partnership o a

ci.il nature, the said entity is the one bound to pay the

income ta) which the deendant collected under the

aoresaid section +3 a" o 4ct No# !566, as amended

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by section ! o 4ct No# 678+# $here is no merit in

plaintifGs contention that the ta) should be prorated

among them and paid indi.idually, resulting in their

e)emption rom the ta)#

Oillo# '#. CIR&#2# No# D<85++5 October !-, +-5@

&a+!#On Harch !, +-76 %ose Obillos, Sr# bought two

lots with areas o +,+! and -86 s(uare meters o located at &reenhills, San %uan, 2izal# $he ne)t day hetranserred his rights to his our children, thepetitioners, to enable them to build their residences# $he $orrens titles issued to them showed that theywere co<owners o the two lots#

1n +-7, or ater ha.ing held the two lots ormore than a year, the petitioners resold them to the?alled City Securities Corporation and Olga CruzCanada or the total sum o P6+6,3@3# $hey deri.edrom the sale a total pro*t o P+6, 6+#55 or P66,@5or each o them# $hey treated the pro*t as a capitalgain and paid an income ta) on one<hal thereo or o P+8,7-!#

1n 4pril, +-53, the Commissioner o 1nternal2e.enue re(uired the our petitioners to pay corporateincome ta) on the total pro*t o P+6,668 in addition toindi.idual income ta) on their shares thereo# $hepetitioners are being held liable or de*ciency incometa)es and penalties totaling P+!7,75+#78 on their pro*toP+6,668, in addition to the ta) on capital gainsalready paid by them#

$he Commissioner acted on the theory that theour petitioners had ormed an unregisteredpartnership or ;oint .enture# $he petitioners contestedthe assessments# $wo %udges o the $a) Courtsustained the same# Aence, the instant appeal#

I##$

?hether or not the petitioners had indeed ormed apartnership or ;oint .enture and thus liable orcorporate ta)#

H$l)

$he Supreme Court held that the petitionersshould not be considered to ha.e ormed a partnership ;ust because they allegedly contributed P+75,735#+! tobuy the two lots, resold the same and di.ided the pro*tamong themsel.es# $o regard so would result inoppressi.e ta)ation and con*rm the dictum that the

power to ta) in.ol.es the power to destroy# $hate.entuality should be ob.iated#4s testi*ed by %ose Obillos, %r#, they had no

such intention# $hey were co<owners pure and simple# $o consider them as partners would obliterate thedistinction between a co<ownership and a partnership# $he petitioners were not engaged in any ;oint .entureby reason o that isolated transaction#

I4rticle +78-6" o the Ci.il Code pro.ides that

Jthe sharing o gross returns does not o itsel establisha partnership, whether or not the persons sharing them

ha.e a ;oint or common right or interest inany property rom which the returns are deri.edJ $here must be an unmistakable intention to orma partnership or ;oint .enture#I

$heir original purpose was to di.ide the lots orresidential purposes# 1 later on they ound it noteasible to build their residences on the lots because othe high cost o construction, then they had no choicebut to resell the same to dissol.e the co<ownership $he di.ision o the pro*t was merely incidental to thedissolution o the co<ownership which was in the natureo things a temporary state# 1t had to be terminatedsooner or later# $hey did not contribute or in.est additional G capital toincrease or e)pand the properties, nor was therean unmistakable intention to orm partnership or ;oint.enture#

?A:2:KO2:, the ;udgment o the $a) Court is re.ersedand set aside# $he assessments are cancelledNo costs#

G.R. No. 133 O+!o$r 1, 19

ARIANO P. PASC(AL a) RENATO P. RAGON,

petitioners, .s# THE COISSIONER O& INTERNALRE'EN(E a) CO(RT O& TA6 APPEALS,

respondents#

&ACTS

On %une !!, +-8@, petitioners bought two !" parcels o

land rom Santiago /ernardino, et al# and on Hay !5

+-88, they bought another three 6" parcels o land

rom %uan 2o(ue# Dater, they sold the said parcels o

land# Petitioners realized a net pro*t in the sale and

paid the corresponding capital gains ta)es by a.ailing

o the ta) amnesties#

Aowe.er, in a letter dated Harch 6+, +-7- o then

4cting /12 Commissioner :ren 1# Plana, petitioners

were assessed and re(uired to pay a total amount o

P+37,+3+#73 as alleged de*ciency corporate income

ta)es or the years +-85 and +-73 in which the

petitioners protested#

7COISIONER8 S R(LING

1n a reply o 4ugust !!, +-7-, respondent

Co::i##io$r inormed petitioners that in the years

+-85 and +-73, p$!i!io$r# a# +o-o;$r# i !0$

r$al $#!a!$ !ra#a+!io# *or:$) a r$i#!$r$)par!$r#0ip or <oi! %$!r$ !a=al$ a# a+orpora!io )$r S$+!io 2>7 a) i!# i+o:$;a# #<$+! !o !0$ !a=$# pr$#+ri$) )$rS$+!io 24, o!0 o* !0$ Na!ioal I!$raR$%$$ Co)$ 1 that the unregistered partnership

was sub;ect to corporate income ta) as distinguished

rom pro*ts deri.ed rom the partnership by them

which is sub;ect to indi.idual income ta)> and that the

a.ailment o ta) amnesty under P## No# !6, as

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amended, by petitioners relie.ed petitioners o their

indi.idual income ta) liabilities but did not relie.e them

rom the ta) liability o the unregistered partnership#

Aence, the petitioners were re(uired to pay the

de*ciency income ta) assessed#

7CO(RT O& TA6 APPEALS8S R(LING

Petitioners *led a petition or re.iew with the

respondent Cor! o* Ta= App$al# but it a?r:$) the

decision and action taken by respondent commissioner#

1t ruled that on the basis o the principle enunciated in

Evangelista 3 an unregistered partnership was in act

ormed by petitioners which like a corporation was

sub;ect to corporate income ta) distinct rom that

imposed on the partners#

In a separate dissenting opinion, Associate Judge

Constante Roaquin stated that considering the

circumstances of this case, although there might in

fact be a co-ownership between the petitioners, there

was no adequate basis for the conclusion that the

thereb formed an unregistered partnership which

made them liable for corporate income ta! under the

"a! Code#

Aence, this petition#

ISS(E

?hether petitioners are sub;ect to the ta) on

corporations#

R(LING

"he petition is meritorious# "he basis of the sub$ect decision of the respondent court is the ruling of this

Court in Evangelista# 4 Article 1767 of the Civil Code

of the Philippines provides% & the contract of

partnership two or more persons bind themselves to

contribute mone, propert, or industr to a common

fund, with the intention of dividing the pro'ts among

themselves#

Pursuant to this article, the essential elements of a

partnership are two, namel% (a) an agreement to

contribute money, property or industry to a

common fund and (b) intent to divide the pro!ts

among the contracting parties" $he *rst element isundoubtedly present in the case at bar, or, admittedly,

petitioners ha.e agreed to, and did, contribute money

and property to a common und# (ence, the issue

narrows down to their intent in acting as the did#

Fpon consideration o all the acts and circumstances

surrounding the case, we are full satis'ed that their

purpose was to engage in real estate transactions for

monetar gain and then divide the same among

themselves, because9

+# )aid common fund was not something the found

alread in e!istence#

!# $hey invested the same, not merel in one

transaction, but in a series of transactions#

6# "he aforesaid lots were not devoted to residential

purposes or to other personal uses, of petitioners

herein#

# "he a*airs relative to said properties have been

handled as if the same belonged to a corporation or

business enterprise operated for pro't# @# "he foregoing conditions have e!isted for more than

ten +. ears

P2:S:N$ C4S:there is no e.idence that petitioners entered into

an agreement to contribute money, property or

industry to a common und, and that they

intended to di.ide the pro*ts among themsel.es#

2espondent commissioner andB or his

representati.e ;ust assumed these conditions to

be present on the basis o the act that petitioners

purchased certain parcels o land and became co<owners thereo#

th

pe

sh

co

or

ch

tra

wa

petitioners bought two !" parcels o land in +-8@#

$hey did not sell the same nor make any

impro.ements thereon# 1n +-88, they bought

another three 6" parcels o land rom one seller# 1t

was only +-85 when they sold the two !" parcels

o land ater which they did not make any

additional or new purchase# $he remaining three

6" parcels were sold by them in +-73# $he

transactions were isolated# $he character o

habituality peculiar to business transactions or

the purpose o gain was not present#

th

se

m

co

o

ba

en

1n the present case, there is clear e.idence o co

ownership between the petitioners# $here is no

ade(uate basis to support the proposition that they

thereby ormed an unregistered partnership# $he two

isolated transactions whereby they purchased

properties and sold the same a ew years thereater did

not thereby make them partners# $hey shared in the

gross pro*ts as co< owners and paid their capital gains

ta)es on their net pro*ts and a.ailed o the ta)

amnesty thereby# ()$r !0$ +ir+:#!a+$#, !0$@+ao! $ +o#i)$r$) !o 0a%$ *or:$) ar$i#!$r$) par!$r#0ip ;0i+0 i# !0$r$@ lial$*or +orpora!$ i+o:$ !a=, a# !0$ r$#po)$!+o::i##io$r propo#$#.

4nd e.en assuming or the sake o argument that such

unregistered partnership appears to ha.e been ormed

since there is no such e)isting unregistered partnership

with a distinct personality nor with assets that can be

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held liable or said de*ciency corporate income ta),

then petitioners can be held indi.idually liable as

partners or this unpaid obligation o the partnership p# Aowe.er, as petitioners ha.e a.ailed o the bene*ts

o ta) amnesty as indi.idual ta)payers in these

transactions, they are thereby relie.ed o any urther

ta) liability arising thererom#

Ara+0 %# Sai!ar@ ar$#

Kacts9

Pri.ate respondent, Sanitary ?ares, is a domesticcorporation engaged in manuacturing sanitary wares#4merican Standards 1nc 4S1", a oreign corporation,entered into an agreement with Saniwares and someKilipino in.estors whereby 4S1 and the Kilipino in.estorsagreed to participate in the ownership o an enterprisewhich would engage in the business o manuacturingin the Philippines and selling here and abroad sanitarywares# $he parties agreed that the business operationsin the Philippines#

1n their agreement, it contained a pro.ision whereby

4S1 shall own at least 63L o the outstanding stock o the corporation and also, three o the nine board o directors shall be designated by 4S1# $he agreementcontained pro.isions designed to protect it as aminority group, including the grant o .eto powers o.era number o corporate acts and the right to designatecertain ocers, such as a member o the :)ecuti.eCommittee whose .ote was re(uired or importantcorporate transactions#

Fnortunately, there came a disagreement betweenthe Kilipino and oreign in.estors due to their desire toe)pand the e)port operations o the company to which4S1 ob;ected as it apparently had other subsidiaries o ;oint ;oint .enture groups in the countries wherePhilippine e)ports were contemplated# Stockholdersthen proceeded to the election o the members o theboard o directors# 4S1 nominated 6 members, whom inthis case are the petitioners and the philippinein.estors also nominated si)# Aowe.er, dispute ensuedamong the *lipino and oreign in.estors which led tothe *ling o separate petitions regarding the decision o the chairman, /aldwin Moung, during their election toallow the nomination o oreign directors since 4S10sstocks were increased to 3L#

1ssue9

?ON the nature o the business established by theparties are a ;oint .enture or a corporation

2uling

Mes# 1n the instant case, our e)amination o importantpro.isions o the 4greement as well as the testimoniale.idence presented by the Dagdameo and Moung &roupshows that the parties agreed to establish a ;oint.enture and not a corporation# $he history o theorganization o Saniwares and the unusual

arrangements which go.ern its policy making body areall consistent with a ;oint .enture and not with anordinary corporation#

$he ;oint .enture character o the enterprise mustalways be taken into account, so long as the companye)ists under its original agreement# Cumulati.e .otingmay not be used as a de.ice to enable 4S1 to achie.estealthily or indirectly what they cannot accomplishopenly# $here are substantial saeguards in the4greement which are intended to preser.e the ma;oritystatus o the Kilipino in.estors as well as to maintainthe minority status o the oreign in.estors group asearlier discussed# $hey should be maintained#

