FEDERICO JARANTILLA JR.

Vs ANTONIETA JARANTILLA
G.R. No. 154486 December 1, 2010

FACTS:

The Spouses Andres and Felisa Jarantillo were survived by eight children: Federico, Delfin, Benjamin, Conchita,
Rosita, Pacita, Rafael and Antonieta. Petitioner Federico Jr. Is the grandchild of the late Jarantilla spouses by
their son Federico Sr.

In 1948, the Jarantilla heirs extrajudicially partitioned amongst themselves the real properties of their deceased
parents. With the exception of the real property adjudicated to Pacita jarantilla, the heirs also agreed to allot
the produce of the said real properties for the years 1947-1949 for the studies of Rafael and Antonieta.

In the same year, the spouses Rosita Jarantilla and Vivencio Deocampo entered into an agreement with the
spouses Buenaventura Romatigue and Conchita Jarantilla to provide mutual assistance to each other by way
of financial support to any commercial and agricultural activity on a joint business arrangement. The business
relationship proved to be successful. The partnership ended in 1973 when the parties, in an “agreement”,
voluntarily agreed to completely dissolve their “joint business relationship/agreement.”

The spouses Buenaventura and Conchita Remotigue executed a document acknowledging that while
registered only in Buenaventure Remotigue’s name, they were not the only owners of the capital of the
businesses Manila Athletic, Remotigue Trading. In the same acknowledgement they stated the participating
capital of their co-owners as of the year 1952, with Antonieta Jarantilla’s stated as P8,000 and Federico
Jarantilla Jr. As P5,000.

The controversy started when Antonieta filed a complaint against Buenaventura, Cynthia, Doroteo and Tomas,
for the accounting of the assets and income of the co-ownership, for its partition and the delivery of her share
corresponding to eight percent (8%), and for damages. She alleged that the initial contribution of property and
money came from the heirs inheritance, and her subsequent annual investment of seven thousand five
hundred pesos (P7,500.00) as additional capital came from the proceeds of her farm.

Respondents denied having formed a partnership. They did not deny the existence and validity of the
"Acknowledgement of Participating Capital" and in fact used this as evidence to support their claim that
Antonietas 8% share was limited to the businesses enumerated therein. Petitioner Federico Jr joined his aunt
Antonieta and likewise asserted his share in the supposed partnership.

The RTC rendered judgement in favour of Antonieta and Federico. The CA agreed with the RTC. Hence, the
petition.

ISSUE:

W/N the partnership subject to the “Acknowledgement of Participating Capital”, funded the subject real
properties.

RULING:

NO.
The common ownership of property does not itself create a partnership between the owners, though they may
use it for the purpose of making gains; and they may, without becoming partners, agree among themselves as
to the management, and use of such property and the application of the proceeds therefrom.
Under Article 1767 of the Civil Code, there are two essential elements in a contract of partnership: (a) an
agreement to contribute money, property or industry to a common fund; and (b) intent to divide the profits
among the contracting parties.

It is not denied that all the parties in this case have agreed to contribute capital to a common fund to be able
to later on share its profits. They have admitted this fact, agreed to its veracity, and even submitted one
common documentary evidence to prove such partnership - the Acknowledgement of Participating Capital.

The Acknowledgement of Participating Capital is a duly notarized document voluntarily executed by Conchita
Jarantilla-Remotigue and Buenaventura Remotigue in 1957. Petitioner does not dispute its contents and is
actually relying on it to prove his participation in the partnership. Article 1797 of the Civil Code provides:

Art. 1797. The losses and profits shall be distributed in conformity with the agreement. If only the share of each
partner in the profits has been agreed upon, the share of each in the losses shall be in the same proportion.

In the absence of stipulation, the share of each partner in the profits and losses shall be in proportion to what
he may have contributed, but the industrial partner shall not be liable for the losses.

The petitioner himself claims his share to be 6%, as stated in the Acknowledgement of Participating Capital.
However, petitioner fails to realize that this document specifically enumerated the businesses covered by the
partnership: Manila Athletic Supply, Remotigue Trading in Iloilo City and Remotigue Trading in Cotabato City.
Since there was a clear agreement that the capital the partners contributed went to the three businesses, then
there is no reason to deviate from such agreement and go beyond the stipulations in the document. Therefore,
the Court of Appeals did not err in limiting petitioners share to the assets of the businesses enumerated in the
Acknowledgement of Participating Capital.

The petitioner further asserts that he is entitled to respondents properties based on the concept of trust. He
claims that since the subject real properties were purchased using funds of the partnership, wherein he has a
6% share, then "law and equity mandates that he should be considered as a co-owner of those properties in
such proportion."

As a rule, the burden of proving the existence of a trust is on the party asserting its existence, and such proof
must be clear and satisfactorily show the existence of the trust and its elements. While implied trusts may be
proved by oral evidence, the evidence must be trustworthy and received by the courts with extreme caution,
and should not be made to rest on loose, equivocal or indefinite declarations. Trustworthy evidence is required
because oral evidence can easily be fabricated.

The petitioner has failed to prove that there exists a trust over the subject real properties. Aside from his bare
allegations, he has failed to show that the respondents used the partnerships money to purchase the said
properties. Even assuming arguendo that some partnership income was used to acquire these properties, the
petitioner should have successfully shown that these funds came from his share in the partnership profits. After
all, by his own admission, and as stated in the Acknowledgement of Participating Capital, he owned a mere
6% equity in the partnership.

VICENTE SY VS. CA & SAHOT

G.R. NO. 142293, February 27, 2003

FACTS:

Sometime in 1958, private respondent Jaime Sahot started working as a truck helper for petitioners’ family-
owned trucking business named Vicente Sy Trucking. In 1965, he became a truck driver of the same family
business, renamed T. Paulino Trucking Service, later 6B’s Trucking Corporation in 1985, and thereafter known as
SBT Trucking Corporation since 1994. Throughout all these changes in names and for 36 years, private
respondent continuously served the trucking business of petitioners. When Sahot was 59 years old, he incurred
several absences due to various ailments. Particularly causing him pain was his left thigh, which greatly
affected the performance of his task as a driver. He inquired about his medical and retirement benefits with the
Social Security System (SSS) on April 25, 1994, but discovered that his premium payments had not been remitted
by his employer. Sahot filed a week-long leave to get medical attention. He was treated for EOR, presleyopia,
hypertensive retinopathy G II and heart enlargement. Because of such, Belen Paulino of the SBT Trucking
Service management told him to file a formal request for extension of his leave.

When Sahot applied for an extended leave, he was threatened of termination of employment should he refuse
to go back to work. Eventually, Sahot was dismissed from employment which prompted the latter to file an
illegal dismissal case with the NLRC. For their part, petitioners admitted they had a trucking business in the 1950s
but denied employing helpers and drivers. They contend that private respondent was not illegally dismissed as
a driver because he was in fact petitioner’s industrial partner. They add that it was not until the year 1994, when
SBT Trucking Corporation was established, and only then did respondent Sahot become an employee of the
company, with a monthly salary that reached P4,160.00 at the time of his separation. The NLRC and the CA
ruled that Sahot was an employee of the petitioner.

ISSUE:

W/N Sahot is an industrial partner.

RULING:

NO. Article 1767 of the Civil Code states that in a 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. Not one of these circumstances is present in this case. No written agreement exists to prove the
partnership between the parties. Private respondent did not contribute money, property or industry for the
purpose of engaging in the supposed business. There is no proof that he was receiving a share in the profits as a
matter of course, during the period when the trucking business was under operation. Neither is there any proof
that he had actively participated in the management, administration and adoption of policies of the business.
Thus, the NLRC and the CA did not err in reversing the finding of the Labor Arbiter that private respondent was
an industrial partner from 1958 to 1994. On this point, the Court affirmed the findings of the appellate court and
the NLRC. Private respondent Jaime Sahot was not an industrial partner but an employee of petitioners from
1958 to 1994. The existence of an employer-employee relationship is ultimately a question of fact and the
findings thereon by the NLRC, as affirmed by the Court of Appeals, deserve not only respect but finality when
supported by substantial evidence. Substantial evidence is such amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion.

ANTONIA. TORRES VS COURT OF APPEALS

(G.R. No. 134559 December 9, 1999)

FACTS:

Sisters Antonia Torres and Emeteria Baring (petitioners) entered into a "joint venture agreement" with
Respondent Manuel Torres for the development of a parcel of land into a subdivision. Pursuant to the contract,
they executed a Deed of Sale covering the said parcel of land in favor of Torres, who then had it registered in
his name. By mortgaging the property, Torres obtained from Equitable Bank a loan of P40,000 which, under the
Joint Venture Agreement, was to be used for the development of the subdivision. All three of them also agreed
to share the proceeds from the sale of the subdivided lots. The project did not push through, and the land was
subsequently foreclosed by the bank.

Antonia and Emeteria’s allegations: the project failed because of Torres’ lack of funds or means and skills and
he used the loan not for the development of the subdivision, but in furtherance of his own company, Universal
Umbrella Company.

Manuel’s allegations: he used the loan to implement the Agreement. He claimed that the subdivision project
failed because petitioners and their relatives had separately caused the annotations of adverse claims on the
title to the land, which eventually scared away prospective buyers.

Petitioners filed a criminal case for estafa against respondent and his wife, who were however acquitted.

ISSUE:

Whether or not there was a joint venture/partnership between petitioners Antonia and Emeteria and
respondent Manuel.

RULING:

Yes.

The pertinent portions of the Joint Venture Agreement read as follows:

"KNOW ALL MEN BY THESE PRESENTS:

"This AGREEMENT, is made and entered into at Cebu City, Philippines, this 5th day of March, 1969, by and
between MR. MANUEL R. TORRES, . . . the FIRST PARTY, likewise, MRS. ANTONIA B. TORRES, and MISS EMETERIA
BARING, the SECOND PARTY:

WITNESSETH:

"That, whereas, the SECOND PARTY, voluntarily offered the FIRST PARTY, this property located at Lapu-Lapu City,
Island of Mactan, under Lot No. 1368 covering TCT No. T-0184 with a total area of 17,009 square meters, to be
sub-divided by the FIRST PARTY;

"Whereas, the FIRST PARTY had given the SECOND PARTY, the sum of: TWENTY THOUSAND (P20,000.00) Pesos,
Philippine Currency, upon the execution of this contract for the property entrusted by the SECOND PARTY, for
sub-division projects and development purposes;

"NOW THEREFORE, for and in consideration of the above covenants and promises herein contained the
respective parties hereto do hereby stipulate and agree as follows:

"ONE: That the SECOND PARTY signed an absolute Deed of Sale . . . dated March 5, 1969, in the amount of
TWENTY FIVE THOUSAND FIVE HUNDRED THIRTEEN & FIFTY CTVS. (P25,513.50) Philippine Currency, for 1,700 square
meters at ONE [PESO] & FIFTY CTVS. (P1.50) Philippine Currency, in favor of the FIRST PARTY, but the SECOND
PARTY did not actually receive the payment.

"SECOND: That the SECOND PARTY, had received from the FIRST PARTY, the necessary amount of TWENTY
THOUSAND (P20,000.00) pesos, Philippine currency, for their personal obligations and this particular amount will
serve as an advance payment from the FIRST PARTY for the property mentioned to be sub-divided and to be
deducted from the sales.

"THIRD: That the FIRST PARTY, will not collect from the SECOND PARTY, the interest and the principal amount
involving the amount of TWENTY THOUSAND (P20,000.00) Pesos, Philippine Currency, until the sub-division project
is terminated and ready for sale to any interested parties, and the amount of TWENTY THOUSAND (P20,000.00)
pesos, Philippine currency, will be deducted accordingly.

"FOURTH: That all general expense[s] and all cost[s] involved in the sub-division project should be paid by the
FIRST PARTY, exclusively and all the expenses will not be deducted from the sales after the development of the
sub-division project.

"FIFTH: That the sales of the sub-divided lots will be divided into SIXTY PERCENTUM 60% for the SECOND PARTY
and FORTY PERCENTUM 40% for the FIRST PARTY, and additional profits or whatever income deriving from the
sales will be divided equally according to the . . . percentage [agreed upon] by both parties.

"SIXTH: That the intended sub-division project of the property involved will start the work and all improvements
upon the adjacent lots will be negotiated in both parties[’] favor and all sales shall [be] decided by both
parties.

"SEVENTH: That the SECOND PARTIES, should be given an option to get back the property mentioned provided
the amount of TWENTY THOUSAND (P20,000.00) Pesos, Philippine Currency, borrowed by the SECOND PARTY, will
be paid in full to the FIRST PARTY, including all necessary improvements spent by the FIRST PARTY, and the FIRST
PARTY will be given a grace period to turnover the property mentioned above.

"That this AGREEMENT shall be binding and obligatory to the parties who executed same freely and voluntarily
for the uses and purposes therein stated."

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.

Under the above-quoted Agreement, petitioners would contribute property to the partnership in the form of
land which was to be developed into a subdivision; while respondent would give, in addition to his industry, the
amount needed for general expenses and other costs. Furthermore, the income from the said project would be
divided according to the stipulated percentage. Clearly, the contract manifested the intention of the parties to
form a partnership.

It should be stressed that the parties implemented the contract. Thus, petitioners transferred the title to the land
to facilitate its use in the name of the Respondent. On the other hand, respondent caused the subject land to
be mortgaged, the proceeds of which were used for the survey and the subdivision of the land. As noted
earlier, he developed the roads, the curbs and the gutters of the subdivision and entered into a contract to
construct low-cost housing units on the property. Respondent’s actions clearly belie petitioners’ contention that
he made no contribution to the partnership. Under Article 1767 of the Civil Code, a partner may contribute not
only money or property, but also industry.

AFISCO INSURANCE CORPORATION VS CA

G.R. NO. 112675 JANUARY 25, 1999

FACTS:
The petitioners are 41 non-life insurance corporations organized and existing under the laws of the Philippines.
They entered into a Quota Share Reinsurance Treaties with Munich, a non-resident foreign insurance
corporation, to cover for All Risk Insurance Policies over machinery erection, breakdown and boiler explosion.
The treaties required petitioners to form a pool, to which AFISCO and others complied. On April 14, 1976, the
pool of machinery insurers submitted a financial statement and filed an “Information Return of Organization
Exempt from Income Tax” for the year ending 1975, on the basis of which, it was assessed by the commissioner
of internal revenue deficiency corporate taxes. On the basis of this, the CIR assessed a deficiency of
1,843,273.60 and withholding taxes in the amount of 1,768,799.39 and 89,438.68 on dividends paid to Munich
and to the petitioners respectively. Petitioners (Afisco) contend that they cannot be taxed as corporation
because (a) the reinsurance policies were written by them individually and separately, (b) their liability was
limited to the extend of their allocated share in the original risks insured and not solidary, (c) there was no
common fund, (d) the executive board of the pool did not exercise control and management of its funds,
unlike the board of corporation, (e) the pool or clearing house was not and could not possibly have engaged
in the business of reinsurance from which it could have derived income for itself. They further contend that
remittances to Munich are not dividends and to subject it to tax would be tantamount to an illegal double
taxation.

ISSUE:

Whether or not the clearing house or insurance pool so formed deemed a partnership or an association that is
taxable as a corporation under the National Internal Revenue Code.

RULING:

A pool of individual real property owners dealing in real estate business was considered a corporation for the
purposes of the tax in Sec. 24 of the Tax Code in Evangelista vs. Collector of Internal Revenue, the Supreme
Court said that the term “partnership” includes a syndicate, group, pool, joint venture or other unincorporated
organization, through or by means of which any business, financial operation, or venture is carried on. Under
Art. 1767 of the civil code recognizes the creation of a contract of partnership when “two or more persons bind
themselves to contribute money, property, or industry to a common fund, with the intention of dividing the
profits among themselves. Its requisites are: (1) mutual contribution to a common stock, and (2) a joint interest
in the profits. In other words partnership is formed when persons contract “to devote to a common purpose
either money, property, or labor with the intention of dividing the profits between themselves. While an
association implies associates who enter into a joint enterprise for the transaction of business. In the case at bar,
the ceding companies entered into a Pool Agreement or an association that would handle all the insurance
businesses covered under their quota-share reinsurance treaty and surplus reinsurance treaty with Munich. The
following unmistakably indicates a partnership or an association covered by Sec. 24 of the NIRC.

(1) The pool has a common fund, consisting of money and other valuables that are deposited in the name and
credit of the pool. This common fund pays for the administration and operation expenses of the pool.

(2) The pool Functions through an executive board which resembles the board of directors of a corporation,
composed of one representative for each of the ceding companies.

(3) True, the pool itself is not a reinsurer and does not issue any insurance policy; however, its work is
indispensable, beneficial and economically useful to the business of the ceding companies and Munich,
because without it they would not have received their premiums. The ceding companies share in the business
ceded to the pool and in the expenses according to the Rules of Distribution annexed ti the Pool Agreement.
Profit motive or business is, therefore, the primordial reason for the pool's formation.
LIM vs. PHILIPPINE FISHING GEAR INDUSTRIES
GR.NO. 136448 November 3, 1999

FACTS:

Antonio Chua ang Peter Yao, on behalf of “Ocean Quest Fishing Corporation” entered into a contract with
Philippine Fishing Gear Industries(PFGI) for the purchase of fishing nets. They claimed that they were engaged in
a business venture with Lim Tong Lim (petitioner), who was not a signatory to the agreement. The total price of
the nets was P532, 045. Floats worth P68, 000 were also sold.

The buyers of the fishing nets and floats were unable to pay. Philippine Fishing Gear Industries filed a collection
suit against Chua, Yao and Lim as well as a prayer for writ of preliminary attachment. The writ was issued and
enforced by attaching the fishing nets on the F/B Lourdes.

Chua admitted liability and requested a reasonable time within which to pay.
Yao filed an answer but failed to appear in subsequent hearings.
Lim Tong Lim filed an answer with Counterclaim and Crossclaim and moved for the lifting of the writ(denied)
and the nets were sold at public auction. He claimed that no partnership existed.

Trial Court – Philippine Fishing Gear Industries is entitled to the Writ of Attachment and that Chua, Yao and Lim,
as general partners, were jointly liable to pay PFGI.

CA – affirmed RTC

ISSUE:

W/N a partnership exists between Chua, Yao and Lim Tong Lim

HELD:
Yes. Art. 1767 — By the contract of partnership, two or more persons bind themselves to contribute money,
property, or industry to a common fund, with the intention of dividing the profits among themselves.

Chua, Yao and Lim had decided to engage in a fishing business, which they started by buying boats worth
P3.35 million, financed by a loan secured from Jesus Lim who was Lim Tong Lim’s brother.

In their Compromise Agreement, they subsequently revealed their intention to pay the loan with the proceeds
of the sale of the boats, and to divide equally among them the excess or loss. These boats, the purchase and
the repair of which were financed with borrowed money, fell under the term "common fund" under Article 1767.
The contribution to such fund need not be cash or fixed assets; it could be an intangible like credit or industry.
That the parties agreed that any loss or profit from the sale and operation of the boats would be divided
equally among them also shows that they had indeed formed a partnership.

The partnership extended not only to the purchase of the boat, but also to that of the nets and the floats. The
fishing nets and the floats, both essential to fishing, were obviously acquired in furtherance of their business.

