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KILOSBAYAN V. GUINGONA
FACTS: Pursuant to Section 1 of the charter of the PCSO
(R.A. No. 1169, as amended by B.P. Blg. 42) which grants it
the authority to hold and conduct charity sweepstakes races,
lotteries and other similar activities, the PCSO decided to
establish an on-line lottery system for the purpose of
increasing its revenue base and diversifying its sources of
funds. Sometime before March 1993, after learning that the
PCSO was interested in operating an on-line lottery system,
the Berjaya Group Berhad, a multinational company and one
of the ten largest public companies in Malaysia, became
interested to offer its services and resources to PCSO. As an
initial step, Berjaya Group Berhad (through its individual
nominees) organized with some Filipino investors in March
1993 a Philippine corporation known as the Philippine
Gaming Management Corporation (PGMC), which was
intended to be the medium through which the technical and
management services required for the project would be offered
and delivered to PCSO.
Before August 1993, the PCSO formally issued a Request for
Proposal (RFP) for the Lease Contract of an on-line lottery
system for the PCSO. On 15 August 1993, PGMC submitted
its bid to the PCSO. On 21 October 1993, the Office of the
President announced that it had given the respondent PGMC
the go-signal to operate the countrys on-line lottery system
and that the corresponding implementing contract would be
submitted not later than 8 November 1993 for final clearance
and approval by the Chief Executive.
On 4 November 1993, KILOSBAYAN sent an open letter to
President Fidel V. Ramos strongly opposing the setting up of
the on-line lottery system on the basis of serious moral and
ethical considerations. Considering the denial by the Office of
the President of its protest and the statement of Assistant
Executive Secretary Renato Corona that only a court
injunction can stop Malacaang, and the imminent
implementation of the Contract of Lease in February 1994,
KILOSBAYAN, with its co-petitioners, filed on 28 January
1994 this petition.
Petitioner claims that it is a non-stock domestic corporation
composed of civic-spirited citizens, pastors, priests, nuns, and
lay leaders. The rest of the petitioners, except Senators Freddie
Webb and Wigberto Taada and Representative Joker P.
Arroyo, are suing in their capacities as members of the Board
of Trustees of KILOSBAYAN and as taxpayers and concerned
citizens. Senators Webb and Taada and Representative
Arroyo are suing in their capacities as members of Congress
and as taxpayers and concerned citizens of the Philippines.
The public respondents, meanwhile allege that the petitioners
have no standing to maintain the instant suit, citing the Courts
resolution in Valmonte vs. Philippine Charity Sweepstakes
Office.
ISSUES: 1. Whether or not the petitioners have locus standi
2. Whether or the Contract of Lease in the light of Section 1 of
R.A. No. 1169, as amended by B.P. Blg. 42, which prohibits
the PCSO from holding and conducting lotteries in
collaboration, association or joint venture with any person,
association, company or entity, whether domestic or foreign.
is legal and valid.
HELD: We find the instant petition to be of transcendental
importance to the public. The ramifications of such issues
immeasurably affect the social, economic, and moral well-
being of the people even in the remotest barangays of the
country and the counter-productive and retrogressive effects of
the envisioned on-line lottery system are as staggering as the
billions in pesos it is expected to raise. The legal standing then
of the petitioners deserves recognition and, in the exercise of
its sound discretion, this Court hereby brushes aside the
procedural barrier which the respondents tried to take
advantage of.
The language of Section 1 of R.A. No. 1169 is indisputably
clear. The PCSO cannot share its franchise with another by
way of collaboration, association or joint venture. Neither can
it assign, transfer, or lease such franchise. Whether the
contract in question is one of lease or whether the PGMC is
merely an independent contractor should not be decided on the
basis of the title or designation of the contract but by the intent
of the parties, which may be gathered from the provisions of
the contract itself. Animus hominis est anima scripti. The
intention of the party is the soul of the instrument.
Undoubtedly, from the very inception, the PCSO and the
PGMC mutually understood that any arrangement between
them would necessarily leave to the PGMC the technical,
operations, and management aspects of the on-line lottery
system while the PSCO would, primarily, provide the
franchise. The so-called Contract of Lease is not, therefore,
what it purports to be. Woven therein are provisions which
negate its title and betray the true intention of the parties to be
in or to have a joint venture for a period of eight years in the
operation and maintenance of the on-line lottery system.
We thus declare that the challenged Contract of Lease violates
the exception provided for in paragraph B, Section 1 of R.A.
No. 1169, as amended by B.P. Blg. 42, and is, therefore,
invalid for being contrary to law. This conclusion renders
unnecessary further discussion on the other issues raised by
the petitioners.

KILOSBAYAN v. GUINGONA
G.R. No. 113375 May 5, 1994
Ponente: DAVIDE, JR., J.