1t is said that participants in a ;oint .enture, inorganizing the ;oint .enture de.iate rom thetraditional pattern o corporation management# 4noted authority has pointed out that ;ust as in closecorporations, shareholdersG agreements in ;oint .enturecorporations oten contain pro.isions which do one ormore o the ollowing9 +" re(uire greater than ma;ority.ote or shareholder and director action> !" gi.ecertain shareholders or groups o shareholders powerto select a speci*ed number o directors> 6" gi.e to

the shareholders control o.er the selection andretention o employees> and " set up a procedure orthe settlement o disputes by arbitration

uite oten, Kilipino entrepreneurs in their desire tode.elop the industrial and manuacturing capacities oa local *rm are constrained to seek the technology andmarketing assistance o huge multinationacorporations o the de.eloped world# 4rrangements areormalized where a oreign group becomes a minorityowner o a *rm in e)change or its manuacturinge)pertise, use o its brand names, and other suchassistance# Aowe.er, there is always a danger romsuch arrangements# $he oreign group may, rom thestart, intend to establish its own sole or monopolistic

operations and merely uses the ;oint .enturearrangement to gain a oothold or test the Philippinewaters, so to speak# Or the co.etousness may comelater# 4s the Philippine *rm enlarges its operations andbecomes pro*table, the oreign group undermines thelocal ma;ority ownership and acti.ely tries tocompletely or predominantly take o.er the entirecompany# $his undermining o ;oint .entures is noconsistent with air dealing to say the least# $o thee)tent that such sub.ersi.e actions can be lawullypre.ented, the courts should e)tend protectionespecially in industries where constitutional and legare(uirements reser.e controlling ownership to Kilipinocitizens#

1ssue !9?ON 4S1 may .ote their additional e(uity during theelection o board o directors#

2uling9

No# 4s in other ;oint .enture companies, the e)tent o4S1Gs participation in the management o thecorporation is spelled out in the 4greement# Section@a" hereo says that three o the nine directors shalbe designated by 4S1 and the remaining si) by the

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other stockholders, i#e#, the Kilipino stockholders# $hisallocation o board seats is ob.iously in consonancewith the minority position o 4S1#

Aa.ing entered into a well<de*ned contractualrelationship, it is imperati.e that the parties shouldhonor and adhere to their respecti.e rights andobligations thereunder# 4ppellants seem to contendthat any allocation o board seats, e.en in ;oint .enturecorporations, are null and .oid to the e)tent that suchmay interere with the stockholderGs rights tocumulati.e .oting as pro.ided in Section ! o theCorporation Code# $his Court should not be prepared tohold that any agreement which curtails in any waycumulati.e .oting should be struck down, e.en i suchagreement has been reely entered into bye)perienced businessmen and do not pre;udice thosewho are not parties thereto# 1t may well be that itwould be more cogent to hold, as the Securities and:)change Commission has held in the decisionappealed rom, that cumulati.e .oting rights may be.oluntarily wai.ed by stockholders who enter intospecial relationships with each other to pursue andimplement speci*c purposes, as in ;oint .enturerelationships between oreign and local stockholders,

so long as such agreements do not ad.ersely afectthird parties# $o allow the 4S1 &roup to .ote their additional e(uity tohelp elect e.en a Kilipino director who would bebeholden to them would obliterate their minority statusas agreed upon by the parties# 4s aptly stated by theappellate court9

### 4S1, howe.er, should not be allowedto interere in the .oting within the Kilipinogroup# Otherwise, 4S1 would be able todesignate more than the three directors it isallowed to designate under the 4greement,and may e.en be able to get a ma;ority o theboard seats, a result which is clearly contraryto the contractual intent o the parties#

Such a ruling will gi.e efect to both theallocation o the board seats and thestockholderGs right to cumulati.e .oting#Horeo.er, this ruling will also gi.e dueconsideration to the issue raised by theappellees on possible .iolation orcircum.ention o the 4nti<ummy Daw Com#4ct No# +35, as amended" and thenationalization re(uirements o theConstitution and the laws i 4S1 is allowed tonominate more than three directors# 4t p# 6-,2ollo, 7@57@"

$he insinuation that the 4S1 &roup may be able to

control the enterprise under the cumulati.e .otingprocedure cannot, howe.er, be ignored# $he .alidity o the cumulati.e .oting procedure is dependent on thedirectors thus elected being genuine members o theKilipino group, not .oters whose interest is to increasethe 4S1 share in the management o Saniwares# $he ;oint .enture character o the enterprise must alwaysbe taken into account, so long as the company e)istsunder its original agreement# Cumulati.e .oting maynot be used as a de.ice to enable 4S1 to achie.estealthily or indirectly what they cannot accomplishopenly# $here are substantial saeguards in the

4greement which are intended to preser.e the ma;oritystatus o the Kilipino in.estors as well as to maintainthe minority status o the oreign in.estors group asearlier discussed# $hey should be maintained#

TOCAO 'S CA, G.R. No. 124>5, S$p!$:$r 2>,2>>1

&ACTS O& THE CASE Petitioners Har;orie $ocao and

?illiam $# /elo *led a Hotion or 2econsideration o the

ecision dated October , !333# $hey maintain tha

there was no partnership between petitioner /elo, on

the one hand, and respondent Nenita 4# 4nay, on the

other hand> and that the latter being merely an

employee o petitioner $ocao#

4ter a careul re.iew o the e.idence presented, the

court was con.inced that, indeed, petitioner /elo acted

merely as guarantor o &eminesse :nterprise# $his was

categorically armed by respondentGs own witness

:lizabeth /antilan, during her cross<e)amination

Kurthermore, /antilan testi*ed that it was Peter Do who

was the companyGs *nancier#

$he oregoing was neither reuted nor contradicted by

respondentGs e.idence# 1t should be recalled that the

business relationship created between petitioner $ocao

and respondent 4nay was an inormal partnership

which was not e.en recorded with the Securities and

:)change Commission# 4s such, it was understandable

that /elo, who was ater all petitioner $ocaoGs good

riend and con*dante, would occasionally participate in

the afairs o the business, although ne.er in a orma

or ocial capacity# 4gain, respondentGs witness

:lizabeth /antilan, con*rmed that petitioner /eloGs

presence in &eminesse :nterpriseGs meetings wasmerely as guarantor o the company and to help

petitioner $ocao#

ISS(E ?hether or not a partnership e)ists between

petitioner /elo and respondent 4nay# NO

R(LING No e.idence was presented to show that

petitioner /elo participated in the pro*ts o the

business enterprise# 2espondent hersel proessed lack

o knowledge that petitioner /elo recei.ed any share in

the net income o the partnership# On the other hand

petitioner $ocao declared that petitioner /elo was not

entitled to any share in the pro*ts o &eminesse

:nterprise# ?ith no participation in the pro*ts

petitioner /elo cannot be deemed a partner since the

essence o a partnership is that the partners share in

the pro*ts and losses#

Conse(uently, inasmuch as petitioner /elo was not a

partner in &eminesse :nterprise, respondent had no

cause o action against him and her complaint against

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him should accordingly be dismissed# Aence, the

Hotion or 2econsideration o petitioners is partially

granted# $he 2$C o Hakati was ordered to 1SH1SS the

complaint against petitioner ?illiam $# /elo only# $he

sum o P!35,!@3#33 shall be deducted rom whate.er

amount petitioner Har;orie $ocao shall be held liable to

pay respondent ater the normal accounting o the

partnership afairs#

&ERNANO SANTOS, p$!i!io$r %#. Spo#$#ARSENIO a) NIE'ES REES, r$#po)$!#.

GR NO 13513

O+!o$r 25, 2>>1

&ACTS9

1n %une +-58, &$ra)o Sa!o# a) Ni$%$# R$@$#;$r$ i!ro)+$) !o $a+0 o!0$r @ $li!o aa!regarding a lending #i$## %$!r$ propo#$) @Ni$%$## $hey orall@ i#!i!!$) a par!$r#0ip with

them as partners and agreed that they will ha.e a >-15-15 #0ar$ or &$ra)o Sa!o#, Ni$%$# R$@$#,a) $l!o aa! r$#p$+!i%$l@# $hey agreed that

Sa!o# #0all $ Da+i$r and that Ni$%$# a)aa! #0all +o!ri!$ !0$ir i)#!r@ by taking

charge o solicitation o members and collection o loan

payments#

Dater, in %uly +-58, Ni$%$# i!ro)+$) C$#arGra$ra !o Sa!o## &ragera was the chairman o

Honte Haria e.elopment Corporation# Gra$ra#o0! #0or!-!$r: loa# or members o the

corporation# 1t was agreed that the partnership shall

pro.ide loans to the employees o &ragera0scorporation and Gra$ra #0all $ar +o::i##io*ro: loa pa@:$!##

1n 4ugust +-58, !0$ !0r$$ par!$r# p! i!o ;ri!i!0$ir %$ral ar$$:$! !o *or: !0$ par!$r#0ip#

4s earlier agreed, Santos shall *nance and Nie.es shall

do the daily cash ow more particularly rom their

dealings with &ragera, Qabat on the other hand shall

be a loan in.estigator# Aowe.er, aa! ;a# $=p$ll$)*ro: !0$ par!$r#0ip or engaging in another

lending business which competes with their business#

$he !;o +o!i$) ;i!0 !0$ par!$r#0ip a) !0$@!oo ;i!0 !0$: Ni$%$#8 0#a), Ar#$io, who

became their loan in.estigator# Dater, Sa!o# a++#$)!0$ #po#$# o* o! r$:i!!i Gra$ra8#+o::i##io# to the latter# Ae sued them or collection

o sum o money# $he spouses countered that Santos

merely *led the complaint because he did not want the

spouses to get their shares in the pro*ts amounting to

P6H# Sa!o# ar$) !0a! !0$ #po#$#, insoar as

the dealing with &ragera is concerned, ar$ :$r$l@ 0i#$:plo@$$## Sa!o# all$$) !0a! !0$r$ i# a

)i#!i+! par!$r#0ip $!;$$ 0i: a) Gra$rawhich is separate rom the partnership ormed

between him, Qabat and Nie.es#

$he $rial court held that respondents were partners

and not merely employees o the petitioner# 1t ruled

that &ragera was only a commission agent o

petitioner, not his partner#

T0$ CA p0$l) !0$ )$+i#io o* !0$ lo;$r +or!.T0$ CA rl$) !0a! !0$ *ollo;i +ir+:#!a+$#i)i+a!$) !0$ $=i#!$+$ o* a par!$r#0ip a:o!0$ par!i$# 71 i! ;a# Ni$%$# ;0o roa+0$) !op$!i!io$r !0$ i)$a o* #!ar!i a :o$@-l$)i#i$## a) i!ro)+$) 0i: !o Gra$ra 72Ar#$io r$+$i%$) )i%i)$)# or proD!-#0ar$#+o%$ri !0$ p$rio) o* Jl@ 15 !o A#! , 19F73 !0$ par!$r#0ip +o!ra+! ;a# $=$+!$) a*!$r!0$ Ar$$:$! ;i!0 Gra$ra a) p$!i!io$r a)!0# #0o;$) !0$ par!i$#8 i!$!io !o +o#i)$r i!a# a !ra#a+!io o* !0$ par!$r#0ip. I !0$ir+o::o %$!r$, p$!i!io$r i%$#!$) +api!a

;0il$ r$#po)$!# +o!ri!$) i)#!r@ o#$r%i+$# ;i!0 !0$ i!$!io o* #0ari i !0$proD!# o* !0$ #i$##.

$he deendants were industrial partners o the

petitioner# Nie.es hersel pro.ided the initiati.e in the

lending acti.ities with Honte Haria# 4nd as agreed

Nie.es and Qabat later replaced by 4rsenio

contributed industry to the common und with the

intention o sharing in the pro*ts o the partnership

$he spouses pro.ided ser.ices without which the

partnership would not ha.e had the ability to carry on

the purpose or which it was organized and as such

were considered industrial partners# $he partnershipbetween Santos, Nie.es and Qabat was technically

dissol.ed by the e)pulsion o Qabat# T0$ r$:aiipar!$r# #i:pl@ +o!i$) !0$ #i$## o* !0$par!$r#0ip ;i!0o! )$roi !0$ pro+$)r$r$la!i%$ !o )i##ol!io. 1nstead, they in.ited 4rsenio

to participate as a partner in their operations# T0$r$;a# !0$r$*or$, o i!$! !o )i##ol%$ !0$ $arli$rpar!$r#0ip. $he partnership between Santos, Nie.es

and 4rsenio simply took o.er and continued the

business o the ormer partnership with Qabat, one o

the incidents o which was the lending operations with

Honte Haria#

Horeo.er, Gra$ra a) Sa!o# ;$r$ o! par!$r#. $he money<lending acti.ities undertaken with Honte

Haria were done in pursuit o the business or which

the partnership between Santos, Nie.es and Qabat

later 4rsenio" was organized# &ragera who

represented Honte Haria was merely paid commissions

in e)change or the collection o loans# $he

commissions were *)ed on gross returns, regardless o

the e)penses incurred in the operation o the business




T0$ #0ari o* ro## r$!r# )o$# o! i i!#$l* $#!ali#0 a par!$r#0ip.

