6 Phil 671 (1906) Fernandez vs.

Dela Rosa
EN BANC
G.R. No. 413 February 2, 1903
JOSE FERNANDEZ,Plaintiff-Appellant, vs. FRANCISCO DE LA ROSA,DefendantAppellee.
Vicente Miranda, for appellant.
Simplicio del Rosario, for appellee.
LADD, J.:
The object of this action is to obtain from the court a declaration that a partnership exists
between the parties, that the plaintiff has a consequent interested in certain cascoes which are
alleged to be partnership property, and that the defendant is bound to render an account of his
administration of the cascoes and the business carried on with them.
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Judgment was rendered for the defendant in the court below and the plaintiff appealed.

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The respective claims of the parties as to the facts, so far as it is necessary to state them in order
to indicate the point in dispute, may be briefly summarized. The plaintiff alleges that in January,
1900, he entered into a verbal agreement with the defendant to form a partnership for the
purchase of cascoes and the carrying on of the business of letting the same for hire in Manila, the
defendant to buy the cascoes and each partner to furnish for that purpose such amount of money
as he could, the profits to be divided proportionately; that in the same January the plaintiff
furnished the defendant 300 pesos to purchase a casco designated as No. 1515, which the
defendant did purchase for 500 pesos of Doa Isabel Vales, taking the title in his own name; that
the plaintiff furnished further sums aggregating about 300 pesos for repairs on this casco; that on
the fifth of the following March he furnished the defendant 825 pesos to purchase another casco
designated as No. 2089, which the defendant did purchase for 1,000 pesos of Luis R. Yangco,
taking the title to this casco also in his own name; that in April the parties undertook to draw up
articles of partnership for the purpose of embodying the same in an authentic document, but that
the defendant having proposed a draft of such articles which differed materially from the terms
of the earlier verbal agreement, and being unwillingly to include casco No. 2089 in the
partnership, they were unable to come to any understanding and no written agreement was
executed; that the defendant having in the meantime had the control and management of the two
cascoes, the plaintiff made a demand for an accounting upon him, which the defendant refused to
render, denying the existence of the partnership altogether.
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The defendant admits that the project of forming a partnership in the casco business in which he
was already engaged to some extent individually was discussed between himself and the plaintiff
in January, 1900, and earlier, one Marcos Angulo, who was a partner of the plaintiff in a bakery
business, being also a party to the negotiations, but he denies that any agreement was ever
consummated. He denies that the plaintiff furnished any money in January, 1900, for the
purchase of casco No. 1515, or for repairs on the same, but claims that he borrowed 300 pesos on
his individual account in January from the bakery firm, consisting of the plaintiff, Marcos
Angulo, and Antonio Angulo. The 825 pesos, which he admits he received from the plaintiff
March 5, he claims was for the purchase of casco No. 1515, which he alleged was bought March
12, and he alleges that he never received anything from the defendant toward the purchase of
casco No. 2089. He claims to have paid, exclusive of repairs, 1,200 pesos for the first casco and
2,000 pesos for the second one.
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The case comes to this court under the old procedure, and it is therefore necessary for us the
review the evidence and pass upon the facts. Our general conclusions may be stated as follows:
library

(1) Doa Isabel Vales, from whom the defendant bought casco No. 1515, testifies that the sale
was made and the casco delivered in January, although the public document of sale was not
executed till some time afterwards. This witness is apparently disinterested, and we think it is