FACTS:
The PCSO decided to establish an on- line lottery
system for the purpose of increasing its revenue base and
diversifying its sources of funds pursuant to Section 1 of the
charter of the PCSO (R.A. No. 1169, as amended by B.P. Blg.
42) which grants it the authority to hold and conduct "charity
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sweepstakes races, lotteries and other similar activities."
PCSO is then seeking for a suitable contractor which shall
build, at its own expense, all the facilities needed to operate
and maintain a nationwide on-line lottery system. PCSO shall
lease the facilities for a fixed percentage of quarterly gross
receipts. Then subsequently, PGMC submitted its bid. On 21
October 1993, the Office of the President announced that it
had given the respondent PGMC the go-signal to operate the
country's on-line lottery system. PGMC and PSCO then
entered into a contract of lease with certain agreements
amongst themselves.
This prompted the petitioner KILOSBAYAN, who
are suing in their capacities as members of the Board of
Trustees of KILOSBAYAN and as taxpayers and concerned
citizens, opposed to the online lotto on account of its
immorality and illegality. They also said that the lease
agreement was not valid on the ground that PCSO is
prohibited from holding and conducting charity sweepstakes
races, lotteries, and other similar activities "in collaboration,
association or joint venture with any person, association,
company or entity, foreign or domestic. This ground was
contested by PCSO on the ground that what they entered into
with PGMC is just a lease contract and not a joint venture.
ISSUE: Whether or not the lease agreement was valid
HELD:
No. Because if we look deeply into the lease
agreement between PCSO and PGMC we can see that what
they entered into is not simply a lease agreement but in fact a
joint venture agreement. Moreover, PCSO is prohibited from
holding and conducting charity sweepstakes races, lotteries
and other similar activities in collaboration, association or
joint venture with any person, association, company or entity,
foreign or domestic, according to its charter.
Furthermore, the following provision in their
agreement constitutes that PCSO and PGMC in fact entered
into a joint venture, instead of a simple lease contract, to wit:
(a) Rent is defined in the lease contract as the amount to be
paid to the PGMC as compensation for the fulfillment of its
obligations under the contract, including, but not limited to the
lease of the Facilities. However, this rent is not actually a
fixed amount. Although it is stated to be 4.9% of gross
receipts from ticket sales, payable net of taxes required by law
to be withheld, it may be drastically reduced or, in extreme
cases, nothing may be due or demandable at all because the
PGMC binds itself to "bear all risks if the revenue from the
ticket sales, on an annualized basis, are insufficient to pay the
entire prize money." This risk-bearing provision is unusual in
a lessor-lessee relationship, but inherent in a joint venture.
(b) In the event of pre-termination of the contract by the
PCSO, or its suspension of operation of the on-line lottery
system in breach of the contract and through no fault of the
PGMC, the PCSO binds itself "to promptly, and in any event
not later than sixty (60) days, reimburse the Lessor the amount
of its total investment cost associated with the On-Line
Lottery System, including but not limited to the cost of the
Facilities, and further compensate the LESSOR for loss of
expected net profit after tax, computed over the unexpired
term of the lease." If the contract were indeed one of lease, the
payment of the expected profits or rentals for the unexpired
portion of the term of the contract would be enough.
(c) The PGMC cannot "directly or indirectly undertake any
activity or business in competition with or adverse to the On-
Line Lottery System of PCSO unless it obtains the latter's
prior written consent." If the PGMC is engaged in the business
of leasing equipment and technology for an on-line lottery
system, we fail to see any acceptable reason why it should
allow a restriction on the pursuit of such business.
(d) The PGMC shall provide the PCSO the audited Annual
Report sent to its stockholders, and within two years from the
effectivity of the contract, cause itself to be listed in the local
stock exchange and offer at least 25% of its equity to the
public. If the PGMC is merely a lessor, this imposition is
unreasonable and whimsical, and could only be tied up to the
fact that the PGMC will actually operate and manage the
system; hence, increasing public participation in the
corporation would enhance public interest.
(e) The PGMC shall put up an Escrow Deposit of
P300,000,000.00 pursuant to the requirements of the RFP,
which it may, at its option, maintain as its initial performance
bond required to ensure its faithful compliance with the terms
of the contract.
(f) The PCSO shall designate the necessary personnel to
monitor and audit the daily performance of the on-line lottery
system; and promulgate procedural and coordinating
rules governing all activities relating to the on-line lottery
system. The first further confirms that it is the PGMC which
will operate the system and the PCSO may, for the protection
of its interest, monitor and audit the daily performance of the
system. The second admits the
coordinating and cooperative powers and functions of the
parties.
(g) The PCSO may validly terminate the contract if the PGMC
becomes insolvent or bankrupt or is unable to pay its debts, or
if it stops or suspends or threatens to stop or suspend payment
of all or a material part of its debts.

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BIGLANGAWA and ESPIRITU v.PASTOR B.
CONSTANTINO
G.R. No. L-9965 August 29, 1960
Ponente: BARRERA, J.

FACTS:

