PARTNERSHIP {AMDG}

Article 1767. By the contract of partnership two or more

persons bind themselves to contribute money, property, or
industry to a common fund, with the intention of dividing the
profits among themselves.
Two or more persons may also form a partnership for the
exercise of a profession. (1665a)
Article 1768. The partnership has a juridical personality
separate and distinct from that of each of the partners, even in
case of failure to comply with the requirements of article 1772,
first paragraph.
CAMPOS RUEDA & CO. VS. PACIFIC COMMERCIAL CO. ET.
AL.
Facts: This case involves the application by the petitioner for a
judicial decree adjudging itself insolvent.
The limited
partnership of Campos Rueda & Co. was, and is, indebted to
Pacific Commercial Co., the Asiatic Petroleum Co. and the
International Banking Corporation in various sums amounting
to not less than Php1000.00, payable in the Philippines, which
were not paid more than thirty days prior to the date of their
filing of the application for involuntary insolvency. The lower
court denied the petition because it was not proven, nor
alleged, that the members of the aforesaid firm were insolvent
at the time of the application was filed; and that as said
partners are personally and solidarily liable for the
consequences of the transaction of partnership, it cannot be
adjudged insolvent so long as the partners are not alleged and
proven to be insolvent. From this judgment, the petitioners
appeal to the Supreme Court.

Issue: Whether or not a limited partnership, such as the

petitioner, which has failed to pay its obligations with three
creditors for more than thirty days, may be held to have
committed an act of insolvency, and thereby be adjudged
insolvent against its will.
Held: In the Philippines, a limited partnership duly organized in
accordance with law has a personality distinct from that of its
members. If it commits an act of bankruptcy, such as that of
failing for more than 30 days to pay debts amounting to
PhP1000.000 or more, it may be adjudged insolvent on the
petition of three of its creditors although its members may not
be insolvent. Under our Insolvency Law, one of the acts of
bankruptcy upon which an adjudication of involuntary
insolvency is predicated is the failure of a partnership to pay its
obligations with three creditors for a period of more than 30
days.
On the contrary, some courts of the United States have held
that a partnership may not be adjudged insolvent in an
involuntary insolvency proceeding unless all of its members are
insolvent, while others have maintained a contrary view.
Nevertheless, it must be borne in mind that under American
common law, partnerships have no juridical personality
independent from that of its members.
Therefore, it having been proven that the partnership Campos
Rueda & Co. failed for more than 30 days to pay its obligations
to the herein respondents, the partnership have the right to a
judicial decree declaring the involuntary insolvency of said
partnership.
VARGAS and COMPANY, plaintiff-appellee,vs.CHAN HANG
CHIU, ET AL., defendants-appellants.
Facts: On the 19th day of August, 1911, an action was begun
by Chan Hang Chiu against the plaintiff in this case as a

mercantile association duly organized under the laws of the

Philippine Islands, to recover a sum of money. The summons
and complaint were placed in the hands of the sheriff,
delivering to and leaving with one Jose Macapinlac personally
true copies thereof, he being the managing agent of said
Vargas & Co. at the time of such service. On July 2, 1912, the
justice's court rendered judgment against Vargas & Co. for the
sum of 372.28.
It is plaintiffs contention that Vargas & Co. being a
partnership, it is necessary, in bringing an action
against it, to serve the summons on all of the partners,
delivering to each one of them personally a copy
thereof; and that the summons in this case having been
served on the managing agent of the company only, the
service was of no effect as against the company and the
members thereof and the judgment entered by virtue of
such a service was void.

individual partners constituting the firm. In case the individual

members of the firm must be separately served with process,
the rule also prevails that they must be parties to the action,
either plaintiffs or defendant, and that the action cannot be
brought in the name of or against the company itself.
2. If it is necessary to serve the partners individually, they are
entitled to be heard individually in the action and they must,
therefore, be made parties thereto so that they can be heard. It
would be idle to serve process on individual members of a
partnership if the litigation were to be conducted in the name
of the partnership itself and by the duly constituted officials of
the partnership exclusively.
In this case, is apparent that the plaintiff is acting contrary to
its own contention by bringing the action in the name of the
company. If not served with process, then the action should be
brought in the individual names of the partners and not in the
name of the company itself.

Issue: Whether or not it is indispensable in bringing an action

to a partnership to serve summons to all parties thereof.
Held: No, it is dispensable. Reasons:
1. It has been the universal practice in the Philippine Islands
since American occupation, and was the practice prior to that
time, to treat companies of the class to which the plaintiff
belongs as legal or juridical entities and to permit them to sue
and be sued in the name of the company, the summons being
served solely on the managing agent or other official of the
company specified by the section of the Code of Civil Procedure
referred to. The plaintiff brings this action in the company name
and not in the name of the members of the firm. Actions
against companies of the class to which plaintiff belongs are
brought, according to the uninterrupted practice, against such
companies in their company names and not against the

NGO TIAN TEK AND NGO HAY V PHILIPPINE EDUCATION

CO. INC.
Ngo Tian Tek appealing the decision of CFI and CA which
granted the petition for collection of a sum of money from Lee
Guan Box Factory.
The defense of Ngo Tian Tek is that the Lee Guan Box Factory is
a separate entity from the Ngo Tian Tek and Ngo Hay
partnership, which is named Modern Box Factory. Modern Box
dealt in goods bought from Philippine Education Co. since 1925,
then in 1930, Lee Guan Box was established just some meters
away from Modern Box. Evidence was found that there were
goods purchased in the name of Lee Guan Box that were
delivered to the Modern Box, and that the owner of the two

establishments are one and the same.

The defense of Ngo Tian Tek is that he sold Lee Guan Box to
Vicente Tan, aka Chan Sy, and that the liabilities of Chan Sy is
his won, because Chan Sy was acting in his own name. The SC
said that the findings of fact of the CA are conclusive upon the
SC. Also even if the contracts were entered into by a factor of a
commercial establishment known to belong to a well-known
enterprise or association, it shall still be understood to be for
the account of the owner of such association, provided that
such contracts involve objects in the line and business of the
establishment. Also, the lack of a power of attorney by Chan Sy
does not operate to prejudice third person.
There's also a contention that Philippine Education is a mere
assignee for collection and thus could not bring suit on behalf
of the other assignors, but the SC ruled that Ngo Tian Tek is not
prejudiced by this because he would still be relieved of the
obligation had he paid the assignee Philippine Education.

AGUILA, JR. VS. CA

Facts: The petitioner herein is the manager of A.C. Aguila &
Sons, Co., a partnership engaged in lending activities, while the
private respondent and her late husband were the registered
owners of a house and lot, covered by a transfer certificate of
title. Sometime in 1991, the private respondent and A.C.
Aguila & Sons, Co., represented by the petitioner, entered into
a Memorandum of Agreement. In this agreement, a deed of
absolute sale shall be executed by the private respondent in
favor of A.C. Aguila & Sons, Co., giving the former an option to
repurchase and obliging the same to deliver peacefully the
possession of the property to A.C. Aguila & Sons, Co., within 15
days after the expiration of the said 90 days grace period.

When the private respondent failed to redeem the property

within the grace period, the petitioner caused the cancellation
of the transfer certificate of title under the private respondents
name and the issuance of a new certificate of title in the name
of A.C. Aguila & Sons, Co.
Subsequently, the private
respondent was asked to vacate the premises, however she
refused. Because of this refusal, A.C. Aguila & Sons, Co. filed
an ejectment case against her.
The MTC ruled in favor of A.C. Aguila & Sons, Co., on the ground
that the private respondent did not redeem the subject
property before the expiration of the 90-day period provided in
the MOA. She filed an appeal before the RTC, but failed again.
Then, she filed a petition for declaration of nullity of a deed of
sale with the RTC. She alleged that the signature of her
husband on the deed of sale was a forgery because he was
already to be dead when the deed was supposed to have been
executed. It appears however that the she filed a criminal
complaint for falsification against the petitioner.
RTC: DENIED. The plaintiff never questioned receiving from
A.C. Aguila & Sons, Co. the sum of P200,000.00 representing
her loan from the defendant. Common sense dictates that an
established lending and realty firm like Aguila would not part
with Php200,000.00 to the spouses, who are virtual strangers
to it, without simultaneous accomplishment and signing of all
the required documents, more particularly the Deed of Absolute
Salem to protect its interest.
CA: REVERSED.
The transaction between the parties is
indubitably an equitable mortgage.
Considering that the
private respondent (vendor) was paid the price which is
unusually inadequate (240 sq. m. subdivision lot for only
Php200,000.00 in the year 1991), has retained possession of
the property and has continued paying real taxes over the
subject property.

Petitioner:
1. He is not the real party in interest but A.C. Aguila & Sons, Co.;
2. The judgment in the ejectment case is a bar to the filing of the
complaint for declaration of nullity of a deed of sale in this
case; and
3. The contract between the parties is a pacto de retro sale and
not an equitable mortgage.
Held: The petition is meritorious. A real party in interest is one
who would be benefited or injured by the judgment, or who is
entitled to the avails of the suit. Moreover, under Article 1768
of the New Civil Code, a partnership has a juridical personality
separate and distinct from that of each of the partners. The
partners cannot be held liable for the obligations of the
partnership unless it is shown that the legal fiction of a
different juridical personality is being used for fraudulent,
unfair, or illegal purposes.
In this case, the private respondent ahs not shown that A.C.
Aguila & Sons, Co., as a separate juridical entity, is being used
for fraudulent, unfair or illegal purposes. Moreover, the title to
the subject property is in the name of A.C. Aguila & Sons, Co.
and the MOA was executed between the private respondent,
with the consent of her husband, and A.C. Aguila & Sons, Co.,
represented by the petitioner. Hence, it is the partnership, not
its officers or agents, which should be impleaded in any
litigation involving property registered in its name.
We cannot understand why both the RTC and the CA
sidestepped this issue when it was squarely raised before them
by the petitioner. The courts conclusion is that the petitioner
is not the real party in interest against whom this action should
be prosecuted. It is unnecessary to discuss the other issues
raised by him in his appeal.

ANG PUE AND CO. V SECRETARY OF COMMERCE

Ang Pue appeals a dismissed petition for declaratory relief filed
at the RTC. Ang Pue wants to be able to extend for another five
years their partnership pursuant to their article of copartnership which provides that after five years and upon the
consent of the two partners, the partnership could be extended
for another five years.
Ang Pue was constituted on May 1, 1953. On June 19, 1954, the
Retail Act, which limits only to Filipinos the retail business was
enacted. The Retail Act allows partnerships of non-Filipinos to
continue existing until the expiration of the said partnership.
On April 1958, before the expiration of Ang Pue's term, the
partners agreed to extend the life of the partnership. When
they registered it to SEC, SEC refused to register, citing the
Retail Act. Hence the petition to RTC which was denied and now
being appealed in this case.
SC held that the stipulation in the articles of partnership that it
could be extended will still be subject to the laws that will be
existing at the time that such extension is to be executed.
Otherwise, such an extension would be a clear violation of the
Retail Act. Also, organizing a partnership or a corporation is a
privilege and not a right.
Article 1769. In determining whether a partnership exists,
these rules shall apply:
(1) Except as provided by article 1825, persons who are not
partners as to each other are not partners as to third persons;
(2) Co-ownership or co-possession does not of itself establish a
partnership, whether such-co-owners or co-possessors do or do
not share any profits made by the use of the property;

(3) The sharing of gross returns does not of itself establish a

partnership, whether or not the persons sharing them have a
joint or common right or interest in any property from which
the returns are derived;
(4) The receipt by a person of a share of the profits of a
business is prima facie evidence that he is a partner in the
business, but no such inference shall be drawn if such profits
were received in payment:
(a) As a debt by installments or otherwise;
(b) As wages of an employee or rent to a landlord;
(c) As an annuity to a widow or representative of a deceased
partner;
(d) As interest on a loan, though the amount of payment vary
with the profits of the business;
(e) As the consideration for the sale of a goodwill of a business
or other property by installments or otherwise. (n)

HEIRS OF TAN ENG KEE vs.CA 341 SCRA 740, G.R. No.
126881, October 3, 2000

FACTS:
After the second World War, Tan EngKee and Tan Eng Lay,
pooling their resources and industry together, entered into a
partnership engaged in the business of selling lumber and
hardware and construction supplies. They named their
enterprise "Benguet Lumber" which they jointly managed until