ISS(ES

?hether or not the Santos and Spouses 2eyes are

partners

HEL

Mes, the court upheld the decisions o the $rial Courtand C4 that there was a partnership created between

Santos and Spouses 2eyes# /y the contract o

partnership, two or more persons bind themsel.es to

contribute money, property or industry to a common

und, with the intention o di.iding the pro*ts among

themsel.es# $he J4rticles o 4greementJ stipulated

that the signatories shall share the pro*ts o the

business in a 73<+@<+@ manner, with petitioner getting

the biggest share# $his stipulation clearly pro.ed the

establishment o a partnership#

$hough it is true that the original partnership between

Qabat, Santos and Nie.es was terminated when Qabatwas e)pelled, the said partnership was howe.er

considered continued when Nie.es and Santos

continued engaging as usual in the lending business

e.en getting Nie.es0 husband, who resigned rom the

4sian e.elopment /ank, to be their loan in.estigator

R who, in efect, substituted Qabat# $here is no

separate partnership between Santos and &ragera# $he

latter being merely a commission agent o the

partnership# $his is e.en though the partnership was

ormalized shortly ater &ragera met with Santos# Note

that Nie.es was e.en the one who introduced &ragera

to Santos e)actly or the purpose o setting up a

lending agreement between the corporation and the

partnership#

G.R. No. L-19342 a@ 25, 192

LORENO T. OA a) HEIRS O& J(LIA B(ALES,a:$l@ ROOL&O B. OA, ARIANO B. OA, L(B. OA, 'IRGINIA B. OA a) LORENO B. OA,

JR., .s#

THE COISSIONER O& INTERNAL RE'EN(E

&ACTS

+# %ulia /u=ales died on Harch !6, +-, lea.ing as

heirs her sur.i.ing spouse, Dorenzo $# O=a and her *.e

children#

!# 1n +-5, a suit was instituted in the Court o Kirst

1nstance o Hanila or the settlement o her estate#

6# Dorenzo $# O=a, the sur.i.ing spouse, was appointed

administrator o the estate o said deceased#

# On 4pril +, +--, the administrator submitted the

pro;ect o partition, which was appro.ed by the Court

on Hay +8, +--#

@# No attempt was made to di.ide the properties

therein listed#

8# $he properties remained under the management o

Dorenzo $# O=a#

7# Ae used said properties in business by leasing or

selling them and in.esting the income deri.ed

thererom and the proceeds rom the sales thereo in

real properties and securities#

5# PetitionersG properties and in.estments gradually

increased rom P+3@,@3#33 in +-- to P53,33@#!3 in

+-@8#

-# Krom said in.estments and properties, petitioners

deri.ed such incomes as pro*ts rom installment sales

o subdi.ided lots, pro*ts rom sales o stocks

di.idends, rentals and interests#

+3# :.ery year, petitioners returned or income ta)

purposes their shares in the net income deri.ed rom

said properties and securities andBor rom transactions

in.ol.ing them#

++# Aowe.er, petitioners did not actually recei.e their

shares in the yearly income# $he income was alwayslet in the hands o Dorenzo $# O=a who in.ested them

in real properties and securities#

+!# On the basis o the oregoing acts, responden

Commissioner o 1nternal 2e.enue" decided that

petitioners ormed an unregistered partnership and

thereore, sub;ect to the corporate income ta)

pursuant to Section !, in relation to Section 5b", o

the $a) Code#

+6# Ae assessed against the petitioners the amounts o

P5,3-!#33 and P+6,5--#33 as corporate income ta)es

or +-@@ and +-@8, respecti.ely#

+# Petitioners protested against the assessment and

asked or reconsideration o the ruling o respondent

that they ha.e ormed an unregistered partnership#

+@# Kinding no merit in petitionersG re(uest, respondent

denied it#




+8# Court o $a) 4ppeals held that petitioners ha.e

constituted an unregistered partnership and are

sub;ect to the payment o the de*ciency corporate

income ta)es assessed against them or the years

+-@@ and +-@8#

+7# PetitionersG motion or reconsideration was denied

by the said court#

+5# Aence, this petition#

ISS(E

?hether or not petitioners should be deemed to ha.e

ormed an unregistered partnership sub;ect to ta)

under Sections ! and 5b" o the National 1nternal

2e.enue Code#

HEL

M:S#

1ndeed, it is admitted that during the materialyears herein in.ol.ed, some o the said properties were

sold at considerable pro*t, and that with said pro*t,

petitioners engaged, thru Dorenzo $# O=a, in the

purchase and sale o corporate securities# 1t is likewise

admitted that all the pro*ts rom these .entures were

di.ided among petitioners proportionately in

accordance with their respecti.e shares in the

inheritance# 1n these circumstances, it is Our

considered .iew that rom the moment petitioners

allowed not only the incomes rom their respecti.e

shares o the inheritance but e.en the inherited

properties themsel.es to be used by Dorenzo $# O=a as

a common und in undertaking se.eral transactions orin business, with the intention o deri.ing pro*t to be

shared by them proportionally, such act was

tantamount to actually contributing such incomes to a

common und and, in efect, they thereby ormed an

unregistered partnership within the pur.iew o the

abo.e<mentioned pro.isions o the $a) Code#

Kor ta) purposes, the co<ownership o inherited

properties is automatically con.erted into an

unregistered partnership the moment the said common

properties andBor the incomes deri.ed thererom are

used as a common und with intent to produce pro*ts

or the heirs in proportion to their respecti.e shares in

the inheritance as determined in a pro;ect partition

either duly e)ecuted in an e)tra;udicial settlement or

appro.ed by the court in the corresponding testate or

intestate proceeding# Krom the moment o such

partition, the heirs are entitled already to their

respecti.e de*nite shares o the estate and the

incomes thereo, or each o them to manage and

dispose o as e)clusi.ely his own without the

inter.ention o the other heirs, and, accordingly he

becomes liable indi.idually or all ta)es in connection

therewith# 1 ater 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 o making

pro*t thereby in proportion to his share, there can be

no doubt that, e.en i no document or instrument were

e)ecuted or the purpose, or ta) purposes, at least, an

unregistered partnership is ormed#

NA'ARRO 'S CA

&ACTS

Oli.ia # Manson pri.ate respondent B plaintif" and

Dourdes Na.arro petitioner B deendant" were engaged

in the business o 4ir Kreight Ser.ice 4gency# Pursuant

to the 4greement which they entered, they agreed to

operate the said 4gency#

1t is the pri.ate respondent who supplies the necessary

e(uipment and money used in the operation o the

agency# Aer brother in the person o 4tty# 2odoloillaores was the manager thereo, while petitione

was the cashier#

1n compliance to her obligation as stated in thei

agreement, pri.ate respondent brought into thei

business certain chattels or mo.ables or persona

properties# Aowe.er, those personal properties remain

to be registered in her name#

4mong the pro.isions stipulated in their agreement is

the e(ual sharing o whate.er proceeds realized rom

their business# Aowe.er, sometime on %uly !6, +-78pri.ate respondent in order or her to reco.er the

abo.e mentioned personal properties which she

brought into their business, *led a complaint against

petitioner or Jeli.ery o Personal Properties with

amages and with an 4pplication or a ?rit o

2eple.inJ#

Pri.ate respondentsG application or a writ o reple.in

was later granted by the $C#

Kor her deense, petitioner argue that she and pri.ate

respondent actually ormed a .erbal partnership whichwas to engage in the business o 4ir Kreight Ser.ice

4gency# She contended that the decision o sustaining

the writ o reple.in is .oid since the properties

belonging to the partnership do nbot actuall belong to

any o the parties until the *nal disposition and winding

up o the partnership#




On appeal, C4 outrightly dismissed the Petition or

4nnulment o %udgment *led by the spouses petitioner

due to absence o e)trinsic or collateral raud"# Aence

this Petition or 2e.iew#

ISS(E

?ON there was a partnership that e)isted betweent

the partiesT

R(LING

erily, petitioners keeps on pressing that the idea o a

partnership e)ists on account o the so<called

admissions in ;udicio# /ut the actual premises o the

trial court were more than enough to suppress and

negate petitioners submissions#

4rticle +787 o the New Ci.il Code (uoted as9

/y the contract o partnership two or more persons

bind themsel.es to contribute money, property, or

industry to a common und, with the intention o di.iding the proceeds among themsel.es# ))) )))

1n consideration o the abo.e, it is undeniable that both

the plaintif and the deendant<wie made admission to

ha.e entered into an agreement o operating this 4llied

4ir Kreight 4gency o which the plaintif personally

constituted the Hanila Oce in a sense that the

plaintif did supply the necessary e(uipments and

money while her brother 4tty# 2odolo illaores was

the Hanager and the deendant the Cashier# 1t was also

admitted that part o this agreement was an e(ualsharing o whate.er proceeds realized# Conse(uently,

the plaintif brought into this transaction certain

chattels in compliance with her obligation# $he same

has been done by the herein brother and the herein

deendant who started to work in the business#

4 cursory e)amination o the e.idences presented no

proo that a partnership, whether oral or written had

been constituted at the inception o this transaction# 1n

act, those mo.ables brought by the pri.ate

respondent B plaintif Oli.ia Manson or the use in the

operation o the business remain registered in her

name#

?hile there may ha.e been co<ownership or co<

possession o some items andBor any sharing o

proceeds by way o ad.ances recei.ed by both plaintif

and the deendant, these are not indicati.e and

supporti.e o the e)istence o any partnership between

them#

4rticle +78- o the New Ci.il Code is e)plicit#

))) ))) JCo<ownership or co<possession does not itsel

establish a partnership, whether such co<owners or co<

possessors do or do not share any pro*ts made by the

use o the property#J

:.en the books and records retrie.ed by the

Commissioner appointed by the Court did not show

proo o the e)istence o a partnership asconceptualized by law# Such that i assuming that there

were pro*ts realized in +-7@ ater the two<year de*cits

were compensated, this could only be sub;ect to an

e(ual sharing consonant to the agreement to e(ually

di.ide any pro*t realized# Aowe.er, this Court cannot

o.erlook the act that the 4udit 2eport o the appointed

Commissioner was not highly reliable in the sense that

it was more o his personal estimate o what is

a.ailable on hand# /esides, the alleged pro*t was a

diference ound ater .aluating the assets and not

arising rom the real operation o the business# 1n

accounting procedures, stricty, this could not be pro*t

but a net worth#

?A:2:KO2:, the petition is 1SH1SS:# $he 2esolution

o the Court o 4ppeals dated %une !3, +--+ is

4KK12H: in all respects# SO O2:2:#

SARANE 'S CA

&ACTS

2omeo 4co;edo brought an action in the City

Court o ipolog or collection o a sum o P@,!+7#!@

based on promissory notes e)ecuted by Nobio Sardane

in a.or o him# 4ter the trial on the merits, the City

Court rendered its decision in a.or o 4co;edo# Sardane

appealed to the Court o Kirst 1nstance o Qamboanga

del Norte which re.ersed the decision o the lowe

court by dismissing the complaint#

$he CK1 held that the said amount taken by

Sardane rom 4co;edo is or was not his personal debt,but e)penses o the partnership that e)isted between

them# $he promissory notes in.ol.ed were merely

receipts or the contributions to said partnership and

upheld the claim that there was ambiguity in the

promissory notes hence> parol e.idence was allowable

to contradict the terms o the represented loan

contract#

P42$ 1# P42$N:2SA1PBCase igestsBD:+37 !3+8<!3+7" E -/FS O2& 1



ISS(E ?hether a partnership e)ists between the

parties#

R(LING

No# $he e.idence is insucient to pro.e that a

partnership e)isted between the pri.ate parties# On the

ace o the promissory notes, nothing appears to be.ague or ambiguous# 1t was clearly the intent o the

parties to enter into a contract o loan# $he C4

correctly held that e.en i e.idence aliunde other than

the promissory notes may be admitted to alter the

meaning con.eyed thereby, still the e.idence is

insucient to pro.e that a partnership e)isted between

4co;edo and Sardane#

Sardane, as manager o the basnig business o

4co;edo, naturally had some degree o control o.er the

operations and maintenance thereo# Aowe.er, the act

that he had recei.ed @3L o the net pro*ts does not

conclusi.ely establish that he was a partner o the

pri.ate respondent# Ar!i+l$ 1F974 o* !0$ Ci%il

Co)$ i# $=pli+i! !0a! ;0il$ !0$ r$+$ip! @ a

p$r#o o* a #0ar$ o* !0$ proD!# o* a #i$##

i# prima facie $%i)$+$ !0a! 0$ i# a par!$r i !0$

#i$##, o #+0 i*$r$+$ #0all $ )ra; i*

#+0 proD!# ;$r$ r$+$i%$) i pa@:$! a#

;a$# o* a $:plo@$$. Kurther, the use by the

parties o the pronoun JourJ in reerring to Jour basnig,

our catchJ, Jour depositJ, or Jour boserosJ was merely

indicati.e o the camaraderie and not e.identiary o a

partnership, between them#

&lor$+io R$@$# a) A$l R$@$# %# CIR a) CTA

&a+!#

• On October 6+, +-@3, petitioners, ather andson, purchased a lot and building &ibbs