On June 25, 1953, respondent Pastor B. Constantino filed with
the Court of First Instance of Rizal an amended complaint
(docketed as Civil Case No. 2138) against petitioners Lucina
Biglangawa and Lucia Espiritu, alleging that Petitioners are
owners of a parcel of land and that Plaintiffs appointed
Respondent their exclusive agent to develop the land into
subdivision lots and to sell them to prospective homeowners;
and as compensation for his services, defendants promised to
pay him a commission of 20% on the gross sales and a fee of
10% on the collections made by him payable from "the first
collections received from the purchasers in respect to each lot
sold." Contracts were executed pursuant thereto. Respondent
also alleged that Petitioners subsequently terminated the
contracts depriving him of his full commission. He later on
agreed to a settlement but the said settlement was not
faithfully complied with by the petitioners prompting
defendant to file the abovementioned complaint.
On April 6, 1955, the Register of Deeds of Bulacan requested
petitioners to surrender their owner's copy of Transfer
Certificate of Title No. 5459 for annotation of a notice of lis
pendens, but petitioners refused to do so. However, on May
17, 1955, when petitioners registered the absolute deed of sale
in favor of Carmelita L. Santos covering some of the lots of
the subdivision, said official without their knowledge and
consent, made the annotation of the lis pendens on petitioners'
aforementioned title, as well as on the title issued to Carmelita
L. Santos. Petitioners filed with the Court of First Instance of
Bulacan, a petition praying for the cancellation of said notice
of lis pendens. The CFI ruled in favor of petitioners. Hence,
this petition.
ISSUE: Whether respondent's complaint was one for the
settlement and adjustment of partnership interest or a partition
action or proceeding.
HELD: No. It is true that in paragraph 5 of the amended
complaint (supra) appellant claims to have made advances for
the expenses incurred in the development and administration
of the property. But again he never considered these as
contributions to the business as to make him a partner;
otherwise, he would have so stated it in his complaint. In fact,
after a liquidation of these advances and the commissions due
to appellant at the time of the termination of the agency, the
whole balance was considered as appellees' indebtedness
which appellant consented to be settled in monthly
installments (see paragraphs 6, 8, and 9 of the amended
complaint).While it is true again that the prayer in a complaint
does not determine the nature of the action, it not being a
material part of the cause of action, still it logically indicates,
as it does in this case, the purpose of the actor. The four
paragraphs of the prayer seeks the recovery of fixed amounts
of underpayments and commissions and fees; not liquidation
or accounting or partition as now insisted upon by appellant.
Appellants's amended complaint, not being "an action
affecting the title or the right of possession of real property",

nor one "to recover possession of real estate, or to quiet title
thereto, or to remove clouds upon the title thereof, or for
partition or other proceeding of any kind in court affecting the
title to real estate or the use or occupation thereof or the
buildings thereon . . .", the same cannot be the basis for
annotating a notice of lis pendens on the title of the
petitioners-appellees.
NAVARRO VS CA 222 SCRA 675
Private respondent Olivia V. Yanson and Petitioner Lourdes
Navarro were engaged in the business of Air Freight Service
Agency.
Pursuant to the Agreement which they entered, they agreed to
operate the said Agency;
It is the Private Respondent Olivia Yanson who supplies the
necessary equipment and money used in the operation of the
agency. Her brother in the person of Atty. Rodolfo Villaflores
was the manager thereof while petitioner Lourdes Navarro was
the Cashier;
In compliance to her obligation as stated in their agreement,
private respondent brought into their business certain chattels
or movables or personal properties. However, those personal
properties remain to be registered in her name

Among the provisions stipulated in their agreement is the
equal sharing of whatever proceeds realized from their
business;
However, sometime on July 23, 1976, private respondent
Olivia V. Yanson, in order for her to recovery the above
mentioned personal properties which she brought into their
business, filed a complaint against petitioner Lourdes Navarro
for "Delivery of Personal Properties With Damages and with
an application for a writ of replevin
Private respondents' application for a writ of replevin was later
approved/granted by the trial court.
For her defense, petitioner Navarro argue that she and private
respondent Yanson actually formed a verbal partnership which
was engaged in the business of Air Freight Service Agency.
She contended that the decision sustaining the writ of replevin
is void since the properties belonging to the partnership do not
actually belong to any of the parties until the final disposition
and winding up of the partnership


ISSUE

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1. Whether or not there was a partnership that existed between
the parties.
2. Whether the properties that were commonly used in the
operation of Allied Air Freight belonged to the alleged
partnership business.

RULING

Article 1767 of the New Civil Code defines the contract of
partnership:
Art. 1767. By the contract of partnership two or more persons
bind themselves to contribute money, property, or industry to
a common fund, with the intention of dividing the proceeds
among themselves.
A cursory examination of the evidences presented no proof
that a partnership, whether oral or written had been
constituted.
In fact, those movables brought by the plaintiff for the use in
the operation of the business remain registered in her name.

While there may have been co-ownership or co-possession of
some items and/or any sharing of proceeds by way of
advances received by both plaintiff and the defendant, these
are not indicative and supportive of the existence of any
partnership between them.
Art. 1769 par. 2 provides:
Co-ownership or co-possession does not of itself establish a
partnership, whether such co-owners or co-possessors do or do
not share any profits made by the use of the property
Besides, the alleged profit was a difference found after
valuating the assets and not arising from the real operation of
the business. In accounting procedures, strictly, this could not
be profit but a net worth

OBILLOS VS CIR 139 SCRA 675
- Jose Obillos, Sr. completed payment of two parcels of land.
The next day he transferred his rights to his four children, the
petitioners, to enable them to build their residences. The
Torrens titles issued to them would show that they were co-
owners of the two lots.
- The four brothers and sisters acquired lots
with the original purpose to divide it among
themselves for residential purposes; when later they
found it not feasible to build their residences thereon
because of the high cost of construction; they decided
to resell the properties to dissolve the co-ownership.
- Petitioners sold the lots they inherited
from their father and derived a total profit of P33,584
for each of them. They treated the profit as capital
gain and paid an income tax thereof. The CIR
required petitioners to pay corporate income tax on
their shares, 20% tax fraud surcharge and 42%
accumulated interest. Deficiency tax was assessed on
the theory that they had formed an unregistered
partnership or joint venture.