Tan EngKee's death. Petitioners herein averred that the

business prospered due to the hard work and thrift of the
alleged partners. However, they claimed that in 1981, Tan Eng
Lay and his children caused the conversion of the partnership
"Benguet Lumber" into a corporation called "Benguet Lumber
Company." The incorporation was purportedly a ruse to deprive
Tan EngKee and his heirs of their rightful participation in the
profits of the business. Petitioners prayed for accounting of the
partnership assets, and the dissolution, winding up and
liquidation thereof, and the equal division of the net assets of
Benguet Lumber. The RTC ruled in favor of petitioners,
declaring that Benguet Lumber is a joint venture which is akin
to a particular partnership. The Court of Appeals rendered the
assailed decision reversing the judgment of the trial court.
ISSUE: Whether the deceased Tan EngKee and Tan Eng Lay are
joint adventurers and/or partners in a business venture and/or
particular partnership called Benguet Lumber and as such
should share in the profits and/or losses of the business venture
or particular partnership
RULING:
There was no partnership whatsoever. Except for a firm name,
there was no firm account, no firm letterheads submitted as
evidence, no certificate of partnership, no agreement as to
profits and losses, and no time fixed for the duration of the
partnership. There was even no attempt to submit an
accounting corresponding to the period after the war until Kee's
death in 1984. It had no business book, no written account nor
any memorandum for that matter and no license mentioning
the existence of a partnership. Also, the trial court determined
that Tan EngKee and Tan Eng Lay had entered into a joint
venture, which it said is akin to a particular partnership. A
particular partnership is distinguished from a joint adventure,
to wit:(a) A joint adventure (an American concept similar to our

joint accounts) is a sort of informal partnership, with no firm

name and no legal personality. In a joint account, the
participating merchants can transact business under their own
name, and can be individually liable therefor. (b) Usually, but
not necessarily a joint adventure is limited to a SINGLE
TRANSACTION, although the business of pursuing to a
successful termination maycontinue for a number of years; a
partnership generally relates to a continuing business of
various transactions of a certain kind. A joint venture
"presupposes generally a parity of standing between the joint
co-ventures or partners, in which each party has an equal
proprietary interest in the capital or property contributed, and
where each party exercises equal rights in the conduct of the
business. The evidence presented by petitioners falls short of
the quantum of proof required to establish a partnership. In the
absence of evidence, we cannot accept as an established fact
that Tan EngKee allegedly contributed his resources to a
common fund for the purpose of establishing a partnership.
Besides, it is indeed odd, if not unnatural, that despite the forty
years the partnership was allegedly in existence, Tan EngKee
never asked for an accounting. The essence of a partnership is
that the partners share in the profits and losses .Each has the
right to demand an accounting as long as the partnership
exists. A demand for periodic accounting is evidence of a
partnership. During his lifetime, Tan EngKee appeared never to
have made any such demand for accounting from his brother,
Tang Eng Lay. We conclude that Tan EngKee was only an
employee, not a partner since they did not present and offer
evidence that would show that Tan EngKee received amounts of
money allegedly representing his share in the profits of the
enterprise. There being no partnership, it follows that there is
no dissolution, winding up or liquidation to speak of.

Pascual and Dragon appealing CTA decision which found

deficiency corporate income taxes against them in the amount
of P107,000 during the years 1968 and 1970. The CIR found
that the two bought 2 parcels of land in 1965, and three parcels
of land in 1966. They sold the two parcels in 1968 and the
three parcels in 1970, and realized provide of about P225,000.
The corresponding capital gains tax were paid by the
petitioners in 1973 and 1974 by availing of tax amnesties
during those years.
The CIR said that they formed an unregistered partnership
which is liable to pay corporate income tax, aside from the
income taxes of the individual partners therein. The defense is
that the tax amnesty absolved them from the tax, even if it is
adjudged that they indeed formed an unregistered partnership.
The CTA said that the tax amnesty relieved them only of the
individual income tax liability, but not the tax liability of the
unregistered partnership.
SC held that the case is different from Evangelista case,
because the transactions were isolated. The co- ownership does
not necessarily mean that they formed an unregistered
partnership. Even if they shared in the gross proceeds in the
sale, regardless of whether each of them had interests over
what had been sold, does not ipso facto make them partners.
Ona vs. Commissioner of Internal Revenue 45 SCRA 74
Topic: Heirs agreed, after partition, to use common properties
and income therefrom as a common fund with the intention of
making pro t for them in proportion to their shares in the
inheritance.
Facts

PASCUAL AND DRAGON V COMMISSIONER OF INTERNAL

REVENUE

A and B are co-owners of inherited properties. They agreed to

use the said common properties and the income derived

therefrom as a common fund with the intention to produce pro

ts for them in proportion to their respective shares in the
inheritance as determined in a project of partition.
Issue
What is the e ect of such agreement on the existing coownership?
Held
The co-ownership is automatically converted into a partnership.
From the moment of partition, A and B, as heirs, are entitled
already to their respective de nite shares of the estate and the
income thereof, for each of them to manage and dispose of as
exclusively his own without the intervention of the other heirs,
and, accordingly, he becomes liable individually for all taxes in
connection therewith.
If, after such partition, an heir allows his shares to be held in
common with his co- heirs under a single management to be
used with the intent of making pro t thereby in proportion to his
share, even if no document or instrument were executed for
the purpose, for tax purposes, at least, an unregistered
partnership is formed.

GATCHALIAN v. COLLECTOR OF INTERNAL REVENUE

67 Phil. 666 (1939)
Facts: Plainti s (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 le 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 plainti s formed a partnership, or
merely a community of property without a personality of its
own; in the rst 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.
Held: There is no doubt that if the plainti s 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 plainti s 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 o ce of the Philippine Charity Sweepstakes, in

his capacity as co- partner, as such collected the prize, the o ce
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
plainti s 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.
G.R. Nos. L-24020-21
July 29, 1968
FLORENCIO REYES and ANGEL REYES, petitioners,
vs.
COMMISSIONER OF INTERNAL REVENUE and HON. COURT
OF TAX APPEALS, respondents.
Jose W. Diokno and Domingo Sandoval for petitioners.Office of
the Solicitor General for respondents.
FERNANDO, J.:
Petitioners in this case were assessed by respondent
Commissioner of Internal Revenue the sum of P46,647.00 as
income tax, surcharge and compromise for the years 1951 to
1954, an assessment subsequently reduced to P37,528.00. This
assessment sought to be reconsidered unsuccessfully was the
subject of an appeal to respondent Court of Tax Appeals.
Thereafter, another assessment was made against petitioners,
this time for back income taxes plus surcharge and compromise
in the total sum of P25,973.75, covering the years 1955 and
1956. There being a failure on their part to have such
assessments reconsidered, the matter was likewise taken to the
respondent Court of Tax Appeals. The two cases 1 involving as
they did identical issues and ultimately traceable to facts
similar in character were heard jointly with only one decision
being rendered.
In that joint decision of respondent Court of Tax Appeals, the
tax liability for the years 1951 to 1954 was reduced to
P37,128.00 and for the years 1955 and 1956, to P20,619.00 as

income tax due "from the partnership formed" by petitioners. 2

The reduction was due to the elimination of surcharge, the
failure to file the income tax return being accepted as due to
petitioners honest belief that no such liability was incurred as
well as the compromise penalties for such failure to file.3 A
reconsideration of the aforesaid decision was sought and
denied by respondent Court of Tax Appeals. Hence this petition
for review.
The facts as found by respondent Court of Tax Appeals, which
being supported by substantial evidence, must be respected 4
follow: "On October 31, 1950, petitioners, father and son,
purchased a lot and building, known as the Gibbs Building,
situated at 671 Dasmarias Street, Manila, for P835,000.00, of
which they paid the sum of P375,000.00, leaving a balance of
P460,000.00, representing the mortgage obligation of the
vendors with the China Banking Corporation, which mortgage
obligations were assumed by the vendees. The initial payment
of P375,000.00 was shared equally by petitioners. At the time
of the purchase, the building was leased to various tenants,
whose rights under the lease contracts with the original
owners, the purchasers, petitioners herein, agreed to respect.
The administration of the building was entrusted to an
administrator who collected the rents; kept its books and
records and rendered statements of accounts to the owners;
negotiated leases; made necessary repairs and disbursed
payments, whenever necessary, after approval by the owners;
and performed such other functions necessary for the
conservation and preservation of the building. Petitioners
divided equally the income of operation and maintenance. The
gross income from rentals of the building amounted to about
P90,000.00 annually."5
From the above facts, the respondent Court of Tax Appeals
applying the appropriate provisions of the National Internal
Revenue Code, the first of which imposes an income tax on
corporations "organized in, or existing under the laws of the
Philippines, no matter how created or organized but not

including duly registered general co-partnerships (companias

colectivas), ...,"6 a term, which according to the second
provision cited, includes partnerships "no matter how created
or organized, ...,"7 and applying the leading case of Evangelista
v. Collector of Internal Revenue,8 sustained the action of
respondent Commissioner of Internal Revenue, but reduced the
tax liability of petitioners, as previously noted.
Petitioners maintain the view that the Evangelista ruling does
not apply; for them, the situation is dissimilar.1wph1.t
Consequently they allege that the reliance by respondent Court
of Tax Appeals was unwarranted and the decision should be set
aside. If their interpretation of the authoritative doctrine therein
set forth commands assent, then clearly what respondent Court
of Tax Appeals did fails to find shelter in the law. That is the
crux of the matter. A perusal of the Evangelista decision is
therefore unavoidable.
As noted in the opinion of the Court, penned by the present
Chief Justice, the issue was whether 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, ..."9 After referring to another section of
the National Internal Revenue Code, which explicitly provides
that the term corporation "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 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, ..." 10

In support of the above conclusion, reference was made to the

following circumstances, namely, the common fund being
created purposely not something already found in existence,
the investment of the same not merely in one transaction but
in a series of transactions; the lots thus acquired not being
devoted to residential purposes or to other personal uses of
petitioners in that case; 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; the above
conditions having existed for more than 10 years since the
acquisition of the above properties; and no testimony having
been introduced as to the purpose "in creating the set up
already adverted to, or on the causes for its continued
existence."11 The conclusion that emerged had all the imprint of
inevitability. Thus: "Although, taken singly, they might not
suffice to establish the intent necessary to constitute a
partnership, the collective effect of these circumstances is such
as to leave no room for doubt on the existence of said intent in
petitioners herein."12
It may be said that there could be a differentiation made
between the circumstances above detailed and those existing
in the present case. It does not suffice though to preclude the
applicability of the Evangelista decision. Petitioners could harp
on these being only one transaction. They could stress that an
affidavit of one of them found in the Bureau of Internal Revenue
records would indicate that their intention was to house in the
building acquired by them the respective enterprises, coupled
with a plan of effecting a division in 10 years. It is a little
surprising then that while the purchase was made on October
31, 1950 and their brief as petitioners filed on October 20,
1965, almost 15 years later, there was no allegation that such
division as between them was in fact made. Moreover, the facts
as found and as submitted in the brief made clear that the
building in question continued to be leased by other parties
with petitioners dividing "equally the income ... after deducting

the expenses of operation and maintenance ..." 13 Differences of

such slight significance do not call for a different ruling.
It is obvious that petitioners' effort to avoid the controlling force
of the Evangelista ruling cannot be deemed successful.
Respondent Court of Tax Appeals acted correctly. It yielded to
the command of an authoritative decision; it recognized its
binding character. There is clearly no merit to the second error
assigned by petitioners, who would deny its applicability to
their situation.
The first alleged error committed by respondent Court of Tax
Appeals in holding that petitioners, in acquiring the Gibbs
Building, established a partnership subject to income tax as a
corporation under the National Internal Revenue Code is
likewise untenable. In their discussion in their brief of this
alleged error, stress is laid on their being co-owners and not
partners. Such an allegation was likewise made in the
Evangelista case.
This is the way it was disposed of in the opinion of the present
Chief Justice: "This pretense was correctly rejected by the Court
of Tax Appeals."14 Then came the explanation why: "To begin
with, the tax in question is one imposed upon "corporations",
which, strictly speaking, are distinct and different from
"partnerships". When our Internal Revenue Code 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. Thus, for instance, section 24 of
said Code exempts from the aforementioned tax "duly
registered general partnerships", which constitute precisely one
of the most typical forms of partnerships in this jurisdiction.
Likewise, as defined in section 84(b) of said Code, "the term
corporation includes partnerships, no matter how created or
organized." This qualifying expression 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. Again, pursuant to said

section 84(b), the term "corporation" includes, among others,
"joint accounts, (cuentas en participacion)" and "associations",
none of which has a legal personality of its own, independent of
that of its members. Accordingly, the lawmaker could not have
regarded that personality as a condition essential to the
existence of the partnerships therein referred to. In fact, as
above stated, "duly registered general copartnerships" which
are possessed of the aforementioned personality - have been
expressly excluded by law (sections 24 and 84[b]) from the
connotation of the term "corporation"." 15 The opinion went on
to summarize the matter aptly: "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."16
In the light of the above, it cannot be said that the respondent
Court of Tax Appeals decided the matter incorrectly. There is no
warrant for the assertion that it failed to apply the settled law
to uncontroverted facts. Its decision cannot be successfully
assailed. Moreover, an observation made in Alhambra Cigar &
Cigarette Manufacturing Co. v. Commissioner of Internal
Revenue,17 is well-worth recalling. Thus: "Nor as a matter of
principle is it advisable for this Court to set aside the conclusion
reached by an agency such as the Court of Tax Appeals which
is, by the very nature of its functions, dedicated exclusively to
the study and consideration of tax problems and has
necessarily developed an expertise on the subject, unless, as
did not happen here, there has been an abuse or improvident
exercise of its authority."
WHEREFORE, the decision of the respondent Court of Tax
Appeals ordering petitioners "to pay the sums of P37,128.00 as
income tax due from the partnership formed by herein

petitioners for the years 1951 to 1954 and P20,619.00 for the
years 1955 and 1956 within thirty days from the date this
decision becomes final, plus the corresponding surcharge and
interest in case of delinquency," is affirmed. With costs against
petitioners.

