FACTS :
On June 1965, petitioners bought two (2) parcels of land from Bernardino, et al. and on May 1966, they
bought another three (3) parcels of land from Roque. The first two parcels of land were sold by petitioners
in 1968 to Marenir Development Corporation, while the three parcels of land were sold by petitioners to
Erlinda Reyes and Maria Samson on March 1970.
Petitioners realized a net profit in the sale made in 1968 in the amount of P165,224.70, while they
realized a net profit of P60,000.00 in the sale made in 1970. The corresponding capital gains taxes were
paid by petitioners in 1973 and 1974 by availing of the tax amnesties granted in the said years.
However, in a letter dated March 31, 1979 of then Acting BIR Commissioner Efren I. Plana, petitioners
were assessed and required to pay a total amount of P107,101.70 as alleged deficiency corporate income
taxes for the years 1968 and 1970.
Petitioners protested the said assessment in a letter of June 26, 1979 asserting that they had availed of
tax amnesties way back in 1974.
In a reply of August 1979, respondent Commissioner informed petitioners that in the years 1968 and
1970, petitioners as co-owners in the real estate transactions formed an unregistered partnership or joint
venture taxable as a corporation under Section 20(b) and its income was subject to the taxes prescribed
under Section 24, both of the National Internal Revenue Code; that the unregistered partnership was
subject to corporate income tax as distinguished from profits derived from the partnership by them which
is subject to individual income tax; and that the availment of tax amnesty under P.D. No. 23, as amended,
by petitioners relieved petitioners of their individual income tax liabilities but did not relieve them from the
tax liability of the unregistered partnership. Hence, the petitioners were required to pay the deficiency
income tax assessed.
ISSUE :
Whether or not petitioners formed an unregistered partnership subject to corporate tax?
HELD :
1.
Article 1769 of the new Civil Code lays down the rule for determining when a transaction should be
Co-ownership or co-possession does not itself establish a partnership, whether such co-owners
or co-possessors do or do not share any profits made by the use of the property;
b.
The sharing of gross returns does not of itself establish a partnership, whether or not the persons
sharing them have a joint or common right or interest in any property from which the returns are derived
2.
Those who agree to form a co- ownership share or do not share any profits made by the use of the
property held in common does not convert their venture into a partnership
a.
Or the sharing of the gross returns does not of itself establish a partnership whether or not the
persons sharing therein have a joint or common right or interest in the property.
b.
Aside from the circumstance of profit, the presence of other elements constituting partnership is
3.
It is evident that an isolated transaction whereby two or more persons contribute funds to buy
certain real estate for profit in the absence of other circumstances showing a contrary intention cannot be
considered a partnership.
4.
A joint purchase of land, by two, does not constitute a co-partnership in respect thereto; nor does an
agreement to share the profits and losses on the sale of land create a partnership; the parties are only
tenants in common.
2.
Whether or not Yiu no longer has the right to demand an accounting due to prescription.
3.
HELD:
1. Yes. The private respondent is a partner of the petitioner in Sun Wah Panciteria. The requisites of a
partnership which are 1) two or more persons bind themselves to contribute money, property, or
industry to a common fund; and 2) intention on the part of the partners to divide the profits among
themselves (Article 1767, Civil Code; Yulo v. Yang Chiao Cheng, 106 Phil. 110) have been established.
2. Regarding the prescriptive period within which the private respondent may demand an accounting,
Articles 1806, 1807, and 1809 show that the right to demand an accounting exists as long as the
partnership exists. Prescription begins to run only upon the dissolution of the partnership when the final
accounting is done.
3. There shall be a liquidation and winding up of partnership affairs, return of capital, and other incidents
of dissolution because the continuation of the partnership has become inequitable.
