COMMISSIONER OF INTERNAL REVENUE v WILLIAM J.

SUTER
GR. No. L 25532 | Febuary 28, 1969

A universal partnership requires either that the object of the association be all the present property of the partners, as contributed by them to the common fund, or
else "all that the partners may acquire by their industry or work during the existence of the partnership

FACTS:
A limited partnership, named "William J. Suter 'Morcoin' Co., Ltd.," was formed on 30 September 1947 by herein respondent William J.
Suter as the general partner, and Julia Spirig and Gustav Carlson, as the limited partners which was duly registered in the Securities and
Exchange Commission. The partners contributed, respectively, P20,000.00, P18,000.00 and P2,000.00 to the partnership. In 1948,
however, general partner Suter and limited partner Spirig got married and, thereafter, on 18 December 1948, limited partner Carlson sold
his share in the partnership to Suter and his wife. The sale was duly recorded with the Securities and Exchange Commission on 20
December 1948. The limited partnership had been filing its income tax returns as a corporation, without objection by the herein petitioner,
Commissioner of Internal Revenue, until in 1959 when the latter, in an assessment, consolidated the income of the firm and the individual
incomes of the partners-spouses Suter and Spirig resulting in a determination of a deficiency income tax against respondent Suter for 1955.
The commissioner contented that the marriage of Suter and Spirig and their subsequent acquisition of the interests of remaining partner
Carlson in the partnership dissolved the limited partnership, Respondent Suter protested the assessment, and requested its cancellation and
withdrawal, as not in accordance with law, but his request was denied. Unable to secure a reconsideration, he appealed to the Court of Tax
Appeals, which court, after trial, rendered a decision, on 11 November 1965, reversing that of the Commissioner of Internal Revenue.

ISSUE:
Whether or not the limited partnership is considered a particular partnership.

RULING:
NO. The petitioner-appellant has evidently failed to observe the fact that William J. Suter "Morcoin" Co., Ltd. was not a
universal partnership, but a particular one. As appears from Articles 1674 and 1675 of the Spanish Civil Code, of 1889 (which was the law in
force when the subject firm was organized in 1947), a universal partnership requires either that the object of the association be all the present
property of the partners, as contributed by them to the common fund, or else "all that the partners may acquire by their industry or
work during the existence of the partnership". William J. Suter "Morcoin" Co., Ltd. was not such a universal partnership, since the
contributions of the partners were fixed sums of money, P20,000.00 by William Suter and P18,000.00 by Julia Spirig and neither one of
them was an industrial partner. It follows that William J. Suter "Morcoin" Co., Ltd. was not a partnership that spouses were forbidden to
enter by Article 1677 of the Civil Code of 1889. The capital contributions of partners William J. Suter and Julia Spirig were separately
owned and contributed by them before their marriage; and after they were joined in wedlock, such contributions remained their respective
separate property under the Spanish Civil Code (Article 1396). It being a basic tenet of the Spanish and Philippine law that the partnership
has a juridical personality of its own, distinct and separate from that of its partners. The limited partnership's separate individuality makes it
impossible to equate its income with that of the component members.
 CHARLES F. WOODHOUSE v FORTUNATO F. HALILI
G.R. No. L-4811 | July 31, 1953

The law recognizes the individual's freedom or liberty to do an act he has promised to do, or not to do it, as he pleases. It falls within what Spanish commentators
call a very personal act (acto personalismo), of which courts may not compel compliance, as it is considered an act of violence to do so.

FACTS:
The plaintiff entered on a written agreement, the most important provisions of which are (1) that they shall organize a partnership for the
bottling and distribution of Mision soft drinks, plaintiff to act as industrial partner or manager, and the defendant as a capitalist, furnishing
the capital necessary therefor; (2) that the defendant was to decide matters of general policy regarding the business, while the plaintiff was
to attend to the operation and development of the bottling plant; (3) that the plaintiff was to secure the Mission Soft Drinks franchise for
and in behalf of the proposed partnership; and (4) that the plaintiff was to receive 30 per cent of the net profits of the business. Prior to
entering into this agreement, plaintiff had informed the Mission Dry Corporation of Los Angeles, California, U.S.A., manufacturers of the
bases and ingridients of the beverages bearing its name, that he had interested a prominent financier (defendant herein) in the business,
who was willing to invest half a million dollars in the bottling and distribution of the said beverages, and requested, in order that he may
close the deal with him, that the right to bottle and distribute be granted him for a limited time under the condition that it will finally be
transferred to the corporation .Pursuant for this request, plaintiff was given "a thirty-days" option on exclusive bottling and distribution
rights for the Philippines". When the agreement to the partnership has been duly signed by both the defendant and the plaintiff they both
went to the United States and on December 10, 1947, a franchise agreement was entered into the Mission Dry Corporation and Fortunato
F. Halili and/or Charles F. Woodhouse, granted defendant the exclusive right, license, and authority to produce, bottle, distribute, and sell
Mision beverages in the Philippines. The plaintiff and the defendant thereafter returned to the Philippines. Plaintiff reported for duty in
January, 1948, but operations were not begun until the first week of February, 1948. In January plaintiff was given as advance, on account
of profits, the sum of P2,000, besides the use of a car; in February, 1948, also P2,000, and in March only P1,000. The car was withdrawn
from plaintiff on March 9, 1948. When the bottling plant was already on operation, plaintiff demanded of defendant that the partnership
papers be executed. At first defendant executed himself, saying there was no hurry. Then he promised to do so after the sales of the
product had been increased to P50,000. As nothing definite was forthcoming, after this condition was attained, and as defendant refused to
give further allowances to plaintiff, the latter caused his attorneys to take up the matter with the defendant with a view to a possible
settlement as none could be arrived at, the plaintiff filed a complaint asking for the execution of the contract of partnership, an accounting
of the profits, and a share thereof of 30 per cent, as well as damages in the amount of P200,000. In his answer defendant alleges by way of
defense (1) that defendant's consent to the agreement, Exhibit A, was secured by the representation of plaintiff that he was the owner, or
was about to become owner of an exclusive bottling franchise, which representation was false, and plaintiff did not secure the franchise,
but was given to defendant himself.