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 pro t among themselves. They were
co-owners, pure and simple. The petitioners were not engaged
in any joint venture by reason of that isolated transaction.

OBILLOS, JR. v. COMMISSIONER OF INTERNAL REVENUE

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

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
pro t. They treated the pro t as capital gain and paid an income
tax on one-half thereof. In 1980, or a day before the expiration
of the ve-year prescriptive period, the CIR required the
petitioners to pay corporate income tax on the total pro t, 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
Ruling: It is wrong to consider petitioners as having formed a

same to dissolve the co-ownership. The division of the pro t

was merely incidental to the dissolution of the coownership 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.

Aznar vs. Garcia, 102 Phil. 1055 [1958]

INFORMAL CIVIL PARTNERSHIP; REQUISITE BEFORE A PARTY
MAY BE ENTITLED) TO SHARE IN THE PROPERTIES ACQUIRED
DURING THE COHABITATION; CASE AT BAR. Before Republic
Act No. 386 (Civil Code of the Philippines) went into operation
on August 30, 1950, this Court had already declared that where
a man and a woman, not suffering from any impediment to
contract marriage, live together as husband and wife, an
informal civil partnership exists, and each of them has an equal
interest in the properties acquired during said union and is

entitled to participate therein if said properties were the

product of their JOINT e ort (Marata vs. Dionio G. R. No, 24419,
December 31, 1925; Lesaca vs. Felix Vda. de Lesaca, 91 Phil.,
135; Flores vs. Rehabilitation Finance Corporation, 94 Phil., 451,
50 O . Gaz. 1029). In the case at bar, aside from the
observation of the trial court that appellee was an illiterate
woman, there appears no evidence to prove appellee's
contribution or participation in the acquisition of the properties
involved; therefore, following the aforecited ruling of this Court,
appellee's claim f or 12 of the properties cannot be granted.
Even assuming for the sake of argument that this case falls
under the provisions of Article 144 of the Civil Code which
recognizes the parties as co-owners of the properties acquired
during the union, the law would be applicable only as far as
properties acquired after the Act are concerned and to no
other, for such law cannot be given retroactive e ect to govern
those already possessed before August 30, 1950.
FACTS: From the records of the above-entitled cases, it appears
that as of 1913, Edward E. Christensen, an American citizen,
was already residing in Davao and on the following year
became the manager of the Mindanao Estates located in the
municipality of Padada of the same province. At a certain time,
which the lower court placed at 1917, a group of laborers
recruited from Argao, Ceb, arrived to work in the said
plantation. Among the group was a young girl, Bernarda
Camporedondo, who became an assistant to the cook.
Thereafter, this girl and Edward E. Christensen, who was also
unmarried started living together as husband and wife and
although the records f ailed to establish the exact date when
such relationship commenced, the lower court f ound the same
to have been continuous for over 30 years until the death of
Christensen occurred on April 30, 1953. Out of said relations, 2
children, Lucy and Helen Christensen, were allegedly born.
G. R. NO. L-11484.

Upon the demise of the American, who had left a considerable

amount of properties his will naming Adolfo Cruz Aznar as
executor was duly presented for probate in court and became
the subject of Special Proceedings No. 622 of the Court of First
Instance of Davao. Said will contains, among others, the
following provisions:
xxx
xxx
xxx.
3. I declare . . . that I have but one (1) child, named MARIA
LUCY CHRISTENSEN (now Mrs. Bernard Daney), who was born in
the Philippines about twenty-eight years ago, and who is now
residing at No. 665 Rodger Young Village, Los Angeles,
California, U.S.A.
4. I further declare that I have no living ascendants, andno
descendantsexcept my above named daughter, MARIA LUCY
CHRISTENSEN DANEY.
xxx
xxx
xxx.
7. I give, devise and bequeath unto MARIA LUCY CHRISTENSEN,
now married toEduardo Garcia, about eighteen years of age
and who, notwithstanding the factthat she was baptized
Christensen, is not in any way related to me, nor hasshe been
at any time adopted to me, and who, from all information I
have now resides in Egipt, Digos, Davao, Philippines, the sum of
THREEE THOUSAND SIXHUNDRED PESOS (P3,600) Philippine
Currency, the same to be deposited in trustfor said Maria Lucy
Christensen with the Davao Branch of the PhilippineNational
Bank, and paid to her at the rate of One Hundred Pesos (P100),
Philippine Currency per month until the the principal thereof as
well as any interest which may have accrued thereon, is
exhausted.
8.
I
give
devise
and
bequeath
unto
BERNARDA
CAMPORENDONDO, now residing inPadada, Davao, Philippines,
the sum of One Thousand Pesos (P1,000), Philippine Currency.
xxx
xxx
xxx.
12. I hereby give, devise and bequeath, unto my well-beloved
daughter, the said MARIA Lucy CHRISTENSEN DANEY (Mrs.
Bernard Daney), now residing as aforesaid at No. 665 Rodger

Young Village Los Angeles, California, U.S.A., all the income

from the rest, remainder, and residue of my property and
estate, real, personal and/or mixed, of whatsoever kind or
character, andwheresover situated; of which I may be
possessed at any death and which mayhave come to me from
any source whatsoever, during her lifetime,Provided, honvever,
that should the said MARIA LUCY CHRISTENSEN DANEY at any
time prior to her decease having living issue, then, and in that
event, the life interest herein given shall terminate, and if so
terminated, then I give, devise, and bequeath to my said
daughter, the said MARIA LUCY CHRISTENSEN DANEY, the rest
remainder and residue of my property, with the same force and
effectas if I had originally so given, devised and bequeathedit
to her; and provided, further, that should be said Maria Lucy
ChristensenDaney die without living issue then, and in that
event, I give, devise and bequeath all the rest, remainder and
residue of my property, one-half (1/2) to my well-beloved sister,
Mrs. CARRIE LOIUSE C. BORTON, now residing at No. 2124
Twentieth Street, Bakersfield, California, U.S.A. and one-half
(1/2) to the children of my deceased brother, JOSEPH C.
CRISTENSEN, . . .
13. I hereby nominate and appoint Mr Adolfo Cruz Aznar, of
Davao City, Philippines, my executor, and the executor of this,
my last will and testament.
. . . (Exh. A).
Oppositions to the probate of this will were separately filed by
Maria Helen Christensen Garcia and Bernarda Camporendondo,
the first contending that thewill lacked the formalities required
by law; that granting that he had, thedispositions made therein
were illegal because although she and Lucy Christensen were
both children had by the deceased with Bernarda
Camporendondo, yet she was given only a meager sum of
P3,600 out of an estate valued at $485,000 while Lucy would
get the rest of the properties;and that the petitioner Adolfo
Cruz Aznar was not qualified to be appointed as administrator

of the estate because he had an interest adverse to thatof the

estate. It was therefore prayed by his oppositor that the
application for probate be denied and the will disallowed; that
the proceeding be declared intestate and that another
disinterested person be appointed as administrator.
Bernarda Camporedondo, on the other hand, claimed
ownership over one-halfof the entire estate in virtue of her
relationship with the deceased, it being alleged that she and
the testator having lived together as husband andwife
continuously for a period of over 30 years, the properties
acquired during such cohabitation should be governed by the
rules on co-ownership. This opposition was dismissed by the
probate court on the ground that shehad no right to intervene
in said proceeding, for as such common-law wife she had no
successional right that might be affected by the probate of
thewill, and likewise, she could not be allowed to establish her
title and co-ownership over the properties therein for such
questions must be ventilated in a court of general jurisdiction.
In view of this ruling of the Court and in order to attain the
purpose sought by her overruled opposition Bernarda
Camporedondo had to institute, as she did institute Civil Case
No. 1076 of the Court of First Instance of Davao (G.R. No. L11483) which we will consider and discuss hereinafter.
In the meantime, Adolfo Cruz Aznar was appointed special
adminsitrator of the estate after filing a bond for P5,000
pending the appointment of a regular one, and letters of
special administrition were correspondingly issued to him on
May 21, 1953.
The records further show that subsequent to her original
opposition. Helen Christensen Garcia filed a supplemental
opposition and motion to declare her an acknowledged natural
child of Edward E. Christensen, alleging that shewas conceived
during the time when her mother Bernarda Camporendondo
was living with the deceased as his common-law wife; that she
had been in continous possession of the status of a natural
child of the deceased; thatahe had in her favor evidence and/or

proof that Edward Christensen was her father; and that she and
Lucy had the same civil status as children of the decedent and
Bernarda Camporedondo. This motion was opposed jointly by
the executor and Maria Lucy Christensen Daney asserting that
before, during and after the conception and birth of Helen
Christensen Garcia, her mother was generally known to be
carrying relations with 3 different men; that during the lifetime
of the decedent and even years before his death, Edward
Christensen verbally as well as in writing disavowed
relationship with said oppositor; that oppositor appropriated
and used the surname Christensen illegally and without
permission from the deceased. Thus they prayed the Court that
the will be allowed; that Maria Helen Christensen Garcia be
declared not in any way related to the deceased; and that the
motion of said oppositor be denied.
After due hearing, the lower court in a decision dated February
28, 1953, found that oppositor Maria Helen Cristensen had
been in continous possession of the status of a natural child of
the deceased Edward Christensen notwithstanding the fact that
she was disowned by him in his will, for such action must have
been brought about by the latter's disaproval of said
oppositor's marriage to a man he did not like. But taking into
considerationthat such possession of the status of a natural
child did not itself constitute acknowledgment but may only be
availed of to compel acknowledgment, the lower Court directed
Maria Lucy Christensen Daney toacknowledge the oppositor as
a natural child of Edward E. Christensen. Thewill was, however,
allowed the letters testamentary consequently issued toAdolfo
Cruz Aznar, the executor named therein. From the portion of
the decision requiring Lucy Christensen to acknowledge Helen
as a natural child of the testator, the former and the executor
interposed an appeal to the Court of Appeals (CA-G. R. No.
13421-R), but the appellate tribunal elevatedthe same to Us on
the ground that the case involves an estate the value of which
far exceeds P50,000.00 and thus falls within the exclusive
appellate jurisdiction of this Court pursuant to Section 17 (5),

Republic Act No. 296.

The principal issue in this litigation is whether the lower court
erred in finding that the oppositor Maria Helen Christensen
Garcia had been in continous possession of the status of a
natural child of the deceased EdwardE. Christensen and in
directing Maria Lucy Christensen Daney, recognizeddaughter
and instituted heirs of the decedent, to acknowledge the former
assuch natural child.
Maria Lucy Christensen was born on April 25, 1922, and Maria
Helen Christensen on July 2, 1934, of the same mother,
Bernarda Camporedondo, during the period when the latter was
publicly known to have been living as common-law wife of
Edward E. Chrisiensen. From the facts of the case there can be
no question as to Lucy's parentage, but controversy arose when
Edward Christensen, in making his last will and testament,
disavowed such paternity to Helen and gave her only a legacy
of P3,600. ln the course of the proceeding for the probate of the
will (Exh, A), Helen introduced documentary and testimonial
evidence to support her claim that she, Lucy,was a natural child
of the deceased and, therefore, entitled to the hereditaryshare
corresponding to such descendant. Several witness testified in
herfavor, including the mother Bernarda Camporendondo, her
former teachers andother residents of the community, tending
to prove that she was known in the locality as a child of the
testator and was introduced by the latter to the circle of his
friends and acquaintances as his daughter. Family portraits,
greeting cards and letters were likewise presented to bolster
herassertion that she had always been treated by the deceased
and by Lucy herself as a member of the family.
Lucy Christensen and Adolfo Cruz Aznar, as executor, tried to
repudiate herclaim by introducing evidence to prove that on or
about the period when shewas conceived and born, her mother
was carrying an affair with another man,Zosimo Silva, a former
laborer in her Paligue plantation. Silva executed an affidavit
and even took the witness stand to testify to this effect.
Appellants also strived to show that the defendant's