Lim Tong Lim's argument that he was merely the lessor of the boats to Chua and Yao, not a partner in the
fishing venture is erroneous. His consent to the sale proved that there was a preexisting partnership among all
three.
Lim Tong Lim entered into a business agreement with Chua and Yao, in which debts were undertaken in order
to finance the acquisition and the upgrading of the vessels which would be used in their fishing business. The
sale of the boats, as well as the division among the three of the balance remaining after the payment of their
loans, proves that F/B Lourdes, though registered in his name, was not his own property but an asset of the
partnership. It is not uncommon to register the properties acquired from a loan in the name of the person the
lender trusts, who in this case is the petitioner himself. After all, he is the brother of the creditor, Jesus Lim.

It is unreasonable for petitioner to sell his property to pay a debt he did not incur, if the relationship among the
three of them was merely that of lessor-lessee, instead of partners.

It is true that petitioner did not directly act on behalf of the corporation. However, having reaped the benefits
of the contract entered into by persons with whom he previously had an existing relationship, he is deemed to
be part of said association and is covered by the scope of the doctrine of corporation by estoppel.

PHILEX MINING CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 148187, April 16, 2008

FACTS:

Philex Mining Corporation (Philex Mining), entered into an agreement with Baguio Gold Mining Company
("Baguio Gold") for the former to manage and operate the latter’s mining claim, known as the Sto. Nino mine.
The parties’ agreement was denominated as "Power of Attorney". In the course of managing and operating
the project, Philex Mining made advances of cash and property in accordance with the agreement. However,
the mine suffered continuing losses over the years which resulted to petitioner’s withdrawal as manager of the
mine. The parties executed a "Compromise with Dation in Payment" wherein Baguio Gold admitted an
indebtedness to petitioner transferring to the latter Baguio Gold’s equitable title in its Philodrill assets and finally
settling the remaining liability through properties that Baguio Gold may acquire in the future.

In its 1982 annual income tax return, petitioner deducted from its gross income the "loss on settlement of
receivables from Baguio Gold against reserves and allowances." It held that the alleged debt was not
ascertained to be worthless since Baguio Gold remained existing and had not filed a petition for bankruptcy;
and that the deduction did not consist of a valid and subsisting debt considering that, under the management
contract, petitioner was to be paid fifty percent (50%) of the project’s net profit.

The Court of Appeals ruled that the 50%-50% sharing in the net profits of the Sto. Nino Mine indicates that Philex
is a partner of Baguio Gold in the development of the Sto. Nino Mine notwithstanding the clear absence of any
intent on the part of Philex and Baguio Gold to form a partnership.

ISSUE:

Whether the agreement entered into is a partnership

HELD:

Yes. 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 a contract 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 partnership and establish a common fund for the purpose. They also had a joint interest in the profits
of the business as shown by the 50-50 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 non-revocation 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.

ANICETO G. SALUDO, JR. v. PHILIPPINE NATIONAL BANK

G.R. No. 193138, August 20, 2018

FACTS:

SAFA Law Office entered into a Contract of Lease with PNB, whereby SAFA Law Office agreed to lease the
second floor of the PNB Financial Center Building in Quezon City for a period of three years.

When the Contract of Lease expired, SAFA Law Office continued to occupy the leased premises but
discontinued paying its monthly rental obligations. After several demand letters of PNB, SAFA Law Office
vacated the leased premises. PNB then sent another demand letter requiring the firm to pay its rental arrears.

Saludo, in his capacity as managing partner of SAFA Law Office, filed an amended complaint for accounting
and/or recomputation of unpaid rentals and damages against PNB in relation to the Contract of Lease.

PNB filed a motion to include SAFA Law Office as principal plaintiff. PNB argued that the lessee in the Contract
of Lease is not Saludo but SAFA Law Office, and that Saludo merely signed the Contract of Lease as the
managing partner of the law firm. Thus, SAFA Law Office must be joined as a plaintiff in the complaint because
it is considered an indispensable party.

Hence, PNB filed its answer by way of compulsory counterclaim, it sought payment from SAFA Law Office in
solidum with Saludo.

Saludo argued that SAFA Law Office is neither a legal entity nor party litigant. As it is only a relationship or
association of lawyers in the practice of law and a single proprietorship which may only be sued through its
owner or proprietor, no valid counterclaims may be asserted against it.

The RTC denies the motion of PNB to include the SAFA Law Offices and ruled that it is a mere single
proprietorship and not a commercial and business partnership.

On appeal, the CA holds that SAFA Law Office is not a legal entity. A partnership for the practice of law is not a
legal entity but a mere relationship or association for a particular purpose.

ISSUE:

Is SAFA Law Office a partnership?

HELD:

Yes. Contrary to Saludo's submission, SAFA Law Office is a partnership and not a single proprietorship.
Article 1767 of the Civil Code provides that by a 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.

Under 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.

Article 1784, on the other hand, provides that a partnership begins from the moment of the execution of the
contract, unless it is otherwise stipulated.

Here, absent evidence of an earlier agreement, SAFA Law Office was constituted as a partnership at the time
its partners signed the Articles of Partnership wherein they bound themselves to establish a partnership for the
practice of law, contribute capital and industry for the purpose, and receive compensation and benefits in the
course of its operation.

The other provisions of the Articles of Partnership also positively identify SAFA Law Office as a partnership. It
constantly used the words "partners" and "partnership." It designated Saludo as managing partner, and Attys.
Agpalo, Fernandez, and Aquino as industrial partners. It also provided for the term of the partnership,
distribution of net profits and losses, and management of the firm in which "the partners shall have equal
interest in the conduct of [its] affairs." Moreover, it provided for the cause and manner of dissolution of the
partnership. These provisions would not have been necessary if what had been established was a sole
proprietorship. Indeed, it may only be concluded from the circumstances that, for all intents and purposes,
SAFA Law Office is a partnership created and organized in accordance with the Civil Code provisions on
partnership.

Saludo asserts that SAFA Law Office is a sole proprietorship on the basis of the Memorandum of Understanding
(MOU) executed by the partners of the firm.
MOU evinces the parties' intention to entirely shift any liability that may be incurred by SAFA Law Office in the
course of its operation to Saludo, who shall also receive all the remaining assets of the firm upon its dissolution.
Such MOU, however, does not serve to convert SAFA Law Office into a sole proprietorship. As discussed, SAFA
Law Office was manifestly established as a partnership based on the Articles of Partnership. The MOU, from its
tenor, reinforces this fact. It did not change the nature of the organization of SAFA Law Office but only excused
the industrial partners from liability.

ALFREDO N. AGUILA, JR., vs. HONORABLE COURT OF APPEALS and FELICIDAD S. VDA. DE ABROGAR,
G.R. No. 127347November 25, 1999
MENDOZA, J.:

FACTS

Alfredo Aguila is the manager of A.C. Aguila & Sons, Co., a partnership engaged in lending activities. Felicidad
and her late husband, Ruben M. Abrogar, were the registered owners of a house and lot. They entered into a
Memorandum of Agreement, which provided, A.C. Aguila & Sons, Co. shall buy the above-described property
from the Felicidad S. Vda. de Abrogar. On the same day, the parties likewise executed a deed of absolute
sale, wherein Abrogar with the consent of her late husband, sold the subject property to A.C. Aguila & Sons,
Co., represented by Alfredo Aguila, for P200,000,00. In a special power of attorney, Felicidad authorized Alfredo
Aguila to cause the cancellation of their TCT and the issuance of a new certificate of title in the name of A.C.
Aguila and Sons, Co., in the event she failed to redeem the subject property as provided in the MOA. Abrogar
failed to redeem the property within the 90-day period as provided in the and pursuant to the SPA mentioned,
Alfredo caused the cancellation of TCT.

Upon the refusal of private respondent to vacate the subject premises, A.C. Aguila & Sons, Co. filed an
ejectment case against her. Abrogar respondent had filed a criminal complaint for falsification against Alfredo
which was dismissed by the RTC

CA reversed and set aside RTC decision on the ground that the agreement entered into by the parties is in the
nature of pactum commissorium. Therefore, the deed of sale should be declared void for being violative of
law.

Alfredo Aguila now contends that: (1) he is not the real party in interest but A.C. Aguila & Co., against which
this case should have been brought; (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 A.C. Aguila &
Sons, Co. and private respondent is a pacto de retro sale and not an equitable mortgage as held by the
appellate court.

ISSUE

Is Alfredo Aguila a real party in interest in the case?

RULING

No. Under Rule 3, §2 of the 1997 Revised Rules of Civil Procedure: 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. Any decision rendered against
a person who is not a real party in interest in the case cannot be executed. Hence, a complaint filed against
such a person should be dismissed for failure to state a cause of action. Moreover, as provided Under Art. 1768
of the Civil Code, a partnership "has a juridical personality separate and distinct from that of each of the
partners." The partners cannot be held liable for the obligations of the partnership unless it is shown that the
legal fiction of a different juridical personality is being used for fraudulent, unfair, or illegal purposes.

In this case, private respondent has not shown that A.C. Aguila & Sons, Co., as a separate juridical entity, is
being used for fraudulent, unfair, or illegal purposes. Moreover, the title to the subject property is in the name of
A.C. Aguila & Sons, Co. and the Memorandum of Agreement was executed between private respondent, with
the consent of her late husband, and A.C. Aguila & Sons, Co., represented by petitioner. Hence, it is the
partnership, not its officers or agents, which should be impleaded in any litigation involving property registered
in its name. A violation of this rule will result in the dismissal of the complaint. Our conclusion that Alfredo Aguila
is not the real party in interest against whom this action should be prosecuted makes it unnecessary to discuss
the other issues raised by him in this appeal.

Villareal v. Ramirez
G.R. No. 144214
July 14, 2003

FACTS:
On July 25, 1984, Luzviminda J. Villareal, Carmelito Jose and Jesus Jose formed a partnership with a capital of
P750,000 for the operation of a restaurant and catering business under the name "Aquarius Food House and
Catering Services. Donaldo Efren C. Ramirez joined as a partner in the business on September 5, 1984. His
capital contribution of P250,000 was paid by his parents, Cesar and Carmelita Ramirez.

In January 1987, Jesus Jose withdrew from the Partnership and was refunded P250,000 in cash by agreement of
the partners. In the same month, the restaurant was closed without notice to Ramirezes but the furniture and
equipments were sent to them. They wrote to the partners that they are no longer interested in continuing their
venture and requesting to return their capital contribution.Such demands were left unheeded hence the filing
of action by Ramirezes against the partners for collection of sum of money.

The partners contended that Ramirezes had expressed a desire to withdraw from the partnership and had
called for its dissolution under Articles 1830 and 1831 of the Civil Code; that Ramirezes had been paid, upon the
turnover to them of furniture and equipment worth over P400,000; and that the latter had no right to demand a
return of their equity because their share, together with the rest of the capital of the partnership, had been
spent as a result of irreversible business losses.
RTC held in favor of Ramirezes. The CA affirmed.

ISSUE:
Whether Ramirezes may demand the refund from the partners.

HELD:
No. Ramirezes have no right to demand from petitioners the return of their equity share. Except as managers of
the partnership, petitioners did not personally hold its equity or assets. "The partnership has a juridical personality
separate and distinct from that of each of the partners." Since the capital was contributed to the partnership,
not to petitioners, it is the partnership that must refund the equity of the retiring partners.

Since it is the partnership, as a separate and distinct entity, that must refund the shares of the partners, the
amount to be refunded is necessarily limited to its total resources. In other words, it can only pay out what it has
in its coffers, which consists of all its assets. However, before the partners can be paid their shares, the creditors
of the partnership must first be compensated. After all the creditors have been paid, whatever is left of the
partnership assets becomes available for the payment of the partners' shares.

Evidently, in the present case, the exact amount of refund equivalent to respondents' one-third share in the
partnership cannot be determined until all the partnership assets will have been liquidated — in other words,
sold and converted to cash — and all partnership creditors, if any, paid.

JOSE P. OBILLOS, JR. vs. CIR and CTA

G.R. No. L-68118October 29, 1985

FACTS:

On March 2, 1973 Jose Obillos, Sr. completed payment to Ortigas & Co., Ltd. on two lots in Greenhills, San Juan,
Rizal. The next day he transferred his rights to his children, herein petitioners, to enable them to build their
residences. The company sold the two lots to petitioners for P178,708.12 on March 13.

In 1974, petitioners resold them to the Walled City Securities Corporation and Olga Cruz Canda for of P313,050.
They derived from the sale a total profit of P134,341.88 or P33,584 for each of them. They treated the profit as a
capital gain and paid an income tax on one-half thereof or of P16,792.
In April, 1980, or one day before the expiration of the five-year prescriptive period, the CIR, acting on the theory
that the four petitioners had formed an unregistered partnership, required the four petitioners to pay corporate
income tax on the total profit of P134,336 in addition to individual income tax on their shares thereof.

Further, the CIR considered the share of the profits of each petitioner in the sum of P33,584 as a " taxable in full
and required them to pay deficiency income taxes aggregating P56,707.20 including the 50% fraud surcharge
and the accumulated interest. The Tax Court sustained the CIR’s findings.

ISSUE:

Whether or not there was a partnership that existed between the siblings, thus subjecting them to corporate
income taxes.

RULING:

NO. To regard the petitioners as having formed a taxable unregistered partnership would result in oppressive
taxation and confirm the dictum that the power to tax involves the power to destroy. That eventuality should
be obviated.

As testified by Jose Obillos, Jr., they had no such intention. They were co-owners pure and simple. To consider
them as partners would obliterate the distinction between a co-ownership and a partnership. The petitioners
were not engaged in any joint venture by reason of that isolated transaction.

Their original purpose was to divide the lots for residential purposes. If later on they found it not feasible to build
their residences on the lots because of the high cost of construction, then they had no choice but to resell the
same to dissolve the co-ownership. The division of the profit was merely incidental to the dissolution of the co-
ownership which was in the nature of things a temporary state.
Article 1769(3) of the Civil Code provides that "the sharing of gross returns does not of itself establish a
partnership, whether or not the persons sharing them have a joint or common right or interest in any property
from which the returns are derived". There must be an unmistakable intention to form a partnership or joint
venture.

FLORENCIO REYES and ANGEL REYES vs. COMMISSIONER OF INTERNAL REVENUE and HON. COURT OF TAX
APPEALS,
G.R. NO. L-24020-21, July 29, 1968

FACTS:

Father and son, Florencio and Angel Reyes, herein petitioners, purchased a lot and building in 1950 which they
continued the leasing business of the previous owner. Their building administrator, who collected the rents,
kept its books and records and rendered statements, reported an annual gross income of P90,000.00. The CIR
assessed them income tax, surcharge and compromise for the years 1951 to 1952 and 1955-1956 of P46,647.00
and P37,528.00 respectively. These tax liabilities, according to the CIR, allegedly arising “from the partnership
formed” by the petitioners.

The appeal and subsequent motion for reconsideration by the petitioners with the CTA, although the amounts
reduced, were both denied. The CTA relying on the provision of the NIRC which imposes income tax on
corporations “organized in, or existing under the laws of the Philippines, no matter how created or organized
but not including registered general partnerships, … a term, which according to the second provision cited,
includes partnerships “no matter how created or organized, …,”
Hence, this petition was filed before the Supreme Court. This time the petitioners insisted that they could not be
considered as a partnership as their intention was not to engage in rental business collectively, but rather,
divide and use the building to house their own enterprises after 10 years. This intention was expressed in an
affidavit that they filed with the BIR. Therefore, they could not be held liable to income tax for partnerships as
embodied in the NIRC provision. However, it was also noted that after almost 15 years from the acquisition of
the property there was no division made.

ISSUE:

Whether or not herein petitioners acquired the personality of a partnership when they continue to earn income
from the rents of the building they both owned for almost 15 years for them to be subjected to income tax for
corporations and partnerships under the NIRC.

RULING:

Yes, the Supreme Court affirmed the ruling of the CTA conforming to the rationale that the NIRC is clear and
equivocal in its provisions that except for those duly registered as general partnerships, a partnership, “no
matter how created or organized” is similarly taxed as a corporation.

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, 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.

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." 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."

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." 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"." 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."

Hence, the father and son petitioners were ordered to pay the reduced assessments with costs.

FRANCISCO BASTIDA vs MENZI & Co.

G.R. No. L-35840 March 31, 1933

FACTS:

Bastida offered to assign to Menzi & Co. his contract with the Philippine Sugar Centrals Agency and to supervise
the mixing of the fertilizer and to obtain other orders for 50% of the net profit that Menzi might derive therefrom.
Menzi accepted the offer. The Agreement between the parties was verbal and was confirmed by the letter of
Menzi to Bastida on January 10, 1922.

Pursuant to the verbal agreement, On April 27, 1922 Menzi entered into a written contract with Bastida, which is
the basis of the present action. Still, the fertilizer business as carried on in the same manner as it was prior to the
written contract, but the net profit that Bastida was limited to supervising the mixing of the fertilizers in the
bodegas of Menzi.

Prior to the expiration of the contract in April 27, 1927, the manager of Menzi notified Bastida that the contract
for his services would not be renewd. Subsequently, when the contract expired. Menzi proceeded to liquidate
the fertilizer business in question. Bastida refused to agree to this. He argued that the written contract entered
into by the parties is a contract of general regular commercial partnership, wherein Menzi was the Capitalist
and Bastida as the industrial partner.

ISSUE:

W/N there exist a partnership among the parties.

RULING:

NO.
The relationship established between the parties by their contract was not that of a partnership, but that of an
employer and an employee, whereby Bastida was to receive 35 percent of the net profits of the fertilizer
business of Menzi in compensation for his services of supervising the mixing of the fertilizers. Neither the provisions
of the contract nor the conduct of the parties prior or subsequent to its execution justified the finding that it was
a contract of partnership.

The trial court relied on article 116 of the Code of Commerce, which provides that articles of association by
which two or more persons obligate themselves to place in a common fund any property, industry, or any of
these things, in order to obtain profit, shall be commercial, no matter what its class may be, provided it has
been established in accordance with the provisions of this Code; but in the case at bar there was no common
fund, that is, a fund belonging to the parties as joint owners or partners. The business belonged to Menzi. The
Bastida was working for Menzi. Instead of receiving a fixed salary or a fixed salary and a small percentage of
the net profits, he was to receive 35 per cent of the net profits as compensation for his services. Menzi , was to
advanced him P300 a month on account of his participation in the profits. It will be noted that no provision was
made for reimbursing Menzi, in case there should be no net profits at the end of the year. It is now well settled
that the old rule that sharing profits as profits made one a partner is overthrown.

It is nowhere stated in the contract that the parties were establishing a partnership or intended to become
partners. Great stress in laid by the trial judge and plaintiff's attorneys on the fact that in the sixth paragraph of
the contract the phrase "en sociedad con" is used in providing that defendant corporation not engage in the
business of prepared fertilizers except in association with the plaintiff (en sociedad con). The fact is that en
sociedad con as there used merely means en reunion con or in association with, and does not carry the
meaning of "in partnership with".