ISSUE:
(1)Whether or not the false representation of the plaintiff annuls the contract.
(2) Whether or not the contract may be executed

RULING:
(1) No. The record abounds with circumstances indicative that the fact that the principal consideration, the main cause that induced
defendant to enter into the partnership agreement with plaintiff, was the ability of plaintiff to get the exclusive franchise to bottle and
distribute for the defendant or for the partnership. The original draft prepared by defendant's counsel was to the effect that plaintiff
obligated himself to secure a franchise for the defendant. Correction appears in this same original draft, but the change is made not as to
the said obligation but as to the grantee. In the corrected draft the word "capitalist"(grantee) is changed to "partnership." The contract in its
final form retains the substituted term "partnership." The defendant was, therefore, led to the belief that plaintiff had the exclusive
franchise, but that the same was to be secured for or transferred to the partnership. The plaintiff no longer had the exclusive franchise, or
the option thereto, at the time the contract was perfected. But while he had already lost his option thereto (when the contract was entered
into), the principal obligation that he assumed or undertook was to secure said franchise for the partnership, as the bottler and distributor
for the Mission Dry Corporation. We declare, therefore, that if he was guilty of a false representation, this was not the causal consideration,
or the principal inducement, that led plaintiff to enter into the partnership agreement. But, on the other hand, this supposed ownership of
an exclusive franchise was actually the consideration or price plaintiff gave in exchange for the share of 30 percent granted him in the net
profits of the partnership business. Defendant agreed to give plaintiff 30 per cent share in the net profits because he was transferring his
exclusive franchise to the partnership.
(2) No. We find no merit in the claim of plaintiff that the partnership was already a fait accompli from the time of the operation of the plant,
as it is evident from the very language of the agreement that the parties intended that the execution of the agreement to form a partnership
was to be carried out at a later date. They expressly agreed that they shall form a partnership. (Par. No. 1, Exhibit A.) As a matter of fact, from
the time that the franchise from the Mission Dry Corporation was obtained in California, plaintiff himself had been demanding that
defendant comply with the agreement. And plaintiff's present action seeks the enforcement of this agreement. Plaintiff's claim, therefore, is
both inconsistent with their intention and incompatible with his own conduct and suit. The defendant may not be compelled against his
will to carry out the agreement nor execute the partnership papers. Under the Spanish Civil Code, the defendant has an obligation to do, not
to give. The law recognizes the individual's freedom or liberty to do an act he has promised to do, or not to do it, as he pleases. It falls
within what Spanish commentators call a very personal act (acto personalismo), of which courts may not compel compliance, as it is
considered an act of violence to do so.
 GREGORIO F. ORTEGA et. al v HON. COURT OF APPEALS
G.R. No. 109248 | July 3, 1995

The right to choose with whom a person wishes to associate himself is the very foundation and essence of that partnership. Its continued existence is, in turn,
dependent on the constancy of that mutual resolve, along with each partner's capability to give it, and the absence of a cause for dissolution provided by the law itself.
Verily, any one of the partners may, at his sole pleasure, dictate a dissolution of the partnership at will.

FACTS:
The law firm of ROSS, LAWRENCE, SELPH and CARRASCOSO was duly registered in the Mercantile Registry on 4 January 1937 and
reconstituted with the Securities and Exchange Commission on 4 August 1948. The SEC records show that there were several subsequent
amendments to the articles of partnership to change the firm and on 7 June 1977 it was changed to BITO, MISA & LOZADA; on 19
December 1980, [Joaquin L. Misa] appellees Jesus B. Bito and Mariano M. Lozada associated themselves together, as senior partners with
respondents-appellees Gregorio F. Ortega, Tomas O. del Castillo, Jr., and Benjamin Bacorro, as junior partners. However, on February 17,
1988, petitioner-appellant wrote a letter stating that he is withdrawing from the partnership to which he entrusted to the accountant the
proper liquidation of his participation in the firm. He thereafter filed with this Commission's Securities Investigation and Clearing
Department (SICD) a petition for dissolution and liquidation of partnership praying among others the (1) the formal dissolution and order
the immediate liquidation of (the partnership of) Bito, Misa & Lozada; (2) to order the respondents to deliver or pay for petitioner's share
in the partnership assets plus the profits, rent or interest attributable to the use of his right in the assets of the dissolved partnership; and
(3) Enjoin respondents from using the firm name of Bito, Misa & Lozada in any of their correspondence, checks and pleadings and to pay
petitioners damages for the use thereof despite the dissolution of the partnership in the amount of at least P50,000.00. The hearing officer
rendered a decision ruling that, Petitioner's withdrawal from the law firm Bito, Misa & Lozada did not dissolve the said law partnership. On
appeal, the SEC en banc reversed the decision of the Hearing Officer and held that the withdrawal of Attorney Joaquin L. Misa had
dissolved the partnership of "Bito, Misa & Lozada." The Commission ruled that, being a partnership at will, the law firm could be dissolved
by any partner at anytime, such as by his withdrawal therefrom, regardless of good faith or bad faith, since no partner can be forced to
continue in the partnership against his will. On appeal to the CA, the CA affirmed the decision of the SEC en banc.