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safe to rely upon the truth of her testimony, especially as the defendant, while asserting that the
sale was in March, admits that he had the casco taken to the ways for repairs in January.
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It is true that the public document of sale was executed March 10, and that the vendor declares
therein that she is the owner of the casco, but such declaration does not exclude proof as to the
actual date of the sale, at least as against the plaintiff, who was not a party to the instrument.
(Civil Code, sec. 1218.) It often happens, of course, in such cases, that the actual sale precedes
by a considerable time the execution of the formal instrument of transfer, and this is what we
think occurred here.
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(2) The plaintiff presented in evidence the following receipt: "I have this day received from D.
Jose Fernandez eight hundred and twenty-five pesos for the cost of a casco which we are to
purchase in company. Manila, March 5, 1900. Francisco de la Rosa." The authenticity of this
receipt is admitted by the defendant. If casco No. 1515 was bought, as we think it was, in
January, the casco referred to in the receipt which the parties "are to purchase in company" must
be casco No. 2089, which was bought March 22. We find this to be the fact, and that the plaintiff
furnished and the defendant received 825 pesos toward the purchase of this casco, with the
understanding that it was to be purchased on joint account.
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(3) Antonio Fernandez testifies that in the early part of January, 1900, he saw Antonio Angulo
give the defendant, in the name of the plaintiff, a sum of money, the amount of which he is
unable to state, for the purchase of a casco to be used in the plaintiff's and defendant's business.
Antonio Angulo also testifies, but the defendant claims that the fact that Angulo was a partner of
the plaintiff rendered him incompetent as a witness under the provisions of article 643 of the then
Code of Civil Procedure, and without deciding whether this point is well taken, we have
discarded his testimony altogether in considering the case. The defendant admits the receipt of
300 pesos from Antonio Angulo in January, claiming, as has been stated, that it was a loan from
the firm. Yet he sets up the claim that the 825 pesos which he received from the plaintiff in
March were furnished toward the purchase of casco No. 1515, thereby virtually admitting that
casco was purchased in company with the plaintiff. We discover nothing in the evidence to
support the claim that the 300 pesos received in January was a loan, unless it may be the fact that
the defendant had on previous occasions borrowed money from the bakery firm. We think all the
probabilities of the case point to the truth of the evidence of Antonio Fernandez as to this
transaction, and we find the fact to be that the sum in question was furnished by the plaintiff
toward the purchase for joint ownership of casco No. 1515, and that the defendant received it
with the understanding that it was to be used for this purposed. We also find that the plaintiff
furnished some further sums of money for the repair of casco.
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(4) The balance of the purchase price of each of the two cascoes over and above the amount
contributed by the plaintiff was furnished by the defendant.
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(5) We are unable to find upon the evidence before us that there was any specific verbal
agreement of partnership, except such as may be implied from the fact as to the purchase of the
casco.
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(6) Although the evidence is somewhat unsatisfactory upon this point, we think it more probable
than otherwise that no attempt was made to agree upon articles of partnership till about the
middle of the April following the purchase of the cascoes.
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(7) At some time subsequently to the failure of the attempt to agree upon partnership articles and
after the defendant had been operating the cascoes for some time, the defendant returned to the
plaintiff 1,125 pesos, in two different sums, one of 300 and one of 825 pesos. The only evidence
in the record as to the circumstances under which the plaintiff received these sums is contained
in his answer to the interrogatories proposed to him by the defendant, and the whole of his
statement on this point may properly be considered in determining the fact as being in the nature
of an indivisible admission. He states that both sums were received with an express reservation
on his part of all his rights as a partner. We find this to be the fact.
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Two questions of law are raised by the foregoing facts: (1) Did a partnership exist between the
parties? (2) If such partnership existed, was it terminated as a result of the act of the defendant in
receiving back the 1,125 pesos?
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(1) "Partnership is a contract by which 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." (Civil Code, art. 1665.)
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The essential points upon which the minds of the parties must meet in a contract of partnership
are, therefore, (1) mutual contribution to a common stock, and (2) a joint interest in the profits. If
the contract contains these two elements the partnership relation results, and the law itself fixes
the incidents of this relation if the parties fail to do so. (Civil Code, secs. 1689, 1695.)
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We have found as a fact that money was furnished by the plaintiff and received by the defendant
with the understanding that it was to be used for the purchase of the cascoes in question. This
establishes the first element of the contract, namely, mutual contribution to a common stock. The