/uilding" in asmarinas Street, Hanila orP56@,333#33 o which they paid the sum o P67@,333#33, lea.ing a balance o P83,333#33, representing the mortgageobligation o the .endors with the China/anking Corporation, which mortgageobligations were assumed by the .endees# $hepetitioners shared the initial payment o P67@,333#33# 4t the time they purchased thebuilding, it was leased to .arious tenants# 4nadministrator was entrusted to collect therents, make repairs, and other unctions

necessary or the conser.ation andpreser.ation o the building# Petitioners di.idede(ually the income o operation andmaintenance# $he gross income rom rentals othe building amounted to about P-3,333#33annually#

• $hey were then assessed by respondent, C12the sum o P8,87#33 as income ta)surcharge and compromise or the years +-@+to +-@, which was later reduced toP67,@!5#33, as well as or the back incometa)es plus surcharge and compromise in thetotal sum o P!@,-76#7@, co.ering the years+-@@ and +-@8#

• $he C$4 sustained the action o respondent butreduced the ta) liability o petitioners4ccording to the C$4, the pro.isions o theNational 1nternal 2e.enue Code N12C" imposeincome ta) on corporations that includespartnership#

Ca#$ *or !0$ P$!i!io$r

• 4ccording to the petitioner, the C$4 erred inholding that petitioners, by ac(uiring the said

building, established a partnership sub;ect toincome ta) under the N12C"# $hey stressedthat their relation was as co<owners and notpartners#

I##$ ?hether or not petitioners are partners so as tosub;ect their ac(uisition o property to income ta)imposed on corporations

Rli

• Mes, petitioners are partners and the allegederror committed by the C$4 is untenable#

• 1n the opinion penned by the then Chie %ustice,

U4ter reerring to another section o theNational 1nternal 2e.enue Code, whiche)plicitly pro.ides that the term corporationJincludes partnershipsJ and then to 4rticle+787 o the Ci.il Code o the Philippinesde*ning what a contract o partnership is, theopinion goes on to state that Jthe essentiaelements o a partnership are two, namely9 a"an agreement to contribute money, property oindustry to a common und> and b" intent todi.ide the pro*ts among the contractingparties# $he *rst element is undoubtedlypresent in the case at bar, or, admittedlypetitioners ha.e agreed to and did, contributemoney and property to a common und# Aencethe issue narrows down to their intent in actingas they did# Fpon consideration o all the actsand circumstances surrounding the case, weare ully satis*ed that their purpose was toengage in real estate transactions or monetarygain and then di.ide the same amongthemsel.es#V

• $he Court reerred to circumstances thatsurround the present case, to wit9 +" thecommon und being created purposely notsomething already ound in e)istence> !" the

P42$ 1# P42$N:2SA1PBCase igestsBD:+37 !3+8<!3+7" E +3/FS O2& 1



in.estment o the same not merely in onetransaction but in a series o transactions> 6"the lots thus ac(uired not being de.oted toresidential purposes or to other personal useso petitioners in that case> " such propertiesha.ing been under the management o oneperson with ull power to lease, to collect rents,to issue receipts, to bring suits, to sign lettersand contracts and to endorse notes andchecks> @" the abo.e conditions ha.ing e)istedor more than +3 years since the ac(uisition o the abo.e properties> and 8" no testimonyha.ing been introduced as to the purpose Jincreating the set up already ad.erted to, or onthe causes or its continued e)istence#J

• $he Court once again noted that although,taken singly, they might not suce to establishthe intent necessary to constitute apartnership, the collecti.e efect o thesecircumstances is such as to lea.e no room ordoubt on the e)istence o said intent inpetitioners herein#

• Horeo.er, as de*ned in section 5b" o saidCode, Jthe term corporation includespartnerships, no matter how created or

organi1ed#J $his (ualiying e)pression clearlyindicates that a ;oint .enture need not beundertaken in any o the standard orms, or inconormity with the usual re(uirements o thelaw on partnerships, in order that one could bedeemed constituted or purposes o the ta) oncorporations# Kor purposes o the ta) oncorporations, our 2ational Internal RevenueCode, include these partnerships W with thee)ception only o duly registered general co<partnerships within the pur.iew o the termJcorporation#J 1t is, thereore, clear thatpetitioners herein constitute a partnership,insoar as said Code is concerned, and are

sub;ect to the income ta) or corporations#JE'ANGELISTA 'S CIR

SE'ILLA %. CA

G.R. No#. L-4112-3 April 15, 19

Po$!$ J. Sar:i$!o

&a+!#

On Oct# +-, +-83, the $ourist ?orld Ser.ice, 1nc# leased

an oce at Habini St#, Hanila or the ormerGs use as a

branch oce# ?hen the branch oce was opened, the

same was run by the herein appellant Dina O# Se.illa

payable to $ourist ?orld Ser.ice 1nc# by any airline or

any are brought in on the eforts o Hrs# Dina Se.illa,

L was to go to Dina Se.illa and 6L was to be withheld

by the $ourist ?orld Ser.ice, 1nc#

On or about No.ember !, +-8+, the $ourist ?orld

Ser.ice, 1nc# appears to ha.e been inormed that Dina

Se.illa was connected with a ri.al *rm, the Philippine

$ra.el /ureau, and, since the branch oce was anyhow

losing, the $ourist ?orld Ser.ice considered closing

down its oce#

$his was *rmed up by two resolutions o the board o

directors o $ourist ?orld Ser.ice, 1nc# dated ec# !

+-8+, the *rst abolishing the oce o the manager and

.ice<president o the $ourist ?orld Ser.ice, 1nc#, :rmita

/ranch, and the second, authorizing the corporate

secretary to recei.e the properties o the $ourist ?orld

Ser.ice then located at the said branch oce# 1t urthe

appears that on %an# 6, +-8!, the contract with the

appellees or the use o the /ranch Oce premises

was terminated and while the efecti.ity thereo was

%an# 6+, +-8!, the appellees no longer used it# 4s a

matter o act appellants used it since No.# +-8+

/ecause o this, and to comply with the mandate o the

$ourist ?orld Ser.ice, the corporate secretary &abino

Canilao went o.er to the branch oce, and, *nding the

premises locked, and, being unable to contact Dina

Se.illa, he padlocked the premises on %une , +-8! to

protect the interests o the $ourist ?orld Ser.ice#

?hen neither the appellant Dina Se.illa nor any o her

employees could enter the locked premises, a

complaint was *led by the herein appellants against

the appellees with a prayer or the issuance o

mandatory preliminary in;unction# /oth appellees

answered with counterclaims# Kor apparent lack ointerest o the parties therein, the trial court ordered

the dismissal o the case without pre;udice#

I##$

?hether the act o $ourist ?orld Ser.ice in abolishing

its :rmita branch proper# No#

Rli

$he act o $ourist ?orld Ser.ice in abolishing its :rmita

branch is not proper#

$he Supreme Court held that when the petitioner, Dina

Se.illa, agreed to manage $ourist ?orld Ser.ice, 1nc#Gs

:rmita oce, she must ha.e done so pursuant to a

contract o agency#

1n the case at bar, Se.illa solicited airline ares, but

she did so or and on behal o her principal, $ourist

?orld Ser.ice, 1nc# 4s compensation, she recei.ed L

P42$ 1# P42$N:2SA1PBCase igestsBD:+37 !3+8<!3+7" E ++/FS O2& 1



o the proceeds in the concept o commissions# 4nd as

we said, Se.illa hersel, based on her letter o

No.ember !5, +-8+, presumed her principalGs authority

as owner o the business undertaking# ?e are

con.inced, considering the circumstances and rom the

respondent CourtGs recital o acts, that the parties had

contemplated a principal<agent relationship, rather

than a ;oint management or a partnership#

/ut unlike simple grants o a power o attorney, theagency that we hereby declare to be compatible with

the intent o the parties, cannot be re.oked at will# $he

reason is that it is one coupled with an interest, the

agency ha.ing been created or the mutual interest o

the agent and the principal# 4ccordingly, the re.ocation

complained o should entitle the petitioner, Dina

Se.illa, to damages#

G.R. No. 14334> A#! 15, 2>>1

LILIBETH S(NGA-CHAN a) CECILIA

S(NGA, petitioners,.s#

LABERTO T. CH(A, respondent#

&ACTS

Damberto $# Chua .erbally entered into a partnership

with %acinto D# Sunga in the distribution o Shellane

Di(ue*ed Petroleum &as DP&" in Hanila#

Kor business con.enience, respondent and %acinto

allegedly agreed to register the business name o their

partnership, SA:DD1$: &4S 4PPD14NC: C:N$:2

hereater Shellite", under the name o %acinto as a sole

proprietorship#

2espondent allegedly deli.ered his initial capitalcontribution o P+33,333#33 to %acinto while the latter

in turn produced P+33,333#33 as his counterpart

contribution, with the intention that the pro*ts would

be e(ually di.ided between them#

Fpon %acintoGs death in the later part o +-5-, his

sur.i.ing wie, petitioner Cecilia and particularly his

daughter, petitioner Dilibeth, took o.er the operations

control, custody, disposition and management o

Shellite without respondentGs consent#

ISS(E

?hether or not a partnership e)isted between

respondent and %acinto rom +-77 until %acintoGs death#

HEL

4 partnership e)isted between respondent and %acinto#

4 partnership may be constituted in any orm, e)cept

where immo.able property o real rights are

contributed thereto, in which case a public instrument

shall necessary# 4 .erbal contract o partnership may

arise#

$he essential pro*ts that must be pro.en to that a

partnership was agreed upon are +" mutua

contribution to a common stock, and !" a ;oint interes

in the pro*ts#

4rticle +77! o the Ci.il Code re(uires that partnerships

with a capital o P6,333#33 or more must register with

the S:C, howe.er, registration re(uirement is not

mandatory# 4rticle +785 o the Ci.il Code!@ e)plicitly

pro.ides that the partnership retains its ;uridica

personality e.en i it ails to register# $he ailure to

register the contract o partnership does not in.alidate

the same as among the partners, so long as thecontract has the essential re(uisites, because the main

purpose o registration is to gi.e notice to third parties

and it can be assumed that the members themsel.es

knew o the contents o their contract#

2e9 laches andBor prescription

P42$ 1# P42$N:2SA1PBCase igestsBD:+37 !3+8<!3+7" E +!/FS O2& 1

http://www.lawphil.net/judjuris/juri2001/aug2001/gr_143340_2001.html#fnt25

http://www.lawphil.net/judjuris/juri2001/aug2001/gr_143340_2001.html#fnt25



$he Ci.il Code pro.ides that an action to enorce an

oral contract prescribes in si) 8" years, while the right

to demand an accounting or a partnerGs interest as

against the person continuing the business accrues at

the date o dissolution, in the absence o any contrary

agreement#

1t was %acintoGs death that respondent as the sur.i.ing

partner had the right to an account o his interest as

against petitioners#

$he Ci.il Code e)pressly pro.ides that upon

dissolution, the partnership continues and its legal

personality is retained until the complete winding up o

its business, culminating in its termination#

J. Tio#$<o I%$#!:$! Corpora!io

%#.

