1.

EUFEMIA EVANGELISTA, MANUELA

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

SEC. 84 (b). The term 'corporation'

includes partnerships, no matter how
created
or
organized,
joint-stock
companies, joint accounts , associations or
insurance companies, but does not include
duly registered general copartnerships.

Facts:
Petitioners borrowed from their father the sum of
P59,1400.00 which amount together with their
personal monies was used by them for the
purpose of buying real properties. Within
February 1943 to April 1994, they have bought
parcels of land from different persons, the
management of said properties was charged to
their brother Simeon evidenced by a document.
These properties were then leased or rented to
various tenants.
On September 1954, CIR demanded the payment
of income tax on corporations, real estate
dealers fixed tax, and corporation residence tax
to which the petitioners seek to be absolved from
such payment.
The CTA held that the petitioners are liable for the
income tax, real estate dealer's tax and the
residence tax for the years 1945 to 1949, hence
this appeal.
Issue:
Whether petitioners are subject to the tax on
corporations provided for in the National Internal
Revenue Code, as well as to the residence tax for
corporations and the real estate dealers fixed tax.

Article 1767 of the Civil Code of the Philippines

provides:
By the contract of partnership two or more
persons bind themselves to contribute
money, properly, or industry to a common
fund, with the intention of dividing the
profits among themselves.
The essential elements of a partnership are two,
namely: (a) an agreement to contribute money,
property or industry to a common fund; and (b)
intent to divide the profits among the contracting
parties. Both are present in this case.
The first element is undoubtedly present in the
case at bar, for, admittedly, petitioners have
agreed to, and did, contribute money and
property to a common fund. The second element
is present since their purpose was to engage in
real estate transactions for monetary gain and
then divide the same among themselves and
further evidenced by the fact that:

Held:
Yes.

With respect to the tax on corporations, the issue

hinges on the meaning of the terms "corporation"
and "partnership," as used in section 24 and 84 of
the NIR Code, the pertinent parts of which read:
SEC. 24. Rate of tax on corporations.There shall be levied, assessed, collected,
and paid annually upon the total net
income received in the preceding taxable
year from all sources by every corporation
organized in, or existing under the laws of
the Philippines, no matter how created or
organized
but
not
including
duly
registered general co-partnerships, a tax
upon such income equal to the sum of the
following: . . .

The common fund was created purposely

They invested the same, not merely in one
transaction, but in a series of transactions.
The aforesaid lots were not devoted to
residential purposes, or to other personal
uses, of petitioners herein. The properties
were leased separately to several persons
The properties have been under the
management of one person, namely
Simeon Evangelista, with full power to
lease, to collect rents, to issue receipts, to
bring suits, to sign letters and contracts,
and to indorse and deposit notes and
checks. Thus, the affairs relative to said
properties have been handled as if the
same belonged to a corporation or
business and enterprise operated for profit
The foregoing conditions have existed for
more than ten (10) years, or, to be exact,
over fifteen (15) years, since the first
property was acquired, and over twelve
(12) years, since Simeon Evangelista
became the manager

Petitioners have not testified or introduced

any evidence, either on their purpose in
creating the set up already adverted to, or
on the causes for its continued existence.

Petitioners insist, however, that they are mere coowners, not copartners, for, in consequence of
the acts performed by them, a legal entity, with a
personality independent of that of its members,
did not come into existence, and some of the
characteristics of partnerships are lacking in the
case at bar. This pretense was correctly rejected
by the Court of Tax Appeals
For purposes of the tax on corporations, our
National Internal Revenue Code, includes these
partnerships - with the exception only of duly
registered general copartnerships - within the
purview of the term "corporation." It is, therefore,
clear to our mind that petitioners herein
constitute a partnership, insofar as said Code is
concerned and are subject to the income tax for
corporations.
As regards the residence of tax for corporations,
section 2 of Commonwealth Act No. 465, it is
apparent that the terms "corporation" and
"partnership" are used in both statutes with
substantially the same meaning. Consequently,
petitioners are subject, also, to the residence tax
for corporations.
On the issue of real estate dealers tax, they are
liable as the records show that for a period of
over twelve years petitioners have habitually
engaged in leasing the properties whose yearly
gross rentals exceed P3,000.
2. MARIANO P. PASCUAL and RENATO P.
DRAGON,
petitioners,
vs.
THE
COMMISSIONER OF INTERNAL REVENUE and
COURT OF TAX APPEALS
Facts:
Petitioners bought two (2) parcels of land from
Santiago Bernardino, et al. and on May 28, 1966,
they bought another three (3) parcels of land
from Juan 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 19,1970. Petitioners
realized net profits in both sales. 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
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
asserting that they had availed of tax amnesties
way back in 1974.
In a reply, respondent Commissioner informed
petitioners that in the years 1968 and 1970,
petitioners as co-owners in the real estate
transactions formed an unregistered partnership
or joint venture taxable as a corporation under
Section 20(b) and its income was subject to the
taxes.
Petitioners filed a petition for review with the
respondent Court of Tax Appeals docketed and it
affirmed the decision and action taken by
respondent commissioner with costs against
petitioners. Hence, this appeal.
Issue:
Whether or not petitioners formed a co-ownership
or an unregistered partnership
Held:
Co-ownership.
The basis of the subject decision of the
respondent court is the ruling of this Court in
Evangelista which cites the essential elements of
a partnership, namely: (a) an agreement to
contribute money, property or industry to a
common fund; and (b) intent to divide the profits
among the contracting parties.
There is no evidence that petitioners entered into
an agreement to contribute money, property or
industry to a common fund, and that they
intended to divide the profits among themselves.
Respondent
commissioner
and/
or
his
representative just assumed these conditions to
be present on the basis of the fact that
petitioners purchased certain parcels of land and
became co-owners thereof.
There is no adequate basis to support the
proposition that they thereby formed an