ISSUE
Whether or not the sharing of gross returns constitute
partnership
HELD
- NO.
- Article 1769(3) of the Civil Code provides
that "the sharing of gross returns does not of itself
establish a partnership, whether or not the persons
sharing them have a joint or common right or interest
in any property from which the returns are derived".
- The original intention was merely to
collectively purchase the lots and eventually to
partition them among themselves to build their
residences; and that in fact they had no choice but to
resell the same to dissolve the co-ownership.
Obillos found that the division of the profits
was merely incidental to the dissolution of the co-
ownership which was in the nature of things a
temporary state; and that there could not have been
any partnership, but merely a co-ownership, since
there was lack of intent to form a partnership or joint
venture.
- All co-ownerships are not deemed
unregistered pratnership.
- Co-Ownership who own properties which
produce income should not automatically be
considered partners of an unregistered partnership, or
a corporation, within the purview of the income tax
law. To hold otherwise, would be to subject the
income of all co-ownerships of inherited properties to
the tax on corporations, inasmuch as if a property
does not produce an income at all, it is not subject to
any kind of income tax, whether the income tax on
individuals or the income tax on corporation.

REYES VS CIR 24 SCRA 198
Petitioners (father and son to each other) purchased a lot and
building (Gibs Building). The payment thereof was shared
equally by petitioners.
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At the time of the purchase, the building was leased to various
tenants. Petitioners divided equally the income from rentals of
the building as well as the expenses in the operation and
maintenance thereof.
The administration of the building was entrusted to an
administrator who collected the rents.
Believing that petitioners were partners, respondent
Commissioner of Internal Revenue assessed them the sum of
P46,647.00 as income tax due for the years 1951 to 1954 and a
sum of P25,973.75, covering the years 1955 and 1956.
The basis of the assessment of said income tax due is the
provision of the National Internal Revenue Code which
imposes an income tax on corporations and corporations
includes partnerships.

ISSUE:
Whether or not petitioners are subject to the tax on
corporations provided for in section 24 of Commonwealth Act
No. 466, otherwise known as the National Internal Revenue
Code
RULING:
Petitioners, in acquiring the Gibbs Building, established a
partnership subject to income tax as a corporation under the
National Internal Revenue Code.
There are two essential elements of a partnership:
(a) an agreement to contribute money, property or industry to
a common fund; and
(b) intent to divide the profits among the contracting parties.

IN the case at bar, all elements are undoubtedly present.
Admittedly, petitioners have agreed to and did, contribute
money and property to a common fund. Their purpose was to
engage in real estate transactions for monetary gain and then
divide the same among themselves.
REASONS:
1. the common fund being created purposely not something
already found in existence;
2. the lots thus acquired not being devoted to residential
purposes or to other personal uses of petitioners;
3. such properties having been under the management of one
person with full power to lease, to collect rents, to issue
receipts, to bring suits, to sign letters and contracts and to
endorse notes and checks;
4. petitioners dividing "equally the income of the building
after deducting the expenses of operation and maintenance
thereof;
"For purposes of the tax on corporations, our National Internal
Revenue Code, include these partnerships with the
exception only of duly registered general co-partnerships
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."

PARTNERSHIP: Fortis vs Hermanos

Facts:

Plaintiff Fortis is an employee of defendant Gutierrez
Hermanos. The former brought an action to recover a balance
due him as salary for the year 1902. He also alleged that he
was entitled, as salary, to 5 per cent of the net profits of the
business of the defendants for said year. The complaint also
contained a cause of action for the sum of 600 pesos, money
expended by plaintiff for the defendants during the year 1903.

The lower court ruled in favor of the plaintiff. The total
judgment rendered amounted to P13, 025.40, which was
reduced to Philippine currency. The defendants moved for
new trial but were denied.

They brought the case in the SC thru bill of exceptions; the
appellants (defendants) alleged that that the contract made the
plaintiff a copartner of the defendants in the business, which
they were carrying on.

Issue:

WON the plaintiff is a co-partner of the defendants in the
business.

Held:

NO. It was a mere contract of employment. The plaintiff had
neither 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
defendants in their business did not in any sense make by a
partner therein. The articles of partnership between the
defendants provided that the profits should be divided among
the partners named in a certain proportion. The contract made
between the plaintiff and the then manager of the defendant
partnership did not in any way vary or modify this provision
of the articles of partnership.

Note:

The rule is that, receipt of a person in a share of profits of
business is a prima facie evidence that he is a partner.
Exception is if the profit is for the payment of wages of an
employee.
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Bill of exceptions- A written statement from a trial judge to an
appellate court listing a partys objections or exceptions made
during the trial and the grounds on which they were based.

Gatchalian vs. Collector of Internal Revenue [G.R. No. L-
45425, April 29, 1939]
Post under case digests, Taxation at Friday, March 02, 2012
Posted by Schizophrenic Mind
Facts: Plaintiffs purchased, in the ordinary course of business,
from one of the duly authorized agents of the National Charity
Sweepstakes Office one ticket for the sum of two pesos (P2),
said ticket was registered in the name of Jose Gatchalian and
Company. The ticket won one of the third-prizes in the
amount of P50,000.

Jose Gatchalian was required to file the corresponding income
tax return covering the prize won. Defendant-Collector made
an assessment against Jose Gatchalian and Co. requesting the
payment of the sum of P1,499.94 to the deputy provincial
treasurer of Pulilan, Bulacan. Plaintiffs, however through
counsel made a request for exemption. It was denied.

Plaintiffs failed to pay the amount due, hence a warrant of
distraint and levy was issued. Plaintiffs paid under protest a
part of the tax and penalties to avoid the effects of the warrant.
A request that the balance be paid by plaintiffs in installments
was made. This was granted on the condition that a bond be
filed.

Plaintiffs failed in their installment payments. Hence a request
for execution of the warrant of distraint and levy was made.
Plaintiffs paid under protest to avoid the execution.