second element, namely, the intention to share profits, appears to be an unavoidable deduction
from the fact of the purchase of the cascoes in common, in the absence of any other explanation
of the object of the parties in making the purchase in that form, and, it may be added, in view of
the admitted fact that prior to the purchase of the first casco the formation of a partnership had
been a subject of negotiation between them.
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Under other circumstances the relation of joint ownership, a relation distinct though perhaps not
essentially different in its practical consequence from that of partnership, might have been the
result of the joint purchase. If, for instance, it were shown that the object of the parties in
purchasing in company had been to make a more favorable bargain for the two cascoes that they
could have done by purchasing them separately, and that they had no ulterior object except to
effect a division of the common property when once they had acquired it, the affectio societatis
would be lacking and the parties would have become joint tenants only; but, as nothing of this
sort appears in the case, we must assume that the object of the purchase was active use and profit
and not mere passive ownership in common.
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It is thus apparent that a complete and perfect contract of partnership was entered into by the
parties. This contract, it is true, might have been subject to a suspensive condition, postponing its
operation until an agreement was reached as to the respective participation of the partners in the
profits, the character of the partnership as collective or en comandita, and other details, but
although it is asserted by counsel for the defendant that such was the case, there is little or
nothing in the record to support this claim, and that fact that the defendant did actually go on and
purchase the boat, as it would seem, before any attempt had been made to formulate partnership
articles, strongly discountenances the theory.
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The execution of a written agreement was not necessary in order to give efficacy to the verbal
contract of partnership as a civil contract, the contributions of the partners not having been in the
form of immovables or rights in immovables. (Civil Code, art. 1667.) The special provision
cited, requiring the execution of a public writing in the single case mentioned and dispensing
with all formal requirements in other cases, renders inapplicable to this species of contract the
general provisions of article 1280 of the Civil Code.
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(2) The remaining question is as to the legal effect of the acceptance by the plaintiff of the money
returned to him by the defendant after the definitive failure of the attempt to agree upon
partnership articles. The amount returned fell short, in our view of the facts, of that which the
plaintiff had contributed to the capital of the partnership, since it did not include the sum which
he had furnished for the repairs of casco No. 1515. Moreover, it is quite possible, as claimed by
the plaintiff, that a profit may have been realized from the business during the period in which
the defendant have been administering it prior to the return of the money, and if so he still
retained that sum in his hands. For these reasons the acceptance of the money by the plaintiff did
not have the effect of terminating the legal existence of the partnership by converting it into a
societas leonina, as claimed by counsel for the defendant.
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Did the defendant waive his right to such interest as remained to him in the partnership property
by receiving the money? Did he by so doing waive his right to an accounting of the profits
already realized, if any, and a participation in them in proportion to the amount he had originally
contributed to the common fund? Was the partnership dissolved by the "will or withdrawal of
one of the partners" under article 1705 of the Civil Code? We think these questions must be
answered in the negative.
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There was no intention on the part of the plaintiff in accepting the money to relinquish his rights
as a partner, nor is there any evidence that by anything that he said or by anything that he omitted
to say he gave the defendant any ground whatever to believe that he intended to relinquish them.
On the contrary he notified the defendant that he waived none of his rights in the partnership.
Nor was the acceptance of the money an act which was in itself inconsistent with the continuance
of the partnership relation, as would have been the case had the plaintiff withdrawn his entire
interest in the partnership. There is, therefore, nothing upon which a waiver, either express or
implied, can be predicated. The defendant might have himself terminated the partnership relation
at any time, if he had chosen to do so, by recognizing the plaintiff's right in the partnership
property and in the profits. Having failed to do this he can not be permitted to force a dissolution
upon his co-partner upon terms which the latter is unwilling to accept. We see nothing in the case
which can give the transaction in question any other aspect than that of the withdrawal by one
partner with the consent of the other of a portion of the common capital.
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The result is that we hold and declare that a partnership was formed between the parties in
January, 1900, the existence of which the defendant is bound to recognize; that cascoes No. 1515
and 2089 constitute partnership property, and that the plaintiff is entitled to an accounting of the
defendant's administration of such property, and of the profits derived therefrom. This
declaration does not involve an adjudication as to any disputed items of the partnership account.