HEIRS OF TAN ENG KEE VS. CA & BENGUET LUMBER

G.R. NO. 126881, October 3, 2000

FACTS:

Matilde Abubo, joined by their children Teresita, Nena, Clarita, Carlos, Corazon and Elpidio, collectively known
as herein petitioners HEIRS OF TAN ENG KEE, filed suit against the decedent’s brother TAN ENG LAY. The
complaint was for accounting, liquidation and winding up of the alleged partnership formed after World War II
between Tan Eng Kee and Tan Eng Lay.

The petitioners filed an amended complaint impleading private respondent herein BENGUET LUMBER
COMPANY, as represented by Tan Eng Lay. The amended complaint principally alleged that Tan Eng Kee and
Tan Eng Lay entered into a partnership engaged in the business of selling lumber and hardware and
construction supplies. They named their enterprise “Benguet Lumber” which they jointly managed until Tan Eng
Kee’s death.

Petitioners herein averred that the business prospered due to the hard work and thrift of the alleged partners.
However, petitioners claimed that Tan Eng Lay and his children caused the conversion of the partnership
“Benguet Lumber” into a corporation called “Benguet Lumber Company.” The incorporation was purportedly a
ruse to deprive Tan Eng Kee and his heirs of their rightful participation in the profits of the business.

ISSUE:

W/N Tang Eng Kee and Tan Eng Lay were partners in Benguet Lumber

RULING:
Tan Eng Kee was only an employee, not a partner. A contract of partnership is defined by law as one where:
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.

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

The agreement need not be formally reduced into writing, since statute allows the oral constitution of a
partnership, save in two instances: (1) when immovable property or real rights are contributed, and (2) when
the partnership has a capital of three thousand pesos or more. In both cases, a public instrument is required. An
inventory to be signed by the parties and attached to the public instrument is also indispensable to the validity
of the partnership whenever immovable property is contributed to the partnership. Undoubtedly, the best
evidence would have been the contract of partnership itself, or the articles of partnership but there is none. The
alleged partnership, though, was never formally organized.

Besides, it is indeed odd, if not unnatural, that despite the forty years the partnership was allegedly in existence,
Tan Eng Kee never asked for an accounting. The essence of a partnership is that the partners share in the profits
and losses. 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 Eng Kee appeared never to have
made any such demand for accounting from his brother, Tang Eng Lay.

It has been concluded by the court that Tan Eng Kee was only an employee, not a partner. Even if the payrolls
as evidence were discarded, petitioners would still be back to square one, so to speak, since they did not
present and offer evidence that would show that Tan Eng Kee received amounts of money allegedly
representing his share in the profits of the enterprise. Petitioners failed to show how much their father, Tan Eng
Kee, received, if any, as his share in the profits of Benguet Lumber Company for any particular period. Hence,
they failed to prove that Tan Eng Kee and Tan Eng Lay intended to divide the profits of the business between
themselves, which is one of the essential features of a partnership.

MARJORIE TOCAO AND WILLIAM BELO VS. CA AND NENITA ANAY

(342 SCRA 20)

FACTS:

Petitioner William T. Bello introduced private respondent Nenita Anay to petitioner Tocao, who conveyed her
desire to enter into a joint venture with her for the importation and local distribution of kitchen cookwares. Belo
acted the capitalist, Tocao as president and general manager, and Anay as head of the marketing
department and later, vice-president for sales. The parties agreed further that Anay would be entitled to:

(1) ten percent (10%) of the annual net profits of the business;
(2) overriding commission of six percent (6%) of theoverall weekly production;
(3) thirty percent (30%) of thesales she would make; and
(4) two percent (2%) for herdemonstration services.

The same was not reduced to writing on the strength of Belo’s assurances.

Later, Anay was able to secure the distributorship of cookware products from the West Bend Company,
operated under the name of Geminesse Enterprise, registered under the name of Marjorie.
Due to Anay’s excellent job performance she was given a plaque of appreciation. Also, in a memo signed by
Belo, Anay was given 37% commission for her personal sales "up Dec31/87,” apart from the 10% share in profits.

Anay learned that Marjorie terminated her as VP of Geminesse Enterprise. Anay attempted to contact Belo.
She wrote him twice to demand her overriding commission and the audit of the company to determine her
share in the net profits. Belo did not answer.

Anay still received her 5% overriding commission up to December 1987. The following year, 1988, she did not
receive the same commission although the company netted a gross sales of P13,300,360.00. She filed a
complaint for sum of money with damages against Tocao and Belo.

Tocao and Belo asserted that the alleged agreement was not reduced to writing nor ratified, hence,
unenforceable, void, or nonexistent. Also, they denied the existence of a partnership because, as Anay herself
admitted, Geminesse Enterprise was the sole proprietorship of Marjorie Tocao. Belo also contended that he
merely acted as a guarantor of Tocao and denied contributing capital. Tocao, on the other hand, denied that
they agreed on a ten percent (10%) commission on the net profits.

ISSUE:

Whether or not there was a partnership.

RULING:

Yes. To be considered a juridical personality, a partnership must fulfill these requisites: (1) two or more persons
bind themselves to contribute money, property or industry to a common fund; and (2) intention on the part of
the partners to divide the profits among themselves. It may be constituted in any form; a public instrument is
necessary only where immovable property or real rights are contributed thereto. This implies that since a
contract of partnership is consensual, an oral contract of partnership is as good as a written one.

Anay contributed her expertise in the business of distributorship of cookware to the partnership and hence,
under the law, she was the industrial or managing partner. Belo had a proprietary interest. He presided over
meetings regarding matters affecting the operation of the business. Moreover, his having authorized in writing
giving Anay 37% of the proceeds of her personal sales, could not be interpreted otherwise than that he had a
proprietary interest in the business. This is inconsistent with his claim that he merely acted as a guarantor. If
indeed he was, he should have presented documentary evidence. Also, Art. 2055 requires that a guaranty
must be express and the Statute of Frauds requires that it must be in writing. Tocao was also a capitalist in the
partnership. She claimed that she herself financed the business.

The business venture operated under Geminesse Enterprise did not result in an employer-employee relationship
between petitioners and private respondent. First, Anay had a voice in the management of the affairs of the
cookware distributorship and second, Tocao admitted that Anay, like her, received only commissions and
transportation and representation allowances and not a fixed salary. If Anay was an employee, it is difficult to
believe that they recieve the same income. Also, the fact that they operated under the name of Geminesse
Enterprise, a sole proprietorship, is of no moment. Said business name was used only for practical reasons - it
was utilized as the common name for petitioner Tocao’s various business activities, which included the
distributorship of cookware.

The partnership exists until dissolved under the law. Since the partnership created by petitioners and private
respondent has no fixed term and is therefore a partnership at will predicated on their mutual desire and
consent, it may be dissolved by the will of a partner.
Tocao’s unilateral exclusion of Anay from the partnership is shown by her memo to the Cubao office plainly
stating that private respondent was, as of October 9, 1987, no longer the vice-president for sales of Geminesse
Enterprise. By that memo, petitioner Tocao affected her own withdrawal from the partnership and considered
herself as having ceased to be associated with the partnership in the carrying on of the business. Nevertheless,
the partnership was not terminated thereby; it continues until the winding up of the business.

The partnership among petitioners and private respondent is ordered dissolved, and the parties are ordered to
effect the winding up and liquidation of the partnership pursuant to the pertinent provisions of the Civil Code.
Petitioners are ordered to pay Anay’s 10% share in the profits, after accounting, 5% overriding commission for
the 150 cookware sets available for disposition since the time private respondent was wrongfully excluded from
the partnership by petitioner, overriding commission on the total production, as well as moral and exemplary
damages, and attorney’s fees.

YULO vs YANG CHIAO SENG

FACTS:

In 1945, Respondent Yang Chiao Seng proposed the formation of a partnership with Petitioner Rosario Yulofor
the operation of a theater on the premises occupied by Cine Oro, wherein Yang guarantees Mrs. Yulo a
monthly participation of P3,000, payable quarterly in advance, etc.

Parties executed a partnership agreement establishing Yang & Co., Ltd.:

a) That the capital is fixed at P100K: P80K was furnished by Yang while P20K by Yulo;
b) That all gains and profits are to be distributed among the partners in the same proportion as their capital
contribution;
c) That the liability of Yulo, in case of loss, shall be limited to her capital contribution.
However, since the land on which the theatre was constructed was owned by the Carrion Sta. Marias., and
was merely leased to Petitioner Yulo; the owners later exercised their right to cancel the contract of lease.

So, the owners filed an action for ejectment against Yulo and Yang. CFI granted the same. CA affirmed.

Consequently, Yulo demanded from YANG her share in the profits of the business. Yang refused; hence, the
action.

PETITIONER YULO’S CONTENTION:

That partnership exists between them, and Yang is obliged to give her share in the profits.

RESPONDENT YANG’S DEFENSE:

That it was only a “sublease”; that the partnership was only adopted as a subterfuge to circumvent the
prohibition against sublease in the lease contract between Yulo and the landowners.

RTC ruled in favor of Respondent Yang; that the agreement was a sublease, not a partnership.

ISSUE:

WON partnership exists, thereby requiring Yang to give Yulo’s share in the profits. (NO)

HELD:

No partnership exists. It was a sublease contract.

The ff. facts belie her allegation of partnership:

a) Yulo did not furnish the supposed P20K capital;

b) She did not help or intervene in the management of the theatre;
c) She never demanded any accounting of the expenses and earnings of the business (Were she really a
partner, her first concern should have been to find out how the business was progressing, whether the expenses
were legitimate, whether the earnings were correct, etc.)

She was absolutely silent with respect to any of the acts that a partner should have done; all that she did was
to receive her share of P3,000 a month, which cannot be interpreted in any manner than a payment for the
use of the premises which she had leased from the owners.

EUFEMIA EVANGELISTA VS THE COLLECTOR OF INTERNAL REVENUE AND COURT OF TAX APPEALS
G.R. L-9996 OCTOBER 15, 1957

FACTS:

Here in petitioners Eufemia Evangelista, Manuela Evangelista and Francisca Evangelista seek a review of CTA's
decision holding them liable for income tax, real estate dealer's tax and residence tax. As stipulated, petitioners
borrowed from their father a certain sum of money for the purpose of buying real properties. Within February
1943 to April 1994, they have bought parcels of land from different persons, the management of said properties
was charged to their brother Simeon evidenced by a document. These properties were then leased or rented
various tenants. On September 1954, CIR demanded the payment of income tax on corporations, real estate
dealer's fixed tax and corporation residence tax to which the petitioners Evangelistas seek to be absolved from
such payment. Petitioners insist that they are mere co-owners, not co-partners, for, in consequence of the acts
performed by them, a legal entity, with a personality independent of that of its members, did not come into
existence, and some of the characteristic of partnerships are lacking. This pretense was correctly rejected by
the Court of Tax Appeals.

ISSUE:

Whether petitioners are subject to tax on corporation provided for in Sec. 24 of Commonwealth Act No.466, as
well as to the residence tax for corporation and real estate dealer tax.

RULING:

Yes. The tax in question is one imposed upon “corporations”, which, strictly speaking, are distinct and different
from “partnerships”. When our Internal Revenue Code includes “partnership” among the entitles subject to tax
corporation, said code must allude, therefore, to organizations which are not necessarily partnership, in the
technical sense of 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 the
jurisdiction. As defined in Sec. 84(b) of said code, the term corporation includes partnerships, no matter how
created or organized. This 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 the purpose of the tax corporations.

The essential elements of partnership are two, namely; (a) an agreement to contribute money, property or
industry to a common fund; and (b) intent to divide the profits among the contracting parties. The first element
is undoubtedly present in the case, for admittedly petitioners have agreed to, and did, contribute money and
property to a common fund. Upon consideration of all the facts and circumstances surrounding the case, the
court are fully satisfied that their purpose was to engage in real estate transaction 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 series of transactions; (3) the aforesaid lots were not devoted to residential purposes, or to
other personal use of petitioners herein.

For the purposes of the tax on corporations, our National Internal Revenue Code, includes these partnerships
with the exception only of duly registered general co-partnerships within the purview of the term corporation. It
is therefore clear that petitioners herein constitute a partnership insofar as said code is concerned and are
subject to the income tax corporations.

In the concurring opinion of Justice Bautista Angelo, he was able to make the following observations:
Under Article 1769 of the new civil code lays down the rule for determining when a transaction should be
deemed a partnership or a co-ownership. Said Article Par.2 and 3 provides:

(2) Co-ownership or co-possession does not itself establish a partnership, whether such a co-owners or co-
possessors do or do not share any profits made by the use of the property;

(3) the sharing of the gross returns does not of itself establish partnership, whether or not the person sharing
them have a joint or common right or interest in any property from which the returns are derived;

from the above it appears that the fact that those who agree to form a co-ownership shared or do not share
any profits made by the use of property held in common does not convert their venture into a partnership. Or
the sharing of the gross returns does not of itself establish a partnership whether or not the persons sharing
therein have a joint or common right or interest in the property. This only means that aside from the
circumstance of profit, the presence of other elements constituting partnership is necessary. Such as the clear
intent to form a partnership, the existence of a judicial personality different from that of the individual partners,
and the freedom to transfer or assign any interest in the property by one with the consent of the others.

LORENZO T. OÑA and HEIRS OF JULIA BUÑALES, namely: RODOLFO B. OÑA, MARIANO B. OÑA, LUZ B. OÑA,
VIRGINIA B. OÑA and LORENZO B. OÑA, JR., vs. THE COMMISSIONER OF INTERNAL REVENUE
G.R. No. L-19342, May 25, 1972

FACTS:

Julia Buñales died leaving as heirs her surviving spouse, Lorenzo Oña and her five children. A civil case was
instituted for the settlement of her state, in which Oña was appointed administrator and later on the guardian
of the three heirs who were still minors when the project for partition was approved. Although the project of
partition was approved by the Court, no attempt was made to divide the properties and they remained under
the management of Oña who used said properties in business by leasing or selling them and investing the
income derived therefrom and the proceeds from the sales thereof in real properties and securities. Petitioners’
properties and investments gradually increased. Petitioners returned for income tax purposes their shares in the
net income but they did not actually receive their shares because this was left in the hands of Oña who
invested them.

CIR decided that petitioners formed an unregistered partnership and therefore, subject to the corporate
income tax, particularly for years 1955 and 1956.

ISSUE:
Whether an unregistered partnership is formed

RULING:

Yes. It is but logical that in cases of inheritance, there should be a period when the heirs can be considered as
co-owners rather than unregistered co-partners within the contemplation of our corporate tax laws
aforementioned. Before the partition and distribution of the estate of the deceased, all the income thereof
does belong commonly to all the heirs, obviously, without them becoming thereby unregistered co-partners,
but it does not necessarily follow that such status as co-owners continues until the inheritance is actually and
physically distributed among the heirs, for it is easily conceivable that after knowing their respective shares in
the partition, they might decide to continue holding said shares under the common management of the
administrator or executor or of anyone chosen by them and engage in business on that basis. Withal, if this
were to be allowed, it would be the easiest thing for heirs in any inheritance to circumvent and render
meaningless Sections 24 and 84(b) of the National Internal Revenue Code.

In Evangelista vs. Collector, 102 Phil. 140, it was stated, among the reasons for holding the appellants therein to
be unregistered co-partners for tax purposes, that their common fund "was not something they found already in
existence" and that "it was not a property inherited by them pro indiviso," but it is certainly far fetched to argue
therefrom, as petitioners are doing here, that ergo, in all instances where an inheritance is not actually divided,
there can be no unregistered co-partnership. As already indicated, for tax purposes, the co-ownership of
inherited properties is automatically converted into an unregistered partnership the moment the said common
properties and/or the incomes derived therefrom are used as a common fund with intent to produce profits for
the heirs in proportion to their respective shares in the inheritance as determined in a project partition either
duly executed in an extrajudicial settlement or approved by the court in the corresponding testate or intestate
proceeding.

The reason for this is simple. From the moment of such partition, the heirs are entitled already to their respective
definite shares of the estate and the incomes 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, he allows his share to be held in common with his co-
heirs under a single management to be used with the intent of making profit thereby in proportion to his share,
there can be no doubt that, even if no document or instrument were executed for the purpose, for tax
purposes, at least, an unregistered partnership is formed. This is exactly what happened to petitioners in this
case.

HEIRS OF JOSE LIM, represented by ELENITO LIM, vs. JULIET VILLA LIM
G.R. No. 172690, March 3, 2010

FACTS:

Jose Lim, together with Jimmy Yu (Jimmy) and Norberto Uy (Norberto), formed a partnership to engage in the
trucking business. Jose managed the operations of this trucking business until his death. Thereafter, Jose's heirs,
including Elfledo, and partners agreed to continue the business under the management of Elfledo. Elfledo died,
leaving Juliet Lim as his sole surviving heir.

Juliet Lim took over the administration of the properties of Elfedo. Which properties, as alleged by the heirs of
Jose, belonged to the estate of Jose as it was purchased by Elfedo using the profits derived from the
management of the partnership.
Claiming that they are co-owners of the properties, the heirs of Jose required Juliet to submit an accounting of
all income, profits and rentals received from the estate of Elfledo, and to surrender the administration thereof.
Juliet refused; thus, the filing of this case.

Juliet traversed the heirs of Jose's allegations and claimed that Elfledo was himself a partner of Norberto and
Jimmy. That per testimony of Cresencia (Jose’s widow), Jose gave Elfledo ₱50,000.00 as the latter's capital in an
informal partnership with Jimmy and Norberto. And that when Jose died, he left no known assets, and the
partnership with Jimmy and Norberto ceased upon his demise. She also stressed that Jose left no properties that
Elfledo could have held in trust. She maintained that all the properties involved in this case were purchased
and acquired through her and her husband’s joint efforts and hard work, and without any participation or
contribution from the heirs of Jose or from Jose. Juliet submitted that these are conjugal partnership properties;
and thus, she had the right to refuse to render an accounting for the income or profits of their own business.

The RTC rendered its decision in favor of the heirs of Jose. The CA reversed and set aside the RTC's decision.

ISSUE:

Is Elfedo a partner of Jimmy and Norberto in the trucking business?

HELD:

Yes, Elfedo is a partner of Jimmy and Norberto in the trucking business.