unregistered partnership. The two isolated

transactions whereby they purchased properties
and sold the same a few years thereafter did not
thereby make them partners. The character of
habituality peculiar to business transactions for
the purpose of gain was not present.
They
shared in the gross profits as co- owners and paid
their capital gains taxes on their net profits and
availed of the tax amnesty thereby. Under the
circumstances, they cannot be considered to
have formed an unregistered partnership which is
thereby liable for corporate income tax, as the
respondent commissioner proposes.

attaching the fishing nets on board F/B Lourdes

which was then docked at the Fisheries Port,
Navotas, Metro Manila.

The sharing of returns does not in itself establish

a partnership whether or not the persons sharing
therein have a joint or common right or interest in
the property. There must be a clear intent to form
a partnership, the existence of a juridical
personality different from the individual partners,
and the freedom of each party to transfer or
assign the whole property.

Petitioner controverts the CA finding that a

partnership existed between him, Peter Yao and
Antonio Chua. He asserts that the CA based its
finding on the Compromise Agreement alone.
Furthermore, he disclaims any direct participation
in the purchase of the nets, alleging that the
negotiations were conducted by Chua and Yao
only, and that he has not even met the
representatives of the respondent company.
Petitioner further argues that he was a lessor, not
a partner, of Chua and Yao.

Petition is granted.

3. LIM TONG LIM vs. PHILIPPINE FISHING

GEAR INDUSTRIES, INC.
Facts:
On behalf of "Ocean Quest Fishing Corporation,"
Antonio Chua and Peter Yao entered into a
Contract dated February 7, 1990, for the
purchase of fishing nets of various sizes from the
Philippine Fishing Gear Industries, Inc. (herein
respondent).
They claimed that they were
engaged in a business venture with Petitioner Lim
Tong Lim, who however was not a signatory to the
agreement. Four hundred pieces of floats were
also sold to the Corporation.

Lim Tong Lim, on the other hand, filed an Answer

with Counterclaim and Crossclaim and moved for
the lifting of the Writ of Attachment. The trial
court rendered its Decision, ruling that Philippine
Fishing Gear Industries was entitled to the Writ of
Attachment and that Chua, Yao and Lim, as
general partners, were jointly liable to pay
respondent. The CA affirmed the RTC hence, this
appeal.

Issue:
Whether or not the acts, Lim, Chua and Yao could
be deemed to have entered into a partnership.
Held:
Yes.

The buyers, however, failed to pay for the fishing

nets and the floats; hence, private respondent
filed a collection suit against Chua, Yao and
Petitioner Lim Tong Lim with a prayer for a writ of
preliminary attachment. The suit was brought
against the three in their capacities as general
partners, on the allegation that Ocean Quest
Fishing
Corporation
was
a
nonexistent
corporation as shown by a Certification from the
Securities and Exchange Commission.

It is clear that Chua, Yao and Lim had decided to

form a partnership engaged in a fishing business,
which they started by buying boats worth P3.35
million, financed by a loan secured from Jesus Lim
who was petitioners brother.
In their
Compromise Agreement, they subsequently
revealed their intention to pay the loan with the
proceeds of the sale of the boats, and to divide
equally among them the excess or loss. These
boats, the purchase and the repair of which were
financed with borrowed money, fell under the
term common fund under Article 1767. 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 lower court issued a Writ of Preliminary