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The judgment of the court below will be reversed without costs, and the record returned for the
execution of the judgment now rendered. So ordered.
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Arellano, C.J., Torres, Cooper, and Mapa, JJ., concur.

Willard, J., dissenting.

ON MOTION FOR A REHEARING.

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MAPA, J.:
This case has been decided on appeal in favor of the plaintiff, and the defendant has moved for a
rehearing upon the following grounds:
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1. Because that part of the decision which refers to the existence of the partnership which is the
object of the complaint is not based upon clear and decisive legal grounds; and
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2. Because, upon the supposition of the existence of the partnership, the decision does not clearly
determine whether the juridical relation between the partners suffered any modification in
consequence of the withdrawal by the plaintiff of the sum of 1,125 pesos from the funds of the
partnership, or if it continued as before, the parties being thereby deprived, he alleges, of one of
the principal bases for determining with exactness the amount due to each.
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With respect to the first point, the appellant cites the fifth conclusion of the decision, which is as
follows: "We are unable to find from the evidence before us that there was any specific verbal
agreement of partnership, except such as may be implied from the facts as to the purchase of the
cascoes."
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Discussing this part of the decision, the defendant says that, in the judgment of the court, if on
the one hand there is no direct evidence of a contract, on the other its existence can only be
inferred from certain facts, and the defendant adds that the possibility of an inference is not
sufficient ground upon which to consider as existing what may be inferred to exist, and still less
as sufficient ground for declaring its efficacy to produce legal effects.
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This reasoning rests upon a false basis. We have not taken into consideration the mere possibility
of an inference, as the appellant gratuitously stated, for the purpose of arriving at a conclusion
that a contract of partnership was entered into between him and the plaintiff, but have considered
the proof which is derived from the facts connected with the purchase of the cascoes. It is stated
in the decision that with the exception of this evidence we find no other which shows the making
of the contract. But this does not mean (for it says exactly the contrary) that this fact is not
absolutely proven, as the defendant erroneously appears to think. From this data we infer a fact

which to our mind is certain and positive, and not a mere possibility; we infer not that it is
possible that the contract may have existed, but that it actually did exist. The proofs constituted
by the facts referred to, although it is the only evidence, and in spite of the fact that it is not
direct, we consider, however, sufficient to produce such a conviction, which may certainly be
founded upon any of the various classes of evidence which the law admits. There is all the more
reason for its being so in this case, because a civil partnership may be constituted in any form,
according to article 1667 of the Civil Code, unless real property or real rights are contributed to it
- the only case of exception in which it is necessary that the agreement be recorded in a public
instrument.
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It is of no importance that the parties have failed to reach an agreement with respect to the minor
details of contract. These details pertain to the accidental and not to the essential part of the
contract. We have already stated in the opinion what are the essential requisites of a contract of
partnership, according to the definition of article 1665. Considering as a whole the probatory
facts which appears from the record, we have reached the conclusion that the plaintiff and the
defendant agreed to the essential parts of that contract, and did in fact constitute a partnership,
with the funds of which were purchased the cascoes with which this litigation deals, although it
is true that they did not take the precaution to precisely establish and determine from the
beginning the conditions with respect to the participation of each partner in the profits or losses
of the partnership. The disagreements subsequently arising between them, when endeavoring to
fix these conditions, should not and can not produce the effect of destroying that which has been
done, to the prejudice of one of the partners, nor could it divest his rights under the partnership
which had accrued by the actual contribution of capital which followed the agreement to enter
into a partnership, together with the transactions effected with partnership funds. The law has
foreseen the possibility of the constitution of a partnership without an express stipulation by the
partners upon those conditions, and has established rules which may serve as a basis for the
distribution of profits and losses among the partners. (Art. 1689 of the Civil Code. ) We consider
that the partnership entered into by the plaintiff and the defendant falls within the provisions of
this article.
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With respect to the second point, it is obvious that upon declaring the existence of a partnership
and the right of the plaintiff to demand from the defendant an itemized accounting of his
management thereof, it was impossible at the same time to determine the effects which might
have been produced with respect to the interest of the partnership by the withdrawal by the
plaintiff of the sum of 1,125 pesos. This could only be determined after a liquidation of the
partnership. Then, and only then, can it be known if this sum is to be charged to the capital
contributed by the plaintiff, or to his share of the profits, or to both. It might well be that the
partnership has earned profits, and that the plaintiff's participation therein is equivalent to or
exceeds the sum mentioned. In this case it is evident that, notwithstanding that payment, his
interest in the partnership would still continue. This is one case. It would be easy to imagine
many others, as the possible results of a liquidation are innumerable. The liquidation will finally
determine the condition of the legal relations of the partners inter se at the time of the withdrawal
of the sum mentioned. It was not, nor is it possible to determine this status a priori without
prejudging the result, as yet unknown, of the litigation. Therefore it is that in the decision no
direct statement has been made upon this point. It is for the same reason that it was expressly
stated in the decision that it "does not involve an adjudication as to any disputed item of the
partnership account."
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The contentions advanced by the moving party are so evidently unfounded that we can not see
the necessity or convenience of granting the rehearing prayed for, and the motion is therefore
denied.
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Arellano, C.J., Torres, Cooper, and Ladd, JJ., concur.