Citing Article 1769 of the Civil Code, which provides:

Art. 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 a prima facie evidence that he is a partner in
the business, but no such inference shall be drawn if such profits were received in payment:
(a) As a debt by 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.
Applying the legal provision to the facts of this case, the following circumstances tend to prove that Elfledo was
himself the partner of Jimmy and Norberto: 1) Cresencia testified that Jose gave Elfledo ₱50,000.00, as share in
the partnership, on a date that coincided with the payment of the initial capital in the partnership; (2) Elfledo
ran the affairs of the partnership, wielding absolute control, power and authority, without any intervention or
opposition whatsoever from any of petitioners herein; (3) all of the properties, particularly the nine trucks of the
partnership, were registered in the name of Elfledo; (4) Jimmy testified that Elfledo did not receive wages or
salaries from the partnership, indicating that what he actually received were shares of the profits of the
business; and (5) none of the heirs of Jose, the alleged partner, demanded periodic accounting from Elfledo
during his lifetime. As repeatedly stressed in Heirs of Tan Eng Kee, a demand for periodic accounting is
evidence of a partnership.
Elfledo was not just a hired help but one of the partners in the trucking business, active and visible in the running
of its affairs from day one until this ceased operations upon his demise. The extent of his control, administration
and management of the partnership and its business, the fact that its properties were placed in his name, and
that he was not paid salary or other compensation by the partners, are indicative of the fact that Elfledo was a
partner and a controlling one at that. It is apparent that the other partners only contributed in the initial capital
but had no say thereafter on how the business was ran. Evidently it was through Elfredo’s efforts and hard work
that the partnership was able to acquire more trucks and otherwise prosper.
It is notable too that Jose Lim died when the partnership was barely a year old, and the partnership and its
business not only continued but also flourished. If it were true that it was Jose Lim and not Elfledo who was the
partner, then upon his death the partnership should have been dissolved and its assets liquidated. On the
contrary, these were not done but instead its operation continued under the helm of Elfledo and without any
participation from the heirs of Jose Lim.
MAURICIO AGAD, vs. SEVERINO MABATO and MABATO and AGAD COMPANY,
G.R. No. L-24193 June 28, 1968
CONCEPCION, C.J

FACTS

Mauricio Agad and Severino Mabato are partners in a fishpond business, to the capital of which Agad
contributed P1,000, with the right to receive 50% of the profits; that from 1952 up to and including 1956, Mabato
who handled the partnership funds, had yearly rendered accounts of the operations of the partnership; and
that, despite repeated demands, Mabato had failed and refused to render accounts for the years 1957 to
1963, Agad prayed in his complaint against Mabato and Mabato & Agad Company; that judgment be
rendered sentencing Mabato to pay him (Agad) the sum of P14,000, as his share in the profits of the partnership
for the period from 1957 to 1963.

Mabato denied the existence of said partnership, upon the ground that the contract therefor had not been
perfected, because Agad had allegedly failed to give his P1,000 contribution to the partnership capital.
Mabato filed a motion to dismiss, upon the ground that the complaint states no cause of action

After due hearing, the court issued the order appealed from, granting the motion to dismiss the complaint for
failure to state a cause of action. This conclusion was predicated upon the theory that the contract of
partnership, is null and void, pursuant to Art. 1773 of our Civil Code, because an inventory of the fishpond
referred in said instrument had not been attached thereto.

Articles 1771 and 1773 of said Code provide:

Art. 1771. A partnership may be constituted in any form, except where immovable property or real rights are
contributed thereto, in which case a public instrument shall be necessary.

Art. 1773. A contract of partnership is void, whenever immovable property is contributed thereto, if inventory of
said property is not made, signed by the parties; and attached to the public instrument.

ISSUE

Is Article 1773 of the Civil Code applicable in the case?

RULING

No. Article 1773 of the Civil Code is not applicable.

The court stated that the partnership was established "to operate a fishpond", not to "engage in a fishpond
business". Moreover, none of the partners contributed either a fishpond or a real right to any fishpond. Their
contributions were limited to the sum of P1,000 each. Paragraph 4 of Annex "A" of their agreement provides:

“That the capital of the said partnership is Two Thousand (P2,000.00) Pesos Philippine Currency, of which One
Thousand (P1,000.00) pesos has been contributed by Severino Mabato and One Thousand (P1,000.00) Pesos
has been contributed by Mauricio Agad.”

The operation of the fishpond mentioned in Annex "A" was the purpose of the partnership. Neither said fishpond
nor a real right thereto was contributed to the partnership or became part of the capital thereof, even if a
fishpond or a real right thereto could become part of its assets.

WHEREFORE, we find that said Article 1773 of the Civil Code is not in point and that, the order appealed from
should be, as it is hereby set aside and the case remanded to the lower court for further proceedings, with the
costs of this instance against defendant-appellee, Severino Mabato.

Torres v. CA
G.R. No. 134559
December 9, 1999

FACTS:
Sisters Antonia Torres and Emeteria Baring, entered into a "joint venture agreement" with Respondent Manuel
Torres for the development of a parcel of land into a subdivision. They executed a Deed of Sale covering the
said parcel of land in favor of Manuel, who then had it registered in his name. By mortgaging the property, he
obtained from Equitable Bank a loan of P40,000 which, under the Joint Venture Agreement, was to be used for
the development of the subdivision. They all agreed to share the proceeds of the sale of the subdivided lots.

The project did not push through, and the land was subsequently foreclosed by the bank. Petitioners alleged
that the project failed because of "Manuel's lack of funds or means and skills.” And that he used the loan not
for the development of the subdivision, but in furtherance of his own company, Universal Umbrella Company.

On the other hand, Manuel alleged that he used the loan to implement the Agreement. Also he claimed that
the subdivision project failed, however, because petitioners and their relatives had separately caused the
annotations of adverse claims on the title to the land, which eventually scared away prospective buyers.
Despite his requests, petitioners refused to cause the clearing of the claims, thereby forcing him to give up on
the project.

Subsequently, petitioners filed a criminal case for estafa against respondent and his wife, who were however
acquitted. Thereafter, they filed the present civil case which, upon respondent's motion, was later dismissed by
the trial court in an Order dated September 6, 1982. On appeal, however, the appellate court remanded the
case for further proceedings.

ISSUE:
1. is there partnership formed?
2. Is the agreement void?

Held:
1.Yes. A reading of the terms embodied in the Agreement indubitably shows the existence of a partnership
pursuant to Article 1767 of the Civil Code, which provides:
Art. 1767. By the contract of partnership two or more persons bind themselves to contribute money, property, or
industry to a common fund, with the intention of dividing the profits among themselves.

Under the above-quoted Agreement, petitioners would contribute property to the partnership in the form of
land which was to be developed into a subdivision; while respondent would give, in addition to his industry, the
amount needed for general expenses and other costs. Furthermore, the income from the said project would be
divided according to the stipulated percentage. Clearly, the contract manifested the intention of the parties to
form a partnership.

2. No. Art. 1773. A contract of partnership is void, whenever immovable property is contributed thereto, if an
inventory of said property is not made, signed by the parties, and attached to the public instrument.

They contend that since the parties did not make, sign or attach to the public instrument an inventory of the
real property contributed, the partnership is void.

We clarify. First, Article 1773 was intended primarily to protect third persons. Thus, the eminent Arturo M.
Tolentino states that under the aforecited provision which is a complement of Article 1771,”The execution of a
public instrument would be useless if there is no inventory of the property contributed, because without its
designation and description, they cannot be subject to inscription in the Registry of Property, and their
contribution cannot prejudice third persons. This will result in fraud to those who contract with the partnership in
the belief [in] the efficacy of the guaranty in which the immovables may consist. Thus, the contract is declared
void by the law when no such inventory is made." The case at bar does not involve third parties who may be
prejudiced.

Second, petitioners themselves invoke the allegedly void contract as basis for their claim that respondent
should pay them 60 percent of the value of the property. They cannot in one breath deny the contract and in
another recognize it, depending on what momentarily suits their purpose. Parties cannot adopt inconsistent
positions in regard to a contract and courts will not tolerate, much less approve, such practice.

In short, the alleged nullity of the partnership will not prevent courts from considering the Joint Venture
Agreement an ordinary contract from which the parties' rights and obligations to each other may be inferred
and enforced.

AURELIO LITONJUA, JR. vs. EDUARDO LITONJUA, SR.

G.R. NOS. 166299-300December 13, 2005

FACTS:

On or about 22 June 1973, Aurelio and Eduardo entered into a joint venture/partnership for the continuation of
their family business and common family funds. This joint venture/partnership agreement was contained in a
memorandum addressed by Eduardo to his siblings, parents and other relatives.

It was then agreed upon between Aurelio and Eduardo that in consideration of Aurelio retaining his share in the
remaining family businesses and contributing his industry to the continued operation of these businesses, Aurelio
will be given P1 Million or 10% equity in all these businesses and those to be subsequently acquired by them
whichever is greater.

However, sometime in 1992, the relations between Aurelio and Eduardo became sour so that the former
requested for an accounting and liquidation of his share in the joint venture/partnership, but these were not
heeded.
Further, petitioner had reasonable cause to believe that respondents were transferring various real properties of
the corporations belonging to the joint venture/partnership to other parties in fraud of petitioner.

On December 4, 2002, petitioner Aurelio filed a suit against his brother Eduardo, private respondent Robert
Yang, and several corporations for specific performance and accounting. In his complaint, he alleged that,
since June 1973, he and Eduardo are into a joint venture/partnership arrangement, while Yang is described in
the complaint as petitioner’s and Eduardo’s partner in their Odeon Theater investment.

On December 20, 2002, Eduardo his co-defendants, filed a joint answer with compulsory counterclaim,
denying, among others, that Aurelio and Eduardo entered into a contract of partnership. Further, respondent
Yang moved to dismiss on the ground that petitioner has no cause of action against him.

The RTC issued an Omnibus Order dated March 5, 2003, denying the affirmative defenses. Thus, Yang went to
the CA in petitioner for Certiorari under Rule 65 to nullify the order5se of the RTC.

The CA granted the issuance of the writ of certiorari and dismissed the complaint against respondents.

ISSUE:

Whether or not there was a partnership created by the actionable document.

RULING:

NO. A partnership exists when two or more persons agree to place their money, effects, labor, and skill in lawful
commerce or business, with the understanding that there shall be a proportionate sharing of the profits and
losses between them. A contract of partnership is defined by the Civil Code as one where two or more persons
bound themselves to contribute money, property, or industry to a common fund with the intention of dividing
the profits among themselves. A joint venture, on the other hand, is hardly distinguishable from, and may be
likened to, a partnership since their elements are similar, i.e., community of interests in the business and sharing
of profits and losses. Being a form of partnership, a joint venture is generally governed by the law on
partnership.

Art. 1771. A partnership may be constituted in any form, except where immovable property or real rights are
contributed thereto, in which case a public instrument shall be necessary.

Art. 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 requirement of the preceding paragraph shall not affect the liability of the
partnership and the members thereof to third persons.

Art. 1773. A contract of partnership is void, whenever immovable property is contributed thereto, if an inventory
of said property is not made, signed by the parties, and attached to the public instrument.

The document on its face, contains typewritten entries, personal in tone, but is unsigned and undated. As an
unsigned document, there can be no quibbling that it does not meet the public instrumentation requirements
exacted under Article 1771 of the Civil Code. Moreover, being unsigned and doubtless referring to a
partnership involving more than P3,000.00 in money or property, it cannot be presented for notarization, let
alone registered with the SEC, as called for under the Article 1772.
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 actionable document is not a public document and
there was no inventory of immovable properties signed by the parties.

COMMISSIONER OF INTERNAL REVENUE, vs. WILLIAM J. SUTER and THE COURT OF TAX APPEALS;
G.R. No. L-25532 REYES, J.B.L., J.:
February 28, 1969

FACTS:
A limited partnership, named "William J. Suter 'Morcoin' Co., Ltd.," was formed by William J. Suter as the general
partner, and Julia Spirig and Gustav Carlson, as the limited partners. The partners contributed, respectively,
P20,000.00, P18,000.00 and P2,000.00 to the partnership. In 1948, however, general partner Suter and limited
partner Spirig got married and, thereafter, on 18 December 1948, limited partner Carlson sold his share in the
partnership to Suter and his wife. Commissioner of Internal Revenue, on 1959 assessed and consolidated the
income of the firm and the individual incomes of the partners-spouses Suter and Spirig resulting in a
determination of a deficiency income tax.

CIR Contention: The marriage of Suter and Spirig and their subsequent acquisition of the interests of remaining
partner Carlson in the partnership dissolved the limited partnership, and if they did not, the fiction of juridical
personality of the partnership should be disregarded for income tax purposes because the spouses have
exclusive ownership and control of the business; consequently the income tax return of respondent Suter for the
years in question should have included his and his wife's individual incomes and that of the limited partnership,
in accordance with Section 45 (d) of the National Internal Revenue Code:

(d) Husband and wife. — In the case of married persons, whether citizens, residents or non- residents, only one
consolidated return for the taxable year shall be filed by either spouse to cover the income of both spouses; ....

Suter’s Contention: His marriage with limited partner Spirig and their acquisition of Carlson's interests in the
partnership in 1948 is not a ground for dissolution of the partnership, either in the Code of Commerce or in the
New Civil Code, and that since its juridical personality had not been affected and since, as a limited
partnership, as contra distinguished from a duly registered general partnership, it is taxable on its income
similarly with corporations, Suter was not bound to include in his individual return the income of the limited
partnership.

ISSUE:

Whether or not the partnership was dissolved after the marriage of the partners, respondent William J. Suter and
Julia Spirig Suter and the subsequent sale to them by the remaining partner, Gustav Carlson.

HELD:

NO. The petitioner-appellant has evidently failed to observe the fact that William J. Suter "Morcoin" Co., Ltd.
was not a universal partnership, but a particular one. As appears from Articles 1674 and 1675 of the Spanish
Civil Code, of 1889 (which was the law in force when the subject firm was organized in 1947), a universal
partnership requires either that the object of the association be all the present property of the partners, as
contributed by them to the common fund, or else "all that the partners may acquire by their industry or work
during the existence of the partnership". William J. Suter "Morcoin" Co., Ltd. was not such a universal partnership,
since the contributions of the partners were fixed sums of money, P20,000.00 by William Suter and P18,000.00 by
Julia Spirig and neither one of them was an industrial partner. It follows that William J. Suter "Morcoin" Co., Ltd.
was not a partnership that spouses were forbidden to enter by Article 1677 of the Civil Code of 1889.
Nor could the subsequent marriage of the partners operate to dissolve it, such marriage not being one of the
causes provided for that purpose either by the Spanish Civil Code or the Code of Commerce.

The appellant's view, that by the marriage of both partners the company became a single proprietorship, is
equally erroneous. The capital contributions of partners William J. Suter and Julia Spirig were separately owned
and contributed by them before their marriage; and after they were joined in wedlock, such contributions
remained their respective separate property under the Spanish Civil Code (Article 1396):

The following shall be the exclusive property of each spouse:

(a) That which is brought to the marriage as his or her own; ....

Thus, the individual interest of each consort in William J. Suter "Morcoin" Co., Ltd. did not become common
property of both after their marriage in 1948.

It being a basic tenet of the Spanish and Philippine law that the partnership has a juridical personality of its own,
distinct and separate from that of its partners (unlike American and English law that does not recognize such
separate juridical personality), the bypassing of the existence of the limited partnership as a taxpayer can only
be done by ignoring or disregarding clear statutory mandates and basic principles of our law. The limited
partnership's separate individuality makes it impossible to equate its income with that of the component
members. True, section 24 of the Internal Revenue Code merges registered general co-partnerships
(compañias colectivas) with the personality of the individual partners for income tax purposes. But this rule is
exceptional in its disregard of a cardinal tenet of our partnership laws, and can not be extended by mere
implication to limited partnerships.
As the limited partnership under consideration is taxable on its income, to require that income to be included in
the individual tax return of respondent Suter is to overstretch the letter and intent of the law. In fact, it would
even conflict with what it specifically provides in its Section 24: for the appellant Commissioner's stand results in
equal treatment, tax wise, of a general co-partnership (compañia colectiva) and a limited partnership, when
the code plainly differentiates the two. Thus, the code taxes the latter on its income, but not the former,
because it is in the case of compañias colectivas that the members, and not the firm, are taxable in their
individual capacities for any dividend or share of the profit derived from the duly registered general
partnership.

On the contention that the income of the limited partnership is actually or constructively the income of the
spouses and forms part of the conjugal partnership of gains.

SC: This is not wholly correct. the fruits of the wife's parapherna become conjugal only when no longer needed
to defray the expenses for the administration and preservation of the paraphernal capital of the wife. Then
again, the appellant's argument erroneously confines itself to the question of the legal personality of the limited
partnership, which is not essential to the income taxability of the partnership since the law taxes the income of
even joint accounts that have no personality of their own. Appellant is, likewise, mistaken in that it assumes that
the conjugal partnership of gains is a taxable unit, which it is not. What is taxable is the "income of both
spouses" (Section 45 [d] in their individual capacities. Though the amount of income (income of the conjugal
partnership vis- a-vis the joint income of husband and wife) may be the same for a given taxable year, their
consequences would be different, as their contributions in the business partnership are not the same.

The difference in tax rates between the income of the limited partnership being consolidated with, and when
split from the income of the spouses, is not a justification for requiring consolidation; the revenue code, as it
presently stands, does not authorize it, and even bars it by requiring the limited partnership to pay tax on its own
income.
MAXIMILIANO SANCHO VS SEVERIANO LIZZARRAGA
G.R. No. L-33580 February 6, 1931

FACTS:

Sancho brought an action for rescission of a partnership contract between him and Lizarraga, entered into on
October 15, 1920. Lizzaraga denies generally and specifically all the allegations of the complaint which are
incompatible with his special defenses, cross-complaint and counterclaim, setting up the latter and asking for
the dissolution of the partnership, and the payment to him as its manager and administrator of P500 monthly
from October 15, 1920, until the final dissolution, with interest, one-half of said amount to be charged to the
plaintiff.

The CFI proved that Lizzaraga had not contributed all the capital he had bound himself to invest and that
Sancho had demanded him to liquidate the partnership, declared it dissolved on account of the expiration of
the period for which it was constituted, and ordered the Lizzaraga, as managing partner, to proceed without
delay to liquidate it, submitting to the court the result of the liquidation together with the accounts and
vouchers within the period of thirty days from receipt of notice of said judgment, without costs.

Sancho appealed for the rescission of the contract of partnership according to Article 1124 of the civil code.

ISSUE:

W/N Sancho has acquired the right to demand for rescission of the partnership contract.

RULING:

NO.
In view of the lower court's findings referred to above, which we cannot revise because the parol evidence has
not been forwarded to this court, articles 1681 and 1682 of the Civil Code 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 it is a well known principle that special provisions prevail over general provisions.

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.

He shall also be bound for warranty in case of eviction with regard to specific and determinate things which he
may have contributed to the partnership, in the same cases and in the same manner as the vendor is bound
with respect to the vendee. He shall also be liable for the fruits thereof from the time they should have been
delivered, without the need of any demand

Tai Tong Chiache & Co (TTCC) v. Insurance Commission (IC) & Traveller’s Multi-Indemnity Corp (TMIC)
G. R. No.: L-55398
Feb. 29, 1988

Facts:

Arsenio Chua, representative of Tai Tong Chuache & Co. (TTCC) insured a land and building which was
mortgaged in favor of TTCC by Sps. Palomo. TMIC was one of the insurance company that Chua procured a
fire insurance policy. A fire razed the building. TMIC refused to pay TTCC as the Insurance Commission absolved
TMIC of any liability on the basis of the certification issued by the CFI of Davao, Branch II, that in a certain civil
action against Sps. Palomo, Chua stands as the complainant and not TTCC. From said evidence, the IC inferred
that the credit extended by TTCC to Sps. Palomo secured by the insured property must have been paid. The IC
further argues that if the civil case really aroused from the loan granted to Sps. Palomo by TTCC, it should have
been filed by TTCC or its representative in its own behalf.

Issue:

WON the IC is correct to absolve TMIC from liability.

Held:

No, the IC is incorrect since Art. 1800 of the Civil Code allows the appointed manger to do acts of
administration.