Attachment, which the sheriff enforced by

Moreover, it is clear that the partnership

extended not only to the purchase of the boat,

but also to that of the nets and the floats. The

fishing nets and the floats, both essential to
fishing, were obviously acquired in furtherance of
their business.
Petitioner argues that the appellate courts sole
basis for assuming the existence of a partnership
was the Compromise Agreement. He also claims
that the settlement was entered into only to end
the dispute among them, but not to adjudicate
their preexisting rights and obligations.
His
arguments are baseless. The Agreement was but
an embodiment of the relationship extant among
the parties prior to its execution.
The Court stresses that it is unreasonable
indeed, it is absurd -- for petitioner to sell his
property to pay a debt he did not incur, if the
relationship among the three of them was merely
that of lessor-lessee, instead of partners.
The issuance of the Writ to assure the payment of
the price stipulated in the invoices is proper.
Besides, by specific agreement, ownership of the
nets remained with Respondent Philippine Fishing
Gear, until full payment thereof.
Petition denied.
4. DR. CARLOS L. SEVILLA and LINA O.
SEVILLA vs. THE COURT OF APPEALS,
TOURIST WORLD SERVICE, INC., ELISEO
S.CANILAO, and SEGUNDINA NOGUERA,
Facts:
A contract by and between Noguera and Tourist
World Service (TWS), represented by Canilao,
wherein TWS leased the premises belonging to
Noguera as branch office of TWS. When the
branch office was opened, it was run by appellant
Sevilla payable to TWS by any airline for any fare
brought in on the efforts of Mrs. Sevilla, 4% was
to go to Sevilla and 3% was to be withheld by the
TWS.
Later, TWS was informed that Sevilla was
connected with rival firm, and since the branch
office was losing, TWS considered closing down
its office.
On January 3, 1962, the contract with appellee for
the use of the branch office premises was
terminated and while the effectivity thereof was
January 31, 1962, the appellees no longer used it.
Because of this, Canilao, the secretary of TWS,

went over to the branch office, and finding the

premises locked, he padlocked the premises.
When neither appellant Sevilla nor any of his
employees could enter, a complaint was filed by
the appellants against the appellees.
The trial court held for the private respondent on
the premise that the private respondent, Tourist
World Service, Inc., being the true lessee, it was
within its prerogative to terminate the lease and
padlock the premises. It likewise found the
petitioner, Lina Sevilla, to be a mere employee of
said Tourist World Service, Inc. and as such, she
was bound by the acts of her employer. The
respondent Court of Appeal rendered an
affirmance.
Issue:
Whether or not parties had embarked on a joint
venture or otherwise, a partnership
Held:
No, it is an agency.
A joint venture, including a partnership,
presupposes generally a of standing between the
joint co-venturers 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. Furthermore, the parties did not hold
themselves out as partners, and the building
itself was embellished with the electric sign
"Tourist World Service, Inc. in lieu of a distinct
partnership name.
It is the Court's considered opinion, that when the
petitioner, Lina Sevilla, agreed to man the private
respondent, Tourist World Service, Inc.'s Ermita
office, she must have done so pursuant to a
contract of agency. It is the essence of this
contract that the agent renders services "in
representation or on behalf of another. In the
case at bar, Sevilla solicited airline fares, but she
did so for and on behalf of her principal, Tourist
World Service, Inc. As compensation, she
received 4% of the proceeds in the concept of
commissions. And as we said, Sevilla herself
based on her letter of November 28, 1961, preassumed her principal's authority as owner of the
business undertaking. We are convinced,
considering the circumstances and from the
respondent Court's recital of facts, that the ties

had contemplated a principal agent relationship,

rather than a joint management or a partnership.

The project did not push through, and the land

was subsequently foreclosed by the bank.

But unlike simple grants of a power of attorney,

the agency that we hereby declare to be
compatible with the intent of the parties, cannot
be revoked at will. The reason is that it is one
coupled with an interest, the agency having been
created for mutual interest, of the agent and the
principal. It appears that Lina Sevilla is a bona
fide travel agent herself, and as such, she had
acquired an interest in the business entrusted to
her. Moreover, she had assumed a personal
obligation for the operation thereof, holding
herself solidarily liable for the payment of rentals.
She continued the business, using her own name,
after Tourist World had stopped further
operations. Her interest, obviously, is not to the
commissions she earned as a result of her
business transactions, but one that extends to
the very subject matter of the power of
management delegated to her. It is an agency
that, as we said, cannot be revoked at the
pleasure of the principal. Accordingly, the
revocation complained of should entitle the
petitioner, Lina Sevilla, to damages.

Respondent alleged that he used the proceeds

from the mortgage to start building roads, curbs
and gutters. Manuel also contracted an
engineering firm for the building of housing units.
But due to adverse claims in the land,
prospective buyers were scared off and the
subdivision project eventually failed.