ISSUE:
Whether or not the Court of Appeals has erred in holding that the partnership of Bito, Misa & Lozada (now Bito, Lozada, Ortega &
Castillo) is a partnership at will.

RULING:
No. A partnership that does not fix its term is a partnership at will. That the law firm "Bito, Misa & Lozada," and now "Bito, Lozada,
Ortega and Castillo," is indeed such a partnership need not be unduly belabored. Evidence shows that the partnership agreement
(amended articles of 19 August 1948) does not provide for a specified period or undertaking. he birth and life of a partnership at will is
predicated on the mutual desire and consent of the partners. The right to choose with whom a person wishes to associate himself is the
very foundation and essence of that partnership. Its continued existence is, in turn, dependent on the constancy of that mutual resolve,
along with each partner's capability to give it, and the absence of a cause for dissolution provided by the law itself. Verily, any one of the
partners may, at his sole pleasure, dictate a dissolution of the partnership at will. He must, however, act in good faith, not that the
attendance of bad faith can prevent the dissolution of the partnership but that it can result in a liability for damages. In passing, neither
would the presence of a period for its specific duration or the statement of a particular purpose for its creation prevent the dissolution of
any partnership by an act or will of a partner. Among partners, mutual agency arises and the doctrine of delectus personae allows them to have
the power, although not necessarily theright, to dissolve the partnership. An unjustified dissolution by the partner can subject him to a
possible action for damages.The dissolution of a partnership is the change in the relation of the parties caused by any partner ceasing to be
associated in the carrying on, as might be distinguished from the winding up of, the business. Upon its dissolution, the partnership
continues and its legal personality is retained until the complete winding up of its business culminating in its termination
Outback v Sanitary Works Mfg. Corp.
 LIM TONG LIM v PHILIPPINE FISHING GEAR INDUSTRIES, INC.
G.R. No. 76351 | October 29, 1993

A partnership may be deemed to exist among parties who agree to borrow money to pursue a business and to divide the profits or losses that may arise therefrom,
even if it is shown that they have not contributed any capital of their own to a "common fund." Their contribution may be in the form of credit or industry, not
necessarily cash or fixed assets.

FACTS:
On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter Yao entered into a Contract 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. The total price of the nets amounted to
P532,045. Four hundred pieces of floats worth P68,000 were also sold to the Corporation. The buyers, however, failed to pay for the
fishing nets and the floats; hence, private respondents 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. The trial court ruled that a partnership among Lim, Chua and Yao existed based (1) on the testimonies of the witnesses
presented and (2) on a Compromise Agreement executed by the three in Civil Case which Chua and Yao had brought against Lim in the
RTC of Malabon, Branch 72. The trial court noted that the Compromise Agreement was silent as to the nature of their obligations, but that
joint liability could be presumed from the equal distribution of the profit and loss. Lim appealed to the Court of Appeals (CA) which, as
already stated, affirmed the RTC. Petitioner 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, for the "Contract of Lease " dated February 1, 1990, showed that he had merely leased to the two the main asset of the purported
partnership — the fishing boat F/B Lourdes. The lease was for six months, with a monthly rental of P37,500 plus 25 percent of the gross
catch of the boat

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

RULING:
Yes. From the factual findings of both lower courts, it is clear that Chua, Yao and Lim had decided to engage in a fishing business, which
they started by buying boats worth P3.35 million, financed by a loan secured from Jesus Lim who was petitioner's 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. A partnership may be deemed to exist among parties who agree to borrow
money to pursue a business and to divide the profits or losses that may arise therefrom, even if it is shown that they have not contributed
any capital of their own to a "common fund." Their contribution may be in the form of credit or industry, not necessarily cash or fixed
assets. Being partner, they are all liable for debts incurred by or on behalf of the partnership. The liability for a contract entered into on
behalf of an unincorporated association or ostensible corporation may lie in a person who may not have directly transacted on its behalf,
but reaped benefits from that contract.
 ALFREDO N. AGUILA, JJR v. HONORABLE COURT OF APPEALS AND FELICIDAD S. VDA. DE ABROGAR
G.R. No. 127347 | November 25, 1999

Art. 1768 of the Civil Code, a partnership has a juridical personality separate and distinct from that of each of the partners. The partners cannot be held liable for
the obligations of the partnership unless it is shown that the legal fiction of a different juridical personality is being used for fraudulent, unfair, or illegal purposes

FACTS:
Alfredo N. Aguila Jr., is the manager of A. C. Aguila and Sons, Co., a partnership engaged in lending business. Private respondent,
Felicididad, and her late, husband, sold their house and lot in Marikina to the said lending firm for P200,000. In the Memorandum of
Agreement, the lending frim gave the spouses an option to repurchase the land within a period of 90 days; but the spouses failed to redeem
the property, causing the cancellation and issuance of a new title in the name of A.C Aguila & Sons, Co. Moreover, the lending firm
requested the spouses to vacate the land. RTC rendered a ruling in favor of the petitioner, stating that the private respondents never
questioned receiving the sum of money representing the loan from the lending firm, hence, common sense dictates that Aguila & Sons, Co.
would not part with P200,000 with the spouses without the simultaneous accomplishment and signing of all the required documents. CA
reversed the decision and said that the agreement the parties entered into is one of equitable mortgage; the court pointed, among others,
that the defendant-appellee pays only a measly P833.33 per square meter, considering the size of the property and where it is situated.
Further, the Court of Appeals annulled the Transfer of Certificate of Title and ordered the loan in the amount of P230,000 shall be paid
within 90 days from the finality of the decision. When the issue reached the Supreme Court, manager Alfredo N. Aguila claims that the
case should not be brought against him, but against A.C. Aguila & Sons, Co.

ISSUE:
Whether or not Aguila, Jr is the real party in interest in the case.