A claim for refund was made by the plaintiffs, which was
dismissed, hence the appeal.

Issue: Whether the plaintiffs formed a partnership hence liable
for income tax.

Held: Yes. According to the stipulation facts the plaintiffs
organized a partnership of a civil nature because each of them
put up money to buy a sweepstakes ticket for the sole purpose
of dividing equally the prize which they may win, as they did
in fact in the amount of P50,000. The partnership was not only
formed, but upon the organization thereof and the winning of
the prize, Jose Gatchalian personally appeared in the office of
the Philippines Charity Sweepstakes, in his capacity as co-
partner, as such collection the prize, the office issued the
check for P50,000 in favor of Jose Gatchalian and company,
and the said partner, in the same capacity, collected the said
check. All these circumstances repel the idea that the plaintiffs
organized and formed a community of property only.

DALION V. CA

[G.R. No. 78903. February 28, 1990.]
FACTS: Petitioner seeks to annul the decision of the CA
upholding the validity of the sale of a parcel of land by
petitioner Segundo Dalion (hereafter, Dalion) in favor of
private respondent Ruperto Sabesaje, Jr.
Sabesaje sued to recover ownership of a parcel of land, based
on a private document of absolute sale, dated July 1, 1965
(Exhibit A), allegedly executed by Dalion, who, however
denied the fact of sale, contending that the document sued
upon is fictitious, his signature thereon, a forgery, and that
subject land is conjugal property he and his wife acquired
the said property in 1960 from Saturnina Sabesaje as
evidenced by the Escritura de Venta Absoluta The
spouses denied claims of Sabesaje that after executing a deed
of sale over the parcel of land, they had pleaded with Sabesaje,
their relative, to be allowed to administer the land because
Dalion did not have any means of livelihood. They
admitted, however, administering since 1958, five (5) parcels
of land in Sogod, Southern Leyte, which belonged to
Leonardo Sabesaje, grandfather of Sabesaje, who died in
1956 They never received their agreed 10% and 15%
commission on the sales of copra and abaca, respectively.
Sabesajes suit, they countered, was intended merely to harass,
preempt and forestall Dalions threat to sue for these unpaid
commissions. Dalions argument: Assuming authenticity of
his signature and the genuineness of the document, Dalion
nonetheless still impugns the validity of the sale on the ground
that the same is embodied in a private document, and did not
thus convey title or right to the lot in question since acts and
contracts which have for their object the creation,
transmission, modification or extinction of real rights over
immovable property must appear in a public instrument (Art.
1358, par 1, NCC)
ISSUE: a)WON the contract of sale of a parcel of land is valid
and b) WON there is necessity of a public document for
transfer of ownership thereto.
HELD: This argument is misplaced.
OBLIGATIONS AND CONTRACT; PUBLIC DOCUMENT
IS NECESSARY ONLY FOR CONVENIENCE AND NOT
FOR VALIDITY OR ENFORCEABILITY. The provision
of Art. 1358 on the necessity of a public document is only for
convenience, not for validity or enforceability. It is not a
requirement for the validity of a contract of sale of a parcel of
land that this be embodied in a public instrument.
PERFECTION OF CONTRACT; SALE IS PERFECTED BY
MERE CONSENT; VENDEE MAY COMPEL TRANSFER
OF OWNERSHIP OF THE OBJECT OF SALE. A contract
of sale is a consensual contract, which means that the sale is
perfected by mere consent. No particular form is required for
its validity. Upon perfection of the contract, the parties may
reciprocally demand performance (Art. 1475, NCC), i.e., the
vendee may compel transfer of ownership of the object of the
sale, and the vendor may require the vendee to pay the thing
sold (Art. 1458, NCC). The trial court thus rightly and legally
ordered Dalion to deliver to Sabesaje the parcel of land and to
execute corresponding formal deed of conveyance in a public
document. Under Art. 1498, NCC, when the sale is made
through a public instrument, the execution thereof is
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equivalent to the delivery of the thing. Delivery may either be
actual (real) or constructive. Thus delivery of a parcel of land
may be done by placing the vendee in control and possession
of the land (real) or by embodying the sale in a public
instrument (constructive).
ACTION FOR RECOVERY OF OWNERSHIP IS PROPER
AS IT SEEKS CONSUMMATION OF CONTRACT OF
SALE. As regards petitioners contention that the proper
action should have been one for specific performance, We
believe that the suit for recovery of ownership is proper. As
earlier stated, Art. 1475 of the Civil Code gives the parties to a
perfected contract of sale the right to reciprocally demand
performance, and to observe a particular form, if warranted,
(Art. 1357). The trial court, aptly observed that Sabesajes
complaint sufficiently alleged a cause of action to compel
Dalion to execute a formal deed of sale, and the suit for
recovery of ownership, which is premised on the binding
effect and validity inter partes of the contract of sale, merely
seeks consummation of said contract. Moreover, people who
witnessed the execution of subject deed positively testified on
the authenticity thereof. They categorically stated that it had
been executed and signed by the signatories thereto. On the
other hand, defendant has affirmatively alleged forgery, but he
never presented any witness or evidence to prove his claim of
forgery.

TORRES v. CA
G.R. No. 134559 December 9, 1999
Ponente: PANGANIBAN, J.