solicitations for Helen's welfare and the help extended to her

merely sprang out generosity and hammered on the fact that
on several occasions, the deceased disclaimed any relationship
with her (Exh. O-Daney, Exh. Q-Daney, Exh. Z-Daney, Exh. 8Helen).
Going over the evidence adduced during the trial, it appears
indubitable that on or about the period when Helen was born,
Bernarda Camporendondo had established residence at her
plantation at Paligue, Davao, and that although Edward
Christensen stayed in Davao City to manage his merchandising
business, he spent the weekends with the former and their
child Lucy in the Christensenplantation. Even granting that
Zosimo Silva at his stage fitted himself intothe picture, it
cannot be denied that Helen's mother and the deceased
weregenerally and publicly known to be living together as
husband and wife. Thismust have been the reason why
Christensen from Helen's birth in 1934 providedfor her
maintenance; shouldered the expenses for her education to the
extentthat she was even enrolled as an intern in an exclusive
college for girls inManila; tolerated or allowed her carrying the
surname "Christensen", and ineffect gaver her the attention
and care that a father would only do to this offspring. We
should take note that nothing appears on record to show
thatChristensen ever entertained any doubt or disputed Helen's
paternity. Hisrepudations of her relationship with him came
about only after he andBernarda Comperodondo parted ways in
March, 1950, and apparently after Helentook sides with her
mother. Furthermore, it seems that despite that decedent's
desire that she continue her studies, Helen ignored the same
andgot married to a man for Christensen held no high esteem.
We may state at hisjuncture that while it is true that herein
appellants introduced witnesses todisprove oppositor'r claim,
the lower Court that had the opportunity to observe the
conduct of the witnesses while testifying and could better
gaugetheir credibility and impartiality in the case, arrived at
the conclusion that Maria Helen Christensen had established

that she had been in continouspossessions of the status of a

natural child of the deceased. Considering the preponderant
evidence on record, We see no reason to reverse said
ruling.The testator' lastacts cannot be made the criterion in
determining whether oppositor was his child or not, for human
frailty and parental arrogance maydraw a person to adopt
unnatural or harsh measures against an erring child orone who
displeases just so the weight of his authority could be felt. In
theconsideration of a claim that one is a natural child, the
attitude or directacts of the person against whom such action is
directed or that of his family before the controversy arose or
during his lifetime if he predeceases the claimant, and not a
single opportunity or an isolated occasions but as a whole,
must be taken into account. The possession of such status is
one of the cases that gives rise to the right, in favor of the
child, of coumpulsaryrecognition. (Art. 283, Civil Code).
The lower Court, however, after making its finding directed
Maria Lucy Christensen Daney, an heir of the decedent, to
recognize oppositor as a natural child of the deceased. This
seems improper.
The
Civil
Code
for 2 kinds of
acknowledgement of a natural child: voluntary and compulsory.
In the first instance, which may be effected in the record of
birth, a will, a statement before a court of record or in an
authentic writing (Art. 278,Civil Code), court intervention is
very nil and not altogether wanting, whereas in the second,
judicial pronouncement is essential, and while it is true that the
effect of a voluntary and a compulsory acknowledgment onthe
right of the child so recognized is the same, to maintain the
view of thelower Court would eliminate the distinction between
voluntary acts and those brought about by judicial dicta. And if
We consider that in the case, where, the presumed parent dies
ahead of the child and action for compulsory recogniton is
brought against the heirs of the deceased, as in the instant
case, the situation would take absurd turn, for the heirs would
be compelled to recognize such child as a natural child of the
deceased without a properprovision of the law, for as it now

stands, the Civil Code only requires a declaration by the court

of the child's status as a natural child of the parent who, if
living, would be compelled to recognize his offspring as
such.Therefore, We hold that in cases of compulsory
recognition, as in the case at bar, it would be sufficient that a
competent court, after taking into account all the evidence on
record, would declare that under any of the circumstances
specified by Article 283 of the Civil Code, a child has acquired
the status of a natural child of the presumptive parent and as
such is entitled to all rights granted it by law, for such
declaration is by itself already a judicial recognition of the
paternity of the parent concerned which is her against whom
the action is directed, are bound to respect.
G.R. No. L-11483
Coming now to Civil Case No. 1076 of the Court of First Instance
of Davao, Bernarda Camporendondo claimed in her complaint
1/2 of the properties of thedeceased as co-owner thereof in
virtue of her relations with the deceased. She alleged as basis
for action that she and the deceased Edward E. Christensen
had lived and cohabitated as husband and wife, continously
and openly for a period for more than 30 years; that within said
period, plaintiff and the deceased acquired real and personal
properties through their common effort and industry; and that
in virtue of such relationship, she was a co-owner of said
properties. As the executor refused to account forand deliver
the share allegedly belonging to her despite her repeated
demands, she prayed the court that said executor be ordered
to submit an inventory and render an accounting of the entire
estate of the deceased;to divide the same into 2 equal parts
and declare that one of them lawfully belonged to plaintiff; and
for such other reliefs as may be deemed just and equitable in
the premises. In his answer, the executor denied the
avermentsof the complaint, contending that the decedent was
the sole owner of the properties left by him as they were
acquired through his own efforts; thatplaintiff had never been a
co-owner of any property acquired or possessed by the late

Edward christensen during his lifetime; that the personal

relationship between plaintiff and the deceased was purely
clandestinebecause the former habitually lived in her plantation
at Paligue, Davao, from the time she acquired the same in
1928; that she also maintained relations with 2 other men; and
that the claim of plaintiff would violate the provisions of Article
2253 of the Civil Code as the vested rights of the compulsory
heirs of the deceased would be impaired. Defendant thus
prayed for the dismissal of the complaint and as counterclaim
demanded the sum ofP70.000.00 representing actual, moral
and exemplary damages.
Due hearing was conducted thereon and after the parties ad
submitted theirrespective memoranda, the lower Court on
August 25, 1954, rendered judgmentfinding that the deceased
Edward Christensen and Bernarda Camporendondo,not
otherwise suffering from any impediment to contract marriage,
lived together as husband and wife without marital ties
continously for over 30years until the former's death in 1953;
that out of such relations 2 childrenwere born; and that the
properties in controversy were acquired by either orboth of
them through their work or industry. Relying on Section 144 of
theCivil Code which said court considered to have created
another mode ofacquiring ownership, plaintiff was held to be
entitled to one-half of saidproperties as co-owner thereof in
view of her relationship with the deceasedand ordered the
executor to account for and deliver the same by her. Fromthis
decision, defendant Aznar, as Executor of the will, perfected an
appealto the Court of Appeals, but as the property involved in
the litigation exceeds P50,000.00 said tribunal elevated the
case to Us for consideration.
It is not controverted that at the time of his death, Edward
Christensen was the owner of certain properties, including
shares of stock in the plantation bearing his name and a
general merchandising store in Davao City. It is also undeniable
that the deceased and appellee, both capacitated to enter into
the married state, maintained relations as husband and wife,

continuously and publicly for a considerable number of years

which the lower Court declared to be until the death of
Christensen in 1953. While as a general rule appellate courts
do not usually disturb the lower court's findings of fact, unless
said finding is not supported by or totally devoid of or
inconsistent with the evidence on record, such finding must
ofnecessity be modified to confrom with the evidence if the
reviewing tribunalwere to arrive at the proper and just solution
of the controversy. In theinstant case, the court a quo
overlooked or failed to consider the testimonies of both Lucy
and Helen Christensen to the effect that the deceased and their
mother Bernarda Camporendondo had some sort of quarrel or
misunderstanding and parted ways as of March, 1950, a fact
which appelleewas not able to overcome. Taking into account
the circumstances of this caseas found by the trial court, with
the modification that the cohabitation should appear as
continuous from the early 20's until March, 1950, the question
left for our determination is whether Bernarda Camporedondo,
byreason of such relationship, may be considered as a coowner of the properties acquired by the deceased during said
period and thus entitledto one-half thereof after the latter's
death.
Presumably taking judicial notice of the existence in our society
of a certain kind of relationship brought about by couples living
together as husbands and wives without the benefit of
marriage, acquiring and bringingproperties unto said union, and
probably realizing that while same may not beacceptable from
the moral point of view they are as much entitled to
theprotection of the laws as any other property owners, the
lawmakersincorporated Article 144 in Republic Act No. 386
(Civil Code of the Philippines) to govern their property relations.
Said article read as follows:
ART. 114. When a man and a woman live together as husband
and wife, but they are not married, or their marriage is void
from the beginning, the property acquired by either or both of
them through their work or industry or their wages and salaries

shall be governed by the rules of co-ownership.

It must be noted that such form of co-ownership requires that
the man and the woman thus living together must not in any
way be incapacitated to contract marriage and that the
properties realized during their cohabitation be acquired
through the work, industry, employment or occupation of both
or either of them. And the same thing may be said of whose
marriages are by provision of law declared void ab intio. While
it is true that these requisites are fully met and satisfied in the
case at bar, We must remember that the deceased and herein
appellee were already estranged as of March, 1950. There
being no provision of law governing the cessation of such
informal civil partnership, if ever existed, same may be
considered terminated upon their separation or desistance to
continue said relations.The Spanish Civil Code which was then
enforce contains to counterpart of Article 144 and as the
records in the instant case failed to show show thata
subsequent reconciliation ever took place and considering that
Republic ActNo. 386 which recognizeed such form of coownership went into operation onlyon August 30, 1950,
evidently, this later enactment cannot be invoked as basis for
appellee's claim.
In determining the question poised by this action We may look
upon the jurisprudence then obtaining on the matter. As early
as 1925, this Court already declared that where a man and a
woman, not suffering from any impediment to contract
marriage, live together as husband and wife, an informal civil
partnership exists and made the pronouncement that each of
them has an intereat in the properties acquired during said
union and is entitled to participate therein if said properties
were the product oftheir JOINT efforts (Marata vs. Dionio G.R.
No. 24449, Dec. 31, 1925). In another case, this Court similarly
held that although there is no technical marital partnership
between person living maritally without being lawfully married,
nevertheless there is between them an informalcivil
partnership, and the parties would be entitled to an equal

interest where the property is acquired through their JOINT

efforts (Lesaca vs. FelixVda. de Lesaca, 91 Phil., 135).
Appellee, claiming that the properties in controversy were the
product of their joint industry apparently in her desire to tread
on the doctrine laiddown in the aforementioned cases, would
lead Us to believe that her help wassolicited or she took a hand
in the management of and/or acquisition of thesame. But such
assertion appears incredible if We consider that she
wasobserved by the trial Court as an illiterate woman who
cannot even remembersimple things as the date when she
arrived at the Mindanao Estate, when shecommenced
relationship with the deceased, not even her approximate age
orthat of her children. And considering that aside from her own
declaration, which We find to be highly improbable, there
appears no evidence to proveher alleged contribution or
participation in the acquisition of the properties involved
therein, and that in view of the holding of this Courtthat for a
claim to one-half of such property to be allowed it must be
provedthat the same was acquired through their joint efforts
and labor (Flores vs.Rehabilitation Finance Corporation, * 50
Off. Gaz. 1029), We have no recoursebut reverse the holding of
the lower Court and deny the claim of BernardaCampredondo.
We may further state that even granting, for the sake
ofargument, that this case falls under the provisions of Article
144 of theCivil Code, same would be applicable only as far as
properties acquiredafter the effectivity of Republic Act 386 are
concerned and to no other, forsuch law cannot be given
retroactive effect to govern those already possessedbefore
August 30, 1950. It may be argued, however, that being a
newly created right, the provisions of Section 144 should be
made to retroact if only toenforce such right. Article 2252 of the
same Code is explicit in thisrespect when it states:
SEC. 2252. Changes made and new provisions and rules laid
down by this Code which may prejudice or impair vested or
acquired rights in accordance with the old legislation, shall
have ro retroactive effect.

xxx
xxx
xxx.
As it cannot be denied that the rights and legitimes of the
compulsory heirsof the deceased Edward Christensen would be
impaired or diminished if the claim of herein appellee would
succeed, the answer to such argument wouldbe simply obvious.
With regard to appellant Aznar's contention that the lower
Court erred in admitting the testimony of appellee Bernarda
Camporedondo dealing with facts that transpired before the
death of Edward Christensen on the ground that it is prohibited
by Section 26-(c), Rule 123 of the Rules of Court. We deem it
unnecessary to delve on the same because even admitting that
the court a quo committed the error assigned, yet it will not
affect anymore the outcome of the case in view of the
conclusion We have already arrived at on the main issue.
On the strength of the foregoing considerations, We affirm the
decision of the lower Court in case G.R. No. L-11484, with the
modification that MariaLucy Christensen Daney need not be
compelled to acknowledge her sister Maria Helen Christensen
Garcia as a natural child of her father Edward E. Christensen,
the declaration of the Court in this respect being sufficient to
enable her to all the rights inherent to such status.