RULING:
Under Art. 1768 of the Civil Code, a partnership has a juridical personality separate and distinct from that of each of the partners. The
partners cannot be held liable for the obligations of the partnership unless it is shown that the legal fiction of a different juridical
personality is being used for fraudulent, unfair, or illegal purposes. In this case, private respondent has not shown that A.C. Aguila & Sons,
Co., as a separate juridical entity, is being used for fraudulent, unfair, or illegal purposes. Moreover, the title to the subject property is in the
name of A.C. Aguila & Sons, Co. and the Memorandum of Agreement was executed between private respondent, with the consent of her
late husband, and A. C. Aguila & Sons, Co., represented by petitioner. Hence, it is the partnership, not its officers or agents, which should
be impleaded in any litigation involving property registered in its name. A violation of this rule will result in the dismissal of the
complaint. We cannot understand why both the Regional Trial Court and the Court of Appeals sidestepped this issue when it was squarely
raised before them by petitioner.
 ANG PUE & COMPANY, ET AL., v SECRETARY OF COMMERCE AND INDUSTRY
G.R. No. L-17295 | July 30, 1962

To organize a corporation or a partnership that could claim a juridical personality of its own and transact business as such, is not a matter of absolute right but a
privilege which may be enjoyed only under such terms as the State may deem necessary to impose

FACTS:
On May 1, 1953, Ang Pue and Tan Siong, both Chinese citizens, organized the partnership Ang Pue & Company for a term of five years
from May 1, 1953, extendible by their mutual consent. The purpose of the partnership was "to maintain the business of general
merchandising, buying and selling at wholesale and retail, particularly of lumber, hardware and other construction materials for commerce,
either native or foreign." The corresponding articles of partnership (Exhibit B) were registered in the Office of the Securities & Exchange
Commission on June 16, 1953. On June 19, 1954 Republic Act No. 1180 was enacted to regulate the retail business. It provided, among
other things, that, after its enactment, a partnership not wholly formed by Filipinos could continue to engage in the retail business until the
expiration of its term. On April 15, 1958 — prior to the expiration of the five-year term of the partnership Ang Pue & Company, but after
the enactment of the Republic Act 1180, the partners already mentioned amended the original articles of part ownership (Exhibit B) so as
to extend the term of life of the partnership to another five years. When the amended articles were presented for registration in the Office
of the Securities & Exchange Commission on April 16, 1958, registration was refused upon the ground that the extension was in violation
of the aforesaid Act.

ISSUE:
Whether or not petitioners can extend the terms of their partnership

RULING:
No. To organize a corporation or a partnership that could claim a juridical personality of its own and transact business as such, is not a
matter of absolute right but a privilege which may be enjoyed only under such terms as the State may deem necessary to impose. That the
State, through Congress, and in the manner provided by law, had the right to enact Republic Act No. 1180 and to provide therein that only
Filipinos and concerns wholly owned by Filipinos may engage in the retail business cannot be seriously disputed. That this provision was
clearly intended to apply to partnership already existing at the time of the enactment of the law is clearly showing by its provision giving
them the right to continue engaging in their retail business until the expiration of their term or life. To argue that because the original
articles of partnership provided that the partners could extend the term of the partnership, the provisions of Republic Act 1180 cannot be
adversely affect appellants herein, is to erroneously assume that the aforesaid provision constitute a property right of which the partners
cannot be deprived without due process or without their consent. The agreement contain therein must be deemed subject to the law
existing at the time when the partners came to agree regarding the extension. In the present case, as already stated, when the partners
amended the articles of partnership, the provisions of Republic Act 1180 were already in force, and there can be not the slightest doubt
that the right claimed by appellants to extend the original term of their partnership to another five years would be in violation of the clear
intent and purpose of the law aforesaid.
 HEIRS OF TAN ENG KEE, v. COURT OF APPEALS and BENGUET LUMBER COMPANY, represented by its President
TAN ENG LAY
G.R. No. 126881 | October 3, 2000

To constitute a partnership, it must be established that (1) two or more persons bound themselves to contribute money, property, or industry to a common fund, and
(2) they intend to divide the profits among themselves.

FACTS:
Following the death of Tan Eng Kee on September 13, 1984, Matilde Abubo, the common-law spouse of the decedent, joined by their
children Teresita, Nena, Clarita, Carlos, Corazon and Elpidio, collectively known as herein petitioners HEIRS OF TAN ENG KEE, filed
suit against the decedent's brother TAN ENG LAY. The complaint, in the Regional Trial Court of Baguio City was for accounting,
liquidation and winding up of the alleged partnership formed after World War II between Tan Eng Kee and Tan Eng Lay. complaint
principally alleged that after the second World War, Tan Eng Kee 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 Eng Kee'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 Eng Kee and his heirs of their rightful participation in the profits of the business. Regional Trial Court of Baguio City,
rendered judgment Declaring that Benguet Lumber is a joint venture which is akin to a particular partnership. Private respondent sought
relief before the Court of Appeals which, on March 13, 1996, rendered the assailed decision reversing the judgment of the trial court.

ISSUE:
Whether or not Tan Eng Kee and Tang Eng Lay were partners in Benguet Lumber.