The SC held that TTCC being a partnership may sue and be sued in its name or by its duly authorised
representative. The fact that Chua is the representative of TTCC is not question. TTCC’s declaration that Chua
acts as the managing partner of the partnership was corroborated by TMIC. Thus, Chua as the managing
partner of the partnership may execute all acts of administration including the right to sue debtors of the
partnership in case of their failure to pay their obligations when it became due and demandable. Or at the
very least, Chua being a partner of TTCC is an agent of the partnership. Being an agent, it is understood that he
acted for and in behalf of the firm. IC’s allegation that the civil case filed by Chua was in his capacity as
personal creditor of Sps. Palomo has no basis.

Litton vs. Hill & Ceron. 67 Phil. 509 , April 25, 1939 No. 45624

FACTS:
This is a petition to review on certiorari the decision of the Court of Appeals. On February 14, 1934, Litton sold
and delivered to Carlos Ceron, who is one of the managing partners of Hill & Ceron, a certain number of
mining claims, and by virtue of said transaction, Ceron delivered to plaintiff adocument (receipt)
acknowledging that he received from Litton certain share certificates of Big Wedge Mining Company totaling
P1870. Ceron paid to the plaintiff the sum or P1,150 leaving an unpaid balance of P720, and unable to collect
this sum either from Hill & Ceron or from its surety Visayan Surety & Insurance Corporation, Litton filed a
complaint in the Court of First Instance of Manila against the said defendants for the recovery of the said
balance.
The lower court, after trial, ordered Carlos Ceron personally to pay the amount claimed and absolved the
partnership Hill & Ceron, Robert Hill and the Visayan Surety & Insurance Corporation. On appeal to the CA, the
latter affirmed the decision of the lower court, having reached the conclusion that Ceron did not intend to
represent and did not act for the firm Hill & Ceron in the transaction involved in this litigation.
ISSUE:
Whether or not Ceron’s act binds the partnership?
RULING:
Yes. The Supreme Court held that the stipulation in the articles of partnership that any of the two managing
partners may contract and sign in the name of the partnership with the consent of the other, undoubtedly
creates an obligation between the two partners, which consists in asking the other's consent before
contracting for the partnership. This obligation of course is not imposed upon a third person who contracts with
the partnership. Neither is it necessary for the third person to ascertain if the managing partner' with -whom ha
contracts has previously obtained the consent of the other, A third person may' and has a right to presume that
the partner with whom he contracts has, in the ordinary and natural course of business, the consent of his
copartner; for otherwise he would not enter into the contract. The third person would naturally not presume
that the partner with whom he enters into the transaction is violating the articles of partnership but, on the
contrary, is acting in accordance therewith. And this finds support in the legal presumption that the ordinary
course of business has been followed (No. 18, section 334, Code of Civil Procedure), and that the law has been
obeyed (No. 31, section 334). This last presumption is equally applicable to contracts which have the force of
law between the parties. Unless the contrary is shown, namely, that one of the partners did not consent to his
copartner entering into a contract with a third person, and that the latter with knowledge thereof entered into
said contract, the aforesaid presumption with all its force and legal effects should be taken into account. There
is nothing in the case at bar which destroys this presumption.
The order of the Bureau of Commerce of December 7, 1933, prohibits brokers from buying and selling shares on
their own account. The second paragraph of the articles of partnership of Hill Ceron reads in part: "Second:
That the purpose or object for which this copartnership is organized is to engage in the business of brokerage in
general, such as stock and bond brokers, real brokers, investment security brokers, shipping brokers, and other
activities pertaining to the business of brokers in general." The kind of business in which the partnership Hill Ceron
is to engage being thus determined, none of the two partners, under article 130 of the Code of Commerce,
may legally engage in the business of brokerage in general as stock brokers, security brokers and other
activities pertaining to the business of the partnership. C, therefore, could not have entered into the contract of
sale of shares with L as a private individual, but as a managing partner of Hill Ceron.
Under article 130 of the Code of Commerce, when, not only without the consent but against the will of any of
the managing partners, a contract is entered into with a third person who acts in good faith, and the
transaction is of the kind of business in which the partnership is engaged, as in the present case, said contract
shall not be annulled, without prejudice to the liability of the guilty partner. The reason or purpose behind these
legal provisions is no other than to protect a third person who contracts with one of the managing partners of
the partnership, thus avoiding fraud and deceit to which he may easily fall a victim without this protection
which the Code of Commerce wisely provides.

DAN FUE LEUNG vs. INTERMEDIATE APPELLATE COURT and LEUNG YIU
[G.R. No. 70926. January 31, 1989.]
GUTIERREZ, JR., J p:

Principle of Law: Article 1809

FACTS:
A complaint filed by respondent Leung Yiu with the then CFI of Manila to recover the sum equivalent to 22% of
the annual profits derived from the operation of Sun Wah Panciteria since October, 1955 from petitioner Dan
Fue Leung.

The Sun Wah Panciteria, a restaurant at Sta. Cruz, Manila, was established sometime in October, 1955. It was
registered as a single proprietorship and its licenses and permits were issued to and in favor of petitioner Dan
Fue Leung as the sole proprietor. Respondent Leung Yiu adduced evidence during the trial of the case to show
that Sun Wah Panciteria was actually a partnership and that he was one of the partners having contributed
P4,000.00 to its initial establishment. Furthermore, private respondent received from the petitioner the amount of
P12,000.00 covered by the latter's Equitable Banking Corporation Check from the profits of the operation of the
restaurant for the year 1974.

Petitioner denied having received from the private respondent the amount of P4,000.00. That he used his
savings from his salaries as an employee at Camp Stotsenberg in Clark Field and later as waiter at the Toho
Restaurant amounting to a little more than P2,000.00 as capital in establishing Sun Wah Panciteria. To bolster his
contention that he was the sole owner of the restaurant, the petitioner presented various government licenses
and permits showing the Sun Wah Panciteria was and still is a single proprietorship solely owned and operated
by himself alone. Fue Leung also flatly denied having issued to the private respondent the receipt and the
Equitable Banking Corporation's Check No. 13389470 B in the amount of P12,000.00.

Both the trial court and the appellate court found that the private respondent is a partner of the petitioner in
the setting up and operations of the panciteria. There is no question from the factual findings that the
respondent invested in the business as a partner. Hence, the two courts declared that the private petitioner is
entitled to a share of the annual profits of the restaurant.

Petitioner argues: "The complaint avers that private respondent extended 'financial assistance' to herein
petitioner at the time of the establishment of the Sun Wah Panciteria, in return of which private respondent
allegedly will receive a share in the profits of the restaurant. The same complaint did not claim that private
respondent is a partner of the business. It was, therefore, a serious error to grant a relief not called for by the
complaint. It was also error for the IAC to interpret or construe 'financial assistance' to mean the contribution of
capital by a partner to a partnership;

ISSUE:
Whether or not the private respondent is a partner of the petitioner in the establishment of Sun Wah Panciteria?

HELD: YES
We agree with the appellate court's observation to the effect that given its ordinary meaning, financial
assistance is the giving out of money to another without the expectation of any returns therefrom'. It connotes
an ex gratia dole out in favor of someone driven into a state of destitution. But this circumstance under which
the P4,000.00 was given to the petitioner does not obtain in this case. The complaint explicitly stated that "as a
return for such financial assistance, plaintiff (private respondent) would be entitled to twenty-two percentum
(22%) of the annual profit derived from the operation of the said panciteria." The well-settled doctrine is that the
". . . nature of the action filed in court is determined by the facts alleged in the complaint as constituting the
cause of action." (De Tavera v. Philippine Tuberculosis Society, Inc., 113 SCRA 243; Alger Electric, Inc. v. Court of
Appeals, 135 SCRA 37).

The private respondent is a partner of the petitioner in Sun Wah Panciteria. The requisites of a partnership which
are — 1) two or more persons bind themselves to contribute money, property, or industry to a common fund;
and 2) intention on the part of the partners to divide the profits among themselves (Article 1767, Civil Code;
Yulo v. Yang Chiao Cheng, 106 Phil. 110) — have been established. As stated by the respondent, a partner
shares not only in profits but also in the losses of the firm. If excellent relations exist among the partners at the
start of business and all the partners are more interested in seeing the firm grow rather than get immediate
returns, a deferment of sharing in the profits is perfectly plausible. It would be incorrect to state that if a partner
does not assert his rights anytime within ten years from the start of operations, such rights are irretrievably lost.
The private respondent's cause of action is premised upon the failure of the petitioner to give him the agreed
profits in the operation of Sun Wah Panciteria. In effect the private respondent was asking for an accounting of
his interests in the partnership

Regarding the prescriptive period within which the private respondent may demand an accounting, Articles
1806, 1807, and 1809 show that the right to demand an accounting exists as long as the partnership exists.
Prescription begins to run only upon the dissolution of the partnership when the final accounting is done.

G.R. No. 126334 November 23, 2001

EMILIO EMNACE, petitioner,
vs.
COURT OF APPEALS, ESTATE OF VICENTE TABANAO, SHERWIN TABANAO, VICENTE WILLIAM TABANAO, JANETTE
TABANAO DEPOSOY, VICENTA MAY TABANAO VARELA, ROSELA TABANAO and VINCENT TABANAO, respondents.
YNARES-SANTIAGO, J.:

NOTE: CITED TWICE - Article 1809 & 1842 [Case No. 27 & 41]

CASE SUMMARY:
Emnace, Tabanao, and Divina-Gracia were partners in a fishing industry. They decided to dissolve their
partnership. However, throughout the existence of the partnership, and even after Vicente Tabanao’s demise,
Emnace failed to submit to Tabanao’s heirs any statement of assets and liabilities of the partnership, and to
render an accounting of the partnership’s finances. Emnace also failed to turn over Tabanao’s shares. Heirs of
Tabanao filed an action for accounting and payment of shares against Emnace. The issue in this case is WON
the heirs action for accounting has prescribed. The SC ruled in favor of Emnace.

DOCTRINE:
For as long as the partnership exists, any of the partners may demand an accounting of the partnership’s
business, and prescription of the said right starts to run only upon the dissolution of the partnership when the
final accounting is done.

FACTS:
Emilio Emnace, Vicente Tabanao and Jacinto Divina-gracia were partners in a fishing business, Ma. Nelma
Fishing Industry.

After Jacinto Divinagracia’s withdrew from the partnership, they decided to dissolve their partnership and
executed an agreement of partition and distribution of the partnership properties among them sometime in
January of 1986. Assets to be distributed were 5 fishing boats, 6 vehicles, and 2 parcels of land.
Tabanao died in 1994.

Throughout the existence of the partnership, and even after Vicente Tabanao’s demise, Emnace failed to
submit to Tabanao’s heirs any statement of assets and liabilities of the partnership, and to render an
accounting of the partnership’s finances. Emnace also reneged on his promise to turn over to Tabanao’s heirs
the deceased’s 1/3 share in the total assets of the partnership, amounting to P30,000,000.00, or the sum of
P10,000,000.00, despite formal demand for payment thereof.
Consequently, Tabanao’s heirs, respondents herein, filed against petitioner an action for accounting, payment
of shares, division of assets and damages.

Emnace filed a motion to dismiss the complaint on the grounds of improper venue, lack of jurisdiction over the
nature of the action or suit, and lack of capacity of the estate of Tabanao to sue.

RTC denied the motion to dismiss.

Tabanao’s heirs filed an amended complaint, incorporating the additional prayer that petitioner be ordered to
“sell all (the partnership’s) assets and thereafter pay/remit/deliver/surrender/yield to the plaintiffs” their
corresponding share in the proceeds thereof.
Emnace filed a manifestation and motion to dismiss. As an additional ground, Emnace raised prescription
warranting the outright dismissal of the complaint trial court denying the motion to dismiss

RTC ruled that prescription begins to run only upon the dissolution of the partnership when the final accounting
is done. Hence, prescription has not set in the absence of a final accounting.

CA rendered the assailed decision, dismissing the petition for certiorari.

Emnace filed the instant petition for review.

ISSUE #1:
WON the action for accounting was filed in an improper venue. (NO)

Petitioner’s argument: Petitioner insists that venue was improperly laid since the action is a real action involving
a parcel of land that is located outside the territorial jurisdiction of the court a quo.

HELD #1: NO.

SC ruled that there was no error on the part of the RTC and the CA in holding that it was filed in correct venue.

An action for accounting, payment of partnership shares, division of assets and damages is a personal action
which, under the Rules, may be commenced and tried where the defendant resides or may be found, or
where the plaintiffs reside, at the election of the latter

ISSUE #2:
WON the surviving spouse of Tabunao has legal capacity to sue.

Petitioner’s argument: Petitioner asserts that the surviving spouse of Vicente Tabanao has no legal capacity to
sue since she was never appointed as administratrix or executrix of his estate.

HELD #2: YES.

SC ruled that petitioner’s objection in this regard is misplaced. The surviving spouse does not need to be
appointed as executrix or administratrix of the estate before she can file the action. She and her children are
complainants in their own right as successors of Vicente Tabanao. From the very moment of Vicente Tabanao’s
death, his rights insofar as the partnership was concerned were transmitted to his heirs, for rights to the
succession are transmitted from the moment of death of the decedent.
Whatever claims and rights Vicente Tabanao had against the partnership and petitioner were transmitted to
respondents by operation of law, more particularly by succession. Moreover, respondents became owners of
their respective hereditary shares from the moment Vicente Tabanao died.

As successors who stepped into the shoes of their decedent upon his death, they can commence any action
originally pertaining to the decedent. From the moment of his death, his rights as a partner and to demand
fulfillment of petitioner’s obligations as outlined in their dissolution agreement were transmitted to respondents.
They, therefore, had the capacity to sue and seek the court’s intervention to compel petitioner to fulfill his
obligations.

ISSUE #3:
WON the action for accounting has prescribed

Petitioner’s argument: Petitioner contends that the trial court should have dismissed the complaint on the
ground of prescription, arguing that respondents’ action prescribed four (4) years after it accrued in 1986.

HELD #3: NO.

The three (3) final stages of a partnership are:

(1) dissolution;
(2) winding-up; and
(3) termination.

In this case, Emnace and his partners dissolved their partnership but such did not perfect the dissolution
because no accounting took place. The partnership, although dissolved, continues to exist and its legal
personality is retained, at which time it completes the winding up of its affairs, including the partitioning and
distribution of the net partnership assets to the partners.

For as long as the partnership exists, any of the partners may demand an accounting of the partnership’s
business. Prescription of the said right starts to run only upon the dissolution of the partnership when the final
accounting is done.

When a final accounting is made, it is only then that prescription begins to run. In the case at bar, no final
accounting has been made, and that is precisely what the heirs are seeking in their action before the trial
court, since Emnace has failed or refused to render an accounting of the partnership’s business and assets.
Hence, the said action is not barred by prescription.

The SC found that prescription had not even begun to run in the absence of a final accounting.

Article 1842 of the Civil Code provides:

The right to an account of his interest shall accrue to any partner, or his legal representative as against the
winding up partners or the surviving partners or the person or partnership continuing the business, at the date of
dissolution, in the absence of any agreement to the contrary.

The provision states that the right to demand an accounting accrues at the date of dissolution in the absence
of any agreement to the contrary. When a final accounting is made, it is only then that prescription begins to
run. In the case at bar, no final accounting has been made, and that is precisely what respondents are seeking
in their action before the trial court, since petitioner has failed or refused to render an accounting of the
partnership’s business and assets. Hence, the said action is not barred by prescription.
Jo Chung Cang vs Pacific Commercial Co 45 Phil 142-

FACTS
In an insolvency proceedings of petitioner-establishment, “Sociedad Mercantil, Teck Seing &Co., Ltd., creditors,
"Pacific Commercial and others filed a motion with the Court to declare the individual partners parties to the
proceeding, for each to file an inventory, and for each to be adjudicated as insolvent debtors.
RTC granted the motion but subsequently denied it. Hence this appeal.

Issue:
WON the nature of the mercantile establishment, Teck Seing & Co., Ltd. is a limited partnership
Held:
NO. The contract of partnership established a general partnership.
By process of elimination, Teck Seing & Co., Ltd. is not a corporation nor an accidental partnership (joint
account association). To establish a limited partnership, there must be, at least, one general partner and the
name of at least one of the general partners must appear in the firm name. This requirement has not been
fulfilled. Those who seek to avail themselves of the protection of laws permitting the creation of limited
partnerships must show a substantially full compliance with such laws. It must be noted that all the requirements
of the Code have been met with the sole exception of that relating to the composition of the firm name.
The legal intention deducible from the acts of the parties controls in determining the existence of a partnership.
If they intend to do a thing which in law constitutes a partnership, they are partners although their very purpose
was to avoid the creation of such relation. Here the intention of the persons making up, Teck Seing & Co. Ltd.
Was to establish partnership which they erroneously denominated as a limited partnership. Order appealed
from is reversed.

G.R. No. L-3704 December 12, 1907

LA COMPAÑIA MARITIMA, plaintiff-appellant,
vs.
FRANCISCO MUÑOZ, ET AL., defendants-appellees.

The case: La Compañia Maritima (plaintiff) brought this action against the partnership of Franciso Muñoz &
Sons, and against Francisco Muñoz de Bustillo, Emilio Muñoz de Bustillo, and Rafael Naval (defendants) to
recover the sum of P26,828.30, with interest and costs.