FACTS:
Petitioners Antonia Torres and Emeteria Baring are
sisters. They 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. 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. All three of them also agreed to share the
proceeds from the sale of the subdivided lots. However, the
project did not push through despite the effort of Manuel
Torres, he even gave additional capital just to develop the
parcel of land. Subsequently the bank foreclosed the mortgage.
ISSUE:
1. What relationship was formed between the Sisters
Torres and Manuel Torres?
2. What will be the extent of their liabilities?
HELD:
1. They formed a partnership. In their agreement,
petitioners would contribute property to the
partnership in the form of land which was to be
developed into a subdivision; while respondent would
give, in addition to his industry, the amount needed
for general expenses and other costs. Furthermore,
the income from the said project would be divided
according to the stipulated percentage. Clearly, the
contract manifested the intention of the parties to
form a partnership.

2. Petitioners and respondent had formed a partnership
for the development of the subdivision. Thus, they
must bear the loss suffered by the partnership in the
same proportion as their share in the profits stipulated
in the contract.

EUFEMIA EVANGELISTA, et. al. v. THE COLLECTOR
OF INTERNAL REVENUE
G.R. No. L-9996 October 15, 1957
Ponente: CONCEPCION, J.

FACTS:
Petitioners borrowed money from their father in the sum of
P59,1400.00 which they used to buy properties. Some of the
properties they purchased include 21 parcels of land with
improvements from Mrs. Josefina Oppus, a parcel of land
from Insular Investments, Inc., and a parcel of land from Mrs.
Velentina Afable. They appointed their brother, Simeon
Evangelista, to manage the properties. They then rented and
leased said properties and earned income from it.
On September 24, 1954 respondent Collector of Internal
Revenue demanded the payment of income tax on
corporations, real estate dealer's fixed tax and corporation
residence tax for the years 1945-1949.
The petitioners sought recourse from the Court of Tax appeals
reverse the decision of the CIR as contained in his demand
letter. The CTA upheld the CIR. Hence, this petition.
ISSUE: Whether petitioners are considered to be a partnership
and, hence, subject to the tax on corporations.
HELD:
Yes. Pursuant to the article, the essential elements of a
partnership are two, namely: (a) an agreement to contribute
money, property or industry to a common fund; and (b) intent
to divide the profits among the contracting parties. The first
element is undoubtedly present in the case at bar, for,
admittedly, petitioners have agreed to, and did, contribute
money and property to a common fund. Hence, the issue
narrows down to their intent in acting as they did. Upon
consideration of all the facts and circumstances surrounding
the case, we are fully satisfied that their purpose was to engage
in real estate transactions for monetary gain and then divide
the same among themselves.
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.

Catalan Vs. Gatchalian

105 Phil 1270

G.R. No. L-11648 April 22, 1959


8

Facts:

Catalan and Gatchalian are partners. They mortgaged
two lots to Dr. Marave together with the improvements
thereon to secure a credit from the latter. The partnership
failed to pay the obligation. The properties were sold to Dr.
Marave at a public auction. Catalan redeemed the property
and he contends that title should be cancelled and a new one
must be issued in his name.



Issue:

Did Catalans redemption of the properties make him
the absolute owner of the lands?



Ruling:

No. Under Article 1807 of the NCC every partner becomes a
trustee for his copartner with regard to any benefits or profits
derived from his act as a partner. Consequently, when Catalan
redeemed the properties in question, he became a trustee and
held the same in trust for his copartner Gatchalian, subject to
his right to demand from the latter his contribution to the
amount of redemption.

UNITED STATES VS EUSEBIO CLARIN
POSTED | 0 COMMENTS


US V. CLARIN
7 Phil 504 Business Organization Partnership, Agency,
Trust Co-Partners Liability Misappropriation
Sometime before 1910, Pedro Larin formed a partnership with
Pedro Tarug, Eusebio Clarin and Carlos de Guzman. Larin,
being the capitalist, agreed to contribute P172.00 to the
partnership and the three others shall use said fund to trade
mangoes. The three industrial partners bought mangoes and
sell them and they earned P203.00 but they failed to give
Larins share of the profits. Larin charged them with the crime
of estafa, but the provincial fiscal filed an information only
against Eusebio Clarin in which he accused him of
appropriating to himself not only the P172 but also the share
of the profits that belonged to Larin, amounting to P15.50.
Clarin was eventually convicted.
ISSUE: Whether or not the conviction is correct.
HELD: No. The P172.00 having been received by the
partnership, the business commenced and profits accrued, the
action that lies with the partner who furnished the capital for
the recovery of his money is not a criminal action for estafa,
but a civil one arising from the partnership contract for a
liquidation of the partnership and a levy on its assets if there
should be any.
The then Penal Code provides that those who are guilty of
estafa are those who, to the prejudice of another, shall
appropriate or misapply any money, goods, or any kind of
personal property which they may have received as a deposit
on commission for administration or in any other producing
the obligation to deliver or return the same, (as, for example,
in commodatum, precarium, and other unilateral contracts
which require the return of the same thing received) does not
include money received for a partnership; otherwise the result
would be that, if the partnership, instead of obtaining profits,
suffered losses, as it could not be held liable civilly for the
share of the capitalist partner who reserved the ownership of
the money brought in by him, it would have to answer to the
charge of estafa, for which it would be sufficient to argue that
the partnership had received the money under obligation to
return it.