Willard and McDonough, JJ., did not sit in this case.

GATCHALIAN v. COLLECTOR OF INTERNAL

REVENUE 67 Phil. 666 (1939)
Facts:
BUSORG CASE DIGESTS
Atty. Charlie Mendoza
6
Plaintiffs (15 persons), in order to enable them to purchase one
sweepstakes ticket valued at two pesos (P2), subscribed and
paid each varied amounts aggregating 2 pesos. The said ticket
was registered in the name of Jose Gatchalian and Company .
The above-mentioned ticket bearing No. 178637 won one of
the third prizes in the amount of 50, 000. Jose Gatchalian was
required by income tax examiner Alfredo David to file the
corresponding income tax return covering the prize won by
Jose Gatchalian & Company. The Collector of Internal
Revenue collected the tax under section 10 of Act No. 2833,
as last amended by section 2 of Act No. 3761, reading as
follows:
"SEC. 10. (a) There shall be levied, assessed, collected, and
paid annually upon the total net income received in the
preceding calendar year from all sources by every corporation,
joint-stock company, partnership, joint account (cuenta en
participacin), association or insurance company, organized in
the Philippine Islands, no matter how created or organized, but
not including duly registered general copartnerships
(compaias colectivas), a tax of three per centum upon such
income;
Issue: Whether or not the plaintiffs formed a partnership, or
merely a community of property without a personality of its
own; in the first case it is admitted that the partnership thus
formed is liable for the payment of income tax, whereas if
there was merely a community of property, they are exempt
from such payment.
Ratio:
There is no doubt that if the plaintiffs merely formed a
community of property the latter is exempt from the payment
of income tax under the law. But according to the stipulated
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
(article 1665, Civil Code). 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 Philippine Charity Sweepstakes, in his capacity as copartner, as such collected 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. Having organized
and constituted a partnership of a civil nature, the 'said entity
is the one bound to pay the income tax which the defendant
collected.

LIM TONG LIM v. PHILIPPINE FISHING GEAR

INDUSTRIES
G.R. No. 136448. November 3, 1999
Facts:
Antonio Chua and Peter Yao entered into a contract for the
purchase of fishing nets from the Philippine Fishing Gear
Industries. They claimed that they were engeged in a business
venture with petitioner Lim Tong Lim. The buyers however
failed to pay for the nets and the floats. Private respondent
filed a collection suit against Yao, Chua an Lim Tong Lim
with preliminary attachment. Trial court rendered its decision
in favor of Phil. Fishing Gear and that Chua, Yao and Lim, as
general partners were jointly liable to pay respondents. It
based its decision on a compromise agreement wherein joint
liability was presumed from the equal distribution of the profit
and loss. The Court of Appeals affirmed. Hence, this petition.
Issue: Whether or not, by their acts, Lim, Chua and Yao could
be deemed to have entered into a partnership. YES
Ratio:
BUSORG CASE DIGESTS
Atty. Charlie Mendoza
9
There is a partnership between Lim, Chua and Yao. Petitioner
Lim requested Yao who was engaged in commercial fishing to
join him, while Antonio Chua was already Yaos partner. The
three verbally agreed to acquire two fishing boats, FB Lourdes
and FB Nelson for the sum of 3.35 million. They also
borrowed 3.25 million from Jesus Lim, brother of petitioner
Lim Tong Lim. They purchased the boats and later the nets
and floats, which constituted the main asets of the partnership
and they agreed to divide tha proceeds form the sale and
operation thereof. The sale of the boats as well as the division
among the three of the balance remaining after the payment of
their loans prove that F/B Lourdes was not his own property
but an asset of the partnership. Although the corporation was
never legally formed for unknown reasons, this fact alone does
not preclude the liabilities of the three as contracting parties in
representation of it. Under the law on estoppel, those acting on
behalf of a corporation and those benefited by it, knowing it to
be without valid existence, are held liable as general partners.
Having reaped the benefits of the contract entered into by
persons with whom he previously had an existing relationship
he is deemed to be part of said association and is covered by
the scope of the doctrine of corporation by estoppel

In re Sycip92 SCRA 1
Facts:
Two separate Petitions were filed before this Court 1) bythe surviving partners of Atty. Alexander
Sycip, who died on May5, 1975, and 2) by the surviving partners of Atty. HerminioOzaeta, who
died on February 14, 1976, praying that they beallowed to continue using, in the names of their
firms, the namesof partners who had passed away.
Jurisprudence:

the Deen case: the matter was resolved with this Court advising the firm to desist from including
in their firmdesignation the name of C. D. Johnston, who has long beendead.