Facts:
March 1905: The defendants Francisco Muñoz, Emilio Muñoz, and Rafael Naval formed on ordinary general
mercantile partnership under the name of Francisco Muñoz & Sons for the purpose of carrying on the
mercantile business in the Province of Albay which had formerly been carried on by Francisco Muñoz.
Francisco Muñoz was a capitalist partner and Emilio Muñoz and Rafael Naval were industrial partners.
In the articles of partnership signed by the partners it is expressly stated that they have agreed to form, and do
form, an ordinary, general mercantile partnership. The object of the partnership, as stated in the fourth
paragraph of the articles, is a purely mercantile one and all the requirements of the Code of Commerce in
reference to such partnership were complied with.
The claim of the appellees that Emilio Muñoz contributed nothing to the partnership, either in property, money,
or industry, can not be sustained. He contributed as much as did the other industrial partner, Rafael Naval, the
difference between the two being that Rafael Naval was entitled by the articles of agreement to a fixed salary
of P2,500 as long as he was in charge of the branch office established at Ligao.
Industrial partners, by signing the articles, agree to contribute their work to the partnership and article 138 of the
Code of Commerce prohibits them from engaging in other work except by the express consent of the
partnership. With reference to civil partnerships, section 1683 of the Civil Code relates to the same manner.
It is also said in the brief of the appellees that Emilio Muñoz was entirely excluded from the management of the
business. It rather should be said that he excluded himself from such management, for he signed the articles of
partnership by the terms of which the management was expressly conferred by him and the others upon the
persons therein named. That partners in their articles can do this, admits of no doubt. Article 125 of the Code of
Commerce requires them to state the partners to whom the management is intrusted. This right is recognized
also in article 132.
Emilio Muñoz was, therefore, a general partner

Issue: Is an industrial partner in an ordinary, general mercantile partnership liable to third persons for the debts
and obligations contracted by the partnership?
Ruling: yes
In limited partnership the Code of Commerce recognizes a difference between general and special partners,
but in a general partnership there is no such distinction-- all the members are general partners. The fact that
some may be industrial and some capitalist partners does not make the members of either of these classes
alone such general partners. There is nothing in the code which says that the industrial partners shall be the only
general partners, nor is there anything which says that the capitalist partners shall be the only general partners.
There is no injustice in imposing this liability upon the industrial partners. They have a voice in the management
of the business, if no manager has been named in the articles; they share in the profits and as to third persons it
is no more than right that they should share in the obligations. It is admitted that if in this case there had been a
capitalist partner who had contributed only P100 he would be liable for this entire debt of P26,000.
In this particular case that view is strengthened by the provisions of article 12, above quoted. There it is stated
that if, when the affairs of the partnership are liquidated — that is, at the end of five years — it turns out that
there had been losses instead of gains, then the capitalist partner, Francisco Muñoz, shall pay such losses —
that is, pay them to the industrial partners if they have been compelled to disburse their own money in
payment of the debts of the partnership.
While this is a commercial partnership and must be governed therefore by the rules of the Code of Commerce,
yet an examination of the provisions of the Civil Code in reference to partnerships may throw some light upon
the question here to be resolved. Articles 1689 and 1691 contain, in substance, the provisions of articles 140 and
141 of the Code of Commerce. It is to be noticed that these articles are found in section 1 of Chapter II [Title
VIII] of Book IV. That section treats of the obligations of the partners between themselves. The liability of the
partners as to third persons is treated in a distinct section, namely, section 2, comprising articles from 1697 to
1699.
If industrial partners in commercial partnerships are not responsible to third persons for the debts of the firm,
then industrial partners in civil partnerships are not. Waiving the question as to whether there can be a
commercial partnership composed entirely of industrial partners, it seems clear that there can be such civil
partnership, for article 1678 of the Civil Code provides as follows:
A particular partnership has for its object specified things only, their use of profits, or a specified undertaking, or
the exercise of a profession or art.
It might very easily happen, therefor, that a civil partnership could be composed entirely of industrial partners. If
it were, according to the claim of the appellees, there would be no personal responsibility whatever for the
debts of the partnership. Creditors could rely only upon the property which the partnership had, which in the
case of a partnership organized for the practice of any art or profession would be practically nothing.
Our conclusion is upon this branch of the case that neither on principle nor on authority can the industrial
partner be relieved from liability to third persons for the debts of the partnership.
It is apparently claimed by the appellee in his brief that one action can not be maintained against the
partnership and the individual partners, this claim being based upon the provisions of article 237 of the Code of
Commerce which provides that the private property of the partners shall not be taken until the partnership
property has been exhausted. But this article furnishes to argument in support of the appellee's claim. An action
can be maintained against the partnership and partners, but the judgment should recognize the rights of the
individual partners which are secured by said article 237.

De Los Reyes v. Lukban and Borja,

35 Phil. 757 G.R. No. 10695, December 15, 1916

FACTS:
Teodoro de los Reyes brought a suit in the Court of First Instance of Manila against Vicente Lukban and
Esperidion Borja to recover from them payment for the merchandise they bought on credit by the firm Lukban
& Borja from the plaintiff's ship supply store named La Industria.
A judgment was rendered, on which the defendant firm was ordered to pay the sum of P1, 086.65 with interest
thereon, amounting to P1, 102.95. Esperidion Borja paid P522.69. Teodoro de los Reyes later on brought a suit
against Lukab & Borja to recover the sum of P853, the remaining unpaid balance plus legal interest. Defendant
Lukban contended that he is not liable, he was merely an industrial partner in the firm and it was Borja who
furnished the capital.
As it was proven on trial that the partnership has no more remaining property, as it is already insolvent, the court
rendered judgment holding Borja and Lukban jointly and severally liable to pay the sum to plaintiff de los Reyes.
ISSUE: Is a creditor entitled to collect individually from the partners the amount of the debt that the dissolved
partnership owed at the time of its dissolution?
RULING: Yes. The creditor has the right to recover from the partners thereof in the manner provided by Art. 127
of the Code of Commerce (now governed by Art. 1816 of the Civil Code of the Philippines).
It is unquestionable that such a right has given rise to the corresponding right of action to demand the
payment of the debt from the partners individually, or from each of them, by the insolvency of the partnership,
inasmuch as they are personally and severally liable with all their property for the results of the operations of the
partnership which they conducted.
Article 127 of the Code of Commerce provides:
All the member of the general copartnership, be they or be they not managing partners of the same, are
personally and severally liable with all their property for the results of the transactions made in the name and for
the account of the partnership, under the signature of the latter, and by a person authorized to make use
thereof.

G.R. No. L-39780 November 11, 1985

ELMO MUÑASQUE
vs.
COURT OF APPEALS,CELESTINO GALAN TROPICAL COMMERCIAL COMPANY and RAMON PONS

FACTS:
Muñasque in behalf of the partnership of "Galan and Muñasque" as Contractor entered into a written contract
with respondent Tropical for remodelling the respondent's Cebu branch building. A total amount of P25,000.00
was to be paid under the contract for the entire services of the Contractor. The first payment made by
respondent Tropical was in the form of a check for P7,000.00 in the name of the petitioner. Petitioner, however,
indorsed the check in favor of respondent Galan to enable the latter to deposit it in the bank and pay for the
materials and labor used in the project.
Muñasque alleged that Galan spent P6,183.37 out of the P7,000.00 for his personal use so that when the second
check in the amount of P6,000.00 came and Galan asked Muñasque to indorse it again, the latter refused.
The check was withheld from the petitioner. Since Galan informed the Cebu branch of Tropical that there was
a"misunderstanding" between him and petitioner, respondent Tropical changed the name of the payee in the
second check from Muñasque to "Galan and Associates" which was the duly registered name of the
partnership between Galan and petitioner and under which name a permit to do construction business was
issued by the mayor of Cebu City. This enabled Galan to encash the second check.
Meanwhile, the construction continued through his sole efforts. He stated that he borrowed some P12,000.00
from his friend, Mr. Espina.
The two remaining checks, each in the amount of P6,000.00,were subsequently given to the petitioner alone
with the last check being given pursuant to a court order.
Petitioner filed a complaint for payment of sum of money and damages against the respondents,seeking to
recover the amounts covered by the first and second checks which fell into the hands of respondent Galan,
the additional expenses that the petitioner incurred in the construction, moral and exemplary damages, and
attorney's fees.
Both the trial and appellate courts not only absolved respondents Tropical and its Cebu Manager, Pons, from
any liability but they also held the petitioner together with respondent Galan, liable to the intervenors Cebu
Southern Hardware Company and Blue Diamond Glass Palace for the credit which the intervenors extended to
the partnership of petitioner and Galan.

ISSUE:
Whether or not Muñasque is solidarily or jointly liable with respondent Galan to pay the credits of intervenors
Blue Diamond Glass and Cebu Southern Hardware.

HELD:
Yes. Article 1816 of the Civil Code should be construed together with Article 1824 which provides that: "All
partners are liable solidarily with the partnership for everything chargeable to the partnership under Articles
1822 and 1823." In short, while the liability of the partners are merely joint in transactions entered into by the
partnership, a third person who transacted with said partnership can hold the partners solidarily liable for the
whole obligation if the case of the third person falls under Articles 1822 or 1823.
The obligation is solidary, because the law protects him, who in good faith relied upon the authority of a
partner, whether such authority is real or apparent. That is why under Article 1824 of the Civil Code all partners,
whether innocent or guilty, as well as the legal entity which is the partnership, are solidarily liable.

In the case at bar the respondent Tropical had every reason to believe that a partnership existed between the
petitioner and Galan and no fault or error can be imputed against it for making payments to "Galan and
Associates" and delivering the same to Galan because as far as it was concerned, Galan was a true partner
with real authority to transact on behalf of the partnership with which it was dealing. This is even more true in
the cases of Cebu Southern Hardware and Blue Diamond Glass Palace who supplied materials on credit to the
partnership. Thus, it is but fair that the consequences of any wrongful act committed by any of the partners
therein should be answered solidarily by all the partners and the partnership as a whole.

However. as between the partners Muñasque and Galan,justice also dictates that Muñasque be reimbursed by
Galan for the payments made by the former representing the liability of their partnership to herein intervenors,
as it was satisfactorily established that Galan acted in bad faith in his dealings with Muñasque as a partner.

G.R. No. L-11840 July 26, 1960

ANTONIO C. GOQUIOLAY and THE PARTNERSHIP "TAN SIN AN and ANTONIO C. GOQUIOLAY, plaintiffs-
appellants,
vs.
WASHINGTON Z. SYCIP, ET AL., defendants-appellees.

FACTS:
Antonio Goquiolay executed a general power of attorney to this effect:
That besides the powers and duties granted the said Tan Sin An by the articles of co-partnership of said co-
partnership, that said Tan Sin An should act as the Manager for the full period of the term for which said co-
partnership was organized or until the whole period that the said capital of P30,000.00 of the co-partnership
should last, to carry on to the best advantage and interest of the said co-partnership, to make and execute,
sign, seal and deliver for the co-partnership, and in its name, all bills, bonds, notes, specialties, and trust receipts
or other instruments or documents in writing whatsoever kind or nature which shall be necessary to the proper
conduction of the said businesses, including the power to mortgage and pledge real and personal properties,
to secure the obligation of the co-partnership, to buy real or personal properties for cash or upon such terms as
he may deem advisable, to sell personal or real properties, such as lands and buildings of the co-partnership in
any manner he may deem advisable for the best interest of said co-partnership, to borrow money on behalf of
the co-partnership and to issue promissory notes for the repayment thereof, to deposit the funds of the co-
partnership in any local bank or elsewhere and to draw checks against funds so deposited ... .

Tan Sin An and Antonio C. Goquiolay", entered into a general commercial partnership under the partnership
name "Tan Sin An and Antonio C. Goquiolay", for the purpose in dealing in real state. The partnership had a
capital of P30,000.00, P18,000.00 of which was contributed by Goquiolay and P12,000.00 by Tan Sin An. The
agreement lodge upon Tan Sin An the sole management of the partnership affairs.
The plaintiff partnership purchased three (3) parcels of land (in Davao) assuming the payment of a mortgage
obligation payable to "La Urbana Sociedad Mutua de Construccion y Prestamos.” Another 46 parcels were
purchased by Tan Sin An in his individual capacity, and he assumed payment of a mortgage debt thereon. The
downpayment and the amortization were advanced by Yutivo and Co., for the account of the purchasers.
These obligations were consolidated in an instrument executed by the partnership whereby the entire 49 lots
were mortgaged in favor of the "Banco Hipotecario de Filipinas" (as successor to "La Urbana") and the
covenantors bound themselves to pay, jointly and severally, the remaining balance of their unpaid accounts.
Tan Sin An died, leaving as surviving heirs his widow, Kong Chai Pin, and four minor children. Kong Chai Pin was
appointed administratrix of the intestate estate of her deceased husband.
In the meantime, repeated demands for payment were made by the Banco Hipotecario on the partnership
and on Tan Sin An. The defendant Sing Yee and Cuan, Co., Inc., upon request of defendant Yutivo Sons
Hardware Co., paid the remaining balance of the mortgage debt, and the mortgage was cancelled.
Then, Yutivo Sons Hardware Co. and Sing Yee and Cuan Co., Inc. filed their claims in the intestate proceedings
of Tan Sin An as alleged obligations of the partnership and Tan Sin An, for advances, interest and taxes paid in
amortizing and discharging their obligations to "La Urbana" and the "Banco Hipotecario".
Kong Chai Pin filed a petition with the probate court for authority to sell all the 49 parcels of land to Washington
Z, Sycip and Betty Y. Lee, for the purpose preliminary of settling the debts of Tan Sin An and the partnership.
Pursuant to a court order Kong Chai Pin executed a deed of sale of the 49 parcels of land to the defendants
Washington Sycip and Betty Lee in consideration of P37,000.00 and of vendees' assuming payments of the
claims filed by Yutivo Sons Hardware Co. and Sing Yee and Cuan Co., Inc. Defendants Sycip and Betty Lee
executed in favor of the Insular Development Co., Inc. a deed of transfer covering the said 49 parcels of land.
Learning about the sale to Sycip and Lee, the surviving partner Antonio Goquiolay filed a petition in the
intestate proceedings seeking to set aside the order of the probate court approving the sale in so far as his
interest over the parcels of land sold was concerned. So the probate court annulled the sale with respect to
the 60% interest of Antonio Goquiolay over the properties sold. Goquilay also filed for the annulment of the sale
in favor of Washington Sycip and Betty Lee, and their subsequent conveyance in favor of Insular Development
Co., Inc., in so far as the three (3) lots owned by the plaintiff partnership are concerned. The answer averred
the validity of the sale by Kong Chai Pin as successor partner, in lieu of the late Tan Sin An.
ISSUE:
Is the transfer of partnership property by one partner (Kong Chai Pin), acting in behalf of the firm, to the
stranger (Sycip and Betty Lee) valid and therefore binds the partnership? YES.
Is the consent of the other partner (Goquiolay) necessary to perfect the sale of the partnership properties
executed by Kong Chai Pin in favour of Sycip and Betty Lee? NO.
HELD:
Strangers dealing with a partnership have the right to assume, in the absence of restrictive clauses in the co-
partnership agreement, that every general partner has power to bind the partnership, specially those partners
acting with ostensible authority. And so, we held in one case:
. . . Third persons, like the plaintiff, are not bound in entering into a contract with any of the two partners, to
ascertain whether or not this partner with whom the transaction is made has the consent of the other partner.
The public need not make inquiries as to the agreements had between the partners. Its knowledge is enough
that it is contracting with the partnership which is represented by one of the managing partners.
"There is a general presumption that each individual partner is an agent for the firm and that he has authority to
bind the firm in carrying on the partnership transactions."
"The presumption is sufficient to permit third persons to hold the firm liable on transactions entered into by one
of the members of the firm acting apparently in its behalf and within the scope of his authority."
Article 129 of the Code of Commerce to the effect that —
If the management of the general partnership has not been limited by special agreement to any of the
members, all shall have the power to take part in the direction and management of the common business, and
the members present shall come to an agreement for all contracts or obligations which may concern the
association.
But this obligation is one imposed by law on the partners among themselves, that does not necessarily affect
the validity of the acts of a partner, while acting within the scope of the ordinary course of business of the
partnership, as regards third persons without notice. The latter may rightfully assume that the contracting
partner was duly authorized to contract for and in behalf of the firm and that, furthermore, he would not
ordinarily act to the prejudice of his co-partners. The regular course of business procedure does not require that
each time a third person contracts with one of the managing partners, he should inquire as to the latter's
authority to do so, or that he should first ascertain whether or not the other partners had given their consent
thereto. In fact, Article 130 of the same Code of Commerce provides that even if a new obligation was
contracted against the express will of one of the managing partners, "it shall not be annulled for such reason,
and it shall produce its effects without prejudice to the responsibility of the member or members who
contracted it, for the damages they may have caused to the common fund."
Although the partnership under consideration is a commercial partnership and, therefore, to be governed by
the Code of Commerce, the provisions of the old Civil Code may give us some light on the right of one partner
to bind the partnership. States Art. 1695 thereof:
Should no agreement have been made with respect to the form of management, the following rules shall be
observed:
1. All the partners shall be considered agents, and whatever any one of the may do individually shall bind the
partnership; but each one may oppose any act of the others before it has become legally binding.
The records fail to disclose that appellant Goquiolay made any opposition to the sale of the partnership realty
to Washington Z. Sycip and Betty Lee; on the contrary, it appears that he (Goquiolay) only interposed his
objections after the deed of conveyance was executed and approved by the probate court, and,
consequently, his opposition came too late to be effective.

Other matters discussed:

Did the widow, Kong Chai Pin, succeeded her husband, Tan Sin An, in the sole management of the partnership,
upon the latter's death? No.
The Articles of Co-Partnership and the power of attorney executed by Antonio Goquiolay, conferred upon Tan
Sin An the exclusive management of the business, such power, premised as it is upon trust and confidence, was
a mere personal right that terminated upon Tan's demise. The provision in the articles stating that "in the event
of death of any one of the partners within the 10-year term of the partnership, the deceased partner shall be
represented by his heirs", could not have referred to the managerial right given to Tan Sin An; more
appropriately, it related to the succession in the proprietary interest of each partner.
The covenant that Antonio Goquiolay shall have no voice or participation in the management of the
partnership, being a limitation upon his right as a general partner, must be held coextensive only with Tan's right
to manage the affairs, the contrary not being clearly apparent.
Could Kong Chai Pin act alone as sole managing partner in view of the minority of the other heirs? NO.
Consonant with the articles of co-partnership providing for the continuation of the firm notwithstanding the
death of one of the partners, the heirs of the deceased, by never repudiating or refusing to be bound under
the said provision in the articles, became individual partners with Antonio Goquiolay upon Tan's demise. The
validity of like clauses in partnership agreements is expressly sanctioned under Article 222 of the Code of
Commerce.
Minority of the heirs is not a bar to the application of that clause in the articles of co-partnership.
Is Kong Chai Pin the only heir qualified to act as managing partner? Since the "new" members' liability in the
partnership was limited merely to the value of the share or estate left by the deceased Tan Sin An, did they
became no more than limited partners and, as such, were disqualified from the management of the business
under Article 148 of the Code of Commerce? NO.
Although ordinarily, this effect follows from the continuance of the heirs in the partnership, it was not so with
respect to the widow Kong Chai Pin, who, by her affirmative actions, manifested her intent to be bound by the
partnership agreement not only as a limited but as a general partner. Thus, she managed and retained
possession of the partnership properties and was admittedly deriving income therefrom up to and until the
same were sold to Washington Sycip and Betty Lee. In fact, by executing the deed of sale of the parcels of
land in dispute in the name of the partnership, she was acting no less than as a managing partner. Having thus
preferred to act as such, she could be held liable for the partnership debts and liabilities as a general partner,
beyond what she might have derived only from the estate of her deceased husband. By allowing her to retain
control of the firm's property from 1942 to 1949, plaintiff estopped himself to deny her legal representation of the
partnership, with the power to bind it by the proper contracts.
Did the sale covering the entire firm realty in effect, threw the partnership into dissolution, which requires
consent of all the partners? NO.
That the partnership was left without the real property it originally had will not work its dissolution, since the firm
was not organized to exploit these precise lots but to engage in buying and selling real estate, and "in general
real estate agency and brokerage business". Incidentally, it is to be noted that the payment of the solidary
obligation of both the partnership and the late Tan Sin An, leaves open the question of accounting and
contribution between the co-debtors, that should be ventilated separately.
This case involves the rights acquired by strangers, and does not deal with the rights arising between partners
Goquiolay and the widow of Tan Sin An.
Now, in determining what kind of partner the widow of partner Tan Sin An had elected to become, strangers
had to be guided by her conduct and actuations and those of appellant Goquiolay. Knowing that by law a
limited partner is barred from managing the partnership business or property, third parties (like the purchasers)
who found the widow possessing and managing the firm property with the acquiescense (or at least without
apparent opposition) of the surviving partners were perfectly justified in assuming that she had become a
general partner, and, therefore, in negotiating with her as such a partner, having authority to act for, and in
behalf of, the firm. This belief, be it noted, was shared even by the probate court that approved the sale by the
widow of the real property standing in the partnership name. That belief was fostered by the very inaction of
appellant Goquiolay.
Note that for seven long years, from partner Tan Sin An's death in 1942 to the sale in 1949, there was more than
ample time for Goquiolay to take up the management of these properties, or at least ascertain how its affairs
stood. For seven years Goquiolay could have asserted his alleged rights, and by suitable notice in the
commercial registry could have warned strangers that they must deal with him alone, as sole general partner.
But he did nothing of the sort, because he was not interested and he did not even take steps to pay, or settle,
the firm debts that were overdue since before the outbreak of the last war. He did not even take steps, after
Tan Sin An died, to cancel, or modify, the provisions of the partnership articles that he (Goquiolay) would have
no intervention in the management of the partnership. This laches certainly contributed to confirm the view
that the widow of Tan Sin An had, or was given, authority to manage and deal with the firm's properties, apart
from the presumption that a general partner dealing with partnership property has the requisite authority from
his co-partners
The stipulation in the articles of partnership that any of the two managing partners may contract and sign in the
name of the partnership with the consent of the other, undoubtedly creates an obligation between the two
partners, which consists in asking the other's consent before contracting for the partnership. This obligation of
course is not imposed upon a third person who contracts with the partnership. Neither is it necessary for the
third person to ascertain if the managing partner with whom he contracts has previously obtained the consent
of the other. A third person may and has a right to presume that the partner with whom he contracts has, in the
ordinary and natural course of business, the consent of his co-partner; for otherwise he would not enter into the
contract. The third person would naturally not presume that the partner with whom he enters into the
transaction is violating the articles of partnership, but on the contrary, is acting in accordance therewith. And
this finds support in the legal presumption that the ordinary course of business has been followed (No. 18,
section 334, Code of Civil Procedure), and that the law has been obeyed (No. 31, section 334). This last
presumption is equally applicable to contracts which have the force of law between the parties.