Sp#. B$<a:i a) El$aor A

&a+!#

$his is a petition or re.iew seeking there.ersal o the C40s 2esolution declaring the petitionersolidary liable with Primetown Property &roup, 1nc#PP&1" to pay Spouses 4ng#

$he petitioner herein entered into a %ointenture 4greement with PP&1 or the de.elopment o aresidential condominium pro;ect known as Heditel inHandaluyong City# Petitioner contributed the lot whilePP&1 undertook to de.elop the condominium# $heparties urther agreed to a +7L<56L sharing as tode.eloped units# PP&1 urther undertook to use allproceeds rom the pre<selling o its saleable units orthe completion o the Condominium Pro;ect#

1n +--8, PP&1 e)ecuted a Contract toSell with Spouses 4ng on a certaincondominium unit and parking slot or P!,377,66#!@and P6+6,@33#33, respecti.ely#

Aowe.er, on %uly +---, respondent Spouses*led beore the Aousing and Dand Fse 2egulatory/oard ADF2/" a complaint or the rescission o theContract to Sell, against %# $iose;o and PP&1 due todelay in the turno.er o their purchased unit#

Spouses 4ng instructed petitioner and PP&1 tostop depositing the post<dated checks they issued andto cancel said Contracts to Sell# espite se.eraldemands, petitioner and PP&1 ha.e ailed and reused

to reund the P8++,@+-#@! they already paid under thecircumstances#

4s deense, PP&1 claim that the delay wasattributable to the economic crisis and Korce Ha;eureOn a separate answer, petitioner claims thatits prestation under the %4 consisted ocontributing the property on which the condominiumwas to be contributed# Not being pri.y to theContracts to Sell e)ecuted by PP&1 and respondents, itdid not recei.e any portion o the payments made by

the latter> and, that without any contributory ault andnegligence on its part, PP&1 and not the petitionerbreached its undertakings under the %4 by ailing tocomplete the condominium pro;ect#

$he Aousing and Dand Fse ADF" ruled in a.oro respondents, rescinding the contract and orderingpetitioner and PP&1 to pay reund, interest, damagesattorney0s ees and administrati.e *nes#

$he ADF2/ /oard o Commissioners armedthe ADF0s order# Hotion or 2econsideration H2" wasdenied# $he case was subse(uently raised to the Oceo the President OP" which rendered a decisiondismissing petitioner0s appeal on the ground that the

latter0s appeal memorandum was *led out o time andthat the ADF2/ /oard committed no gra.e abuse odiscretion in rendering the appealed decision# H2 wasalso denied#

Petitioner *led beore the C4 a motion oe)tension within which to *le its petition or re.iewclaiming hea.y workload o its counsel# $his wasdenied by the C4# H2 was denied or lack o merit#

I##$

?BN the petitioner should be held solidarily liabletogether with PP&1#

Rli

Mes# $he petitioner is solidarily liable together withPP&1#

/y e)press terms o the %4, it appears thatpetitioner not only retained ownership o the propertypending completion o the condominium pro;ect buthad also bound itsel to answer liabilities proceedingrom contracts entered into by PP&1 with third parties#

4rticle 111, Section + o the %4 distinctly pro.ides asollows9

Section +9 2escission and damages9

)))

1n any case, the Owner shall respect and strictlycomply with any co.enant entered into by thee.eloper and third parties with respect to any o itsunits in the Condominium Pro;ect# $o enable the owneto comply with this contingent liability, the e.elopershall urnish the Owner with a copy o its contracts withthe said buyers on a month<to<month basis#




X))

iewed in the light o the oregoing pro.ision o the %4, petitioner cannot a.oid liability by claimingthat it was not in any way pri.y to the Contracts to Selle)ecuted by PP&1 and respondents# Horeo.er, a ;oint.enture is considered in this ;urisdiction as a orm o partnership and is, accordingly, go.erned by the law o partnerships#

Fnder 4rticle +5! o the Ci.il Code o the

Philippines, all partners are solidarily liable with thepartnership or e.erything chargeable to thepartnership, including loss or in;ury caused to a thirdperson or penalties incurred due to any wrongul act oromission o any partner acting in the ordinary course o the business o the partnership or with the authority o his co< partners# ?hether innocent or guilty, all thepartners are solidarily liable with the partnership itsel#

&EERICO LOPE, ET AL, plaintifs<appellees, .s (

SE&AO a) BEHN, EER CO., deendants# (

SE&AO, deendant< appellant

&ACTS

$he herein plaintif *led an action beore the

CK1 to reco.er rom the deendants a boat or lanchon,

or its .alue, alleged to be P+,333, together with

damages in the sum o P,853# $he deendant, Mu

Seao, at *rst presented a demurrer, which was

subse(uently o.erruled# Dater, he presented a general

and special deense# Still later, he asked permission to

withdraw his counterclaim and instead thereo to

present the deense that the plaintifs were without

legal capacity to sue# $he deendants, /ehn, Heyer '

Co#, presented a general denial# Dater, /ehn, Heyer '

Co#, was absol.ed rom all liability under the complaint#

4ter hearing the e.idence adduced during the trial o

the case, the court rendered a ;udgment in a.or o the

plaintifs and against the deendant, Mu Seao#

$he deendant appealed the said ;udgment

alleging that the lower court committed an error in

deciding that the plaintifs had legal capacity to sue#

$he deendant and appellant argues that the plaintifshad been doing business under the name o 3ope1

(ermanos> that they had not been organized as a

society, in accordance with the pro.isions o the

Commercial Code, and that, thereore, they were not

authorized to sue and cited decisions o this court in

support o that conclusion#

ISS(E

?hether or not the herein plaintifs ha.e legal capacity

to sue#

HEL

Mes# $he SC armed the decision o the lowe

court holding that the deendant and appellant had not

e)amined the complaint presented by the plaintifs# 4ne)amination o the complaint would ha.e shown the

deendant that the present action was not commenced

in the name o 3ope1 (ermanos, but in the indi.idua

names o the persons constituting the alleged society

or mercantile association# $he SC urther held tha

nothing in the procedure in the present case which is in

conict with the decisions cited by the appellant# $he

plaintifs in the present case, e.en granting that the

society called 3ope1 (ermanos was not authorized to

sue in the name o said society or the reason that it

had not been properly organized, yet, ne.ertheless

they were permitted to sue in their indi.idual names#

BASTIA %# ENI

&a+!#

/astida ofered to assign to Henzi ' Co# his contract

with Phil Sugar Centrals 4gency and to super.ise the

mi)ing o the ertilizer and to obtain other orders or @3

L o the net pro*t that Henzi ' Co#, 1nc#, might deri.e

thererom# %# H# Henzi gen# manager o Henzi ' Co#"

accepted the ofer# $he agreement between the parties

was .erbal and was con*rmed by the letter o Henzi to

the plaintif on %anuary +3, +-!!# Pursuant to the .erba

agreement, the deendant corporation on 4pril !7

+-!! entered into a written contract with the plaintif

marked :)hibit 4, which is the basis o the present

action# Still, the ertilizer business as carried on in the

same manner as it was prior to the written contract,

but the net pro*t that the plaintif herein shall get

would only be 6@L# $he inter.ention o the plaintif

was limited to super.ising the mi)ing o the ertilizers

in the bodegas o Henzi# Prior to the e)piration o the

contract 4pril !7, +-!7", the manager o Henznoti*ed the plaintif that the contract or his ser.ices

would not be renewed# Subse(uently, when the

contract e)pired, Henzi proceeded to li(uidate the

ertilizer business in (uestion# $he plaintif reused to

agree to this# 1t argued, among others, that the written

contract entered into by the parties is a contract o

general regular commercial partnership, wherein Henz

was the capitalist and the plaintif the industria

partner#

P42$ 1# P42$N:2SA1PBCase igestsBD:+37 !3+8<!3+7" E +/FS O2& 1



I##$ 1s the relationship between the petitioner and

Henzi that o partnersT

H$l) #he relationship established between the

parties was not that o partners, but that o employer

and employee, whereby the plaintif was to recei.e

6@L o the net pro*ts o the ertilizer business o Henzi

in compensation or his ser.ices or super.ising the

mi)ing o the ertilizers# Neither the pro.isions o the

contract nor the conduct o the parties prior orsubse(uent to its e)ecution ;usti*ed the *nding that it

was a contract o copartnership# $he written contract

was, in act, a continuation o the .erbal agreement

between the parties, whereby the plaintif worked or

the deendant corporation or onehal o the net pro*ts

deri.ed by the corporation orm certain ertilizer

contracts# 4ccording to 4rt# ++8 o the Code o

Commerce, articles o association by which two or

more persons obligate themsel.es to place in a

common und any property, industry, or any o these

things, in order to obtain pro*t, shall be commercial, no

matter what it class may be, pro.ided it has been

established in accordance with the pro.isions o theCode# Aowe.er in this case, there was no common

und# $he business belonged to Henzi ' Co# $he

plaintif was working or Henzi, and instead o recei.ing

a *)ed salary, he was to recei.e 6@L o the net pro*ts

as compensation or his ser.ices# $he phrase in the

written contract Uen sociedad conV, which is used as a

basis o the plaintif to pro.e partnership in this case,

merely means Uen reunion conV or in association with#

1t is also important to note that although Henzi agreed

to urnish the necessary *nancial aid or the ertilizer

business, it did not obligate itsel to contribute any

*)ed sum as capital or to deray at its own e)pense the

cost o securing the necessary credit#

AGALONA, %# PESACO

&a+!#

$he plaintifs, Hagalona, Sermeno, and the deendant,

Pesayco, ormed a partnership or the purpose o

catching Jsemillas de ba=gus o auaJ, 1t was agreed

that the deendant should put in a bid or this pri.ilege

and that the partners should each supply one third o

the capital in case the deendant was awarded the

desired pri.ilege# $he deendant, ha.ing had

e)perience in this line, was to be the manager in casehis bid was accepted# 4s a deposit o one<ourth o the

amount o the bid was re(uired, each o the partners

put up one third o this amount# $he bid was awarded

to the deendant# $he latter entered upon his duties

under the contract and ga.e an account o two sales o

Jsemillas de ba=gusJ, to $iburcio Dutero as

representati.e o the plaintif Hagalona# 4s the

deendant had on hand only P+3 he wired Dutero or

sucient money to complete the payment o the *rst

(uarter which was to be paid within the *rst twenty

days o the second (uarter o the year +-6+# $he

deendant managed the business and ne.er ga.e any

account o his catches or sales to his partners# 1n .iew

o this, complaint was *led#

2ecei.er took o.er the management and took

possession o all the de.ices and implements used in

the catching o Jsemillas de ba=gusJ#

eendant denies that there was a partnership and

depends principally upon the act that the partnership

agreement was not in writing#

I##$ ?hether or not a partnership was created

between Hagalona and PesaycoT

H$l)

$he partnership was conclusi.ely pro.en by the ora

testimony o the plaintifs and other witnesses#$his

court has held that i a party permits a contract, which

the law pro.ides shall be in writing, to be pro.ed

without ob;ection as to the orm o the proo, it is ;ustas binding as i the statute had been complied with#

$he court did not agree with the appellant that one o

the re(uisites o a partnership agreement such as the

one under consideration, is that it should be in writing

4rticle +887 o the Ci.il Code pro.ides that JCi.i

partnerships may be established in any orm whate.er

unless real property or real rights are contributed to

the same, in which case a public instrument shall be

necessary#J

4rticles o partnership are not re(uired to be in writing

e)cept in the cases mentioned in article +887, Ci.iCode, which controls article +!53 o the same Code#

4 .erbal partnership agreement is .alid between the

parties e.en though more than +,@33 pesetas are

in.ol.ed and can be enorced without bringing action

under article +!7-, Ci.il Code, to compel e)ecution o a

written instrument#

Aa) %. aa!o G.R. No. L-24193 J$ 2, 19F

&a+!#

• 4gad alleged in his complaint that he and

Habato were partners in a *shpond business

pursuant to a public instrument dated 4ug# !-, +-@!,o $hat he contributed P+k to its capital, with the

right to recei.e @3L o the pro*tso $hat Habato, who handled the partnership

unds, had yearly rendered accounts o its

operations rom +-@!<+-@8

P42$ 1# P42$N:2SA1PBCase igestsBD:+37 !3+8<!3+7" E +@/FS O2& 1



o $hat despite repeated demands,

Habato ailed and reused to render

account or the years +-@7<+-86o $hat he prayed that Habato be ordered

to gi.e him his share o the pro*ts rom

the partnership amounting to P+k plus

P+k attorney0s ees, as well as

the dissolution o the partnership, as

well as the winding up o its afairs by a

recei.er to be appointed thereor• Habato denied the e)istence o the partnership on the

ground that the contract thereore had not been

perected because 4gad ailed to gi.e his P+k

contribution to the capitalo Ae *led a motion to dismiss on the

ground o lack o cause o action• $C9 motion to dismiss grantedY public instrument

declared null and .oido No in.entory o the *shpond has been

attached to the public instrument pursuant to

4rt# +776

I##$9 ?ON Uimmo.able property or real rightsV ha.e beencontributed to the alleged partnership, thus allowing the

application o 4rt# +776#

H$l)