RULING:
No. in order to constitute a partnership, it must be established that (1) two or more persons bound themselves to contribute money,
property, or industry to a common fund, and (2) they intend to divide the profits among themselves.The agreement need not be formally
reduced into writing, since statute allows the oral constitution of a partnership, save in two instances: (1) when immovable property or real
rights are contributed, and (2) when the partnership has a capital of three thousand pesos or more.In both cases, a public instrument is
required.An inventory to be signed by the parties and attached to the public instrument is also indispensable to the validity of the
partnership whenever immovable property is contributed to the partnership. Undoubtedly, the best evidence would have been the contract
of partnership itself, or the articles of partnership but there is none. The alleged partnership, though, was never formally organized. In
addition, petitioners point out that the New Civil Code was not yet in effect when the partnership was allegedly formed sometime in 1945,
although the contrary may well be argued that nothing prevented the parties from complying with the provisions of the New Civil Code
when it took effect on August 30, 1950. But all that is in the past. The net effect, however, is that we are asked to determine whether a
partnership existed based purely on circumstantial evidence. A review of the record persuades us that the Court of Appeals correctly
reversed the decision of the trial court. The evidence presented by petitioners falls short of the quantum of proof required to establish a
partnership Besides, it is indeed odd, if not unnatural, that despite the forty years the partnership was allegedly in existence, Tan Eng Kee
never asked for an accounting. The essence of a partnership is that the partners share in the profits and losses.

In connection therewith, Article 1769 of the Civil Code provides: (4) The receipt by a person of a share of the profits of a business is
a 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. In the light of the aforequoted legal provision, we
conclude that Tan Eng Kee was only an employee, not a partner. Even if the payrolls as evidence were discarded, petitioners would still be
back to square one, so to speak, since they did not present and offer evidence that would show that Tan Eng Kee received amounts of
money allegedly representing his share in the profits of the enterprise. Petitioners failed to show how much their father, Tan Eng Kee,
received, if any, as his share in the profits of Benguet Lumber Company for any particular period. Hence, they failed to prove that Tan Eng
Kee and Tan Eng Lay intended to divide the profits of the business between themselves, which is one of the essential features of a
partnership.
 MARIANO P. PASCUAL and RENATO P. DRAGON v THE COMMISSIONER OF INTERNAL REVENUE and COURT
OF TAX APPEALS
G.R. No. 78133 | October 18, 1988

The common ownership of property does not itself create a partnership between the owners, though they may use it for the purpose of making gains; and they may,
without becoming partners, agree among themselves as to the management, and use of such property and the application of the proceeds therefrom

FACTS:
On June 22, 1965, 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 toMarenir Development
Corporation, while the three parcels of land were sold by petitioners to Erlinda Reyes and Maria Samson on March 19,1970. 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 asserting that they had availed of tax amnesties way back in 1974. In a reply, respondent Commissioner informed
petitioners that in the years 1968 and 1970, petitioners as co-owners in the real estate transactions formed an unregistered partnership or
joint venture taxable as a corporation under Section 20(b) and its income was subject to the taxes prescribed under Section 24, both of the
National Internal Revenue Code that the unregistered partnership was subject to corporate income tax as distinguished from profits
derived from the partnership by them which is subject to individual income tax; and that the availment of tax amnesty under P.D. No. 23,
as amended, by petitioners relieved petitioners of their individual income tax liabilities but did not relieve them from the tax liability of the
unregistered partnership. Petitioners filed a petition for review with the respondent Court of Tax Appeals. In due course, the respondent
court affirmed the decision and action taken by respondent commissioner with costs against petitioners.

ISSUE:
Whether or not act of the petitioners are considered as an unregistered partnership.

RULING:
No. The decision of the respondent court is based on the Evangelista. However, in the present case, there is no evidence that petitioners
entered into an agreement to contribute money, property or industry to a common fund, and that they intended to divide the profits
among themselves. 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. In Evangelista, there was a series of transactions where
petitioners purchased twenty-four (24) lots showing that the purpose was not limited to the conservation or preservation of the common fund or
even the properties acquired by them. The character of habituality peculiar to business transactions engaged in for the purpose of gain was present. In the
instant case, petitioners bought two (2) parcels of land in 1965. They did not sell the same nor make any improvements thereon. In 1966,
they bought another three (3) parcels of land from one seller. It was only 1968 when they sold the two (2) parcels of land after which they
did not make any additional or new purchase. The remaining three (3) parcels were sold by them in 1970. The transactions were isolated.
The character of habituality peculiar to business transactions for the purpose of gain was not present.In Evangelista, the properties were
leased out to tenants for several years. The business was under the management of one of the partners. Such condition existed for over
fifteen (15) years. None of the circumstances are present in the case at bar. The co-ownership started only in 1965 and ended in 1970.

In the concurring opinion of Justice Angelo Bautista: Article 1769 of the new Civil Code lays down the rule for determining when a
transaction should be deemed a partnership or a co-ownership. Said article paragraphs 2 and 3, provides; (2) 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; (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 from which the returns are derived;From the above it appears that the fact that 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. 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. This only means that, aside from the circumstance of profit, the presence of other elements constituting partnership is necessary, such as the clear intent to
form a partnership, the existence of a juridical personality different from that of the individual partners, and the freedom to transfer or assign any interest in the
property by one with the consent of the other. The common ownership of property does not itself create a partnership between the owners, though
they may use it for the purpose of making gains; and they may, without becoming partners, agree among themselves as to the management,
and use of such property and the application of the proceeds therefrom.
 NOBIO SARDANE v THE COURT OF APPEALS and ROMEO J. ACOJEDO
G.R. No. L-47045 | November 22, 1988

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.

FACTS:
Petitioner brought an action in the City Court of Dipolog for collection of a sum of money based on promissory notes executed by the
herein private respondent Nobio Sardane in favor of the herein petitioner. It has been established in the trial court that on many occasions,
the petitioner demanded the payment of the total amount of P5,217.25. 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. After the trial
on the merits, the City Court of Dipolog rendered its decision in favor of the plaintiff and against the defendants. Therein defendant
Sardane appealed to the Court of First Instance of Zamboanga del Norte which reversed the decision of the lower court by dismissing the
complaint. Plaintiff-appellee then sought the review of said decision by petition to the respondent Court which ruled that the evidence is
insufficient to prove that a partnership existed between the private parties hereto.