For its unwarranted revocation of the contract of

agency the private respondent, Tourist World
Service, Inc., and Eliseo Canilao, are ordered
jointly and severally to indemnify the petitioner
for damages.
5. ANTONIA TORRES, assisted by her
husband, ANGELO TORRES; and EMETERIA
BARING vs. COURT OF APPEALS and
MANUEL TORRES
Facts:
Sisters Antonia Torres and Emeteria Baring,
herein petitioners, entered into a "joint venture
agreement" with Respondent Manuel Torres for
the development of a parcel of land into a
subdivision.
Pursuant to the contract, they
executed a Deed of Sale covering the said parcel
of land in favor of respondent, who then had it
registered in his name. Under the agreement, the
sisters received no cash payment from Manuel
but the promise of profits (60% for the sisters and
40% for Manuel) 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 sisters then filed a civil case against Manuel

for damages equivalent to 60% of the value of
the property, which according to the sisters, is
whats due them as per the contract.
The lower court ruled in favor of Manuel and the
Court of Appeals affirmed the lower court.
Issue:
Whether or not there exists a partnership.
Held:
Yes. The joint venture agreement the sisters
entered into with Manuel is a partnership
agreement whereby they agreed to contribute
property (their land) which was to be developed
as a subdivision. While on the other hand, though
Manuel did not contribute capital, he is an
industrial partner for his contribution for general
expenses and other costs. Under Article 1767 of
the Civil Code, a partner may contribute not only
money or property, but also industry.
Furthermore, the income from the said project
would be divided according to the stipulated
percentage (60-40). Clearly, the contract
manifested the intention of the parties to form a
partnership. Further still, the sisters cannot
invoke their right to the 60% value of the
property and at the same time deny the same
contract which entitles them to it.
Petitioners argue that the Joint Venture
Agreement is void under Article 1773 of the Civil
Code, which provides:
ART. 1773. A contract of partnership is
void, whenever immovable property is
contributed thereto, if an inventory of said
property is not made, signed by the
parties, and attached to the public
instrument.

They contend that since the parties did not make,

sign or attach to the public instrument an
inventory of the real property contributed, the
partnership is void. However, the case at bar
does not involve third parties who may be
prejudiced.
Claiming that respondent was solely responsible
for the failure of the subdivision project,
petitioners maintain that he should be made to
pay damages equivalent to 60 percent of the
value of the property, which was their share in
the profits under the Joint Venture Agreement.
But the failure of the partnership cannot be
blamed on the sisters, nor can it be blamed to
Manuel (the sisters on their appeal did not show
evidence as to Manuels fault in the failure of the
partnership). The sisters must then bear their loss
(which is 60%). Manuel does not bear the loss of
the other 40% because as an industrial partner
he is exempt from losses.

with a proviso that said agreement "cancels and

supersedes the Joint Affidavit dated 11 April 1966
executed by the co-owners."
For sometime, the petitioner submitted financial
statements regarding the operation of the
business to private respondents, but thereafter
petitioner
failed
to
render
subsequent
accounting. A demand was made on petitioner to
render an accounting of the profits.
Private respondents filed a complaint in the Court
of First Instance of Rizal against petitioner
praying:
1. to execute a public document
embodying all the provisions of the
partnership
agreement
entered
into
between plaintiffs and defendant
2. to render a formal accounting of the
business operation covering the period
from May 6, 1966 up to December 21,
1968 and from January 1, 1969 up to the
time the order is issued and that the same
be subject to proper audit;

Article 1797 - The losses and profits shall

be distributed in conformity with the
agreement. If only the share of each
partner in the profits has been agreed
upon, the share of each in the losses shall
be in the same proportion.

3. to pay the plaintiffs their lawful shares

and participation in the net profits of the
business in

Petition is denied.
6.
ELIGIO
ESTANISLAO,
JR
vs.
THE
HONORABLE COURT OF APPEALS, REMEDIOS
ESTANISLAO,
EMILIO
and
LEOCADIO
SANTIAGO
Facts:
Petitioner and private respondents are brothers
and sisters who are co-owners of certain lots at
the corner of Annapolis and Aurora Blvd., Quezon
City which were then being leased to the Shell
Company of the Philippines Limited (SHELL). They
agreed to open and operate a gas station thereat
to be known as Estanislao Shell Service Station
with an initial investment of P 15,000.00 to be
taken from the advance rentals due to them from
SHELL for the occupancy of the said lots owned in
common by them.
On May 26, 1966, the parties herein entered into
an Additional Cash Pledge Agreement with SHELL
wherein it was reiterated that the P 15,000.00
advance rental shall be deposited with SHELL to
cover advances of fuel to petitioner as dealer