LITTON vs. HILL & CERON
Facts:
The plaintiff sold and delivered to Carlos Ceron, who
is one of the managing partners of Hill & Ceron, a
certain number of mining claims.
Both partners have the management of the business
of the partnership, and that either may contract and
sign for the partnership with the consent of the other.
Ceron did not obtain Hills consent for the purchase
of the mining claims.
Litton was unable to collect the balance from Hill &
Ceron or from its surety.
The trial court held Ceron personally liable for the
unpaid amount. The partnership Hill & Ceron, Robert
Hill (the partner of Ceron), and the surety were
absolved.
CA affirmed, saying that Ceron did not intend to
represent and did not act for the partnership Hill &
Ceron.
Issue: who should prove that the consent of the other partner is
needed when entering into a contract with third persons?
Issue: is the partnership liable?
Held: Yes.
Under article 226 of the Code of Commerce, the dissolution of
a commercial association shall not cause any prejudice to third
parties until it has been recorded in the commercial registry.
(See also Cardell vs. Maeru, 14 Phil., 368.) The Supreme
Court of Spain held that the dissolution of a partnership by the
will of the partners which is not registered in the commercial
registry, does not prejudice third persons.
Third persons, like the plaintiff, are not bound in entering into
a contract with any of the two partners, to ascertain whether or
not this partner with whom the transaction is made has the
consent of the other partner. The public need not make
inquiries as to the agreements had between the partners. Its
knowledge is enough that it is contracting with the partnership
which is represented by one of the managing partners.
There is a general presumption that each individual partner is
an authorized agent for the firm and that he has authority to
bind the firm in carrying on the partnership transactions.
(Mills vs. Riggle, 112 Pac., 617.)
9
The presumption is sufficient to permit third persons to hold
the firm liable on transactions entered into by one of members
of the firm acting apparently in its behalf and within the scope
of his authority. (Le Roy vs.Johnson, 7 U. S. [Law. ed.], 391.)
The kind of business in which the partnership Hill & Ceron is
to engage being thus determined, none of the two partners,
under article 130 of the Code of Commerce, may legally
engage in the business of brokerage in general as stock
brokers, security brokers and other activities pertaining to the
business of the partnership. Ceron, therefore, could not have
entered into the contract of sale of shares with Litton as a
private individual, but as a managing partner of Hill & Ceron.

Even if Ceron had not obtained the consent of Hill for the said
transaction, it is not enough ground to annul the contract
entered by Ceron and Litton.
Under the Article 130 of the Code of Commerce, when, not
only without the consent but against the will of any of the
managing partners, a contract is entered into with a third
person who acts in good faith, and the transaction is of the
kind of business in which the partnership is engaged, as in the
present case, said contract shall not be annulled, without
prejudice to the liability of the guilty partner.

ANTONIO PARDO v. THE HERCULES LUMBER and
IGNACIO FERRER
1924 / Street / Rights and obligations of the partners among
themselves > Books, information, accounts

FACTS
Antonio Pardo [Hercules Lumber Company stockholder] seeks
to obtain a writ of mandamus to compel the company and its
acting secretary Ignacio Ferrer to permit him [Pardo] and his
duly authorized agent and representative to examine the
companys records and business transactions.

The main ground upon which the defense of the company
appears to be rested has reference to the time, or times,
within which the right of inspection may be exercised.
Article 10 of the By-laws of the company
o "Every shareholder may examine the books
of the company and other documents
pertaining to the same upon the days which
the board of directors shall annually fix."
Board Resolution passed at the directors' meeting
held on 16 February 1924
o The board also resolved to call the usual
general (meeting of shareholders) for March
30 of the present year, with notice to the
shareholders that the books of the company
are at their disposition from the 15th to 25th
of the same month for examination, in
appropriate hours.

ISSUES & HOLDING
WON the board resolution constitutes a lawful
restriction on the right conferred by statute. NO
WON Pardo lost his right to inspection and
examination for the year, since he has not availed
himself of the permission [to inspect the companys
books and transactions within the 10 days defined in
the board resolution. NO
WON the shareholders motive in exercising this
right is material. NO

RATIO
The basis of right of inspection is Sec. 51 of Act No. 1459
[Corporation Law].
1
In Philpotts v. Philippine Manufacturing
Co., and Berry, it was held that the right of examination there
conceded to the stockholder may be exercised either by a
stockholder in person or by any duly authorized agent or
representative.

It may be admitted that the officials in charge of a
corporation may deny inspection when sought at unusual
hours or under other improper conditions; but neither the
executive officers nor the board of directors have the
power to deprive a stockholder of the right altogether. A
by-law unduly restricting the right of inspection is
undoubtedly invalid. Under a statute similar to our own it has
been held that the statutory right of inspection is not affected
by the adoption by the board of directors of a resolution
providing for the closing of transfer books thirty days before
an election.

Our statute declares that the right of inspection can be
exercised "at reasonable hours." This means at reasonable
hours on business days throughout the year, and not
merely during some arbitrary period of a few days chosen
by the directors.

Additional issue: The motives that prompted Pardo to
make inspection
It is alleged that the information which Pardo seeks is desired
for ulterior purposes in connection with a competitive firm
with which Pardo is alleged to be connected. It is also insisted
that one of Pardos purposes is to obtain evidence preparatory
to the institution of an action, which he means to bring against
the company re: a contract of employment which once existed
between the corporation and himself. These suggestions are
entirely apart from the issuethe motive of the
shareholder exercising the right is immaterial.