Register of Deeds of Manila vs. China Banking Corporation: inview of the personal and
confidential nature of the relationsbetween attorney and client, and the high standards
demandedin the canons of professional ethics, no practice should beallowed which even in a
remote degree could give rise to thepossibility of deception. Said attorneys are accordingly
advisedto drop the name "PERKINS" from their firm name.
Issue:
Petitioners seek a re-examination of the policy thus farenunciated by the Court.
Held:
The Court finds no sufficient reason to depart from therulings thus laid down. The petitions filed
herein are denied andpetitioners advised to drop the names "SYCIP" and "OZAETA"from their
respective firm names. Those names may, however, beincluded in the listing of individuals who
have been partners intheir firms indicating the years during which they served as such.
Ratio: Arguments of Petitioners Court
Petitioners arguments:
1.
Under the law, apartnership is not prohibited fromcontinuing its businessunder a firm name
whichincludes the name of adeceased partner; in fact,Article 1840 of the CivilCode explicitly
sanctionsthe practice

the use in their partnershipnames of the names of deceased partners will runcounter to Article
1815 of the Civil Code
1

The heirs of a deceasedpartner in a law firm cannot be held liable as the oldmembers to the
creditors of a firm particularly wherethey are non-lawyers.

Accordingly, neither thewidow nor the heirs can beheld liable for transactionsentered into after
the deathof their lawyer-predecessor.There being no benefitsaccruing, there ran be no
1
Art. 1815. Every partnership shall operate under a firm name, whichmay or may not include the
name of one or more of the partners.Those who, not being members of the partnership, include
their names inthe firm name, shall be subject to the liability, of a partner.
corresponding liability.

The public relations value of the use of an old firm namecan tend to create undueadvantages
anddisadvantages in thepractice of the profession.An able lawyer without connections will have
tomake a name for himself starting from scratch.Another able lawyer, whocan join an old firm,
caninitially ride on that oldfirm's reputationestablished by deceasedpartners.
In regards to the last paragraph of Article 1840 of the Civil Code cited bypetitioners:

1)
The Article primarilydeals with the exemptionfrom liability in cases of a dissolved partnership,of
the individualproperty of the deceasedpartner for debtscontracted by the personor partnership
whichcontinues the
business
using the partnershipname or the name of thedeceased partner as part thereof. What the
lawcontemplates therein is ahold-over situationpreparatory to formalreorganization.
2)
Article 1840 treats moreof a
commercial
partnership with a goodwill to protect ratherthan of a
professional
partnership, with nosaleable good will but whose reputationdepends on the
personalqualifications of itsindividual members.Thus, it has been heldthat a saleable goodwillcan
exist only in acommercial partnershipand cannot arise in aprofessional partnershipconsisting of
lawyers
2.
the legislativeauthorization given tothose engaged in thepractice of accountancy

a profession

A partnership for thepractice of law cannot belikened to partnershipsformed by

otherprofessionals or for
Compiled Partnership Digests #4 AJ | Amin | Cha | Janz | Krizel | Paco | Vien | Yen
2
requiring the samedegree of trust andconfidence in respect of clients as that implicit inthe
relationship of attorney and client

toacquire and use a tradename, strongly indicatesthat there is nofundamental policy that is
offended by thecontinued use by a firmof professionals of afirm name whichincludes the name of
adeceased partner, at least where such firmname has acquired thecharacteristics of a"trade
name."business. For one thing, thelaw on accountancyspecifically allows the useof a trade name
inconnection with thepractice of accountancy.3.
The Canons of Professional Ethics are not transgressed by thecontinued use of the nameof a
deceased partner inthe firm name of a lawpartnership4.
No local custom prohibitsthe continued use of adeceased partner's namein a professional
firm'sname

It is true that Canon 33

doesnot consider as unethical
thecontinued use of the nameof a deceased or formerpartner in the firm name of a law
partnership whensuch a practice is
permissible by local custom
but the Canon warns that care should be taken that no imposition or deceptionis practiced
through thisuse.