4. to pay the plaintiffs the amount of P

10,000.00 as attorney's fees and costs of the suit
The trial court, rendered judgment dismissing the
complaint and counterclaim and ordering private
respondents to pay petitioner P 3,000.00
attorney's fee and costs. Private respondent filed
a motion for reconsideration of the decision. The
newly appointed presiding judge of the same
branch, set aside the aforesaid derision and
rendered another decision in favor of said
respondents. The CA affirmed the lower courts
decision hence, this appeal.
Issue:
Whether or not a partnership exists between
members of the same family arising from their
joint ownership of certain properties.
Held:
Yes.
Petitioner contends that because of the said
stipulation cancelling and superseding that

previous Joint Affidavit, whatever partnership

agreement there was in said previous agreement
had thereby been abrogated. The Court finds no
merit in this argument. Said cancelling provision
was necessary for the Joint Affidavit speaks of P
15,000.00 advance rentals starting May 25, 1966
while the latter agreement also refers to advance
rentals of the same amount starting May 24,
1966. There is, therefore, a duplication of
reference to the P 15,000.00 hence the need to
provide in the subsequent document that it
"cancels and supersedes" the previous one. True
it is that in the latter document, it is silent as to
the statement in the Joint Affidavit that the P
15,000.00 represents the "capital investment" of
the parties in the gasoline station business and it
speaks of petitioner as the sole dealer, but this is
as it should be for in the latter document SHELL
was a signatory and it would be against its policy
if in the agreement it should be stated that the
business
is
a
partnership
with
private
respondents and not a sole proprietorship of
petitioner.

The petitioners are 41 non-life insurance

corporations, organized and existing under the
laws of the Philippines. Upon issuance by them of
Erection, Machinery Breakdown, Boiler Explosion
and Contractors All Risk insurance policies, the
petitioners on August 1, 1965 entered into a
Quota Share Reinsurance Treaty and a Surplus
Reinsurance
Treaty
with
the
Munchener
Ruckversicherungs-Gesselschaft (hereafter called
Munich), a non-resident foreign insurance
corporation. The local insurance firms formed
themselves into a pool in order to facilitate the
handling of business contracted with a
nonresident foreign reinsurance company.

Evidence in the record shows that there was in

fact such partnership agreement between the
parties. This is attested by the testimonies of
private respondent Remedies Estanislao and Atty.
Angeles.
Petitioner
submitted
to
private
respondents periodic accounting of the business.
Petitioner gave a written authority to private
respondent Remedies Estanislao, his sister, to
examine and audit the books of their "common
business' aming negosyo). Respondent Remedios
assisted in the running of the business. There is
no doubt that the parties hereto formed a
partnership when they bound themselves to
contribute money to a common fund with the
intention of
dividing
the
profits
among
themselves. The sole dealership by the petitioner
and the issuance of all government permits and
licenses in the name of petitioner was in
compliance with the afore-stated policy of SHELL
and the understanding of the parties of having
only one dealer of the SHELL products.

The Commissioner of Internal Revenue denied the

protest and ordered the petitioners, assessed as
Pool of Machinery Insurers, to pay deficiency
income tax, interest, and withholding tax.

Costs against petitioner.

7. Afisco Insurance Corporation vs Court of

Appeals
Facts:

The pool of machinery insurers submitted a

financial statement and filed an Information
Return of Organization Exempt from Income Tax
for the year ending in 1975, on the basis of which
it was assessed by the Commissioner of Internal
Revenue. These assessments were protested by
the petitioners through its auditors Sycip, Gorres,
Velayo and Co.

The CA ruled in the main that the pool of

machinery insurers was a partnership taxable as
a corporation, and that the latters collection of
premiums on behalf of its members, the ceding
companies, was taxable income. It added that
prescription did not bar the Bureau of Internal
Revenue (BIR) from collecting the taxes due,
because the taxpayer cannot be located at the
address given in the information return filed.
Hence, this petition.
Issue:
Whether or not the clearing house or
insurance pool is a partnership whose dividends
are subject to tax
Held:
Yes. The pool is taxable as a corporation, and that
the governments right to assess and collect the
taxes had not prescribed.
Sec 24 of the NIRC provides:
SEC. 24. Rate of tax on corporations. -(a) Tax on domestic corporations. -- A

tax is hereby imposed upon the taxable

net income received during each taxable
year from all sources by every corporation
organized in, or existing under the laws of
the Philippines, no matter how created or
organized,
but not including
duly
registered
general
co-partnership
(compaias
colectivas),
general
professional
partnerships,
private
educational institutions, and building and
loan associations

(1)
The pool has a common fund,
consisting of money and other valuables
that are deposited in the name and credit
of the pool. This common fund pays for
the administration and operation expenses
of the pool.
(2)
The pool functions through an
executive board, which resembles the
board of directors of a corporation,
composed of one representative for each
of the ceding companies.