ISSUE:
Whether or not a partnership existed between the private parties.

RULING:

No. 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. Under similar facts, this
Court in the early case of Fortis vs. Gutierrez Hermanos, in denying the claim of the plaintiff therein that he was a partner in the business of
the defendant, declared: This contention cannot be sustained. It was a mere contract of employment. The plaintiff had no voice nor vote in
the management of the affairs of the company. The fact that the compensation received by him was to be determined with reference to the
profits made by the defendant in their business did not in any sense make him a partner therein.
 AFISCO INSURANCE CORPORATION et. al. v COURT OF APPEALS
G.R. No. 112675 | January 25, 1999

Art. 1767 of the Civil Code recognizes the creation of a contract of partnership when "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." Its requisites are: "(1) mutual contribution to a common stock, and (2) a
joint interest in the profits."

FACTS:
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 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 reinsurance treaties required petitioners to form a pool. Accordingly, a pool composed of
the petitioners was formed on the same day. Thereafter, 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 deficiency corporate taxes. These assessments were protested by the petitioners through its auditors
Sycip, Gorres, Velayo and Co. The Commissioner of Internal Revenue denied the protest and ordered the petitioners, assessed as "Pool of
Machinery Insurers," to pay deficiency income tax. The CA ruled in the main that the pool of machinery insurers was a partnership taxable
as a corporation, and that the latter's 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 for Review before us. Petitioners belie the existence of a
partnership in this case, because (1) they, the reinsurers, did not share the same risk or solidary liability, (2) there was no common
fund; (3) the executive board of the pool did not exercise control and management of its funds, unlike the board of directors of a
corporation; and (4) the pool or clearing house "was not and could not possibly have engaged in the business of reinsurance from which it
could have derived income for itself."

ISSUE:
Whether or not the pool can be considered as an unregistered partnership and taxable as a corporation

RULING:
Yes. We sustain the ruling of the Court of Appeals that the pool is taxable as a corporation, and that the government's right to assess and
collect the taxes had not prescribed. Art. 1767 of the Civil Code recognizes the creation of a contract of partnership when "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." Its requisites are: "(1) mutual contribution to a common stock, and (2) a joint interest in the profits." In other words, a
partnership is formed when persons contract "to devote to a common purpose either money, property, or labor with the intention of
dividing the profits between themselves." Meanwhile, an association implies associates who enter into a "joint enterprise . . . for the
transaction of business." In the case before us, 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: (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. (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 pool's formation. As aptly found by the CTA:. . . The fact that the pool does not retain any profit or income
does not obliterate an antecedent fact, that of the pool being used in the transaction of business for profit. It is apparent, and petitioners
admit, that their association or coaction was indispensable [to] the transaction of the business, . . . If together they have conducted
business, profit must have been the object as, indeed, profit was earned. Though the profit was apportioned among the members, this is
only a matter of consequence, as it implies that profit actually resulted.
 INOCENCIA DELUAO and FELIPE DELUAO v NICANOR CASTEEL and JUAN DEPRA and NICANOR CASTEEL
G.R. No. L-21906 | December 24, 1968

Art. 1830(3) of the Civil Code enumerates, as one of the causes for the dissolution of a partnership, "... any event which makes it unlawful for the business of the
partnership to be carried on or for the members to carry it on in partnership."

FACTS:
In 1940 Nicanor Casteel filed a fishpond application for a big tract of swampy land in the then Sitio of Malalag, Municipality of Padada,
Davao. No action was taken thereon by the authorities concerned. During the Japanese occupation, he filed another fishpond application
for the same area, but because of the conditions then prevailing, it was not acted upon either. On December 12, 1945 he filed a third
fishpond application for the same area but it was again disapproved since it was discovered that the area applied for was still needed for
firewood production. Meanwhile, several applications were submitted by other persons for portions of the area covered by Casteel's
application, including Leoncio Aradillos, Victor Carpio, Alejandro Cacam, and Deluao.Casteel realized the urgent necessity of expanding
his occupation thereof by constructing dikes and cultivating marketable fishes, in order to prevent old and new squatters from usurping the
land. But lacking financial resources at that time, he sought financial aid from his uncle Felipe Deluao to finance the needed improvements
on the fishpond. Hence, a wide productive fishpond was built. The Director of Fisheries nevertheless rejected Casteel's application and
required him to remove all the improvements which he had introduced on the land, and ordered that the land be leased through public
auction. Inocencia Deluao (wife of Felipe Deluao), and Nicanor executed a contract of service. At the same time, Inocencia executed a
special power of attorney in favor of Jesus Donesa, extending to the latter the authority "To represent me in the administration of the
fishpond at Malalag, Municipality of Padada, Province of Davao, Philippines, which has been applied for fishpond permit by Nicanor
Casteel, but rejected by the Bureau of Fisheries, and to supervise, demand, receive, and collect the value of the fish that is being periodically
realized from it...." Then, the Director of Fisheries rejected the application filed by Felipe Deluao and Victorio Carpio while Alejandro
Cacam’s permit was cancelled and revoked. Casteel had been reinstated and given due course for the area and is required to pay the
improvements to Alejandro Cacam. Nicanor Casteel forbade Inocencia Deluao from further administering the fishpond, and ejected the
latter's representative (encargado), Jesus Donesa, from the premises. Alleging violation of the contract of service entered into between
Inocencia Deluao and Nicanor Casteel, Felipe and Inocencia filed an action in the CFI Davao for specific performance and damages
against Nicanor Casteel and Juan Depra (who, they alleged, instigated Casteel to violate his contract). Plaintiffs filed an ex parte motion for
the issuance of a preliminary injunction which was granted. Casteel then filed a motion to dissolve the injunction, alleging among others,
that he was the owner, lawful applicant and occupant of the fishpond in question.