1
Section 51. All business corporations shall keep and carefully
preserve a record of all business transactions, and a minute of all
meetings of directors, members, or stockholders, in which shall be set
forth in detail the time and place of holding the meeting, how
authorized, the notice given, whether the meeting was regular or
special, if special its object, those present and absent, and every act
done or ordered done at the meeting. On the demand of any director,
member, or stockholder, the time when any director, member, or
stockholder entered or left the meeting must be noted on the minutes,
and on a similar demand, the yeas and nays must be taken on any
motion or proposition and a record thereof carefully made. The protest
of any director, member, or stockholder on any action or proposed
action must be recorded in full on his demand.
The record of all business transactions of the corporation
and the minutes of any meeting shall be open to the inspection of any
director, member, or stockholder of the corporation at reasonable
hours.
10
Writ of mandamus will issue
1.) DAN FUE LEUNG, petitioner, vs. HON.
INTERMEDIATE APPELLATE COURT and LEUNG
YIU, respondents.
G.R. No. 70926 January 31, 1989
GUTIERREZ, JR., J.:
FACTS:
The petitioner asks for the reversal of the decision of the then
Intermediate Appellate Court in AC-G.R. No. CV-00881
which affirmed the decision of the then Court of First Instance
of Manila, Branch II in Civil Case No. 116725 declaring
private respondent Leung Yiu a partner of petitioner Dan Fue
Leung in the business of Sun Wah Panciteria and ordering the
petitioner to pay to the private respondent his share in the
annual profits of the said restaurant.
This case originated from a complaint filed by respondent
Leung Yiu with the then Court of First Instance of Manila,
Branch II to recover the sum equivalent to twenty-two percent
(22%) of the annual profits derived from the operation of Sun
Wah Panciteria since October, 1955 from petitioner Dan Fue
Leung.
The Sun Wah Panciteria, a restaurant, located at Florentino
Torres Street, Sta. Cruz, Manila, was established sometime in
October, 1955. It was registered as a single proprietorship and
its licenses and permits were issued to and in favor of
petitioner Dan Fue Leung as the sole proprietor. Respondent
Leung Yiu adduced evidence during the trial of the case to
show that Sun Wah Panciteria was actually a partnership and
that he was one of the partners having contributed P4,000.00
to its initial establishment.
The private respondents evidence is summarized as follows:
About the time the Sun Wah Panciteria started to become
operational, the private respondent gave P4,000.00 as his
contribution to the partnership. This is evidenced by a receipt
wherein the petitioner acknowledged his acceptance of the
P4,000.00 by affixing his signature thereto. Furthermore, the
private respondent received from the petitioner the amount of
P12,000.00 covered by the latter's Equitable Banking
Corporation Check from the profits of the operation of the
restaurant for the year 1974
The petitioner denied having received from the private
respondent the amount of P4,000.00. He contested and
impugned the genuineness of the receipt. His evidence is
summarized as follows:
The petitioner did not receive any contribution at the time he
started the Sun Wah Panciteria. He used his savings from his
salaries as an employee at Camp Stotsenberg in Clark Field
and later as waiter at the Toho Restaurant amounting to a little
more than P2,000.00 as capital in establishing Sun Wah
Panciteria. Petitioner presented various government licenses
and permits showing the Sun Wah Panciteria was and still is a
single proprietorship solely owned and operated by himself
alone. Fue Leung also flatly denied having issued to the
private respondent the receipt (Exhibit G) and the Equitable
Banking Corporation's Check No. 13389470 B in the amount
of P12,000.00 (Exhibit B).

ISSUE: WON Private respondent is a partner of the
petitioner in Sun Wah Panciteria?
HELD:
The private respondent is a partner of the petitioner in Sun
Wah Panciteria. The requisites of a partnership which are
1) two or more persons bind themselves to contribute money,
property, or industry to a common fund; and 2) intention on
the part of the partners to divide the profits among themselves
(Article 1767, Civil Code; Yulo v. Yang Chiao Cheng, 106
Phil. 110)-have been established. As stated by the respondent,
a partner shares not only in profits but also in the losses of the
firm. If excellent relations exist among the partners at the start
of business and all the partners are more interested in seeing
the firm grow rather than get immediate returns, a deferment
of sharing in the profits is perfectly plausible. It would be
incorrect to state that if a partner does not assert his rights
anytime within ten years from the start of operations, such
rights are irretrievably lost. The private respondent's cause of
action is premised upon the failure of the petitioner to give
him the agreed profits in the operation of Sun Wah Panciteria.
In effect the private respondent was asking for an accounting
of his interests in the partnership.
It is Article 1842 of the Civil Code in conjunction with
Articles 1144 and 1155 which is applicable. Article 1842
states:
The right to an account of his interest shall
accrue to any partner, or his legal
representative as against the winding up
partners or the surviving partners or the
person or partnership continuing the
business, at the date of dissolution, in the
absence or any agreement to the contrary.
Regarding the prescriptive period within which the private
respondent may demand an accounting, Articles 1806, 1807,
and 1809 show that the right to demand an accounting exists
as long as the partnership exists. Prescription begins to run
only upon the dissolution of the partnership when the final
accounting is done.
Considering the facts of this case, the Court may decree a
dissolution of the partnership under Article 1831 of the Civil
Code which, in part, provides:
11
Art. 1831. On application by or for a partner
the court shall decree a dissolution
whenever:
xxx xxx xxx
(3) A partner has been guilty of such
conduct as tends to affect prejudicially the
carrying on of the business;
(4) A partner willfully or persistently
commits a breach of the partnership
agreement, or otherwise so conducts himself
in matters relating to the partnership
business that it is not reasonably practicable
to carry on the business in partnership with
him;
xxx xxx xxx
(6) Other circumstances render a dissolution
equitable.
There shall be a liquidation and winding up of partnership
affairs, return of capital, and other incidents of dissolution
because the continuation of the partnership has become
inequitable.

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