SEC. 22. -- Definition. -- When used in this Title:

(B) The term corporation shall include
partnerships, no matter how created or
organized, joint-stock companies, joint
accounts (cuentas en participacion),
associations, or insurance companies, but
does not include general professional
partnerships [or] a joint venture or
consortium formed for the purpose of
undertaking construction projects or
engaging in petroleum, coal, geothermal
and other energy operations pursuant to
an operating or consortium agreement
under a service contract without the
Government.
General
professional
partnerships are partnerships formed by
persons for the sole purpose of exercising
their common profession, no part of the
income of which is derived from engaging
in any trade or business.
In Evangelista v. Collector of Internal Revenue,
supra. The Supreme Court said:
The term partnership includes a
syndicate, group, pool, joint venture or
other
unincorporated
organization,
through or by means of which any
business, financial operation, or venture is
carried on
The ceding companies entered into a Pool
Agreement or an association[ that would handle
all the insurance businesses covered under their
quota-share reinsurance treaty and surplus
reinsurance treaty with Munich. The following
unmistakably indicates a partnership or an
association covered by Section 24 of the NIRC:

(3) True, the pool itself is not a reinsurer

and does not issue any insurance policy;
however, its work is indispensable,
beneficial and economically useful to the
business of the ceding companies and
Munich, because without it they would not
have received their premiums. The ceding
companies share in the business ceded to
the pool and in the expenses according
to a Rules of Distribution annexed to the
Pool Agreement. Profit motive or business
is, therefore, the primordial reason for the
pools formation.
Petition is denied.

8. Ramani et al vs Court of Appeals

Facts:
Ishwar, Choithram and Navalrai, all surnamed
Jethmal Ramnani, are brothers of the full blood.
Ishwar and his spouse Sonya had their main
business based in New York. Realizing the
difficulty of managing their investments in the
Philippines they executed a general power of
attorney on January 24, 1966 appointing Navalrai
and Choithram as attorneys-in-fact, empowering
them to manage and conduct their business
concern in the Philippines.
On February 1, 1966 and on May 16, 1966,
Choithram, in his capacity as aforesaid attorneyin-fact of Ishwar, entered into two agreements for
the purchase of two parcels of land located in
Barrio Ugong, Pasig, Rizal, from Ortigas &
Company, Ltd. Partnership. 4 buildings were
constructed on the land and were leased out. 2 of
these buildings were later burned.

Sometime in 1970 Ishwar asked Choithram to

account for the income and expenses relative to
these properties during the period 1967 to 1970.
Choithram failed and refused to render such
accounting. As a consequence, on February 4,
1971, Ishwar revoked the general power of
attorney

two buildings. Although the buildings were

burned later, Choithram was able to build two
other buildings on the property. He rented them
out and collected the rentals. Through the
industry and genius of Choithram, Ishwar's
property was developed and improved into what
it is nowa valuable asset worth millions of pesos

Nevertheless, Choithram as such attorney-in-fact

of Ishwar, transferred all rights and interests of
Ishwar and Sonya in favor of his daughter-in-law,
Nirmla Ramnani.

We have a situation where two brothers engaged

in a business venture. One furnished the capital,
the other contributed his industry and talent.
Justice and equity dictate that the two share
equally the fruit of their joint investment and
efforts. Perhaps this Solomonic solution may pave
the way towards their reconciliation. Both would
stand to gain. No one would end up the loser.
After all, blood is thicker than water.

Spouses Ishwar filed a complaint against

Choithram and/or spouses Nirmla and Moti
(Choithram et al. for brevity) and Ortigas for
reconveyance of said properties or payment of its
value and damages.
A decision was rendered by the trial court on
December 3, 1985 dismissing the complaint and
counterclaim. On appeal, the CA ruled in favor of
the spouses Ishwar. Acting on a motion for
reconsideration filed by Choithram, et al. and
Ortigas, the appellate court promulgated an
amended decision granting the motion for
reconsideration of Ortigas by affirming the
dismissal of the case by the lower court as
against Ortigas but denying the motion for
reconsideration of Choithram, et al.
Choithram, et al. thereafter filed a petition for
review. Similarly, spouses Ishwar filed a petition
for review of said amended decision of the
appellate court exculpating Ortigas of liability.
Issue:
Whether or not there was a partnership between
the brothers Ishwar and Choithram
Held:
Yes. The scenario is clear. Spouses Ishwar
supplied the capital of $150,000.00 for the
business. They entrusted the money to
Choithram to invest in a profitable business
venture in the Philippines. For this purpose they
appointed Choithram as their attorney-in-fact.
Choithram in turn decided to invest in the real
estate business. He bought the two (2) parcels of
land in question from Ortigas as attorney-in-fact
of Ishwar- Instead of paying for the lots in cash,
he paid in installments and used the balance of
the capital entrusted to him, plus a loan, to build