ISSUE:
Whether or not the reinstatement of Casteel dissolved the partnership with Deluao.

RULING:
Yes. A congtract of partnership to exploit a fishpond pending its award to any qualified party or applicant is valid, but a contract of
partnership to divide the fish pond after such award is illegal. Act 4003, known as the Fisheries Act, prohibits the holder of a fishpond
permit (the permittee) from transferring or subletting the fishpond granted to him, without the previous consent or approval of the
Secretary of Agriculture and Natural Resources..

Art. 1830(3) of the Civil Code enumerates, as one of the causes for the dissolution of a partnership, "... any event which makes it unlawful
for the business of the partnership to be carried on or for the members to carry it on in partnership." The approval of the appellant's
fishpond application by the decisions in DANR Cases 353 and 353-B brought to the fore several provisions of law which made the
continuation of the partnership unlawful and therefore caused its ipso facto dissolution. Inasmuch as the erstwhile partners articulated in the
aforecited letters their respective resolutions not to share the fishpond with each other — in direct violation of the undertaking for which
they have established their partnership — each must be deemed to have expressly withdrawn from the partnership, thereby causing its
dissolution pursuant to art. 1830(2) of the Civil Code which provides, inter alia, that dissolution is caused "by the express will of any partner
at any time."
 MAURICIO AGAD v SEVERINO MABATO and MABATO and AGAD COMPANY
G.R. No. L-24193 | June 28, 1968

A partnership may be constituted in any form, except where immovable property or real rights are contributed thereto, in which case a public instrument shall be
necessary. Art. 1773. A contract of partnership is void, whenever immovable property is contributed thereto, if inventory of said property is not made, signed by the
parties; and attached to the public instrument.

FACTS:
Alleging that he and defendant Severino Mabato are partners in a fishpond business, to the capital of which Agad contributed P1,000, with
the right to receive 50% of the profits; that from 1952 up to and including 1956, Mabato who handled the partnership funds, had yearly
rendered accounts of the operations of the partnership; and that, despite repeated demands, Mabato had failed and refused to render
accounts for the years 1957 to 1963, Agad prayed in his complaint against Mabato and Mabato & Agad Company, that judgment be
rendered sentencing Mabato to pay him (Agad) the sum of P14,000, as his share in the profits of the partnership for the period from 1957
to 1963, in addition to P1,000 as attorney's fees, and ordering the dissolution of the partnership, as well as the winding up of its affairs by a
receiver to be appointed therefor. In his answer, Mabato admitted the formal allegations of the complaint and denied the existence of said
partnership, upon the ground that the contract therefor had not been perfected, because Agad had allegedly failed to give his P1,000
contribution to the partnership capital. Mabato prayed, therefore, that the complaint be dismissed. After due hearing, the court issued the
order appealed from, granting the motion to dismiss the complaint for failure to state a cause of action. This conclusion was predicated
upon the theory that the contract of partnership,is null and void, pursuant to Art. 1773 of our Civil Code, because an inventory of the
fishpond referred in said instrument had not been attached thereto. A reconsideration of this order having been denied, Agad brought the
matter to us for review by record on appeal.

ISSUE:
Whether or not the contract of partnership is void pursuant to Article 1773 of the Civil Code

RULING:
No. Articles 1771 and 1773 of said Code provide: Art. 1771. A partnership may be constituted in any form, except where immovable
property or real rights are contributed thereto, in which case a public instrument shall be necessary. Art. 1773. A contract of partnership is
void, whenever immovable property is contributed thereto, if inventory of said property is not made, signed by the parties; and attached to
the public instrument. It should be noted, however, that, as stated in the contract of partnership, the partnership was established
"to operate a fishpond", not to "engage in a fishpond business". Moreover, none of the partners contributed either a fishpond or a real right
to any fishpond. Their contributions were limited to the sum of P1,000 each. Indeed, Paragraph 4 of the said contract provides:
That the capital of the said partnership is Two Thousand (P2,000.00) Pesos Philippine Currency, of which One Thousand
(P1,000.00) pesos has been contributed by Severino Mabato and One Thousand (P1,000.00) Pesos has been contributed by
Mauricio Agad.
The operation of the fishpond mentioned in the contract was the purpose of the partnership. Neither said fishpond nor a real right thereto
was contributed to the partnership or became part of the capital thereof, even if a fishpond or a real right thereto could become part of its
assets.We find that said Article 1773 of the Civil Code is not in point
 COMMISSIONER OF INTERNAL REVENUE v CARLOS LEDESMA, JULIETA LEDESMA, VICENTE GUSTILO. JR.
and AMPARO LEDESMA DE GUSTILO

A partnership is considered a registered partnership for the entire taxable year even if its articles of co-partnership are registered only in the middle of the taxable
year or in the last month of the taxable year.