(2) Co-ownership or co-possession does not of itself establish a partnership, whether such co-owners or
co-possessors do or do not share any profits made by the use of the property;
(3) The sharing of gross returns does not of itself establish a partnership, whether or not the persons
sharing them have a joint or common right or interest in any property which the returns are derived;
(4) The receipt by a person of a share of the profits of a business is prima facie evidence that he is a
partner in the business, but no such inference shall be drawn if such profits were received in payment:
(a) As a debt by installment or otherwise;
(b) As wages of an employee or rent to a landlord;
(c) As an annuity to a widow or representative of a deceased partner;
(d) As interest on a loan, though the amount of payment vary with the profits of the business;
(e) As the consideration for the sale of a goodwill of a business or other property by installments or
otherwise.
________________________
4. REAMICO, KRIZIA MAE P.
HEIRS OF TAN ENG KEE vs.CA
341 SCRA 740, G.R. No. 126881, October 3, 2000
FACTS:
After the second World War, Tan EngKee and Tan Eng Lay, pooling their resources and industry
together, entered into a partnership engaged in the business of selling lumber and hardware
and construction supplies. They named their enterprise "Benguet Lumber" which they jointly
managed until Tan EngKee's death. Petitioners herein averred that the business prospered due
to the hard work and thrift of the alleged partners. However, they claimed that in 1981, Tan Eng
Lay and his children caused the conversion of the partnership "Benguet Lumber" into a
corporation called "Benguet Lumber Company." The incorporation was purportedly a ruse to
deprive Tan EngKee and his heirs of their rightful participation in the profits of the business.
Petitioners prayed for accounting of the partnership assets, and the dissolution, winding up and
liquidation thereof, and the equal division of the net assets of Benguet Lumber. The RTC ruled
in favor of petitioners, declaring that Benguet Lumber is a joint venture which is akin to a
particular partnership. The Court of Appeals rendered the assailed decision reversing the
judgment of the trial court.
ISSUE: Whether the deceased Tan EngKee and Tan Eng Lay are joint adventurers and/or
partners in a business venture and/or particular partnership called Benguet Lumber and as such
should share in the profits and/or losses of the business venture or particular partnership
RULING:
There was no partnership whatsoever. Except for a firm name, there was no firm account, no
firm letterheads submitted as evidence, no certificate of partnership, no agreement as to profits
and losses, and no time fixed for the duration of the partnership. There was even no attempt to
submit an accounting corresponding to the period after the war until Kee's death in 1984. It had
no business book, no written account nor any memorandum for that matter and no license
mentioning the existence of a partnership. Also, the trial court determined that Tan EngKee and
Tan Eng Lay had entered into a joint venture, which it said is akin to a particular partnership. A
particular partnership is distinguished from a joint adventure, to wit:(a) A joint adventure (an
American concept similar to our joint accounts) is a sort of informal partnership, with no firm
name and no legal personality. In a joint account, the participating merchants can transact
business under their own name, and can be individually liable therefor. (b) Usually, but not
necessarily a joint adventure is limited to a SINGLE TRANSACTION, although the business of
pursuing to a successful termination maycontinue for a number of years; a partnership generally
relates to a continuing business of various transactions of a certain kind. A joint venture
"presupposes generally a parity of standing between the joint co-ventures or partners, in which
each party has an equal proprietary interest in the capital or property contributed, and where
each party exercises equal rights in the conduct of the business. The evidence presented by
petitioners falls short of the quantum of proof required to establish a partnership. In the absence
of evidence, we cannot accept as an established fact that Tan EngKee allegedly contributed his
resources to a common fund for the purpose of establishing a partnership. Besides, it is indeed
odd, if not unnatural, that despite the forty years the partnership was allegedly in existence, Tan
EngKee never asked for an accounting. The essence of a partnership is that the partners share
in the profits and losses .Each has the right to demand an accounting as long as the partnership
exists. A demand for periodic accounting is evidence of a partnership. During his lifetime, Tan
EngKee appeared never to have made any such demand for accounting from his brother, Tang
Eng Lay. We conclude that Tan EngKee was only an employee, not a partner since they did not
present and offer evidence that would show that Tan EngKee received amounts of money
allegedly representing his share in the profits of the enterprise. There being no partnership, it
follows that there is no dissolution, winding up or liquidation to speak of.