Since Choithram, et al. acted with evident bad

faith and malice, they should pay moral and
exemplary damages as well as attorney's fees to
spouses Ishwar.
Petition is denied. Judgment is modified.
Petitioners Choithram, Nirmla and Moti Ramnani
and respondent Ortigas & Co., Ltd. Partnership
shall also be jointly and severally liable to pay to
said respondents spouses pay in cash the value
of said one-half (1/2) share in the said land and
improvements, total rental income of said
properties and improvements, damages, etc.
9. ARSENIO T. MENDIOLA, petitioner ,vs.
COURT OF APPEALS, NATIONAL LABOR
RELATIONS COMMISSION, PACIFIC FOREST
RESOURCES, PHILS., INC. and/or CELLMARK
AB,
Facts:
Private respondent Pacific Forest Resources,
Phils., Inc. (Pacfor) is a corporation organized and
existing under the laws of California, USA. It is a
subsidiary of Cellulose Marketing International, a
corporation duly organized under the laws of
Sweden, with principal office in Gothenburg,
Sweden.

Private respondent Pacfor entered into a "Side

Agreement on Representative Office known as
Pacific Forest Resources (Phils.), Inc." with
petitioner Arsenio T. Mendiola (ATM), effective
May 1, 1995, "assuming that Pacfor-Phils. is
already approved by the Securities and Exchange

Commission [SEC] on the said date." Petitioner's

base salary and the overhead expenditures of the
company shall be borne by the representative
office and funded by Pacfor/ATM, since Pacfor
Phils. is equally owned on a 50-50 equity by ATM
and Pacfor-usa.
In its application, private respondent Pacfor
proposed to establish its representative office in
the Philippines with the purpose of monitoring
and coordinating the market activities for paper
products. It also designated petitioner as its
resident agent in the Philippines, authorized to
accept summons and processes in all legal
proceedings, and all notices affecting the
corporation.
The Side Agreement was amended through a
"Revised Operating and Profit Sharing Agreement
for the Representative Office Known as Pacific
Forest Resources (Philippines),"9 where the salary
of petitioner was increased to $78,000 per
annum. Both agreements show that the
operational expenses will be borne by the
representative office and funded by all parties "as
equal
partners,"
while
the
profits
and
commissions will be shared among them.

On the basis of the "Side Agreement," petitioner

insisted that he and Pacfor equally own Pacfor
Phils. Thus, it follows that he and Pacfor likewise
own, on a 50/50 basis, Pacfor Phils.' office
furniture and equipment and the service car. He
also
reiterated
his
demand
for
unpaid
commissions, and proposed to offset these with
the remaining Christmas giveaway fund in his
possession.23 Furthermore, he did not renew the
lease contract with Pulp and Paper, Inc., the
lessor of the office premises of Pacfor Phils.,
wherein he was the signatory to the lease
agreement.
Private respondent Pacfor placed petitioner on
preventive suspension and ordered him to show
cause why no disciplinary action should be taken
against him.
Private respondent charged petitioner anew with
serious misconduct for the latter's alleged act of
fraud and misrepresentation in authorizing the
release of an additional peso salary for himself,
besides the dollar salary agreed upon by the
parties.
Private
respondent
also
accused
petitioner of disloyalty and representation of
conflicting interests

In July 2000, petitioner wrote Kevin Daley, Vice

President for Asia of Pacfor, seeking confirmation
of his 50% equity of Pacfor Phils.10 Private
respondent Pacfor, through William Gleason, its
President, replied that petitioner is not a partowner of Pacfor Phils. because the latter is merely
Pacfor-USA's representative office and not an
entity separate and distinct from Pacfor-USA.

Labor Arbiter Felipe Pati ruled in favor of

petitioner, finding there was constructive
dismissal. By directing petitioner to turn over all
office records and materials, regardless of
whether he may have retained copies, private
respondent Pacfor virtually deprived petitioner of
his job by the gradual diminution of his authority
as resident manager.

Petitioner claimed that he was all along made to

believe that he was in a joint venture with them.

Private respondent Pacfor appealed to the NLRC

which ruled in its favor. On December 20, 2001,
the NLRC set aside the July 30, 2001 decision of
the labor arbiter, for lack of jurisdiction and lack
of merit. It held there was no employer-employee
relationship between the parties.
Petitioner's
Motion for Reconsideration of the decision of the
Court of Appeals was denied. Hence, this appeal.

On November 27, 2000, private respondent

Pacfor, through counsel, ordered petitioner to
turn over to it all papers, documents, files,
records, and other materials in his or ATM
Marketing Corporation's possession that belong to
Pacfor or Pacfor Phils. On December 18, 2000,
private respondent Pacfor also required petitioner
to remit more than three hundred thousand-peso
Christmas giveaway fund for clients of Pacfor
Phils. Lastly, private respondent Pacfor withdrew
all its offers of settlement and ordered petitioner
to transfer title and turn over to it possession of
the service car.