FACTS:
Herein respondents, Carlos Ledesma, Julieta Ledesma and the spouses Amparo Ledesma and Vicente Gustilo, Jr., purchased from their
parents, Julio Ledesma and Florentina de Ledesma, the sugar plantation known as "Hacienda Fortuna," consisting of 36 parcels of land,
situated in the municipality of San Carlos, province of Negros Occidental. By virtue of the purchase, Carlos Ledesma acquired the one-
third undivided portion of the plantation for the price of P144,043.00; Julieta Ledesma acquired another one-third undivided portion of the
plantation for the same price; and respondents Amparo Ledesma de Gustilo and Vicente Gustilo, Jr. acquired the remaining one-third
undivided portion also for the same price. After their purchase of the plantation, herein respondents took over the sugar cane farming on
the plantation beginning with the crop year 1948-1949. For the crop year 1948- 1949 the San Carlos Milling Co., Ltd. credited the
respondents with their shares in the gross sugar production. The respondents shared equally the expenses of production, on the basis of
their respective one-third undivided portions of the plantation. The San Carlos Milling Co., Ltd. issued to respondents separate quedans for
the sugar produced, based on the quota under the plantation audits respectively issued to them. In their individual income tax returns for
the year 1949 the respondents included as part of their income their respective net profits derived from their individual sugar production
from the "Hacienda Fortuna," as herein-above stated. On July 11, 1949, the respondents organized themselves into a general co-
partnership under the firm name "Hacienda Fortuna", for the "production of sugar cane for conversion into sugar, palay and corn and such
other products as may profitably be produced on said hacienda, which products shall be sold or otherwise disposed of for the purpose of
realizing profit for the partnership." On March 22, 1959 the Commissioner assessed against the partnership "Hacienda Fortuna" corporate
income tax for the calendar year 1949, under Section 24 of the National Internal Revenue Code, in the sum of P23,704.22. The
respondents contested the assessment upon the ground that the "Hacienda Fortuna" was a registered general co-partnership and requested
for the cancellation of the assessment. the Commissioner advised respondents that inasmuch as the articles of general co-partnership of the
"Hacienda Fortuna" were registered on July 14, 1949, the income realized by the partnership prior to the registration cannot be, exempt
from the payment of corporate income tax.

ISSUE:
Whether or not the income tax in question was validly assessed against the "Hacienda Fortuna" which was considered as an unregistered
partnership.

RULING:
No. The "status-at-the-end-of-the-taxable-year" rule in determining the income tax liability of a partnership, such that a partnership is
considered a registered partnership for the entire taxable year even if its articles of co-partnership are registered only at the middle of the
taxable year, or in the last month of the taxable year. Under this rule, a partnership is considered a registered partnership for the entire
taxable year even if its articles of co-partnership are registered only in the middle of the taxable year or in the last month of the taxable year.
We agree with the Court of Tax Appeals that the ruling is a sound one, and it is in consonance with the purpose of the law in requiring the
registration of partnerships. The policy of the law is to encourage persons doing business under a partnership agreement to have the
partnership agreement, or the articles of partnership, registered in the mercantile registry, so that the public may know who the real
partners of the partnership are, the capital stock of the partnership, the interest or contribution of each partner in the capital stock, the
proportionate share of each partner in the profits, and the earnings or salaries of the partner or partners who render service for the
partnership.
 FORTUNATA SOLIS v MAXIMA BARROSO, ET AL
G.R. NO. L-27939 | OCTOBER 30, 1928

A donation propter nuptias which is not valid and did not create any right, since it was not made in a public instrument, and hence, Article 1279 of the Civil Code
which the lower court applied is not applicable thereto. The last named article provides that, should the law require the execution of an instrument or any other
special form in order to make the obligations of a contract effective, the contracting parties may compel each other to comply with such formality from the moment that
consent has been given, and the other requirements for the validity of the contract exist

FACTS:
Juan Lambino and Maria A. Barroso begot three children named Alejo, Eugenia and Marciana Lambino. On June 2, 1919 said spouses
made a donation of propter nuptias of the lands described in the complaint in favor of their son Alejo Lambino and Fortunata Solis in a
private document (Exhibit A) in consideration of the marriage which the latter were about to enter into. One of the conditions of this
donation is that in case of the death of one of the donees, one-half of these lands thus donated would revert to the donors while the
surviving donee would retain the other half. On the 8th of the said month of June 1919, Alejo Lambino and Fortunata Solis were married
and immediately thereafter the donors delivered the possession of the donated lands to them. On August 3, 1919 donee Alejo Lambino
died. In the same year donor Juan Lambino also died. After the latter's death, his wife, Maxima Barroso, recovered possession of the
donated lands. The surviving donee Fortunata Solis filed the action, which is the subject matter of this appeal, against the surviving donor
Maxima Barroso and Eugenia and Marcelina Lambino, heirs of the deceased donor Juan Lambino, with their respective husbands,
demanding of the defendants the execution of the proper deed of donation according to law, transferring one-half of the donated property,
and moreover, to proceed to the partition of the donated property and its fruits.

ISSUE:
Whether or not Article 1279 us applicable

RULING:
No. Article 633 provides that in order that a donation of real property may be valid, it must be made in a public instrument. This is
the article applicable to donation propter nuptias in so far as its formal validity is concerned. The only exceptions to this rule are
onerous and remuneratory donations, in so far as they do not exceed the value of the charge imposed, which are then governed by
the rules on contracts (art. 622), and those which are to take effect upon the donor's death, which are governed by the rules
established for testamentary successions (art. 620). A donation propter nuptias which is not valid and did not create any right, since it was
not made in a public instrument, and hence, Article 1279 of the Civil Code which the lower court applied is not applicable thereto. The last
named article provides that, should the law require the execution of an instrument or any other special form in order to make the
obligations of a contract effective, the contracting parties may compel each other to comply with such formality from the moment that
consent has been given, and the other requirements for the validity of the contract exist. Suffice it to state that this article refers to
contracts and is inapplicable to the donation in question which must be governed by the rules on donations. It may further be noted, at
first sight, that this article presupposes the existence of a valid contract and cannot possibly refer to the form required in order to make it
valid, which it already has, but rather to that required simply to make it effective, and for this reason, it would, at all events, be inapplicable
to the donation in question, wherein the form is required precisely to make it valid