Articles of Partnership
III. The co-partnership shall be composed of said Tan Sin An as sole managing and partner (sic), and Antonio C.
Goquiolay as co-partner.
IV. The affairs of co-partnership shall be managed exclusively by the managing and partner or by his authorized
agent, and the managing and partner may delegate the entire management of the affairs of the co-
partnership by irrevocable power of attorney to any person, firm or corporation he may select upon such terms
as regards compensation as he may deem proper, and vest in such persons, firm or corporation full power and
authority, as the agent of the co-partnership and in his name, place and stead to do anything for it or on his
behalf which he as such managing and partner might do or cause to be done.
V. The co-partner shall have no voice or participation in the management of the affairs of the co-partnership;
but he may examine its accounts once every six (6) months at any time during ordinary business hours, and in
accordance with the provisions of the Code of Commerce.
The lifetime of the partnership was fixed at ten (10) years and also that —
In the event of the death of any of the partners at any time before the expiration of said term, the co-
partnership shall not be dissolved but will have to be continued and the deceased partner shall be represented
by his heirs or assigns in said co-partnership (Art. XII, Articles of Co-Partnership).
However, the partnership could be dissolved and its affairs liquidated at any time upon mutual agreement in
writing of the partners (Art. XIII, articles of Co-Partnership).

G.R. No. 70403 July 7, 1989

SANTIAGO SYJUCO, INC., petitioner,

vs.
HON. JOSE P. CASTRO

Back in November 1964, Eugenio Lim, for and in his own behalf and as attorney-in-fact of his mother, and other
brothers (the Lims), borrowed from petitioner Santiago Syjuco, Inc. (hereinafter, Syjuco only) the sum of
P800,000.00.

The loan was given on the security of a first mortgage on property registered in the names of said borrowers as
owners in common. Thereafter additional loans on the same security were obtained by the Lims from Syjuco, so
that as of May 8, 1967, the aggregate of the loans stood at P2,460,000.00, exclusive of interest, and the security
had been augmented by bringing into the mortgage other property, also registered as owned pro indiviso by
the Lims under two titles

There is no dispute about these facts, nor about the additional circumstance that as stipulated in the mortgage
deed the obligation matured on November 8, 1967; that the Lims failed to pay it despite demands therefor;
that Syjuco consequently caused extra-judicial proceedings for the foreclosure of the mortgage to be
commenced by the Sheriff of Manila; and that the latter scheduled the auction sale of the mortgaged
property on December 27, 1968. 1 The attempt to foreclose triggered off a legal battle that has dragged on for
more than twenty years now, fought through five (5) cases in the trial courts, 2 two (2) in the Court of
Appeals, 3 and three (3) more in this Court, 4 with the end only now in sight.

After the 2nd case 5. G.R. No. L-56014

The decision consequently decreed that the Sheriff of Manila should proceed with the mortgage sale, there
being no further impediment thereto.23

Notice of the decision was served on the Lims, through Atty. Canlas, on October 2, 1982.

6. THE SECRET ACTION CIVIL CASE NO. Q-36845 OF THE REGIONAL TRIAL COURT,
QUEZON CITY, JUDGE JOSE P. CASTRO, PRESIDING

Twelve (12) days after the Lims were served, as above mentioned, with notice of this Court's judgment in G.R.
No. 56014, or on October 14,1982, they caused the filing with the Regional Trial Court of Quezon City of still
another action, the third, also designed, like the first two, to preclude enforcement of the mortgage held by
Syjuco.

This time the complaint was presented, not in their individual names, but in the name of a partnership of which
they themselves were the only partners: "Heirs of Hugo Lim." The complaint advocated the theory that the
mortgage which they, together with their mother, had individually constituted (and thereafter amended during
the period from 1964 to 1967) over lands standing in their names in the Property Registry as owners pro indiviso,
in fact no longer belonged to them at that time, having been earlier deeded over by them to the partnership,
"Heirs of Hugo Lim", more precisely, on March 30, 1959, hence, said mortgage was void because executed by
them without authority from the partnership.

The complaint was signed by a lawyer other than Atty. Canlas, but the records disclose that Atty. Canlas took
over as counsel as of November 4,1982. The case, docketed as Civil Case No. Q-39295, was assigned to Branch
35 of the Quezon City Regional Trial Court, then presided over by Judge Jose P. Castro.

Judge Castro issued a restraining order on October 15, 1982. Then, Sheriff Perfecto G. Dalangin submitted a
return of summons to the effect that on December 6, 1982 he —

.. served personally and left a copy of summons together with a copy of Complaint and its
annexes x x upon defendant's office formerly at 313 Quirino Ave., Paranaque, Metro-Manila and
now at 407 Dona Felisa Syjuco Building, Remedios St., corner Taft Avenue, Manila, through the
Manager, a person of sufficient age and discretion duly authorized to receive service of such
nature, but who refused to accept service and signed receipt thereof.26

On February 10, 1983, Atty. Canlas filed an ex-parte motion to declare Syjuco in default. The order of default
issued the next day,

8. G.R.NO.L-70403; THE PROCEEDING AT BAR

For the third time Syjuco is now before this Court on the same matter. It filed on April 3, 1985 the instant petition
for certiorari, prohibition and mandamus. It prays in its petition that the default judgment rendered against it by
Judge Castro in said Civil Case No. Q-36485 be annulled on the ground of lack of service of summons, res
judicata and laches, and failure of the complaint to state a cause of action; that the sheriff be commanded to
proceed with the foreclosure of the mortgage on the property covered by Transfer Certificates of Title
Numbered 75413, 75415, 75416 and 75418 of the Manila Registry; and that the respondents the Lims, Judge
Castro, the Sheriff and the Register of Deeds of Manila, the partnership known as "Heirs of Hugo Lim," and Atty.
Paterno R. Canlas, counsel for-the Lims and their partnership-be perpetually enjoined from taking any further
steps to prevent the foreclosure.
The record shows that the respondent partnership is composed exclusively of the individual Lims were brought
and prosecuted, their contribution to the partnership consisting chiefly, if not solely, of the property subject of
the Syjuco mortgage.

It is also a fact that despite its having been contributed to the partnership, allegedly on March 30, 1959, the
property was never registered with the Register of Deeds in the name of the partnership, but to this date
remains registered in the names of the Lims as owners in common.

Issue: W/N the Limss are estopped from to asserting the existence of the partnership

Ruling: Yes.

The original mortgage deed of November 14,1964 was executed by the Lims as such owners, as were all
subsequent amendments of the mortgage. There can be no dispute that in those circumstances, the
respondent partnership was chargeable with knowledge of the mortgage from the moment of its execution.
The legal fiction of a separate juridical personality and existence will not shield it from the conclusion of having
such knowledge which naturally and irresistibly flows from the undenied facts. It would violate all precepts of
reason, ordinary experience and common sense to propose that a partnership, as commonly known to all the
partners or of acts in which all of the latter, without exception, have taken part, where such matters or acts
affect property claimed as its own by said partnership.

If, therefore, the respondent partnership was inescapably chargeable with knowledge of the mortgage
executed by all the partners thereof, its silence and failure to impugn said mortgage within a reasonable time,
let alone a space of more than seventeen years, brought into play the doctrine of estoppel to preclude any
attempt to avoid the mortgage as allegedly unauthorized.

The principles of equitable estoppel, sometimes called estoppel in pais, are made part of our law by Art. 1432
of the Civil Code. Coming under this class is estoppel by silence, which obtains here and as to which it has
been held that:

... an estoppel may arise from silence as well as from words. 'Estoppel by silence' arises where a
person, who by force of circumstances is under a duty to another to speak, refrains from doing
so and thereby leads the other to believe in the existence of a state of facts in reliance on which
he acts to his prejudice. Silence may support an estoppel whether the failure to speak is
intentional or negligent.

Inaction or silence may under some circumstances amount to a misrepresentation and

concealment of the facts, so as to raise an equitable estoppel. When the silence is of such a
character and under such circumstances that it would become a fraud on the other party to
permit the party who has kept silent to deny what his silence has induced the other to believe
and act on, it will operate as an estoppel. This doctrine rests on the principle that if one
maintains silence, when in conscience he ought to speak, equity will debar him from speaking
when in conscience he ought to remain silent. He who remains silent when he ought to speak
cannot be heard to speak when he should be silent. 40

And more to the point:

A property owner who knowingly permits another to sell or encumber the property, without
disclosing his title or objecting to the transaction, is estopped to set up his title or interest as
against a person who has been thereby misled to his injury.

xxx

An owner of real property who stands by and sees a third person selling or mortgaging it under
claim of title without asserting his own title or giving the purchaser or mortgagee any notice
thereof is estopped, as against such purchaser or mortgagee, afterward to assert his title; and,
although title does not pass under these circumstances, a conveyance will be decreed by a
 court of equity. Especially is the rule applicable where the party against whom the estoppel is
claimed, in addition to standing by, takes part in malting the sale or mortgage. 41

More specifically, the concept to which that species of estoppel which results from the non-
disclosure of an estate or interest in real property has ordinarily been referred is fraud, actual or
constructive. ... Although fraud is not an essential element of the original conduct working the
estoppel, it may with perfect property be said that it would be fraudulent for the party to
repudiate his conduct, and to assert a right or claim in contravention thereof. 42

Equally or even more preclusive of the respondent partnership's claim to the mortgaged property is the last
paragraph of Article 1819 of the Civil Code, which contemplates a situation duplicating the circumstances that
attended the execution of the mortgage in favor of Syjuco and therefore applies foursquare thereto:

Where the title to real property is in the names of all the partners a conveyance executed by all
the partners passes all their rights in such property.

The court holds that the respondent partnership was inescapably chargeable with knowledge of the mortgage
executed by all the partners thereof, and therefore its silence and failure to impugn said mortgage within
a reasonable time, let alone a space of more than 17 years, brought into play the doctrine of estoppel to
preclude any attempt to avoid the mortgage as allegedly unauthorized. Also, Article 1819 states that, where
the title to real property is in the names of all the partners, a conveyance executed by all the partners passes
all their rights in such property. Consequently those member’s acts, declarations and omissions cannot be
deemed to be simply the individual acts of said members, but infact and in law, those of the partnership

Case: Muñasque vs. Court of Appeals

No. L-39780. November 11, 1985.*

Facts:

Elmo Muñasque filed a complaint for payment of sum of money and damages against respondents Celestino
Galan, Tropical Commercial, Co., Inc. (Tropical) and Ramon Pons, alleging that the petitioner entered into a
contract with respondent Tropical through its Cebu Branch Manager Pons for remodeling a portion of its
building without exchanging or expecting any consideration from Galan although the latter was casually
named as partner in the contract; that by virtue of his having introduced the petitioner to the employing
company (Tropical), Galan would receive some kind of compensation in the form of some percentages or
commission.

Tropical agreed to give petitioner the amount of P7,000.00 soon after the construction began and thereafter
the amount of P6,000.00 every fifteen (15) days during the construction to make a total sum of P25,000.00.
On January 9, 1967, Tropical and/or Pons delivered a check for P7,000.00 not to the plaintiff but to a stranger to
the contract, Galan, who succeeded in getting petitioner's indorsement on the same check persuading the
latter that the same be deposited in a joint account.

On January 26, 1967, when the second check for P6,000.00 was due, petitioner refused to indorse said check
presented to him by Galan but through later manipulations, respondent Pons succeeded in changing the
payee's name to Galan and Associates, thus enabling Galan to cash the same at the Cebu Branch of the
Philippine Commercial and Industrial Bank (PCIB) placing the petitioner in great financial difficulty in his
construction business and subjecting him to demands of creditors to pay for construction materials, the
payment of which should have been made from the P13,000.00 received by Galan.
Due to the unauthorized disbursement by respondents Tropical and Pons of the sum of P13,000.00 to Galan,
petitioner demanded that said amount be paid to him by respondents under the terms of the written contract
between the petitioner and respondent company.

Issue:

Are they solidary liable towards Elmo Muñasque?

Held:

Yes.
While it is true that under Article 1816 of the Civil Code, "AII partners, including industrial ones, shall be liable pro
rata with all their property and after all the partnership assets have been exhausted, for the contracts which
may be entered into the name and for the account of the partnership, under its signature and by a person
authorized to act for the partnership. x x x", this provision should be construed together with Article 1824 which
provides that: "All partners are liable solidarily with the partnership for everything chargeable to the partnership
under Articles 1822 and 1823." In short, while the liability of the partners are merely joint in transactions entered
into by the partnership, a third person who transacted with said partnership can hold the partners solidarily
liable for the whole obligation if the case of the third person falls under Articles 1822 or 1823.

The obligation is solidary because the law protects him, who in good faith relied upon the authority of a
partner, whether such authority is real or apparent. That is why under Article 1824 of the Civil Code all partners,
whether innocent or guilty, as well as the legal entity which is the partnership, are solidarily liable.

G.R. No. L-11840 July 26, 1960

ANTONIO C. GOQUIOLAY and THE PARTNERSHIP "TAN SIN AN and ANTONIO C. GOQUIOLAY, plaintiffs-
appellants,
vs.
WASHINGTON Z. SYCIP, ET AL., defendants-appellees.

FACTS:
Antonio Goquiolay executed a general power of attorney to this effect:
That besides the powers and duties granted the said Tan Sin An by the articles of co-partnership of said co-
partnership, that said Tan Sin An should act as the Manager for the full period of the term for which said co-
partnership was organized or until the whole period that the said capital of P30,000.00 of the co-partnership
should last, to carry on to the best advantage and interest of the said co-partnership, to make and execute,
sign, seal and deliver for the co-partnership, and in its name, all bills, bonds, notes, specialties, and trust receipts
or other instruments or documents in writing whatsoever kind or nature which shall be necessary to the proper
conduction of the said businesses, including the power to mortgage and pledge real and personal properties,
to secure the obligation of the co-partnership, to buy real or personal properties for cash or upon such terms as
he may deem advisable, to sell personal or real properties, such as lands and buildings of the co-partnership in
any manner he may deem advisable for the best interest of said co-partnership, to borrow money on behalf of
the co-partnership and to issue promissory notes for the repayment thereof, to deposit the funds of the co-
partnership in any local bank or elsewhere and to draw checks against funds so deposited ... .

Tan Sin An and Antonio C. Goquiolay", entered into a general commercial partnership under the partnership
name "Tan Sin An and Antonio C. Goquiolay", for the purpose in dealing in real state. The partnership had a
capital of P30,000.00, P18,000.00 of which was contributed by Goquiolay and P12,000.00 by Tan Sin An. The
agreement lodge upon Tan Sin An the sole management of the partnership affairs.
The plaintiff partnership purchased three (3) parcels of land (in Davao) assuming the payment of a mortgage
obligation payable to "La Urbana Sociedad Mutua de Construccion y Prestamos.” Another 46 parcels were
purchased by Tan Sin An in his individual capacity, and he assumed payment of a mortgage debt thereon. The
downpayment and the amortization were advanced by Yutivo and Co., for the account of the purchasers.
These obligations were consolidated in an instrument executed by the partnership whereby the entire 49 lots
were mortgaged in favor of the "Banco Hipotecario de Filipinas" (as successor to "La Urbana") and the
covenantors bound themselves to pay, jointly and severally, the remaining balance of their unpaid accounts.
Tan Sin An died, leaving as surviving heirs his widow, Kong Chai Pin, and four minor children. Kong Chai Pin was
appointed administratrix of the intestate estate of her deceased husband.
In the meantime, repeated demands for payment were made by the Banco Hipotecario on the partnership
and on Tan Sin An. The defendant Sing Yee and Cuan, Co., Inc., upon request of defendant Yutivo Sons
Hardware Co., paid the remaining balance of the mortgage debt, and the mortgage was cancelled.
Then, Yutivo Sons Hardware Co. and Sing Yee and Cuan Co., Inc. filed their claims in the intestate proceedings
of Tan Sin An as alleged obligations of the partnership and Tan Sin An, for advances, interest and taxes paid in
amortizing and discharging their obligations to "La Urbana" and the "Banco Hipotecario".
Kong Chai Pin filed a petition with the probate court for authority to sell all the 49 parcels of land to Washington
Z, Sycip and Betty Y. Lee, for the purpose preliminary of settling the debts of Tan Sin An and the partnership.
Pursuant to a court order Kong Chai Pin executed a deed of sale of the 49 parcels of land to the defendants
Washington Sycip and Betty Lee in consideration of P37,000.00 and of vendees' assuming payments of the
claims filed by Yutivo Sons Hardware Co. and Sing Yee and Cuan Co., Inc. Defendants Sycip and Betty Lee
executed in favor of the Insular Development Co., Inc. a deed of transfer covering the said 49 parcels of land.
Learning about the sale to Sycip and Lee, the surviving partner Antonio Goquiolay filed a petition in the
intestate proceedings seeking to set aside the order of the probate court approving the sale in so far as his
interest over the parcels of land sold was concerned. So the probate court annulled the sale with respect to
the 60% interest of Antonio Goquiolay over the properties sold. Goquilay also filed for the annulment of the sale
in favor of Washington Sycip and Betty Lee, and their subsequent conveyance in favor of Insular Development
Co., Inc., in so far as the three (3) lots owned by the plaintiff partnership are concerned. The answer averred
the validity of the sale by Kong Chai Pin as successor partner, in lieu of the late Tan Sin An.
ISSUE:
Is the transfer of partnership property by one partner (Kong Chai Pin), acting in behalf of the firm, to the
stranger (Sycip and Betty Lee) valid and therefore binds the partnership? YES.
Is the consent of the other partner (Goquiolay) necessary to perfect the sale of the partnership properties
executed by Kong Chai Pin in favour of Sycip and Betty Lee? NO.
HELD:
Strangers dealing with a partnership have the right to assume, in the absence of restrictive clauses in the co-
partnership agreement, that every general partner has power to bind the partnership, specially those partners
acting with ostensible authority. And so, we held in one case:
. . . Third persons, like the plaintiff, are not bound in entering into a contract with any of the two partners, to
ascertain whether or not this partner with whom the transaction is made has the consent of the other partner.
The public need not make inquiries as to the agreements had between the partners. Its knowledge is enough
that it is contracting with the partnership which is represented by one of the managing partners.
"There is a general presumption that each individual partner is an agent for the firm and that he has authority to
bind the firm in carrying on the partnership transactions."
"The presumption is sufficient to permit third persons to hold the firm liable on transactions entered into by one
of the members of the firm acting apparently in its behalf and within the scope of his authority."
Article 129 of the Code of Commerce to the effect that —
If the management of the general partnership has not been limited by special agreement to any of the
members, all shall have the power to take part in the direction and management of the common business, and
the members present shall come to an agreement for all contracts or obligations which may concern the
association.
But this obligation is one imposed by law on the partners among themselves, that does not necessarily affect
the validity of the acts of a partner, while acting within the scope of the ordinary course of business of the
partnership, as regards third persons without notice. The latter may rightfully assume that the contracting
partner was duly authorized to contract for and in behalf of the firm and that, furthermore, he would not
ordinarily act to the prejudice of his co-partners. The regular course of business procedure does not require that
each time a third person contracts with one of the managing partners, he should inquire as to the latter's
authority to do so, or that he should first ascertain whether or not the other partners had given their consent
thereto. In fact, Article 130 of the same Code of Commerce provides that even if a new obligation was
contracted against the express will of one of the managing partners, "it shall not be annulled for such reason,
and it shall produce its effects without prejudice to the responsibility of the member or members who
contracted it, for the damages they may have caused to the common fund."
Although the partnership under consideration is a commercial partnership and, therefore, to be governed by
the Code of Commerce, the provisions of the old Civil Code may give us some light on the right of one partner
to bind the partnership. States Art. 1695 thereof:
Should no agreement have been made with respect to the form of management, the following rules shall be
observed:
1. All the partners shall be considered agents, and whatever any one of the may do individually shall bind the
partnership; but each one may oppose any act of the others before it has become legally binding.
The records fail to disclose that appellant Goquiolay made any opposition to the sale of the partnership realty
to Washington Z. Sycip and Betty Lee; on the contrary, it appears that he (Goquiolay) only interposed his
objections after the deed of conveyance was executed and approved by the probate court, and,
consequently, his opposition came too late to be effective.