The continued use of a firmname after the death of oneor more of the partnersdesignated by
it is proper only where sustained by local custom and not whereby custom this purports
toIdentify the active members.
...5.

There is no possibility of imposition or deceptionbecause the deaths of theirrespective

deceasedpartners were well-publicized in allnewspapers of generalcirculation for several days;

The possibility of deceptionupon the public, real orconsequential, where thename of a deceased
partnercontinues to be usedcannot be ruled out. Aperson in search of legalcounsel might be
guided bythe familiar ring of adistinguished nameappearing in a firm title2.
The continued use of adeceased partner's name inthe firm name of lawpartnerships has
beenconsistently allowed by U.S.Courts and is an acceptedpractice in the legalprofession of most
countriesin the world.

We find such proof of theexistence of a local custom,and of the elementsrequisite to constitute

thesame, wanting herein.Merely because somethingis done as a matter of practice does not mean
that Courts can rely on the samefor purposes of adjudication as a juridicalcustom. Juridical
custommust be differentiated fromsocial custom. The formercan supplement statutorylaw or be
applied in theabsence of such statute. Not so with the latter.

Evangelista, et al. v. CIR, GR No. L-9996, October 15,

1957
Facts:
Herein petitioners seek a review of CTAs decision
holding them liable for income tax, real estate dealers tax and
residence tax. As stipulated, petitioners borrowed from their
father a certain sum for the purpose of buying real properties.
Within February 1943 to April 1994, they have bought parcels
BUSORG CASE DIGESTS
Atty. Charlie Mendoza
7
of land from different persons, the management of said
properties was charged to their brother Simeon evidenced by a
document. These properties were then leased or rented to
various tenants.
On September 1954, CIR demanded the payment of
income tax on corporations, real estate dealers fixed tax, and
corporation residence tax to which the petitioners seek to be
absolved from such payment.
Issue: Whether petitioners are subject to the tax on
corporations.
Ruling:
The Court ruled that with respect to the tax on
corporations, the issue hinges on the meaning of the terms
corporation and partnership as used in Section 24
(provides that a tax shall be levied on every corporation no
matter how created or organized except general copartnerships) and 84 (provides that the term
corporation
includes among others, partnership) of the NIRC. Pursuant to
Article 1767, NCC (provides for the concept of partnership),
its essential elements are: (a) an agreement to contribute
money, property or industry to a common fund; and (b) intent
to divide the profits among the contracting parties.
It is of the opinion of the Court that the first element is
undoubtedly present for petitioners have agreed to, and did,
contribute money and property to a common fund. As to the
second element, the Court fully satisfied that their purpose
was to engage in real estate transactions for monetary gain and
then divide the same among themselves as indicated by the
following circumstances:
1. The common fund was not something they found
already in existence nor a property inherited by them pro
indiviso. It was created purposely, jointly borrowing a
substantial portion thereof in order to establish said common
fund;
2. They invested the same not merely in one transaction,
but in a series of transactions. The number of lots acquired and
transactions undertake is strongly indicative of a pattern or
common design that was not limited to the conservation and
preservation of the aforementioned common fund or even of
the property acquired. In other words, one cannot but perceive
a character of habitually peculiar to business transactions
engaged in the purpose of gain;
3. Said properties were not devoted to residential purposes,

or to other personal uses, of petitioners but were leased

separately to several persons;
4. They were under the management of one person where
the affairs relative to said properties have been handled as if
the same belonged to a corporation or business and enterprise
operated for profit;
5. Existed for more than ten years, or, to be exact, over
fifteen years, since the first property was acquired, and over
twelve years, since Simeon Evangelista became the manager;
6. Petitioners have not testified or introduced any
evidence, either on their purpose in creating the set up already
adverted to, or on the causes for its continued existence.
The collective effect of these circumstances is such as to leave
no room for doubt on the existence of said intent in petitioners
herein.
Also, petitioners argument that their being mere coowners did not create a separate legal entity
was rejected
because, according to the Court, the tax in question is one
imposed upon "corporations", which, strictly speaking, are
distinct and different from "partnerships". When the NIRC
includes "partnerships" among the entities subject to the tax on
"corporations", said Code must allude, therefore, to
organizations which are not necessarily "partnerships", in the
technical sense of the term. The qualifying expression found
in Section 24 and 84(b) clearly indicates that a joint venture
need not be undertaken in any of the standard forms, or in
conformity with the usual requirements of the law on
partnerships, in order that one could be deemed constituted for
purposes of the tax on corporations. Accordingly, the
lawmaker could not have regarded that personality as a
condition essential to the existence of the partnerships therein
referred to. For purposes of the tax on corporations, NIRC
includes these partnerships - with the exception only of duly
registered general co partnerships - within the purview of the
term "corporation." It is, therefore, clear that petitioners herein
constitute a partnership, insofar as said Code is concerned and
are subject to the income tax for corporations.
As regards the residence of tax for corporations
(Section 2 of CA No. 465), it is analogous to that of section 24
and 84 (b) of the NIRC. It is apparent that the terms
"corporation" and "partnership" are used in both statutes with
substantially the same meaning. Consequently, petitioners are
subject, also, to the residence tax for corporations.
Finally, on the issues of being liable for real estate dealers
tax, they are also liable for the same because the records show
that they have habitually engaged in leasing said properties
whose yearly gross rentals exceeds P3,000.00 a year.