Philex Mining Corp vs CIR

Facts: Petitioner Philex entered into an agreement with Baguio
Gold Mining Corporation for the former to manage the latters
mining claim known as the Sto. Mine. The parties agreement
was denominated as Power of Attorney. The mine su ered
continuing losses over the years, which resulted in petitioners
withdrawal as manager of the mine. The parties executed a
Compromise Dation in Payment, wherein the debt of Baguio
amounted to Php. 112,136,000.00. Petitioner deducted said
amount from its gross income in its annual tax income return as

loss on the settlement of receivables from Baguio Gold against

reserves and allowances. BIR disallowed the amount as
deduction for bad debt. Petitioner claims that it entered a
contract of agency evidenced by the power of attorney
executed by them and the advances made by petitioners is in
the nature of a loan and thus can be deducted from its gross
income. Court of Tax Appeals (CTA) rejected the claim and held
that it is a partnership rather than an agency. CA a rmed CTA
Issue: Whether or not it is an agency.
Held: No. The lower courts correctly held that the Power of
Attorney (PA) is the instrument material that is material in
determining the true nature of the business relationship
between petitioner and Baguio. An examination of the said PA
reveals that a partnership or joint venture was indeed intended
by the parties. While a corporation like the petitioner cannot
generally enter into acontract of partnership unless authorized
by law or its charter, it has been held that it may enter into a
joint venture, which is akin to a particular partnership. The PA
indicates that the parties had intended to create a PAT and
establish a common fund for the purpose. They also had a
joint interest in the pro ts of the business as shown by the 5050 sharing of income of the mine.
Moreover, in an agency coupled with interest, it is the agency
that cannot be revoked or withdrawn by the principal due to an
interest of a third party that depends upon it or the mutual
interest of both principal and agent. In this case the nonrevocation or non-withdrawal under the PA applies to the
advances made by the petitioner who is the agent and not the
principal under the contract. Thus, it cannot be inferred from
the stipulation that it is an agency.

SARDANE VS. COURT OF APPEALS

FACTS:
Petitioner Sardane is the owner of a Sardane Trucking Services.
One day Sardane borrowed money from the other guy by
making promises and issuing several promissory notes. On the
due date the other guy wanted his money back but instead of
paying Sardane apologized for his failure to pay on time, and
he promised the other guy that he would pay him next time.
After so many failed attempts to collect his money the other
guy got mad and finally decided to seek the intervention of the
court. Now after so many failed attempts to collect the
promised payment, the other guy, Mr.Acojedo (Private
Respondent), with so much hate on his heart, finally filed a
collection case against Sardane. Even during the scheduled
date of the trial, Sardane, as usual he did not show up. On
motion by the petitioner(herein private respondent), the Court
issued an order declaring the Sardane in default and eventually
after presentation of evidence ex parte, the court rendered
judgment by default in favor of the petitioner. Sardane
then appealed to the CFI, and he claimed that the promissory
notes were his contribution to the partnership; and that there is
no contract of loan; thus he is not indebted to the other guy.
The CFI, believing the arguments of Sardane, ruled on his favor
thereby reversing the decision of the lower court by dismissing
the complaint and ordered the plaintiff-appellee Acojedo to pay
said defendant-appellant P500.00 for moral damages
ISSUE:
whether or not a partnership existed?

HELD:
NONE .The fact that he had received 50% of the net profits
does not conclusively establish that he was a partner of the
private respondent herein. Article 1769(4) of the Civil Code is

explicit that while the receipt by a person of a share of the

profits of a business is prima facie evidence that he is a partner
in the business, no such inference shall be drawn if such profits
were received in payment as wages of an employee.
Furthermore, herein petitioner had no voice in the
management of the affairs of the basnig. Under similar facts,
this Court in the early case of Fortis vs. Gutierrez Hermanos,
denied the claim of the plaintiff therein that he was a partner in
the business of the defendant. The same rule was reiterated
in Bastida vs. Menzi & Co., Inc., et al. which involved the same
factual and legal milieu.
vs.

3.ID.; BINDING FORCE OF CONTRACTS; FORM NOT ESSENTIAL.

Contracts shall be binding, whatever may be the form in which
they may have been executed, provided the essential
conditions for their validity exist. (Arts. 1261 and 1278, Civil
Code.)
4.ID.; JOINT OWNERSHIP OF REALTY; PARTNERSHIP NOT
NECESSARY.In order temporarily to establish a community of
property rights in real estate, which two or more persons
proposed to acquire in order to divide it among themselves
immediately after the purchase, it is not necessary that a
partnership be formed between them for the purposes specified
in article 1665 of the Civil Code.

6. 1.REALTY; JOINT PURCHASE; PARTITION; POSSESSION.The law

sanctions the partition of real property of joint tenancy,
acquired by two or more persons under a mutual agreement to
pay the price proportionally among them, and afterwards to
divide in equal shares the land so acquired; and no one of the
cowners, without the consent of the others, has a right to hold
the whole of the property which belongs to all.
1 2.ID.; ORAL CONTRACT OF SALE; EVIDENCE; WAIVER.An oral
contract for the sale of real estate is binding between the
parties, though irregular in form, and the effect of a noncompliance with the provisions of section 335 of the Code of
Procedure is simply that no right of action can be proved unless
the law is complied
7. with; but a failure to except to evidence because it does not
conform with the statute, is a waiver of the provisions of the
law. If the parties to the action, during the trial, make no
objection to the admission of oral evidence to support such
contract of sale, thus permitting the contract to be proved, it
will be just as binding upon the parties as if it had been
reduced to writing. (Conlu vs. Araneta and Guanko, 15 Phil.
Rep., 387.)

FACTS: This is an appeal raised by the plaintiff from the

judgment rendered by the Honorable Judge Ramon Avancea.
On March 10, 1908, the plaintiff filed a written complaint, twice
amended with the permission of the court, wherein, after its
second amendment, he alleged that the plaintiff and the
defendant, while residents of the municipality of Dapitan, had
acquired, in joint tenancy, in or about the month of January,
1904, a parcel of land from its original owner, Luis Ganong,
under a verbal, civil contract of partnership, for the price of
P44; that it was stipulated that each of the said purchasers
should pay one-half of the price, or P22, and that an equal
division should be made between them of the land thus
purchased, situate in the place called Tangian, of the barrio of
Dohinob, municipality of Dapitan, subdistrict of the same name,
Moro Province, and bounded on the north and east by the
Tangian river, on the south and west by government forests,
and containing 19,968 square meters, approximately, planted
with 200 abaca plants; that, notwithstanding the demands he
had repeatedly made upon the defendant to divide the said
land, the latter, after having promised him on several occasions
that he would make such partition, finally refused, without good
reason, and still continued to refuse to divide the land and,

CATALINO GALLEMIT, plaintiff and appellant,

CEFERINO TABILIRAN, defendant and appellee.

moreover, without the knowledge and consent of the plaintiff,

gathered the abaca crops of the years 1904, 1905 and 1906,
produced on the land in question, and extracted the hemp
therefrom in the amount of about 12 arrobas to each crop, he
being the sole beneficiary of the fiber obtained; that the
plaintiff, relying upon the several promises made him by the
defendant to divide the said land, took to the latter 1,500 seeds
to be planted in the part thereof which would have fallen to the
plaintiff in the division, all of which seeds died, as an indirect
result of the defendant's never having made the partition he
offered to make; and, that since the year 1904, up to the time
of the complaint, he alone had been paying the taxes on the
land, without the defendant's having contributed to their
payment. Therefore the plaintiff petitioned the court to render
judgment in his favor by ordering a partition to be made of the
said land through the mediation of commissioners appointed
for the purpose, and by sentencing the defendant to pay to the
plaintiff, as damages, the total value of the seed lost,
amounting to P50, to restore to him one-half of the abaca
harvested or the 'value thereof, and to the payment of the
costs of the case. Defendant's counsel received a copy of this
amended complaint.
The defendant, Ceferino Tabiliran, having notified summoned,
in his answer to the preceding amended complaint denied each
and all of the facts in each and all of the paragraphs thereof
and asked that he be absolved from the complaint, with the
costs against the plaintiff. After the hearing of the case and the
production of oral evidence by the parties thereto, the court, on
the 10th of the same month, rendered judgment by absolving
the defendant from the complaint, with the costs against the
plaintiff. Counsel for the latter excepted to this judgment and
by a written motion asked for its annulment, and the holding of
a new trial on the ground that the findings of the court were
contrary to law. This motion was denied by an order of March
11, 1909, excepted to by the plaintiff's counsel, and the proper
bill of exceptions having been duly filed, the same was certified

and forwarded to the clerk of this court.

This suit concerns the partition of a piece of land held pro
indiviso which the plaintiff and the defendant had acquired in
common from its original owner. By the refusal of the defendant
to divide the property, the plaintiff was compelled to bring the
proper action for the enforcement of partition, referred to in
sections 181 and following of the Code of Civil Procedure.
The record shows it to have been duly proved that Catalino
Gallemit and Ceferino Tabiliran by mutual agreement acquired
by purchase the land concerned, situate in Tangian,
municipality 'of Dapitan, from its original owner, Luis Ganong,
for the sum of P44. It was stipulated between the purchasers
that they each should pay one-half of the price and that the
property should be divided equally between them. The vendor
testified under oath that the plaintiff Gallemit paid him the sum
of P22, one-half of the price that it was incumbent upon him to
pay, and that four months afterwards the defendant paid his
part of the price, although, owing to the refusal of the
defendant, who was then the justice of the peace of the pueblo,
to comply with the stipulations made, the deed of sale was not
executed, nor was a partition effected of the land which they
had acquired. The defendant, instead of delivering to the
plaintiff the share that belonged to the latter, the proportionate
price for which the plaintiff had already paid, kept all the land
which belonged to them in common, in violation of the
stipulations agreed upon, notwithstanding that he paid the
vendor only one-half of the price thereof.
There is community of property when the ownership of a thing
belongs to different persons undividedly. (Art. 392, Civil Code.)
No cowner shall be obliged to remain a party to the
community. Each of them may ask at any time the division of
the thing owned in common. (Art. 400 of the same code.)
Considering the terms of the claim made by the plaintiff and
those of the defendant's answer, and the relation of facts
contained in the judgment appealed from, it does not appear
that any contract of partnership whatever was made between

them for the purposes expressed in article 1665 of the Civil

Code, for the sole transaction performed by them was the
acquisition jointly by mutual agreement of the land in question,
since it was undivided, under the condition that they each
should pay one-half of the price thereof and that the property
so acquired should be divided between the two purchasers; and
as, under this title, the plaintiff and the defendant are the
cowners of the said land, the partition or division of such
property held in joint tenancy must of course be allowed, and
the present possessor of the land has no right to deny the
plaintiff's claim on grounds or reasons unsupported by proof.
The circumstance of the plaintiff's inability to present any
document whatever to prove that he and the defendant did
actually purchase jointly the land in litigation can not be a
successful defense in the action for partition, notwithstanding
the provision contained in paragraph 5 of section 335 of the
Code of Civil Procedure, inasmuch as the trial record discloses
that testimony was adduced, unobjected to on the part of the
defendant, to prove that the purchase was actually made by
both litigants of the land in question from its original owner,
Luis Ganong; furthermore, it was proved that after the contract
was made the deed of sale was not drawn up on account of the
opposition of the defendant, Tabiliran, to this being done, with
the indubitable purpose, as Has been seen, of his keeping the
whole of the land purchased, though he paid but one-half of its
price.
In the decision rendered in the case of Conlu et al. vs. Araneta
and Guanko (15 Phil. Rep., 387), the following appears in the
syllabus:
"The decisions in the cases of Thunga Chui vs. Que Bentec (2
Phil. Rep., 561) and Couto vs. Cortes (8 Phil. Rep., 459) followed
to the extent of holding that "an oral contract for the sale of
real estate, made prior to the enactment of the Code of
Procedure in Civil Actions, is binding between the parties
thereto." The contract exists and is valid though it may not be
clothed with the necessary form, and the effect of a

noncompliance with the provisions of the statute (sec. 335 of

the Code of Procedure in Civil Actions) is simply that no' action
can be proved unless the requirement is complied with; but a
failure to except to the evidence because it does not conform
with the statute, is a waiver of the provisions of the law. If the
parties to the action, during the trial, made no objection to the
admissibility of oral evidence to support the contract of sale of
real property, thus permitting the contract to be proved, it will
be just as binding upon the parties as if it had been reduced to
writing."
So that, once it has been proven by the testimony of witnesses
that the purchase of a piece of real estate was made by a
verbal contract between the interested parties, if the oral
evidence was taken at the petition of one of them without
opposition on the part of the other, such proven verbal
contract, as the one herein concerned, must be held to be
valid. On these premises it is, therefore, not indispensable that
a written instrument be presented in order to prove a contract
of purchase and sale of real estate; neither is it necessary that
the record show proof of a contract of partnership, in order that
a demand may be made for the division of a real property
acquired jointly and undividedly by two or more interested
parties, inasmuch as the land was acquired by the two
purchasers, not for the purpose of undertaking any business,
nor for its cultivation in partnership, but solely to divide it
equally between themselves. Therefore, it is sufficient to show
proof of the fact that a real property was actually purchased by
them jointly, in order to insure a successful issue of an action
brought to enforce partition, in accordance with the provisions
of sections 181 to 196 of the Code of Procedure in Civil Actions,
since the plaintiff is really a cowner of the undivided land.
It is neither just nor permissible for the defendant to violate a
contract made, even though verbally, with the plaintiff, and to
keep without good reason, for his exclusive benefit and to the
prejudice only of his cowner, the plaintiff, the whole of the
land belonging to both of them in common, because each paid

a half of the value thereof.