• No immo.able property or real rights ha.e been

contributed in the alleged partnership#• 4rt# +77+9 4 partnership may be constituted in any orm,

e)cept where immo.able property or real rights are

contributed thereto, in which case a public instrument

shall be necessary#4rt# +7769 4 contract o partnership is .oid, whene.er

immo.able property is contributed thereto, i in.entoryo said property is not made, signed by the parties and

attached to the public instrument#

• $he public instrument presented showed that it was the

Uoperation o a *shpondV and not the Uengagement

in a *shpond businessV that was the purpose

established between 4gad and Habato#o Neither contributed a *shpond nor a

real right to any *shpondo $heir contributions were limited to the sum o

P+k each• $he operation o the *shpond was the purpose

o the partnership# Neither said *shpond nor a

real right thereto was contributed to thepartnership or became part o the capital

thereo, e.en i a *shpond or a real right

thereto could become part o its assets#

(LO 'S. ANG CHIAO SENG

&ACTS

• 4 land on which a theatre was constructed was

leased by plaintif Hrs# Mulo rom :milia Carrion

Santa Harina and Haria Carrion Santa Harina

1n the contract o lease it was stipulated that

the lease shall continue or an inde*nite period

o time, but that ater one year the lease may

be cancelled by either party by written notice

to the other party at least -3 days beore the

date o cancellation#

• On %une +7, +-@, deendant Mang Chiao Seng

wrote a letter to the plaintif Hrs# 2osario F Mulo, proposing the ormation o a partnership

between them to run and operate a theatre on

the premises occupied by ormer Cine Oro at

Plaza Sta# Cruz, Hanila# $he principal conditions

o the ofer are +" that Mang Chiao Seng

guarantees Hrs# Mulo a monthly participation o

P6,333 payable (uarterly in ad.ance within the

*rst +@ days o each (uarter, !" that the

partnership shall be or a period o two years

and si) months, starting rom %uly +, +-@ to

ecember 6+, +-7, with the condition that i

the land is e)propriated or rendered

impracticable or the business, or i the ownerconstructs a permanent building thereon, o

Hrs# MuloGs right o lease is terminated by the

owner, then the partnership shall be

terminated e.en i the period or which the

partnership was agreed to be established has

not yet e)pired> 6" that Hrs# Mulo is authorized

personally to conduct such business in the

lobby o the building as is ordinarily carried on

in lobbies o theatres in operation, pro.ided the

said business may not obstruct the ree ingress

and agrees o patrons o the theatre> " that

ater ecember 6+, +-7, all impro.ements

placed by the partnership shall belong to Hrs

Mulo, but i the partnership agreement is

terminated beore the lapse o one and a hal

years period under any o the causes

mentioned in paragraph !", then Mang Chiao

Seng shall ha.e the right to remo.e and take

away all impro.ements that the partnership

may place in the premises#




• Pursuant to the abo.e ofer, which plaintif

e.idently accepted, the parties e)ecuted a

partnership agreement establishing the JMang

' Company, Dimited,J which was to e)ist rom

%uly +, +-@ to ecember 6+, +-7# 1t states

that it will conduct and carry on the business o

operating a theatre or the e)hibition o motion

and talking pictures# $he capital is *)ed at

P+33,333, P53,333 o which is to be urnished

by Mang Chiao Seng and P!3,333, by Hrs# Mulo#4ll gains and pro*ts are to be distributed

among the partners in the same proportion as

their capital contribution and the liability o

Hrs# Mulo, in case o loss, shall be limited to her

capital contribution#

• 1n %une, +-8, they e)ecuted a supplementary

agreement, e)tending the partnership or a

period o three years beginning %anuary +,

+-5 to ecember 6+, +-@3# $he bene*ts are

to be di.ided between them at the rate o @3<

@3 and ater ecember 6+, +-@3, the

showhouse building shall belong e)clusi.ely to

the second party, Hrs# Mulo#

• /ut on 4pril +!, +--, the attorney or the

owners noti*ed Hrs# Mulo o the ownerGs desire

to cancel the contract o lease on %uly 6+, +--#

• On October !7, +-@3, Hrs# Mulo demanded rom

Mang Chiao Seng her share in the pro*ts o the

business# Mang answered the letter saying that

upon the ad.ice o his counsel he had to

suspend the payment o the rentals" because

o the pendency o the e;ectment suit by theowners o the land against Hrs# Mulo# 1n this

letter Mang alleges that inasmuch as he is a

sublessee and inasmuch as Hrs# Mulo has not

paid to the lessors the rentals rom 4ugust,

+--, he was retaining the rentals to make

good to the landowners the rentals due rom

Hrs# Mulo in arrears#

• 1n .iew o the reusal o Mang to pay her the

amount agreed upon, Hrs# Mulo instituted this

action on Hay !8, +-@, alleging the e)istence

o a partnership between them and that the

deendant Mang Chiao Seng has reused to pay

her share rom ecember, +-- to ecember,

+-@3#

• 1n answer to the complaint, deendant alleges

that the real agreement between the plaintif

and the deendant was one o lease and not o

partnership> that the partnership was adopted

as a subteruge to get around the prohibition

contained in the contract o lease between the

owners and the plaintif against the sublease o

the said property

ISS(E

?hether or not there was a partnership

between petitioner and deendant#

HEL

?e ha.e gone o.er the e.idence and we ully

agree with the conclusion o the trial court that the

agreement was a sublease, not a partnership# $he

ollowing are the re(uisites o partnership9 +" two or

more persons who bind themsel.es to contribute

money, property, or industry to a common und> !"

intention on the part o the partners to di.ide the

pro*ts among themsel.es# 4rt# +787, Ci.il Code#"#

1n the *rst place, plaintif did not urnish the

supposed P!3,333 capital# 1n the second place, she did

not urnish any help or inter.ention in the management

o the theatre# 1n the third place, it does not appear

that she has e.er demanded rom deendant any

accounting o the e)penses and earnings o the

business# ?ere she really a partner, her *rst concern

should ha.e been to *nd out how the business was

progressing, whether the e)penses were legitimate

whether the earnings were correct, etc# She was

absolutely silent with respect to any o the acts that a

partner should ha.e done> all that she did was to

recei.e her share o P6,333 a month, which can not be

interpreted in any manner than a payment or the useo the premises which she had leased rom the owners

Clearly, plaintif had always acted in accordance with

the original letter o deendant o %une +7, +-@, which

shows that both parties considered this ofer as the

real contract between them#

T(AON %#. BOLANOS

INOCENCIA a) &ELIPE EL(AO .s# NICANORCASTEEL a) J(AN EPRA

G.R. No. L-219>F $+$:$r 24, 19F, 2FSCRA 45

CASTRO, $"%

&ACTS

$he basic action is or speci*c perormance, anddamages resulting rom an alleged breach o contract#

Nicanor Casteel repeatedly *led a *shpondapplication or a big tract o swampy land in the




Hunicipality o Padada, a.ao# Ais third applicationwas disappro.ed#

espite the said re;ection, Casteel did not loseinterest# Ae *led a motion or reconsideration#

Heanwhile, se.eral applications were submittedand granted permits" by other persons or portionso the area co.ered by CasteelGs application#

Fpon learning that portions o the area applied orby him were already occupied by ri.al applicants,

Casteel immediately *led the corresponding protests#Conse(uently, two administrati.e cases ensuedin.ol.ing the area in (uestion#

$he irector o Kisheries re;ected CasteelGsapplication on October !@, +--, re(uired him toremo.e all the impro.ements which he hadintroduced on the land, and ordered that the land beleased through public auction#

Casteel appealed to the Secretary o 4griculture andNatural 2esources#

On No.ember !@, +-- 1nocencia eluao wie o Kelipe eluao" and Nicanor Casteel e)ecuted acontract W denominated a Jcontract o ser.iceJ,

stating that the ormer hires and employs the latterand that eluao will *nance the construction andimpro.ements o the *shpond and Casteel will be theHanager and sole buyer o all the produce o the *shthat will be produced rom said *shpond# On thesame date, 1nocencia eluao e)ecuted a specialpower o attorney in a.or o %esus onesa, e)tendingto the latter the authority J$o represent me in theadministration o the *shpond at Halalag,Hunicipality o Padada, Pro.ince o a.ao,Philippines##J

On No.ember !-, +-- the irector o Kisheriesre;ected the application *led by Kelipe eluao#

On September +@, +-@3 the Secretary o 4gricultureand Natural 2esources issued a decision reinstatingNicanor Casteel or the area o ictorio # Carpio, o Deoncio 4radillos and o 4le;andro Cacam#

Sometime in %anuary +-@+ Nicanor Casteel orbade1nocencia eluao rom urther administering the*shpond, and e;ected the latterGs representati.eencargado", %esus onesa, rom the premises#

4lleging .iolation o the contract o ser.ice enteredinto between 1nocencia eluao and Nicanor Casteel,Kelipe eluao and 1nocencia eluao on *led an actionin the Court o Kirst 1nstance o a.ao or speci*cperormance and damages against Nicanor Casteeland %uan epra who, they alleged, instigatedCasteel to .iolate his contract"#

ISS(E

?ON a contract o partnership was created betweeneluao and Casteel based on the so<called Jcontract o ser.ice#J

HEL M:S

$he e.idence preponderates in a.or o the .iewthat the initial intention o the parties was not to

orm a co<ownership but to establish a partnership W1nocencia eluao as capitalist partner and Casteel asindustrial partner W the ultimate undertaking owhich was to di.ide into two e(ual parts such portiono the *shpond as might ha.e been de.eloped by theamount e)tended by the plaintifs<appellees, with theurther pro.ision that Casteel should reimburse thee)penses incurred by the appellees o.er one<hal othe *shpond that would pertain to him#

?e shall thereore construe the contract as one o

partnership, di.ided into two parts W namely, acontract o partnership to e)ploit the *shpondpending its award to either Kelipe eluao or NicanorCasteel, and a contract o partnership to di.ide the*shpond between them ater such award# $he *rst is.alid, the second illegal#

4rt# +5636" o the Ci.il Code enumerates, as one othe causes or the dissolution o a partnership, J##any e.ent which makes it unlawul or the business othe partnership to be carried on or or the membersto carry it on in partnership#J $he appro.al o theappellantGs *shpond application brought to the orese.eral pro.isions o law which made thecontinuation o the partnership unlawul and

thereore caused its ipso facto dissolution#

4ct 336, known as the Kisheries 4ct, prohibits theholder o a *shpond permit the permittee" romtranserring or subletting the *shpond granted tohim, without the pre.ious consent or appro.al o theSecretary o 4griculture and Natural 2esources#

Since the partnership had or its ob;ect the di.isioninto two e(ual parts o the *shpond between theappellees and the appellant ater it shall ha.e beenawarded to the latter, and thereore it en.isaged theunauthorized transer o one<hal thereo to partiesother than the applicant Casteel, it was dissol.ed bythe appro.al o his application and the award to him

o the *shpond# $he appro.al was an e.ent whichmade it unlawul or the business o the partnershipto be carried on or or the members to carry it on inpartnership#

CLASSES O& PARTNERSHIPS AN PARTNERS

Gr$orio Or!$a, To:a# )$l Ca#!illo, Jr. a)B$<a:i Ba+orro %. CA, SEC a) JoaKi i#a

G.R. No. 1>924 Jl@ 3, 1995

&a+!#

Ortega, then a senior partner in the law *rm /ito, Hisa

and Dozada withdrew in said *rm#

Ae *led with S:C a petition or dissolution and

li(uidation o partnership

S:C en banc ruled that withdrawal o Hisa rom the

*rm had dissol.ed the partnership#




2eason9 since it is partnership at will, the law *rm

could be dissol.ed by any partner at anytime, such as

by withdrawal thererom, regardless o good aith or

bad aith, since no partner can be orced to continue in

the partnership against his will#

I##$

+# ?ON the partnership o /ito, Hisa ' Dozada

now /ito, Dozada, Ortega ' Castillo"

is a partnership at will>2. !# ?ON the withdrawal o Hisa dissol.ed the

partnership regardless

o his good or bad aith#

H$l)

+# Mes# $he partnership agreement o the *rm pro.ides

that VZt[he partnership shall continue so long as

mutually satisactory and upon the death or legal

incapacity o one o the partners, shall be continued by

the sur.i.ing partners#V

!# Mes# 4ny one o the partners may, at his solepleasure, dictate a dissolution o the partnership at will

e#g# by way o withdrawal o a partner"#

Ae must, howe.er, act in good aith, not that the

attendance o bad aith can pre.ent the dissolution o

the partnership but that it can result in a liability or

damages

ROJAS 'S. AGLANA G.R. No. 3>F1F $+$:$r 1>, 199>.M 192 SCRA 11>

E(&RACIO . ROJAS, Plai!i"-App$lla!, %#.CONSTANCIO B. AGLANA, $*$)a!-App$ll$$.