OBILLOS, JR. v. COMMISSIONER OF INTERNAL

REVENUE 139 SCRA 436 (1985)
Facts:
On 2 March 1973, Jose Obillos, Sr. completed payment to
Ortigas & Co Ltd. on two lots located at Greenhills, San Juan,
Rizal. The next day, he transferred his rights to his four
children (petitioners) to enable them to build their residences.
The company sold the two lots to petitioners, and the torrens
title issued to them show that they were co-owners of the two
lots. In 1974, petitioners resold the lots to Walled City
Securities Corporation and Olga Cruz and divided among
themselves the profit. They treated the profit as capital gain
and paid an income tax on one-half thereof. In 1980, or a day
before the expiration of the five-year prescriptive period, the
CIR required the petitioners to pay corporate income tax on
the total profit, in addition to individual income tax on their
shares thereof. A total of Php 127,781.76 was ordered to be
paid by the petitioners, including the corporate income tax,
50% fraud surcharge, accumulated interest, income taxes and
distributive dividend. Such was ordered by the Commissioner,
acting on the theory that the four petitioners had formed an
unregistered partnership or joint venture.
Issue:
Whether or not the petitioners formed an unregistered
partnership by the act of selling the two lots, of which they
were co-owners. NO
Ratio:
It is wrong to consider petitioners as having formed a
partnership under Article 1767 of the Civil Code simply
because they allegedly contributed money to buy the two lots,
resold the same and divided the profit among themselves.
They were co-owners, pure and simple. The petitioners were
not engaged in any joint venture by reason of that isolated
transaction.
Their original purpose was to divide the lots for residential
purposes. If later on they found it not feasible to build their
residences on the lots because of the high cost of construction,
then they had no choice but to resell the same to dissolve the
co- ownership. The division of the profit was merely
incidental to the dissolution of the co-ownership which was
in the nature of things a temporary state.
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". There must be an
unmistakable intention to form a partnership or joint
venture.

FACTS: 1. Petitioners Florencio and Angel Reyes, father and son, purchased a lot and building
for P 835,000.00. 2. The amount of P 375,000.00 was paid. 3. The balance of P 460,000.00 was
left, which represents the mortgage obligation of the vendors with the China Banking
Corporation, which mortgage obligations were assumed by the vendees. 4. The initial payment of
P 375,000.00 was shared equally by the petitioners. 5. At the time of the purchase, the building
was leased to various tenants, whose rights under the lease contracts with the original owners,
the purchaser, petitioners herein, agreed to respect. 6. Petitioners divided equally the income of
operation and maintenance. 7. The gross income from rentals of the building amounted to about
P 90,000.00 annually. 8. An assessment was made against petitioners by the CIR. 9. The
assessment sought to be reconsidered was futile. 10. On appeal to the Court of Tax Appeals, the
CTA ruled that petitioners are liable for the income tax due from the partnership formed
by petitioners.
ISSUE: Are petitioners subject to the tax on corporations provided for in the National Internal
Revenue Code?
HELD: After referring to another section of the NIRC, which explicitly provides that the term
corporations includes partnerships and then to Article 1767 of the Civil Code of the
Philippines, defining what a contract of partnership is, the opinion goes on to state that 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, 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, it was determined that their purpose was to engage in real estate transaction
for monetary gain and then divide the same among themselves, hence taxable.