"Contracts shall be binding," prescribes article 1278 of the Civil
Code, "whatever may be the form in which they may have been
executed, provided the essential conditions required for their
validity exist." These conditions are enumerated in article 1261
of the same code, and they are also requisite in a verbal
contract that has been proved.
As the plaintiff suffered damage through the loss of the seed
which could not be planted in the part of the land belonging to
him, on account of the refusal of the defendant to accede to a
division of the property, in accordance with the agreement
made, it is right and just that the latter be compelled to make
indemnity for .the amount of the damage occasioned through
his fault.
With respect to the abaca obtained by the defendant, to his
exclusive benefit, from the land of joint ownership: inasmuch as
the amount and value of the fiber gathered is not shown in the
trial record, there are no means available in law whereby a
proper determination may be reached in the matter.
Therefore, we are of opinion that the judgment appealed from
should be, as it is hereby, reversed. It is held to be proper to
effect the partition of the land in question, and the judge of the
Court of First Instance is directed to decree, through the
proceedings prescribed by law, the division of the said land in
conformity with the petition made by the plaintiff, and an
indemnity, in behalf of the latter, in the sum of P50, the value
of the seed lost. The delivery to the plaintiff of one-half of the
abaca harvested on the land, or the value thereof, can not be
ordered, on account of the lack of proof in the premises. No
special finding is made as to costs. So ordered.

EVANGELISTA v. CIR

G.R. No. L-9996, October 15, 1957

Facts: Petitioners borrowed sum of money from their father
and together with their own personal funds they used said
money to buy several real properties. They then appointed
their brother (Simeon) as manager of the said real properties
with powers and authority to sell, lease or rent out said
properties to third persons. They realized rental income from
the said properties for the period 1945-1949.
On September 24, 1954 respondent Collector of Internal
Revenue demanded the payment of income tax on
corporations, real estate dealer's xed tax and corporation
residence tax for the years 1945-1949. The letter of demand
and corresponding assessments were delivered to petitioners
on December 3, 1954, whereupon they instituted the present
case in the Court of Tax Appeals, with a prayer that "the
decision of the respondent contained in his letter of demand
dated September 24, 1954" be reversed, and that they be
absolved from the payment of the taxes in question. CTA
denied their petition and subsequent MR and New Trials were
denied. Hence this petition.
Issue: Whether or not petitioners have formed a partnership
and consequently, 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, as
well as to the residence tax for corporations and the real estate
dealers xed tax.
Held: YES. 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 pro ts among the contracting parties. The rst 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. Upon consideration of all the facts

and circumstances surrounding the case, we are fully satis ed
that their purpose was to engage in real estate transactions for
monetary gain and then divide the same among themselves,
because of the following observations, among others: (1) Said
common fund was not something they
found already in existence; (2) They invested the same, not
merely in one transaction, but in a series of transactions; (3)
The aforesaid lots were not devoted to residential purposes, or
to other personal uses, of petitioners herein.
Although, taken singly, they might not su ce to establish the
intent necessary to constitute a partnership, the collective e
ect of these circumstances is such as to leave no room for
doubt on the existence of said intent in petitioners herein.
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.
Article 1770. A partnership must have a lawful object or
purpose, and must be established for the common benefit or
interest of the partners.
When an unlawful partnership is dissolved by a judicial decree,
the profits shall be confiscated in favor of the State, without
prejudice to the provisions of the Penal Code governing the
confiscation of the instruments and effects of a crime. (1666a)

ARBES v. POLISTICO

G.R. No. 31057 September 7, 1929

FACTS:
This is an action to bring about liquidation of the funds and
property of the association called "Turnuhan Polistico & Co."
The plainti s were members or shareholders, and the
defendants were designated as president-treasurer, directors
and secretary of said association.
This case is brought for 2nd time. In the 1st one, the court held
then that in an action against the o cers of a voluntary
association to wind up its a airs and enforce an accounting for
money and property in their possessions, it is not necessary
that all members of the association be made parties to the
action. The court appointed commissioner of Insular Auditor's O
ce, to examine all the books, documents, and accounts of
"Turnuhan Polistico & Co.," and to receive whatever evidence.
Commissioner's report show a balance of P24, 607.80 cash on
hand. Despite defendants objection to the report, the trial
court rendered judgment holding said association is unlawful.
And sentenced defendants jointly and severally to return the
amount and documents to the plainti s and members of the
association. The Appellant alleged that the association being
unlawful, some charitable institution to whom the partnership
funds may be ordered to be turned over, should be included, as
a party defendant. Referring to Article 1666 of the Civil Code
which provides that A partnership must have a lawful object,
and must be established for the common bene t of the
partners. When the dissolution of an unlawful partnership is
decreed, the pro ts shall be given to charitable institutions of
the domicile of the partnership, or, in default of such, to those
of the province.
ISSUE: Whether or not charitable institution is a necessary
party to this case.

HELD: No. No charitable institution is a necessary party in the

present case of determination of the rights of the parties. The
action which may arise from said article, in the case of unlawful
partnership, is that for the recovery of the amounts paid by the
member from those in charge of the administration of said
partnership, and it is not necessary for the said parties to base
their action to the existence of the partnership, but on the fact
that of having contributed some money to the partnership
capital. And hence, the charitable institution of the domicile of
the partnership, and in the default thereof, those of the
province are not necessary parties in this case.
The article cited above permits no action for the purpose of
obtaining the earnings made by the unlawful partnership,
during its existence as result of the business in which it was
engaged, because for the purpose, as Manresa remarks, the
partner will have to base his action upon the partnership
contract, which is to annul and without legal existence by
reason of its unlawful object; and it is self-evident that what
does not exist cannot be a cause of action. Hence, paragraph 2
of the same article provides that when the dissolution of the
unlawful partnership is decreed, the pro ts cannot inure to the
bene t of the partners, but must be given to some charitable
institution. The pro ts are so applied, and not the contributions,
because this would be an excessive and unjust sanction for, as
we have seen, there is no reason, in such a case, for depriving
the partner of the portion of the capital that he contributed, the
circumstances of the two cases being entirely di erent.
Art. 1807. Every partner must account to the partnership for
any bene t, and hold as trustee for it any pro ts derived by him
without the consent of the other partners from any transaction
connected with the formation, conduct, or liquidation of the
partnership or from any use by him of its property.

Article 1771. A partnership may be constituted in any form,

except where immovable property or real rights are contributed
thereto, in which case a public instrument shall be necessary.
(1667a)
G.R. No. 21639
September 25, 1924
ALBERT F. KIEL, plaintiff-appellee,
vs.
ESTATE OF P. S. SABERT, defendant-appellant.
J. F. Yeager for appellant.J. S. Alano for appellee.
MALCOLM, J.:
This action relates to the legal right of Albert F. Kiel to secure
from the estate of P. S. Sabert the sum of P20,000, on a claim
first presented to the commissioners and disallowed, then on
appeal to the Court of First Instance allowed, and ultimately the
subject-matter of the appeal taken to this court.
A skeletonized statement of the case and the facts based on
the complaint, the findings of the trial judge, and the record,
may be made in the following manner:
In 1907, Albert F. Kiel along with William Milfeil commenced to
work on certain public lands situated in the municipality of
Parang, Province of Cotabato, known as Parang Plantation
Company. Kiel subsequently took over the interest of Milfeil. In
1910, Kiel and P. S. Sabert entered into an agreement to
develop the Parang Plantation Company. Sabert was to furnish
the capital to run the plantation and Kiel was to manage it.
They were to share and share alike in the property. It seems
that this partnership was formed so that the land could be
acquired in the name of Sabert, Kiel being a German citizen
and not deemed eligible to acquire public lands in the
Philippines.
By virtue of the agreement, from 1910 to 1917, Kiel worked
upon and developed the plantation. During the World War, he
was deported from the Philippines.
On August 16, 1919, five persons, including P. S. Sabert,
organized the Nituan Plantation Company, with a subscribed

capital of P40,000. On April 10, 1922, P. S. Sabert transferred all

of his rights in two parcels of land situated in the municipality
of Parang, Province of Cotabato, embraced within his
homestead application No. 21045 and his purchase application
No. 1048, in consideration of the sum of P1, to the Nituan
Plantation Company.
In this same period, Kiel appears to have tried to secure a
settlement from Sabert. At least in a letter dated June 6, 1918,
Sabert wrote Kiel that he had offered "to sell all property that I
have for P40,000 or take in a partner who is willing to develop
the plantation, to take up the K. & S. debt no matter which way
I will straiten out with you." But Sabert's death came before
any amicable arrangement could be reached and before an
action by Kiel against Sabert could be decided. So these
proceedings against the estate of Sabert.
In this court, the defendant-appellant assigns the following
errors:
The lower court erred
(1) In finding this was an action to establish a resulting trust in
land.
(2) In finding a resulting trust in land could have been
established in public lands in favor of plaintiff herein who was
an alien subject at the same time said alleged resulting trust
was created.
(3) In finding a resulting trust in land had been established by
the evidence in the case.
(4) In admitting the testimony of the plaintiff herein.
(5) In admitting the testimony of William Milfeil, John C.
Beyersdorfer, Frank R. Lasage, Oscar C. Butler and Stephen
Jurika with reference to alleged statements and declarations of
the deceased P. S. Sabert.
(6) In finding any copartnership existed between plaintiff and
the deceased Sabert.
(7) In rendering judgment for the plaintiff herein.
Errors 1, 2, and 3, relating to resulting trusts. These three
errors discussing the same subject may be resolved together. In

effect, as will soon appear, we reach the conclusion that both

parties were in error in devoting so much time to the
elaboration of these questions, and that a ruling on the same is
not needed.
It is conceivable, that the facts in this case could have been so
presented to the court by means of allegations in the
complaint, as to disclose characteristics of a resulting trust. But
the complaint as framed asks for a straight money judgment
against an estate. In no part of the complaint did plaintiff allege
any interest in land, claim any interest in land, or pretend to
establish a resulting trust in land. That the plaintiff did not care
to press such an action is demonstrated by the relation of the
fact of alienage with the rule, that a trust will not be created
when, for the purpose of evading the law prohibiting one from
taking or holding real property, he takes a conveyance thereof
in the name of a third person. (26 R. C. L., 1214-1222; Leggett
vs. Dubois [1835], 5 Paige, N. Y., 114; 28 Am. Dec., 413.)
The parties are wrong in assuming that the trial judge found
that this was an action to establish a resulting trust in land. In
reality, all that the trial judge did was to ground one point of his
decision on an authority coming from the Supreme Court of
California, which discussed the subject of resulting trusts.
Error 4, relating to the admission of testimony of the plaintiff
herein. Well taken.
The Code of Civil Procedure in section 383, No. 7, names as
incompetent witnesses, parties to an action or proceeding
against an executor or administrator of a deceased person
upon a claim or demand against the estate of such deceased
person, who "cannot testify as to any matter of fact occuring
before the death of such deceased person." But the trial judge,
misled somewhat by the decision of the Supreme Court of
California in the city of Myers vs. Reinstein ([1885], 67 Cal., 89),
permitted this testimony to go in, whereas if the decision had
been read more carefully, it would have been noted that "the
action was not on a claim or demand against the estate of
Reinstein." Here this is exactly the situation which confronts us.

The case of Maxilom vs. Tabotabo ([1907], 9 Phil., 390), is

squarely on all fours with the case at bar. It was there held that
"A party to an action against an executor or administrator of a
deceased person, upon a claim against the estate of the latter,
is absolutely prohibited by law from giving testimony
concerning such claim or demand as to anything that occurred
before the death of the person against whose estate the action
is prosecuted."
Error 5, relating to the testimony of five witnesses with
reference to alleged statements and declarations of the
deceased P. S. Sabert. Not well taken.
By section 282 of the Code of Civil Procedure, the declaration,
act, or omission of a deceased person having sufficient
knowledge of the subject, against his pecuniary interest, is
admissible as evidence to that extent against his successor in
interest. By section 298, No. 4, of the same Code, evidence
may be given up a trial of the following facts: ". . . the act or
declaration of a deceased person, done or made against his
interest in respect to his real property." (See Leonardo vs.
Santiago [1907], 7 Phil., 401.) The testimony of these witnesses
with reference to the acts or declarations of Sabert was,
therefore, properly received for whatever they might be worth.
Error 6, relating to the existence of a copartnership between
Kiel and Sabert. Not well taken.
No partnership agreement in writing was entered into by Kiel
and Sabert. The question consequently is whether or not the
alleged verbal copartnership formed by Kiel and Sabert has
been proved, if we eliminate the testimony of Kiel and only
consider the relevant testimony of other witnesses. In
performing this task, we are not unaware of the rule of
partnership that the declarations of one partner, not made in
the presence of his copartner, are not competent to prove the
existence of a partnership between them as against such other
partner, and that the existence of a partnership cannot be
established by general reputation, rumor, or hearsay. (Mechem
on Partnership, sec. 65; 20 R. C. L., sec. 53; Owensboro Wagon

Company vs. Bliss [1901], 132 Ala., 253.)