FACTS:
In this case, private respondent Acojedo brought an action in the City Court of Dipolog for the
collection of a sum of money which was based on promissory notes executed by the herein
petitioner Nobio Sardane in his favor. In his oral testimony, Sardane argued that the promissory
notes were merely receipts for the contributions in the said partnership. It has been established
in the trial court that on many occasions, that the petitioner demanded the payment of the total
amount of P5,217.25. The failure of the private respondent to pay the said amount prompted the
petitioner to seek the services of lawyer who made a letter formally demanding the return of the
sum loaned. Because of the failure of the private respondent to heed the demands
extrajudicially made by the petitioner, the latter was constrained to bring an action for collection
of sum of money.
ISSUE:
Whether or not a partnership existed between the parties
RULING:
None.
As manager of the basnig Sarcado naturally some degree of control over the operations and
maintenance thereof had to be exercised by herein petitioner. The fact that he had received
50% of the net profits does not conclusively establish that he was a partner of the private
respondent herein.
Article 1769(4) of the Civil Code is explicit that while the receipt by a person of a share of the
profits of a business is prima facie evidence that he is a partner in the business, no such
inference shall be drawn if such profits were received in payment as wages of an employee.
Furthermore, herein petitioner had no voice in the management of the affairs of the basnig.
and goodwill. An innocent partner thus possesses pecuniary interest in every existing contract
that was incomplete and in the trade name of the co-partnership and assets at the time he was
wrongfully expelled.
An unjustified dissolution by a partner can subject him to action for damages because by the
mutual agency that arises in a partnership, the doctrine of delectus personae allows the
partners to have the power, although not necessarily the right to dissolve the partnership.
Tocaos unilateral exclusion of Anay from the partnership is shown by her memo to the Cubao
office plainly stating that Anay was, as of October 9, 1987, no longer the vice-president for sales
of Geminesse Enterprise. By that memo, petitioner Tocao effected her own withdrawal from the
partnership and considered herself as having ceased to be associated with the partnership in
the carrying on of the business. Nevertheless, the partnership was not terminated thereby; it
continues until the winding up of the business.
CASE NO. 8
ANTONIA TORRES VS. COURT OF APPEALS
(G.R. NO. 134559. December 9, 1999)
FACTS:
Sisters Antonia Torres and Emeteria Baring, herein petitioners, entered into a "joint venture
agreement" with Respondent Manuel Torres for the development of a parcel of land into a
subdivision. By mortgaging the property, respondent obtained from Equitable Bank a loan of P40,000
which, under the Joint Venture Agreement, was to be used for the development of the subdivision.
The project did not push through, and the land was subsequently foreclosed by the bank.
According to petitioners, the project failed because of respondents lack of funds or means and
skills. They add that respondent used the loan not for the development of the subdivision, but in
furtherance of his own company, Universal Umbrella Company.
Respondent claimed that the subdivision project failed, however, because petitioners and their relatives
had separately caused the annotations of adverse claims on the title to the land, which eventually scared
away prospective buyers. Despite his requests, petitioners refused to cause the clearing of the claims,
thereby forcing him to give up on the project. With the loan secured, he was able to effect the survey and
the subdivision of the lots. He secured the Lapu Lapu City Councils approval of the subdivision project
which he advertised in a local newspaper. He also caused the construction of roads, curbs and gutters.
Likewise, he entered into a contract with an engineering firm for the building of sixty low-cost housing
unit
Thereafter, they filed the present civil case which, upon respondent's motion, was later dismissed by the
trial court in an Order dated September 6, 1982. On appeal, however, the appellate court remanded the
case for further proceedings.
ISSUE/S
1.
Whether or not there is a partnership formed
2.