&ACTS Haglana and 2o;as e)ecuted their 4rticles o

Co<partnershipcalled U:astcoast e.elopment

:nterpisesV which had an inde*nite term o e)istence

and was registered with the S:C and had a $imber

Dicense# One o the ::0s purposes was to apply or

secure timber andBor pri.ate orest lands and to

operate, de.elop and promote such orests rights and

concessions# H shall manage the business afairs while

2 shall be the logging superintendent# 4ll pro*ts and

losses shall be di.ided share and share alike between

them# Dater on, the two a.ailed the ser.ices o Pahamotang as industrial partner and e)ecuted

another articles o co<partnership with the latter# $he

purpose o this second partnership was to hold and

secure renewal o timber license and the term o which

was *)ed to 63 years# Still later on, the

three e)ecuted a conditional sale o interest in the

partnership wherein H and 2 shall purchase the

interest, share and participation in the partnership o P#

1t was also agreed that ater payment o such including

amount o loan secured by P in a.or o the

partnership, the two shall become owners o al

e(uipment contributed by P# 4ter this, the two

continued the partnership without any written

agreement or reconstitution o their articles o

partnership# Subse(uently, 2 entered into a

management contract with CHS :state 1nc# H wrote

him re9 his contribution to the capital in.estments as

well as his duties as logging superintendent# 2 replied

that he will not be able to comply with both# H thentold 2 that the latter0s share will ;ust be !3L o the net

pro*ts# Such was the sharing rom +-@7 to +-@-

without complaint or dispute# 2 took unds rom the

partnership more than his contribution# H noti*ed 2

that he dissol.ed the partnership# 2 *led an action

against H or the reco.ery o properties and

accounting o the partnership and damages# CK1

the partnership o H and 2 is ater P retired is one o de

acto and at will> the sharing o pro*ts and

losses is on the basis o actual contributions

there is no e.idence these properties were ac(uired by

the partnership unds thus it should not belong to it>

neither is entitled to damages> the letter o H in efectdissol.ed the partnership> sale o orest concession is

.alid and binding and should be considered

as H0s contribution> 2 must pay or turn o.er to the

partnership the pro*ts he recei.ed rom CHS and pay

his personal account to the partnership> H must be

paid 5@k which he should0.e recei.ed but was not paid

to him and must be considered as his contribution

ISS(E what is the nature o the partnership and lega

relationship o H<2ater P retired rom the second

partnershipT Hay H unilaterally dissol.e the

partnershipT

H$l) SC# $here was no intention to dissol.e the *rst

partnership upon the constitution o the second as

e.erything else was the same e)cept or the act that

they took in an industrial partner9 they pursued the

same purposes, the capital contributions call or

the same amount all subse(uent renewals o

$imber Dicense were secured in a.or o the *rst

partnership,all businesses were carried out under the

registered articles#H and 2 agreed to purchase the

interest, share and participation o P andater, they

became owners o the e(uipment contributed

by P# /othconsidered themsel.es as partners as petheir letters# 1t is not a partnershipde acto or at will as

it was e)isting and duly registered# $he letter o

Hdissol.ing the partnership is in efect a notice o

withdrawal and may bedone by e)pressly withdrawing

e.en beore e)piration o the period withor withou

;usti*able cause# 4s to the li(uidation o the

partnership it shallbe di.ided Ushare and share alikeV

ater an accounting has been made#2 is not entitled to

any pro*ts as he ailed to gi.e the amount he

P42$ 1# P42$N:2SA1PBCase igestsBD:+37 !3+8<!3+7" E +-/FS O2& 1



hadundertaken to contribute thus, had become a

debtor o the partnership#

H cannot be liable or damages as 2 abandoned the

partnership thru his acts and also took unds in an

amount more than his contribution#

Fnder 4rticle +563, par# ! o the Ci.il Code, e.en i

there is a speci*ed term, one partner can cause itsdissolution by e)pressly withdrawing e.en beore the

e)piration o the period, with or without ;usti*able

cause# O course, i the cause is not ;usti*ed or no

cause was gi.en, the withdrawing partner is liable or

damages but in no case can he be compelled to remain

in the *rm# ?ith his withdrawal, the number o

members is decreased, hence, the dissolution# 4nd in

whate.er way he may .iew the situation, the

conclusion is ine.itable that 2o;as and Haglana shall be

guided in the li(uidation o the partnership by the

pro.isions o its duly registered 4rticles o Co<

Partnership> that is, all pro*ts and losses o the

partnership shall be di.ided Jshare and share alikeJbetween the partners#

On the basis o the CommissionersG 2eport, the

corresponding contribution o the partners rom +-@8<

+-8+ are as ollows9 :uracio 2o;as who should ha.e

contributed P+@5,+@5#33, contributed only P+5,7@3#33

while Haglana who should ha.e contributed

P+83,-5#33, contributed P!87,@+# ecision, 2#4#

p# -78"# 1t is a settled rule that when a partner who has

undertaken to contribute a sum o money ails to do so,

he becomes a debtor o the partnership or whate.er

he may ha.e promised to contribute 4rticle +758, Ci.il

Code" and or interests and damages rom the time he

should ha.e complied with his obligation 4rticle +755,

Ci.il Code" Horan, %r# .# Court o 4ppeals, +66 SC24 -

Z+-5["# /eing a contract o partnership, each partner

must share in the pro*ts and losses o the .enture#

$hat is the essence o a partnership 1bid#, p# -@"#

$hus, as reported in the CommissionersG 2eport, 2o;as

is not entitled to any pro*ts# 1n their .oluminous

reports which was appro.ed by the trial court, they

showed that on @3<@3L basis, 2o;as will be liable in the

amount o P+6+,+88#33> on 53<!3L, he will be liable or

P3,3-!#-8 and *nally on the basis o actual capitalcontribution, he will be liable or P@!,33#6+#

Conse(uently, e)cept as to the legal relationship o the

partners ater the withdrawal o Pahamotang which is

un(uestionably a continuation o the duly registered

partnership and the sharing o pro*ts and losses which

should be on the basis o share and share alike as

pro.ided or in the duly registered 4rticles o Co<

Partnership, no plausible reason could be ound to

disturb the *ndings and conclusions o the trial court#

nad

4s to whether Haglana is liable or damages because

o such withdrawal, it will be recalled that ater the

withdrawal o Pahamotang, 2o;as entered into a

management contract with another logging enterprise

the CHS :state, 1nc#, a company engaged in the same

business as the partnership# Ae withdrew his

e(uipment, reused to contribute either in cash or ine(uipment to the capital in.estment and to perorm his

duties as logging superintendent, as stipulated in thei

partnership agreement# $he records also show tha

2o;as not only abandoned the partnership but also took

unds in an amount more than his contribution

ecision, 2#4#, p# --"

1n the gi.en situation Haglana cannot be said to be in

bad aith nor can he be liable or damages

P2:H1S:S CONS1:2:, the assailed decision o the

Court o Kirst 1nstance o a.ao, /ranch 111, is hereby

HO1K1: in the sense that the duly registeredpartnership o :astcoast e.elopment :nterprises

continued to e)ist until li(uidated and that the sharing

basis o the partners should be on share and share

alike as pro.ided or in its 4rticles o Partnership, in

accordance with the computation o the

commissioners# ?e also hereby 4KK12H the decision o

the trial court in all other respects#9 nad

SO O2:2:#

Pal +oal), $!.al. %#. T0$ Na!ioal Ci!@ Ba o* N$; or

G.R. No. L-991, a@ 21, 195FM

&ACTS

Stakinocery is a partnership doing business at

No# @5, 4urora, /oule.ard, San %uan, 2izal, and ormed

by 4lan &orcey, Douis da Costa, %r#, ?illiam \usik, and

:mma &a.ino# $his partnership was denied registration

in the Securities and :)change Commission

considering that &orcey and a Costa are considered

general partners in a copartnership under the name o

Cardinal 2attan#

Prior to %une 6, +--, Stasikinocery had an

o.erdrat account with the National City o New Mork, a

oreign banking association duly licensed to do

business in the Philippines# On %une 6, +--, the

o.erdrat showed a balance o P8,+6#-! against

Stasikinocery or Cardinal 2attan, which account, due to

the ailure o the partnership to make the re(uired

payment, was con.erted into an ordinary loan o

which a promissory note was e)ecuted by a Costa in

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the name o Cardinal 2attan# $he promissory note was

secured by a chattel mortgage o some motor .ehicles#

On %une 7, +--, the same day o the e)ecution

o the chattel mortgage, &orcey and a Costa

e)ecuted an agreement to transer right, title and

participation to Shaefer# 4lso, while the said loan was

still unpaid, a Costa and &orcey transerred the Kargo

$ruck one o the .ehicles mortgaged" to Paul

Hconald# Paul Hcdonald later on transerred the sameto /en;amin &onzales#

$he respondent, upon learning the transer,

opposed and *led an action to reco.er its credits and

to oreclose the chattel mortgage# Hconalds and

&onzales, on the other hand, claimed better right o.er

the said properties# $he CK1 o Hanila rendered decision

in a.or o the respondent# $he same was armed by

the C4# Aence, this petition#

ISS(E

?hether or not an unregistered commercial co<partnership which has no independent ;uridical

personality can ha.e a domicile so that a chattel

mortgage registered in that domicile would bind third

persons who are innocent purchasers or .alue#

R(LING

Mes#

RATIO

?hile an unregistered commercial partnership

has no ;uridical personality, ne.ertheless, where two or

more persons attempt to create a partnership ailing to

comply with all the legal ormalities, the law considers

them as partners and the association is a partnership

in so ar as it is a.orable to third persons, by reason o

e(uitable principle o estoppel# 1n Jo Chung Chang vs#

Paci'c Commercial Co#, it was held Uthat although the

partnership with the *rm name o $eck Seing and Co#,

Dtd#, could not be regarded as a partnership de ;ure,

yet with respect to third persons, it will be considered a

partnership with all the conse(uent obligations or the

purpose o enorcing the rights o such third person#

1n the case at bar, a Costa and &orcey cannot

deny that they are partners o the partnership

Stasikinocery because in all their transactions with the

respondent, they represented themsel.es as such#

Petitioner Hconald cannot disclaim knowledge o the

partnership Stasikinocery because he dealt with said

entity in purchasing two .ehicles in (uestion through

&orcey and a Costa#

4s was held in &ehn 4eer 5 Co#, vs# Rosat1in

where a partnership not duly organized has been

recognized as such in its dealings with certain persons

it shall be considered as partnership by estoppel and

the persons dealing with it are estopped rom denying

its partnership e)istence#

1t results that i the law recognizes a

deecti.ely organized partnership as de acto as ar as

third persons are concerned, or purposes o its deacto e)istence, should ha.e such attribute o a

partnership as domicile# 1n (ung- 4an 6uc vs# 7eing-

Chiong Cheng, it was held that although it has no lega

standing, it is partnership de acto and the genera

pro.isions o the Code applicable to all partnerships

apply to it#

G.R. No. L-25532 &$rar@ 2, 19F9

COISSIONER O& INTERNALRE'EN(E, petitioner, .s#

ILLIA J. S(TER a) THE CO(RT O& TA6APPEALS, respondents#

REES, J.B.L., $"%

&ACTS

4 limited partnership, named J?illiam %# Suter GHorcoin

Co#, Dtd#,J was ormed on 63 September +-7 by herein

respondent ?illiam %# Suter as the general partner, and

%ulia Spirig and &usta. Carlson, as the limited partners

$he partners contributed, respecti.ely, P!3,333#33

P+5,333#33 and P!,333#33 to the partnership# On +

October +-7, the limited partnership was registered

with the S:C# $he *rm engaged in the importation

marketing, distribution and operation o automatic

phonographs, radios, tele.ision sets and amusement

machines, their parts and accessories# 1t had an oce

and held itsel out as a limited partnership#

1n +-5, howe.er, general partner Suter and limited

partner Spirig got married and, thereater, on +5

ecember +-5, limited partner Carlson sold his share

in the partnership to Suter and his wie# $he sale was

duly recorded with the S:C#

$he limited partnership had been *ling its income ta)

returns as a corporation, without ob;ection by the

herein petitioner, until in +-@- when the latter, in an

P42$ 1# P42$N:2SA1PBCase igestsBD:+37 !3+8<!3+7" E !+/FS O2& 1



assessment, consolidated the income o the *rm and

the indi.idual incomes o the partners<spouses Suter

and Spirig resulting in a determination o a de*ciency

income ta) against respondent Suter in the amount o

P!,875#38 or +-@ and P,@87#33 or +-@@#

2espondent Suter protested the assessment, and

re(uested its cancellation and withdrawal, but his

re(uest was denied# he appealed to the Court o $a)