The testimony of the plaintiff's witnesses, together with the
documentary evidence, leaves the firm impression with us that
Kiel and Sabert did enter into a partnership, and that they were
to share equally. Applying the tests as to the existence of
partnership, we feel that competent evidence exists
establishing the partnership. Even more primary than any of
the rules of partnership above announced, is the injunction to
seek out the intention of the parties, as gathered from the facts
and as ascertained from their language and conduct, and then
to give this intention effect. (Giles vs. Vette [1924], 263 U. S.,
553.)
Error 7, relating to the judgment rendered for the plaintiff.
Well taken in part.
The judgment handed down, it will be remembered, permitted
the plaintiff to recover from the estate the full amount claimed,
presumably on the assumption that Sabert having sold by
property to the Nituan Plantation Company for P40,000, Kiel
should have one-half of the same, or P20,000. There is,
however, extant in the record absolutely no evidence as to the
precise amount received by Sabert from the sale of this
particular land. If it is true that Sabert sold all his land to the
Nituan Plantation Company for P40,000, although this fact was
not proven, what part of the P40,000 would correspond to the
property which belonged to Kiel and Sabert under their
partnership agreement? It impresses us further that Kiel under
the facts had no standing in court to ask for any part of the
land and in fact he does not do so; his only legal right is to ask
for what is in effect an accounting with reference to its
improvements and income as of 1917 when Sabert became the
trustee of the estate on behalf of Kiel.
As we have already intimated, we do not think that Kiel is
entitled to any share in the land itself, but we are of the opinion
that he has clearly shown his right to one-half of the value of
the improvements and personal property on the land as to the
date upon which he left the plantation. Such improvements and

personal property include buildings, coconut palms, and other

plantings, cattle and other animals, implements, fences, and
other constructions, as well as outstanding collectible credits, if
any, belonging to the partnership. The value of these
improvements and of the personal property cannot be
ascertained from the record and the case must therefore be
remanded for further proceedings.

Article 1772. Every contract of partnership having a capital of

three thousand pesos or more, in money or property, shall
appear in a public instrument, which must be recorded in the
Office of the Securities and Exchange Commission.
Failure to comply with the requirements of the preceding
paragraph shall not affect the liability of the partnership and
the members thereof to third persons. (n)
Article 1773. A contract of partnership is void, whenever
immovable property is contributed thereto, if an inventory of
said property
is not made, signed by the parties, and attached to the public
instrument. (1668a)
TORRES v. CA
FACTS: In 1969, sisters Antonia Torres and Emeteria Baring
entered into a joint venture agreement with Manuel Torres.
Under the agreement, the sisters agreed to execute a deed of
sale in favor Manuel over a parcel of land, the sisters received
no cash payment from Manuel but the promise of pro ts (60%
for the sisters and 40% for Manuel) said parcel of land is to be
developed as a subdivision.
Manuel then had the title of the land transferred in his name

and he subsequently mortgaged the property. He used the

proceeds from the mortgage to start building roads, curbs and
gutters. Manuel also contracted an engineering rm for the
building of housing units. But due to adverse claims in the land,
prospective buyers were scared o and the subdivision project
eventually failed.
The sisters then led a civil case against Manuel for damages
equivalent to 60% of the value of the property, which according
to the sisters, is whats due them as per the contract.
The lower court ruled in favor of Manuel and the Court of
Appeals a rmed the lower court.
The sisters then appealed before the Supreme Court where
they argued that there is no partnership between them and
Manuel because the joint venture agreement is void.
ISSUE: Whether or not there exists a partnership.
HELD: Yes. The joint venture agreement the sisters entered
into with Manuel is a partnership agreement whereby they
agreed to contribute property (their land) which was to be
developed as a subdivision. While on the other hand, though
Manuel did not contribute capital, he is an industrial partner for
his contribution for general expenses and other costs.
Furthermore, the income from the said project would be divided
according to the stipulated percentage (60-40). Clearly, the
contract manifested the intention of the parties to form a
partnership. Further still, the sisters cannot invoke their right to
the 60% value of the property and at the same time deny the
same contract which entitles them to it.
At any rate, the failure of the partnership cannot be blamed on
the sisters, nor can it be blamed to Manuel (the sisters on their
appeal did not show evidence as to Manuels fault in the failure
of the partnership). The sisters must then bear their loss (which

is 60%). Manuel does not bear the loss of the other 40%
because as an industrial partner he is exempt from losses.
Article 1774. Any immovable property or an interest therein
may be acquired in the partnership name. Title so acquired can
be conveyed only in the partnership name. (n)
Article 1775. Associations and societies, whose articles are
kept secret among the members, and wherein any one of the
members may contract in his own name with third persons,
shall have no juridical personality, and shall be governed by the
provisions relating to co-ownership. (1669)
Article 1776. As to its object, a partnership is either universal
or
particular.
As regards the liability of the partners, a partnership may be
general
or
limited.
(1671a)
Article 1777. A universal partnership may refer to all the
present property or to all the profits. (1672)
Article 1778. A partnership of all present property is that in
which the partners contribute all the property which actually
belongs to them to a common fund, with the intention of
dividing the same among themselves, as well as all the profits
which they may acquire therewith. (1673)
Article 1779. In a universal partnership of all present
property, the property which belonged to each of the partners
at the time of the constitution of the partnership, becomes the
common property of all the partners, as well as all the profits
which they may acquire therewith.

A stipulation for the common enjoyment of any other profits

may also be made; but the property which the partners may
acquire subsequently by inheritance, legacy, or donation
cannot be included in such stipulation, except the fruits thereof.
(1674a)
Article 1780. A universal partnership of profits comprises all
that the partners may acquire by their industry or work during
the existence of the partnership.
Movable or immovable property which each of the partners
may possess at the time of the celebration of the contract shall
continue to pertain exclusively to each, only the usufruct
passing to the partnership. (1675)
Article 1781. Articles of universal partnership, entered into
without specification of its nature, only constitute a universal
partnership of profits. (1676)
Article 1782. Persons who are prohibited from giving each
other any donation or advantage cannot enter into universal
partnership. (1677)
COMMISSIONER OF INTERNAL REVENUE VS. SUTER
Facts: In 1947, A limited partnership, William J. Suter
Morcoin Co., Ltd., was formed with William Suter as general
partner, Julia Spirig and Gustav Carlson as limited partners,
each contributing to the partnership. In 1948, Suter married
Spirig and thereafter, Carlson sold his share in the partnership
to Suter and his wife. The limited partnership had been filing its
income tax returns (ITRs) as a corporation w/o objection from
the CIR. Later in an assessment, the CIR consolidated the
income of the firm and the individual incomes of partnerspouses resulting in a determination of a deficiency income tax
against Suter. Suter protested and requested cancellation and

withdrawal but was denied by the CIR. Suter appealed to the

Court of Tax Appeals w/c reversed CIRs decision.

it to pay income tax. What is taxable is the income of both

spouses in their individual capacities.

Issues:

The Insular Life Assurance Co., Ltd. vs. Ebrado

(1) Should the corporate personality of the partnership be

disregarded for income tax purposes since partner-spouses
form a single taxable unit?

FACTS:
On September 1, 1968, Buenaventura Cristor Ebrado was
issued by The Life Assurance Co., Ltd., on a whole-life for
P5,882.00 with a rider for Accidental Death for the same
amount. He designated Carponia T. Ebrado, his common-law
wife as the revocable beneficiary in his policy. He referred to
her as his wife in the policy. On October 21, 1969, He died as a
result of an accident when he was hit by a failing branch of a
tree. As the policy was in force, the insurance company was
liable to pay the coverage in the total amount of P11,745.73,
representing the face value of the policy in the amount of
P5,882.00 plus the additional benefits for accidental death also
in the amount of P5,882.00 and the refund of P18.00 paid for
the premium due November, 1969, minus the unpaid premiums
and interest thereon due for January and February, 1969, in the
sum of P36.27. Carponia T. Ebrado filed a claim for the
proceeds of the Policy as the designated beneficiary therein,
although she admits that she and the insured Buenaventura C.
Ebrado were merely living as husband and wife without the
benefit of marriage. Pascual T. Ebrado, also filed a claim to the
insurance company, this time claiming to be the legal wife
Buenaventura. She asserts that she has a better right over the
proceeds than Carponia who is a common-law wife. As the
insurance company is at a loss as to whom to give the
proceeds, it commenced an action for interpleader in court.
After the issues have been joined, a pre-trial conference was
held on July 8, 1972, that there is no possibility of amicable
settlement. The Court proceeded to have the parties submit
their evidence for the purpose of the pre-trial and make
admissions for the purpose of pretrial. On September 25, 1972,

(2)Was the partnership dissolved after the marriage of partnerspuses and subsequent sale of Carlson of his participation in
the partnership?
Held: CTA decision affirmed. The limited partnership was not a
universal partnership but a particular one. A universal
partnership requires either that the object of the association be
all the present property of the partners, as contributed by them
to the common fund, or else all that the partners may acquire
by their industry or work during the existence of the
partnership. In the instant case, all of the contributions were
fixed sums of money and neither of them were industrial
partners. Thus it was not a partnership that spouses were
forbidden to enter under the 1889 Civil Code.
The capital contributions of partner-spouses were separately
owned and contributed by them before their marriage; and
after they were joined in wedlock, such contributions remained
their respective separate property under the Spanish Civil
Code. Thus, the individual interest of each did not become
common property of both after their marriage.
In this case the limited partnership is not a mere business
conduit of the partner-spouses; it was organized for legitimate
business purposes, The change in its membership brought
about by the marriage is not a ground for withdrawing the
partnership from coverage under 24 of the tax code requiring

the trial court rendered judgment declaring among others,

Carponia T. Ebrado disqualified from becoming beneficiary of
the insured Buenaventura Cristor Ebrado and directing the
payment of the insurance proceeds to the estate of the
deceased insured. From this judgment, Carponia T. Ebrado
appealed to the Court of Appeals, but on July 11, 1976, the
Appellate Court certified the case to Us as involving only
questions of law.
ISSUE:
Whether or not a common-law wife named as beneficiary in the
life insurance policy of a legally married man claim the
proceeds thereof in case of death of the latter.
HELD:
The appealed judgment of the lower court is hereby affirmed.
Carponia T. Ebrado is hereby declared disqualified to be the
beneficiary of the late Buenaventura C. Ebrado in his life
insurance policy. As a consequence, the proceeds of the policy
are hereby held payable to the estate of the deceased insured.
Costs against Carponia T. Ebrado.
A common-law wife named as a beneficiary in the life insurance
policy of a legally married man cannot claim the proceeds
thereof in case the death of the latter. The contract of
insurance is govern by the provisions of the new civil code on
matters not specifically provided for in the insurance code.
Rather, the general rules of civil law should be applied to
resolve this void in the Insurance Law. Article 2011 of the New
Civil Code states: The contract of insurance is governed by
special laws. Matters not expressly provided for in such special
laws shall be regulated by this Code. When not otherwise
specifically provided for by the Insurance Law, the contract of
life insurance is governed by the general rules of the civil law
regulating contracts. And under Article 2012 of the same Code,
any person who is forbidden from receiving any donation
under Article 739 cannot be named beneficiary of a fife
insurance policy by the person who cannot make a donation to

him. Common-law spouses are, definitely, barred from receiving

donations from each other. Also conviction for adultery or
concubinage is not required as only preponderance of evidence
is necessary. In essence, a life insurance policy is no different
from a civil donation insofar as the beneficiary is concerned.
Both are founded upon the same consideration: liberality. A
beneficiary is like a donee, because the premiums of the policy
which the insured pays out of liberality, the beneficiary will
receive the proceeds or profits of said insurance.

Article 1783. A particular partnership has for its object

determinate things, their use or fruits, or a specific
undertaking, or the exercise of a profession or vocation
LITONJUA, JR. v. LITONJUA, SR.
FACTS: Aurelio and Eduardo are brothers. In 1973, Aurelio
alleged that Eduardo entered into a contract of partnership with
him. Aurelio showed as evidence a letter sent to him by
Eduardo that the latter is allowing Aurelio to manage their
family business (if Eduardos away) and in exchange thereof he
will be giving Aurelio P1 million or 10% equity, whichever is
higher. A memorandum was subsequently made for the said
partnership agreement. The memorandum this time stated that
in exchange ofAurelio, who just got married, retaining his share
in the family business (movie theatres, shipping and land
development) and some other immovable properties, he will be
given P1 Million or 10% equity in all these businesses and those
to be subsequently acquired by them whichever is greater.
In 1992 however, the relationship between the brothers went
sour. And so Aureliodemanded an accounting and the
liquidation of his share in the partnership. Eduardo did not heed
and so Aurelio sued Eduardo.