Issue:
Whether or not there was an employer-employee
relationship or partnership
Held:
Petitioner is an employee of private respondent
Pacfor and no partnership or co-ownership exists
between the parties.

In a partnership, the members become co-owners

of what is contributed to the firm capital and of all
property that may be acquired thereby and
through the efforts of the members. The property
or stock of the partnership forms a community of
goods, a common fund, in which each party has a
proprietary interest. In fact, the New Civil Code
regards a partner as a co-owner of specific
partnership property. Each partner possesses a
joint interest in the whole of partnership property.
If the relation does not have this feature, it is not
one of partnership.
This essential element, the community of
interest, or co-ownership of, or joint interest in
partnership property is absent in the relations
between petitioner and private respondent Pacfor.
Petitioner is not a part-owner of Pacfor Phils.
William Gleason, private respondent Pacfor's
President established this fact when he said that
Pacfor Phils. is simply a "theoretical company" for
the purpose of dividing the income 50-50. He
stressed that petitioner knew of this arrangement
from the very start, having been the one to
propose to private respondent Pacfor the setting
up of a representative office, and "not a branch
office" in the Philippines to save on taxes. Thus,
the parties in this case, merely shared profits.
This alone does not make a partnership.
Besides, a corporation cannot become a member
of a partnership in the absence of express
authorization by statute or charter.41 This
doctrine is based on the following considerations:
(1) that the mutual agency between the partners,
whereby the corporation would be bound by the
acts of persons who are not its duly appointed
and authorized agents and officers, would be
inconsistent with the policy of the law that the
corporation shall manage its own affairs
separately and exclusively; and, (2) that such an
arrangement would improperly allow corporate
property to become subject to risks not
contemplated by the stockholders when they
originally invested in the corporation.42 No such
authorization has been proved in the case at bar.
Petition is granted.

10. J. M. TUASON & CO., INC., represented

by
it
Managing
PARTNER,
GREGORIA
ARANETA, INC., vs. QUIRINO BOLAOS,

Facts:
This is an action originally brought in the Court of
First Instance of Rizal, Quezon City Branch, to
recover possession of registered land situated in
barrio Tatalon, Quezon City where the plaintiff
was represented by a corporation.
Plaintiff's complaint was amended three times
with respect to the extent and description of the
land sought to be recovered. The second
amendment became necessary and was allowed
following the testimony of plaintiff's surveyors
that a portion of the area was embraced in
another certificate of title, which was plaintiff's
Transfer Certificate of Title No. 37677. And still
later, in the course of trial, after defendant's
surveyor and witness, Quirino Feria, had testified
that the area occupied and claimed by defendant
was about 13 hectares, as shown in his Exhibit 1,
plaintiff again, with the leave of court, amended
its complaint to make its allegations conform to
the evidence.
Defendant, in his answer, sets up prescription
and title in himself thru "open, continuous,
exclusive and public and notorious possession.
The answer further alleges that registration of the
land in dispute was obtained by plaintiff or its
predecessors in interest thru "fraud or error.
After trial, the lower court rendered judgment for
plaintiff declaring defendant to be without any
right to the land in question and ordering him to
restore possession thereof to plaintiff and to pay
the latter a monthly rent until he vacates the
land, and also to pay the costs. Defendant
appealed.
Issue:
Whether or not the case should be dismissed on
the ground that the case was not brought by the
real property in interest
Held:
No.
There is nothing to the contention that the
present action is not brought by the real party in
interest, that is, by J. M. Tuason and Co., Inc. What
the Rules of Court require is that an action be
brought in the name of, but not necessarily by,
the real party in interest.

In fact the practice is for an attorney-at-law to

bring the action, that is to file the complaint, in
the name of the plaintiff. That practice appears to
have been followed in this case, since the
complaint is signed by the law firm of Araneta
and Araneta, "counsel for plaintiff" and
commences with the statement "comes now
plaintiff, through its undersigned counsel."
It is true that the complaint also states that the
plaintiff is "represented herein by its Managing
Partner
Gregorio
Araneta,
Inc.",
another
corporation, but there is nothing against one
corporation being represented by another person,
natural or juridical, in a suit in court.

The contention that Gregorio Araneta, Inc. cannot

act as managing partner for plaintiff on the
theory that it is illegal for two corporations to
enter into a partnership is without merit, for the
true rule is that "though a corporation has no
power to enter into a partnership, it may
nevertheless enter into a joint venture with
another where the nature of that venture is in line
with the business authorized by its charter."
There is nothing in the record to indicate that the
venture in which plaintiff is represented by
Gregorio Araneta, Inc. as "its managing partner"
is not in line with the corporate business of either
of them.
The judgment appealed from is affirmed, with
costs against the plaintiff.