Whether or not the Joint Venture Agreement is void under Article 1773 of the Civil Code since the
parties did not make, sign or attach to the public instrument an inventory of the real property contributed
HELD:
1.
YES. Under the above-quoted Agreement, petitioners would contribute property to the
partnership in the form of land which was to be developed into a subdivision; while respondent
would give, in addition to his industry, the amount needed for general expenses and other costs.
Furthermore, the income from the said project would be divided according to the stipulated
percentage. Clearly, the contract manifested the intention of the parties to form a partnership.
ART. 1767. By the contract of partnership two or more persons bind themselves to contribute
money, property, or industry to a common fund, with the intention of dividing the profits among
themselves.
Respondents actions clearly belie petitioners contention that he made no contribution to the
partnership. Under Article 1767 of the Civil Code, a partner may contribute not only money or
property, but also industry.
ART. 1315. Contracts are perfected by mere consent, and from that moment the parties are
bound not only to the fulfillment of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in keeping with good faith, usage and
law.
2.
The Joint Venture is valid
We clarify. First, Article 1773 was intended primarily to protect third persons. Thus, the eminent
Arturo M. Tolentino states that under the aforecited provision which is a complement of Article
1771, the execution of a public instrument would be useless if there is no inventory of
the property contributed, because without its designation and description, they cannot
be subject to inscription in the Registry of Property, and their contribution cannot
prejudice third persons. This will result in fraud to those who contract with the
partnership in the belief [in] the efficacy of the guaranty in which the immovables may
consist. Thus, the contract is declared void by the law when no such inventory is made. The
case at bar does not involve third parties who may be prejudiced.
Second, petitioners themselves invoke the allegedly void contract as basis for their claim that respondent
should pay them 60 percent of the value of the property. They cannot in one breath deny the contract and
in another recognize it, depending on what momentarily suits their purpose
9.Magdaraog, Jethro C.
Lim vs. Philippine Fishing Gear Industries Inc. [GR 136448, 3 November 1999]
FACTS: Lim Tong Lim requested Peter Yao and Antonio Chuato engage in commercial fishing
with him. The three agreed to purchase two fishing boats but since they do not have the money
they borrowed from one Jesus Lim the brother of Lim Tong Lim. Subsequently, they again
borrowed money for the purchase of fishing nets and other fishing equipments. Yao and Chua
represented themselves as acting in behalf of Ocean Quest Fishing Corporation (OQFC) and
they contracted with Philippine Fishing Gear Industries (PFGI) for the purchase of fishing nets
amounting to more than P500k. However, they were unable to pay PFGI and hence were sued
in their own names as Ocean Quest Fishing Corporation is a non-existent corporation. Chua
admitted his liability while Lim Tong Lim refused such liability alleging that Chua and Yao acted
without his knowledge and consent in representing themselves as a corporation.
HELD:Yes. It is apparent from the factual milieu that the three decided to engage in a fishing
business. Moreover, their Compromise Agreement had revealed their intention to pay the loan
with the proceeds of the sale and to divide equally among them the excess or loss. The boats
and equipment used for their business entails their common fund. The contribution to such fund
need not be cash or fixed assets; it could be an intangible like credit or industry. That the parties
agreed that any loss or profit from the sale and operation of the boats would be divided equally
among them also shows that they had indeed formed a partnership. The principle of corporation
by estoppel cannot apply in the case as Lim Tong Lim also benefited from the use of the nets in
the boat, which was an asset of the partnership. Under the law on estoppel, those acting in
behalf of a corporation and those benefited by it, knowing it to be without valid existence are
held liable as general partners. Hence, the question as to whether such was legally formed for
unknown reasons is immaterial to the case.
In the case at hand, the company is estopped from denying Abad Santos as an industrial
partner because it has been 8 years and the company never corrected their agreement in order
to show their true intentions. The company never bothered to correct those up until Abad Santos
filed a complaint.