ISSUE: Whether or not there exists a partnership.

HELD:No. The partnership is void and legally nonexistent. The
documentary evidence presented by Aurelio, i.e. the letter from
Eduardo and the Memorandum, did not prove partnership.
The 1973 letter from Eduardo on its face, contains typewritten
entries, personal in tone, but is unsigned and undated. As an
unsigned document, there can be no quibbling that said letter
does not meet the public instrumentation requirements
exacted under Article 1771 (how partnership is constituted) of
the Civil Code. Moreover, being unsigned and doubtless
referring to a partnership involving more than P3,000.00 in
money or property, said lettercannot be presented for
notarization, let alone registered with the Securities and
Exchange Commission (SEC), as called for under the Article
1772 (capitalization of a partnership) of the Code. And
inasmuch as the inventory requirement under the succeeding
Article 1773 goes into the matter of validity when immovable
property is contributed to the partnership, the next logical point
of inquiry turns on the nature of Aurelios contribution, if any, to
the supposed partnership.
The Memorandum is also not a proof of the partnership for the
same is not a public instrument and again, no inventory was
made of the immovable property and no inventory was
attached to the Memorandum. Article 1773 of the Civil Code
requires that if immovable property is contributed to the
partnership an inventory shall be had and attached to the
contract.

Article 1784. A partnership begins from the moment of the

execution of the contract, unless it is otherwise stipulated.
(1679)

Ortega vs. CA

FACTS:
On December 19, 1980, respondent Misa associated himself
together, as senior partner with petitioners Ortega, del Castillo,
Jr., and Bacorro, as junior partners. On Feb. 17, 1988,
respondent Misa wrote a letter stating that he is withdrawing
and retiring from the firm and asking for a meeting with the
petitioners to discuss the mechanics of the liquidation. On June
30, 1988, petitioner filed a petition to the Commision's
Securities Investigation and Clearing Department for the formal
dissolution and liquidation of the partnership. On March 31,
1989, the hearing officer rendered a decision ruling that the
withdrawal of the petitioner has not dissolved the partnership.
On appeal, the SEC en banc reversed the decision and was
affirmed by the Court of Appeals. Hence, this petition.
ISSUE:
Whether or not the Court of Appeals has erred in holding that
the partnership is a partnership at will and whether or not the
Court of Appeals has erred in holding that the withdrawal of
private respondent dissolved the partnership regardless of his
good or bad faith

HELD:
No. The SC upheld the ruling of the CA regarding the nature of
the partnership. The SC further stated that a partnership that
does not fix its term is a partnership at will. The birth and life of
a partnership at will is predicated on the mutual desire and
consent of the partners. The right to choose with whom a
person wishes to associate himself is the very foundation and
essence of that partnership. Its continued existence is, in turn,
dependent on the constancy of that mutual resolve, along with

each partner's capability to give it, and the absence of a cause

for dissolution provided by the law itself. Verily, any one of the
partners may, at his sole pleasure, dictate a dissolution of the
partnership at will. He must, however, act in good faith, not
that the attendance of bad faith can prevent the dissolution of
the partnership but that it can result in a liability for damages.

FERNANDEZ vs. DE LA ROSA

G.R. No. 413
February 2, 1903
FACTS: Fernandez alleges that in January, 1900, he entered
into a verbal agreement with Dela Rosa to form a partnership
for the purchase of cascoes and the carrying on of the business
of letting the same for hire in Manila, and Dela Rosa is 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; Fernandez furnished Dela Rosa sums to
purchase and repair cascoes, the latter taking the titles 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 the 2nd casco 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.
Dela Rosa 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, but he denies that any agreement

was ever consummated. He denies that the plaintiff furnished

any money in January, 1900, for the purchase of the first casco,
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
Fernandez March 5, he claims was for the purchase of the first
casco, which he alleged was bought March 12, and he alleges
that he never received anything from the defendant toward the
purchase of the 2nd casco. He claims to have paid, exclusive of
repairs, 1,200 pesos for the first casco and 2,000 pesos for the
second one.
ISSUE:
(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?
HELD:
(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.)
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.)
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.
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.
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.
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.
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 defendants
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.

Article 1785. When a partnership for a fixed term or particular

undertaking is continued after the termination of such term or
particular undertaking without any express agreement, the
rights and duties of the partners remain the same as they were
at such termination, so far as is consistent with a partnership at
will.
A continuation of the business by the partners or such of them
as habitually acted therein during the term, without any
settlement or liquidation of the partnership affairs, is prima
facie evidence of a continuation of the partnership. (n)
Article 1786. Every partner is a debtor of the partnership for
whatever he may have promised to contribute thereto.
Lozana vs. Depakakibo
Case Digest
FACTS:
Lozana and Depakakibo established a partnership for the
purpose of maintaining, operating, anddistributing electric light
and power in the Municipality of Dumangas. The partnership is

capitalized at the sum ofP30, 000.00 where Lozana agreed to

furnish 60% while Depakakibo, 40%. However, the franchise for
venture in favor of Buenaflor was cancelled and revoked by the
Public ServiceCommission. Lozana thereafter sold Generator
Buda [Lozanas contribution to the partnership; no liquidation
made] to Decologon. When the decision was appealed, a
temporary certificate of public convenience was issued inthe
name of Decolongon. Depakakibo sold one Crossly Diesel
Engine [Depakakibos contribution to the partnership] to
Spouses Jimenea and Harder.Lozana brought action against
Depakakibo alleging the latter wrongfully detained the
Generator Buda and wooden posts to which he is entitled to the
possession of. Lozano prayed the properties be delivered back
to him.
CFI ordered sheriff to take possession of the properties and the
delivery thereof to Lozano. Depakakiboalleged properties have
been contributed to the partnership and therefor he is
not unlawfully detaining them. Inaddition, Lozano sold his
contribution to partnership in violation of terms of their
agreement.
CFI declared Lozano owner of and entitled to the equipment.
Depakakibo appealed decision to theSupreme Court.
ISSUE:
W/N partnership is void or the act of the partnership in
furnishing
electric
current
to
the
franchise
holder
withoutprevious approval of Public Service Commission render
the partnership void?W/N disposal of contribution of parties
is allowed.
RULING:
Validity of the Partnership. Partnership is valid. The fact of
furnishing the current to the holder of thefranchise alone,
without the previous approval of the Public Service
Commission, does not per se make thecontract of partnership
null and void from the beginning and render the partnership

entered into by the parties forthe purpose also void and nonexistent
Disposal of Contributed Property to the Partnership.
Facts show that parties entered into the contract ofpartnership,
Lozana contributing the amount of P18, 000, and there has
not been liquidation prior to the sale ofthe contributed
properties: Buda Diesel Engine and 70 posts. It necessarily
follows that the Buda diesel enginecontributed by the plaintiff
had become the property of the partnership. As properties of
the partnership, thesame could not be disposed of by the party
contributing the same without the consent or approval of
thepartnership or of the other partner.
G.R. No. L-33580 February 6, 1931MAXIMILIANO SANCHO,
plaintiff-appellant,vs.
SEVERIANO LIZARRAGA,
defendant-appellee.
ROMUALDEZ,
J.:
FACTS:
The plaintiff brought an action for the rescission of a
partnership contract between himself and the defendant,
thereimbursement by the latter of his 50,000 peso investment
therein, with interest at 12 per cent per annum fromOctober
15, 1920.The defendant denies generally and specifically all the
allegations of the complaint and asks for the dissolution of
thepartnership, and the payment to him as its manager and
administrator of P500 monthly from October 15, 1920, until
thefinal dissolution, with interest, one-half of said amount to be
charged to the plaintiff.The CFI of Manila held that
the defendant had not contributed all the capital he had bound
himself to invest, and thatthe plaintiff had demanded that the
defendant liquidate the partnership, declared it dissolved on

account of theexpiration of the period for which it

was constituted, and ordered the defendant, as managing
partner, to proceedwithout delay to liquidate it, submitting to
the court the result of the liquidation.
Issue:
W/N Sancho entitled to rescission of
contract and to the return of his investment.

the

partnership

Held:
No
Ratio:
Counsel for the appellee, says that the appeal is premature.
The point is based on the contention that inasmuch as the
liquidation ordered by the trial court, and the consequent
accounts, have not been made and submitted, the case
cannot be deemed terminated in said court and its ruling is not
yet appealable.
This contention is well founded. Until the accounts have been
rendered as ordered by the trial court, and until they havebeen
either approved or disapproved, the litigation involved in this
action cannot be considered as completely decided. But even
going into the merits of the case, the affirmation of the
judgment appealed from is inevitable.
Articles 1681and 1682 have been properly applied. Owing to
the defendant's failure to pay to the partnership the whole
amount which he bound himself to pay, he became indebted to
it for the remainder, with interest and any damages occasioned
thereby, but the plaintiff did not thereby acquire the right to
demand rescission of the partnership contract according to
Article 1124 of the Code. This article cannot be applied to the
case in question, because it refers to the resolution
of obligations in general, whereas article 1681 and 1682
specifically refer to the contract of partnership in particular.

And itis a well-known principle that special provisions prevail

over general provisions.
Uy vs. Puzon, 79 SCRA 598 [1977]

Facts:
Bartolome Puzon had two contracts with the government for
the construction of roads and bridges. (Bureau of Public
Highways)
He sought the financial assistance of William Uy, so he
proposed that they create a partnership which would be the
sub-contractor of the projects.
They also agreed that the profits will be divided among
themselves.
William Uy agreed to the formation of the partnership "U.P.
Construction Company". They agreed to contribute P50,000
each. (Note: P40,000 was advanced by William Uy while Puzon
was waiting for the approval of his P150,000 PNB Loan. Upon
release of the loan, he promised to reimburse William Uy of the
P40,000; pay his share of P50,000 and loan P60,000 to the
partnership).
Loan was approved by November 1956. Note: At the end of
1957, Uy contributed a total of P115,
The partnership agreement was signed in 1957 (January 18)
although the work for the projects began as early as 1956
(October 1).
Since Puzon was busy with other projects, Uy was the one who
managed the partnership.
In order to guarantee the PNB Loan, Puzon, without the
knowledge of Uy, assigned the payments to the payments to be
received from the projects to PNB.
Due to the financial demands of the projects, Uy demanded
that Puzon comply with his obligation to place his capital
contribution in the company.

However, Puzon failed to comply even after formal demand

letters were sent to him.
Thereafter, Puzon (as the primary contractor of the projects)
wrote terminated the subcontract agreement with the
partnership to which he is also a partner. (November 27, 1957)
Thereafter, Uy was not allowed to hold office in the UP
Construction Company and his authority to negotiate with the
Bureau was revoked by Puzon.
Uy clamied that Puzon had violated the terms of their
partnership agreement. He sought for the dissolution of the
partnership with damages.
The lower court ruled in favor of Uy.
Issue: WON Puzon failed to comply with his obligation of
paying the capital contribution to the company. YES
Ruling: YES
According to the court, there was failure on the part of Puzon to
contribute capital to the partnership. When his load with PNB
was approved, he only gave P60,000 to Uy; P40,000 was for
reimbursement to the payments made by Uy and the other
P20,000 was for the capital contribution. Thereafter, Puzon
never made additional contribution.
Also, it was found by the SC that Puzon misapplied partnership
funds by assigning all payments for the projects to PNB.
Such assignment was prejudicial to the partnership since the

partnership only received a small share from the total

payments made by the Bureau of Public Highways. As a result,
the partnership was unable to discharge its obligations.
Here, the Court ordered Puzon to reimburse whatever amount
Uy had invested in or spent for the partnership on account of
construction projects. The amount P200,000 as compensatory
damages was also awarded in favor of Uy.
RULING:
Had the appellant not been remiss in his obligations as partner
and as prime contractor of the construction projects in question
as he was bound to perform pursuant to the partnership and
subcontract agreements, and considering the fact that the total
contract amount of these two projects is P2,327,335.76, it is
reasonable to expect that the partnership would have earned
much more than the P334,255.61 We have hereinabove
indicated. The award, therefore, made by the trial court of the
amount of P200,000.00, as compensatory damages, is not
speculative, but based on reasonable estimate.
WHEREFORE, finding no error in the decision appealed from,
the said decision is hereby affirmed with costs against the
appellant, it being understood that the liability mentioned
herein shall be home by the estate of the deceased Bartolome
Puzon, represented in this instance by the administrator
thereof, Franco Puzon.