4ppeals, which re.ersed that o the Commissioner o 1nternal 2e.enue#

$he theory o the petitioner, is that the marriage o

Suter and Spirig and their subse(uent ac(uisition o

the interests o remaining partner Carlson in the

partnership dissol.ed the limited partnership, and i

they did not, the *ction o ;uridical personality o the

partnership should be disregarded or income ta)

purposes because the spouses ha.e e)clusi.e

ownership and control o the business> conse(uently

the income ta) return o respondent Suter or the years

in (uestion should ha.e included his and his wieGs

indi.idual incomes and that o the limited partnership,

in accordance with Section @ d" o the National

1nternal 2e.enue Code, which pro.ides as ollows9

d" (usband and wife# W 1n the case o married

persons, whether citizens, residents or non<

residents, only one consolidated return or the

ta)able year shall be *led by either spouse to

co.er the income o both spouses> ####

Suter maintains, as the Court o $a) 4ppeals held, that

his marriage with limited partner Spirig and their

ac(uisition o CarlsonGs interests in the partnership in+-5 is not a ground or dissolution o the partnership,

either in the Code o Commerce or in the New Ci.il

Code, and that since its ;uridical personality had not

been afected and since, as a limited partnership, as

contra distinguished rom a duly registered general

partnership, it is ta)able on its income similarly with

corporations, Suter was not bound to include in his

indi.idual return the income o the limited partnership#

ISS(E ?hether or not the limited partnership has

been dissol.ed ater the marriageo Suter and Spirig

and buying the interest o limited partner Carlson ?e

*nd the CommissionerGs appeal unmeritorious#

HEL No#

4 husband and a wie may not enter into a

contract o general copartnership, because

under the Ci.il Code, which applies in the

absence o e)press pro.ision in the Code o

Commerce, persons prohibited rom making

donations to each other are prohibited rom

entering into universal partnerships# !

:cha.erri +-8" 1t ollows that the marriage o

partners necessarily brings about the

dissolution o a pre<e)isting partnership#

$he petitioner<appellant has e.idently ailed to obser.e

the act that ?illiam %# Suter JHorcoinJ Co#, Dtd

was not a universal partnership, but a particular one

4s appears rom 4rticles +87 and +87@ o the SpanishCi.il Code, o +55- which was the law in orce when

the sub;ect *rm was organized in +-7"

a universal partnership re(uires either that the ob;ect

o the association be all the present propert o the

partners, as contributed by them to the common und

or else Jall that the partners may ac(uire by

their industr or wor8 during the e)istence o the

partnershipJ# ?illiam %# Suter JHorcoinJ Co#, Dtd# was

not such a uni.ersal partnership, since the

contributions o the partners were *)ed sums o

money, P!3,333#33 by ?illiam Suter and P+5,333#33

by %ulia Spirig and neither one o them was an

industrial partner# 1t ollows that ?illiam %# SuteJHorcoinJ Co#, Dtd# was not a partnership that spouses

were orbidden to enter by 4rticle +877 o the Ci.i

Code o +55-#

Nor could the subse(uent marriage o the partners

operate to dissol.e it, such marriage not being one o

the causes pro.ided or that purpose either by the

Spanish Ci.il Code or the Code o Commerce#

$he appellantGs .iew, that by the marriage o both

partners the company became a single proprietorship

is e(ually erroneous# $he capital contributions opartners ?illiam %# Suter and %ulia Spirig were

separately owned and contributed by them before thei

marriage> and ater they were ;oined in wedlock, such

contributions remained their respecti.e separate

property under the Spanish Ci.il Code 4rticle +6-8"#

LONS 'S ROSENSTOC

LI %# PHILIPPINE &ISHING GEAR IN(STRIES,INC.

&ACTS On behal o JOcean uest Kishing

Corporation,J 4ntonio Chua and Peter Mao entered into

a Contract or the purchase o *shing nets o .arious

sizes rom the Philippine Kishing &ear 1ndustries, 1nc

herein respondent"# $hey claimed that they were

engaged in a business .enture with Petitioner Dim $ong

Dim, who howe.er was not a signatory to the

agreement# $he buyers, howe.er, ailed to pay or the

*shing nets and the oats> hence, pri.ate respondent

P42$ 1# P42$N:2SA1PBCase igestsBD:+37 !3+8<!3+7" E !!/FS O2& 1



*led a collection suit against Chua, Mao and Petitioner

Dim $ong Dim with a prayer or a writ o preliminary

attachment# $he suit was brought against the three in

their capacities as general partners, on the allegation

that Ocean uest Kishing Corporation was a

none)istent corporation as shown by a Certi*cation

rom the Securities and :)change Commission# $he

trial court rendered its ecision, ruling that Philippine

Kishing &ear 1ndustries was entitled to the ?rit o

4ttachment and that Chua, Mao and Dim, as generalpartners, were ;ointly liable to pay respondent# Chua

admitted his liability while Dim $ong Dim reused such

liability alleging that Chua and Mao acted without his

knowledge and consent in representing themsel.es as

a corporation#

ISS(E ?hether Dim $ong Dim is liable as a partner

R(LING $he acts as ound by the two lower courts

clearly showed that there e)isted a partnership among

Chua, Mao and him, pursuant to 4rticle +787 o the Ci.il

Code which pro.ides9 4rticle +787 < /y the contract o

partnership, two or more persons bind themsel.es to

contribute money, property, or industry to a common

und, with the intention o di.iding the pro*ts among

themsel.es# Speci*cally, both lower courts ruled that a

partnership among the three e)isted based on the

ollowing actual *ndings9Z+@[ Krom the actual *ndings

o both lower courts, it is clear that Chua, Mao and Dim

had decided to engage in a *shing business, which

they started by buying boats worth P6#6@ million,

*nanced by a loan secured rom %esus Dim who was

petitioners brother# 1n their Compromise 4greement,

they subse(uently re.ealed their intention to pay the

loan with the proceeds o the sale o the boats, and to

di.ide e(ually among them the e)cess or loss# $heseboats, the purchase and the repair o which were

*nanced with borrowed money, ell under the term

common und under 4rticle +787# $he contribution to

such und need not be cash or *)ed assets> it could be

an intangible like credit or industry# $hat the parties

agreed that any loss or pro*t rom the sale and

operation o the boats would be di.ided e(ually among

them also shows that they had indeed ormed a

partnership# Horeo.er, it is clear that the partnership

e)tended not only to the purchase o the boat, but also

to that o the nets and the oats# $he *shing nets and

the oats, both essential to *shing, were ob.iously

ac(uired in urtherance o their business# &i.en thepreceding acts, it is clear that there was, among

petitioner, Chua and Mao, a partnership engaged in the

*shing business# $hey purchased the boats, which

constituted the main assets o the partnership, and

they agreed that the proceeds rom the sales and

operations thereo would be di.ided among them#

G.R. No. L-31F4 J$ 2, 193

E'ANGELISTA CO., OINGO C. E'ANGELISTA, JR., CONCHITA B. NA'ARRO a) LEONARA

ATIENA ABA SABTOS, p$!i!io$r#, %#.ESTRELLA ABA SANTOS, r$#po)$!.

On October -, +-@ a co<partnership was ormed under

the name o J:.angelista ' Co#J On %une 7, +-@@ the

4rticles o Co<partnership was amended as to include

herein respondent, :strella 4bad Santos, as industria

partner, with herein petitioners omingo C:.angelista, %r#, Deonardo 4tienza 4bad Santos and

Conchita P# Na.arro, the original capitalist partners

remaining in that capacity, with a contribution o

P+7,@33 each# $he amended 4rticles pro.ided, inte

alia, that Jthe contribution o :strella 4bad Santos

consists o her industry being an industrial partnerJ

and that the pro*ts and losses Jshall be di.ided and

distributed among the partners ### in the proportion o

73L or the *rst three partners, omingo C

:.angelista, %r#, Conchita P# Na.arro and Deonardo

4tienza 4bad Santos to be di.ided among them

e(ually> and 63L or the ourth partner :strella 4bad

Santos#J

On ecember +7, +-86 herein respondent *led sui

against the three other partners in the Court o Kirst

1nstance o Hanila, alleging that the partnership, which

was also made a party<deendant, had been paying

di.idends to the partners e)cept to her# She thereore

prayed that the deendants be ordered to rende

accounting to her o the partnership business and to

pay her corresponding share in the partnership pro*ts

ater such accounting, plus attorneyGs ees and costs#

$he deendants, in their answer, denied e.er ha.ing

declared di.idends or distributed pro*ts o thepartnership> and byway o armati.e deense alleged

that the amended 4rticles o Co<partnership did not

e)press the true agreement o the parties, which was

that the plaintif was not an industrial partner> that she

did not in act contribute industry to the partnership

and that her share o 63L was to be based on the

pro*ts which might be realized by the partnership only

until ull payment o the loan which it had obtained in

ecember, +-@@ rom the 2ehabilitation Kinance

Corporation in the sum o P63,333, or which the

plaintif had signed a promisory note as co<maker and

mortgaged her property as security#

ISS(E

?hether or not the 4rticles o Co<partnership shall be

considered as a conclusi.e e.idence o respondent0s

status as a limited partnerT

HOLING

$he Court held that despite the genuineness o the

4rticles o Co<partnership the same did not e)press the

P42$ 1# P42$N:2SA1PBCase igestsBD:+37 !3+8<!3+7" E !6/FS O2& 1



true intent and agreement o the parties, howe.er, as

the subse(uent e.ents and testimonial e.idences

indicate otherwise, the Court upheld that respondent is

an industrial partner o the company#

4rticle +75- pro.ides that ]4n industrial partner cannot

engage in business or himsel, unless the partnership

e)pressly permits him to do so> and i he should do so,

the capitalist partners may either e)clude him rom the

*rm or a.ail themsel.es o the bene*ts which he mayha.e obtained in .iolation o this pro.ision, with a right

to damages in either case#0 Since +-@ and until ater

the promulgation o the decision o the appellate court,

4bad Santos has ser.ed as a ;udge o the City Court o

Hanila and had been paid or ser.ices rendered

allegedly contributed by her to the partnership# $hough

being a ;udge o the City Court o Hanila cannot be

characterized a business andBor may be considered an

antagonistic business to the partnership, the

petitioners, subse(uent o petitioners0 answer to the

complaint, petitioners reached the decision that

respondent be e)cluded rom and depri.ed o he

alleged share in the interest or participation as an

alleged industrial partner in the net pro*ts or income o

the partnership#

Aa.ing always known the respondent is a City %udge

e.en beore she ;oined the partnership, why did it take

petitioners so many years beore e)cluding her rom

said companyT Kurthermore, the act o e)clusion is

premised on the ground that respondent has alwaysbeen a partner, an industrial partner# 1n addition, the

Court urther held that with the consideration o 4rticle

+787 that ]/y a contract o partnership two or more

persons bind themsel.es, to contribute money

property, or industry to a common und, with the

intention o di.iding pro*ts among themsel.es0, the

ser.ices rendered by respondent may legitimately be

considered the respondent0s contribution to the

common und#

P42$ 1 P42$N:2SA1PBC i t BD:+37 !3+8 !3+7" E !

bus. org. case digest (1st set)

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