Other matters discussed:

Did the widow, Kong Chai Pin, succeeded her husband, Tan Sin An, in the sole management of the partnership,
upon the latter's death? No.
The Articles of Co-Partnership and the power of attorney executed by Antonio Goquiolay, conferred upon Tan
Sin An the exclusive management of the business, such power, premised as it is upon trust and confidence, was
a mere personal right that terminated upon Tan's demise. The provision in the articles stating that "in the event
of death of any one of the partners within the 10-year term of the partnership, the deceased partner shall be
represented by his heirs", could not have referred to the managerial right given to Tan Sin An; more
appropriately, it related to the succession in the proprietary interest of each partner.
The covenant that Antonio Goquiolay shall have no voice or participation in the management of the
partnership, being a limitation upon his right as a general partner, must be held coextensive only with Tan's right
to manage the affairs, the contrary not being clearly apparent.
Could Kong Chai Pin act alone as sole managing partner in view of the minority of the other heirs? NO.
Consonant with the articles of co-partnership providing for the continuation of the firm notwithstanding the
death of one of the partners, the heirs of the deceased, by never repudiating or refusing to be bound under
the said provision in the articles, became individual partners with Antonio Goquiolay upon Tan's demise. The
validity of like clauses in partnership agreements is expressly sanctioned under Article 222 of the Code of
Commerce.
Minority of the heirs is not a bar to the application of that clause in the articles of co-partnership.
Is Kong Chai Pin the only heir qualified to act as managing partner? Since the "new" members' liability in the
partnership was limited merely to the value of the share or estate left by the deceased Tan Sin An, did they
became no more than limited partners and, as such, were disqualified from the management of the business
under Article 148 of the Code of Commerce? NO.
Although ordinarily, this effect follows from the continuance of the heirs in the partnership, it was not so with
respect to the widow Kong Chai Pin, who, by her affirmative actions, manifested her intent to be bound by the
partnership agreement not only as a limited but as a general partner. Thus, she managed and retained
possession of the partnership properties and was admittedly deriving income therefrom up to and until the
same were sold to Washington Sycip and Betty Lee. In fact, by executing the deed of sale of the parcels of
land in dispute in the name of the partnership, she was acting no less than as a managing partner. Having thus
preferred to act as such, she could be held liable for the partnership debts and liabilities as a general partner,
beyond what she might have derived only from the estate of her deceased husband. By allowing her to retain
control of the firm's property from 1942 to 1949, plaintiff estopped himself to deny her legal representation of the
partnership, with the power to bind it by the proper contracts.
Did the sale covering the entire firm realty in effect, threw the partnership into dissolution, which requires
consent of all the partners? NO.
That the partnership was left without the real property it originally had will not work its dissolution, since the firm
was not organized to exploit these precise lots but to engage in buying and selling real estate, and "in general
real estate agency and brokerage business". Incidentally, it is to be noted that the payment of the solidary
obligation of both the partnership and the late Tan Sin An, leaves open the question of accounting and
contribution between the co-debtors, that should be ventilated separately.
This case involves the rights acquired by strangers, and does not deal with the rights arising between partners
Goquiolay and the widow of Tan Sin An.
Now, in determining what kind of partner the widow of partner Tan Sin An had elected to become, strangers
had to be guided by her conduct and actuations and those of appellant Goquiolay. Knowing that by law a
limited partner is barred from managing the partnership business or property, third parties (like the purchasers)
who found the widow possessing and managing the firm property with the acquiescense (or at least without
apparent opposition) of the surviving partners were perfectly justified in assuming that she had become a
general partner, and, therefore, in negotiating with her as such a partner, having authority to act for, and in
behalf of, the firm. This belief, be it noted, was shared even by the probate court that approved the sale by the
widow of the real property standing in the partnership name. That belief was fostered by the very inaction of
appellant Goquiolay.
Note that for seven long years, from partner Tan Sin An's death in 1942 to the sale in 1949, there was more than
ample time for Goquiolay to take up the management of these properties, or at least ascertain how its affairs
stood. For seven years Goquiolay could have asserted his alleged rights, and by suitable notice in the
commercial registry could have warned strangers that they must deal with him alone, as sole general partner.
But he did nothing of the sort, because he was not interested and he did not even take steps to pay, or settle,
the firm debts that were overdue since before the outbreak of the last war. He did not even take steps, after
Tan Sin An died, to cancel, or modify, the provisions of the partnership articles that he (Goquiolay) would have
no intervention in the management of the partnership. This laches certainly contributed to confirm the view
that the widow of Tan Sin An had, or was given, authority to manage and deal with the firm's properties, apart
from the presumption that a general partner dealing with partnership property has the requisite authority from
his co-partners
The stipulation in the articles of partnership that any of the two managing partners may contract and sign in the
name of the partnership with the consent of the other, undoubtedly creates an obligation between the two
partners, which consists in asking the other's consent before contracting for the partnership. This obligation of
course is not imposed upon a third person who contracts with the partnership. Neither is it necessary for the
third person to ascertain if the managing partner with whom he contracts has previously obtained the consent
of the other. A third person may and has a right to presume that the partner with whom he contracts has, in the
ordinary and natural course of business, the consent of his co-partner; for otherwise he would not enter into the
contract. The third person would naturally not presume that the partner with whom he enters into the
transaction is violating the articles of partnership, but on the contrary, is acting in accordance therewith. And
this finds support in the legal presumption that the ordinary course of business has been followed (No. 18,
section 334, Code of Civil Procedure), and that the law has been obeyed (No. 31, section 334). This last
presumption is equally applicable to contracts which have the force of law between the parties.

Santiago Inc. vs Castro 175 SCRA 171-

Case: Muñasque vs. Court of Appeals
No. L-39780. November 11, 1985.*

Facts:

Elmo Muñasque filed a complaint for payment of sum of money and damages against respondents Celestino
Galan, Tropical Commercial, Co., Inc. (Tropical) and Ramon Pons, alleging that the petitioner entered into a
contract with respondent Tropical through its Cebu Branch Manager Pons for remodeling a portion of its
building without exchanging or expecting any consideration from Galan although the latter was casually
named as partner in the contract; that by virtue of his having introduced the petitioner to the employing
company (Tropical), Galan would receive some kind of compensation in the form of some percentages or
commission.

Tropical agreed to give petitioner the amount of P7,000.00 soon after the construction began and thereafter
the amount of P6,000.00 every fifteen (15) days during the construction to make a total sum of P25,000.00.
On January 9, 1967, Tropical and/or Pons delivered a check for P7,000.00 not to the plaintiff but to a stranger to
the contract, Galan, who succeeded in getting petitioner's indorsement on the same check persuading the
latter that the same be deposited in a joint account.

On January 26, 1967, when the second check for P6,000.00 was due, petitioner refused to indorse said check
presented to him by Galan but through later manipulations, respondent Pons succeeded in changing the
payee's name to Galan and Associates, thus enabling Galan to cash the same at the Cebu Branch of the
Philippine Commercial and Industrial Bank (PCIB) placing the petitioner in great financial difficulty in his
construction business and subjecting him to demands of creditors to pay for construction materials, the
payment of which should have been made from the P13,000.00 received by Galan.

Due to the unauthorized disbursement by respondents Tropical and Pons of the sum of P13,000.00 to Galan,
petitioner demanded that said amount be paid to him by respondents under the terms of the written contract
between the petitioner and respondent company.

Issue:

Are they solidary liable towards Elmo Muñasque?

Held:

Yes.
While it is true that under Article 1816 of the Civil Code, "AII partners, including industrial ones, shall be liable pro
rata with all their property and after all the partnership assets have been exhausted, for the contracts which
may be entered into the name and for the account of the partnership, under its signature and by a person
authorized to act for the partnership. x x x", this provision should be construed together with Article 1824 which
provides that: "All partners are liable solidarily with the partnership for everything chargeable to the partnership
under Articles 1822 and 1823." In short, while the liability of the partners are merely joint in transactions entered
into by the partnership, a third person who transacted with said partnership can hold the partners solidarily
liable for the whole obligation if the case of the third person falls under Articles 1822 or 1823.

The obligation is solidary because the law protects him, who in good faith relied upon the authority of a
partner, whether such authority is real or apparent. That is why under Article 1824 of the Civil Code all partners,
whether innocent or guilty, as well as the legal entity which is the partnership, are solidarily liable.
Information Technology Foundation of the Phil. vs. Comelec, G.R. No. 159139, January 13, 2004

G.R. No. 109248 July 3, 1995

GREGORIO F. ORTEGA, TOMAS O. DEL CASTILLO, JR., and BENJAMIN T. BACORRO, petitioners,
vs.
HON. COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION and JOAQUIN L. MISA, respondents.
VITUG, J.:

FACTS:
The law firm of ROSS, LAWRENCE, SELPH and CARRASCOSO was duly registered in the Mercantile Registry on 4
January 1937 and reconstituted with the Securities and Exchange Commission on 4 August 1948. On 19
December 1980, [Joaquin L. Misa] appellees Jesus B. Bito and Mariano M. Lozada associated themselves
together, as senior partners with respondents-appellees Gregorio F. Ortega, Tomas O. del Castillo, Jr., and
Benjamin Bacorro, as junior partners.

On February 17, 1988, petitioner-appellant wrote the respondents-appellees a letter stating:

I am withdrawing and retiring from the firm of Bito, Misa and Lozada, effective at the end of this month.

On the same day, petitioner-appellant wrote respondents-appellees another letter stating:

"Further to my letter to you today, I would like to have a meeting with all of you with regard to the mechanics of
liquidation, and more particularly, my interest in the two floors of this building. I would like to have this resolved
soon because it has to do with my own plans."
On 30 June 1988, petitioner filed with this Commission's Securities Investigation and Clearing Department (SICD)
a petition for dissolution and liquidation of partnership.

On 13 July 1988, respondents-appellees filed their opposition to the petition.

On 13 July 1988, petitioner filed his Reply to the Opposition.

On 31 March 1989, the hearing officer rendered a decision ruling that:

"[P]etitioner's withdrawal from the law firm Bito, Misa & Lozada did not dissolve the said law partnership.

On appeal, the SEC en banc reversed the decision of the Hearing Officer and held that the withdrawal of
Attorney Joaquin L. Misa had dissolved the partnership of "Bito, Misa & Lozada." The Commission ruled that,
being a partnership at will, the law firm could be dissolved by any partner at anytime, such as by his withdrawal
therefrom, regardless of good faith or bad faith, since no partner can be forced to continue in the partnership
against his will.

The parties sought a reconsideration of the above decision. Attorney Misa, but respondent SEC issued an order
denying reconsideration.

The parties filed with the appellate court separate appeals (docketed CA-G.R. SP No. 24638 and CA-G.R. SP
No. 24648).
During the pendency of the case with the Court of Appeals, Attorney Jesus Bito and Attorney Mariano Lozada
both died on, respectively, 05 September 1991 and 21 December 1991.

The Court of Appeals, finding no reversible error on the part of respondent Commission, AFFIRMED in toto the
SEC decision and order appealed from.

ISSUE:

1. Whether or not the partnership of Bito, Misa & Lozada (now Bito, Lozada, Ortega & Castillo) is a partnership at
will- YES

2. Whether or not the withdrawal of private respondent has dissolved the partnership- YES

3. Whether or not the private respondent’s demand for the dissolution of the partnership was made in bad
faith- NO

HELD:
1. Yes. A partnership that does not fix its term is a partnership at will. That the law firm "Bito, Misa & Lozada," and
now "Bito, Lozada, Ortega and Castillo," is indeed such a partnership need not be unduly belabored. We
quote, with approval, like did the appellate court, the findings and disquisition of respondent SEC on this
matter; viz:

The partnership agreement (amended articles of 19 August 1948) does not provide for a specified period or
undertaking. The "DURATION" clause simply states:

"5. DURATION. The partnership shall continue so long as mutually satisfactory and upon the death or legal
incapacity of one of the partners, shall be continued by the surviving partners."

2. Whether or not the withdrawal of private respondent has dissolved the partnership

Yes. 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.

In passing, neither would the presence of a period for its specific duration or the statement of a particular
purpose for its creation prevent the dissolution of any partnership by an act or will of a partner. Among partners,
mutual agency arises and the doctrine of delectus personae allows them to have the power, although not
necessarily the right, to dissolve the partnership. An unjustified dissolution by the partner can subject him to a
possible action for damages.

The dissolution of a partnership is the change in the relation of the parties caused by any partner ceasing to be
associated in the carrying on, as might be distinguished from the winding up of, the business. Upon its
dissolution, the partnership continues and its legal personality is retained until the complete winding up of its
business culminating in its termination.
3. Whether or not the private respondent’s demand for the dissolution of the partnership was made in bad faith

No. Attorney Misa did not act in bad faith. Public respondents viewed his withdrawal to have been spurred by
“interpersonal conflict” among the partners. It would not be right, we agree, to let any of the partners remain in
the partnership under such an atmosphere of animosity; certainly, not against their will.Indeed, for as long as
the reason for withdrawal of a partner is not contrary to the dictates of justice and fairness, nor for the purpose
of unduly visiting harm and damage upon the partnership, bad faith cannot be said to characterize the act.
Bad faith, in the context here used, is no different from its normal concept of a conscious and intentional design
to do a wrongful act for a dishonest purpose or moral obliquity.

• Tocao vs CA 342 SCRA 20

G.R. No. 17024 March 24, 1922

DOMINGO BEARNEZA, plaintiff-appelle,
vs.
BALBINO DEQUILLA, defendant-appellant.

Facts:
In the year 1903, Balbino Dequilla, the herein defendant, and Perpetua Bearneza formed a partnership for the
purpose of exploiting a fish pond situated in the barrio of Talisay, municipality of Barotac Nuevo, Province of
Iloilo, Perpetua obligating herself to contribute to the payment of the expenses of the business, which
obligation she made good, and both agreeing to divide the profits between themselves, which they had been
doing until the death of the said Perpetua in the year 1912.
Perpetua Bearneza left a will in one of the clauses of which she appointed Domingo Bearnez, the herein
plaintiff, as her heir to succeed to all her rights and interests in the fish pond in question. Domingo Bearneza
demanded from Balbino the delivery of the part of the fish pond but the latter refused, hence an action for
recovery of the said part of the fishpond and half of the profits from what Balbino received from 1913-1919 plus
damages was instituted. In opposition, Balbino averred that his refused was because "the formation of the
supposed partnership between the plaintiff and the defendant for the exploitation of the aforesaid fish pond
was not carried into effect, on account of the plaintiff having refused to defray the expenses of reconstruction
and exploitation of said fish pond."Moreover, the action has also prescribed. RTC ruled for Domingo declaring
him as the owner of the pond composing of alimago and dalusan but without damages for not having to
prove it.CA reversed the decision (no explanation).
Issue: WON there exist partneship between Perpetua and Balbino?
Held: No.
Reason:
There is no sufficient ground for holding that a community of property existed between the plaintiff and the
defendant, it not being known whether the deceased still had any interest in the partnership property which
could have been transmitted by will to the plaintiff. There being no community of property, article 395 of the
Civil Code cited by the plaintiff in support of his contention can have no application to the case at bar.
Although, as the trial court says in its decision, the defendant, in his letters to Perpetua or her husband, makes
reference to the fish pond, calling it "our," or "your fish pond," this reference cannot be held to include the land
on which the said fish pond was built. It has not been proven that Perpetua Bearneza participated in the
ownership of said land, and Exhibits 2 and 3 of the defendant show that he has been paying, as exclusive
owner of the fish pond, the land tax thereon, although in Exhibit X he says that the said land belongs to the
State. The conclusion, therefore, from the evidence is that the land on which the fish pond was constructed did
not constitute a part of the subject- matter of the aforesaid partnership.
Neither can it be maintained that the partnership continued to exist after the death of Perpetua, inasmuch as it
does not appear that any stipulation to that effect has ever been made by her and the defendant, pursuant to
the provisions of article 1704 of the Code last cited.
The partnership having been dissolved by the death of Perpetua Bearneza, its subsequent legal status was that
of a partnership in liquidation, and the only rights inherited by her testamentary heir, the herein plaintiff, were
those resulting from the said liquidation in favor of the deceased partner, and nothing more.
It is true that the latter's act in requiring the heirs of Perpetua to contribute to the payment of the expenses of
exploitation of the aforesaid fishing industry was an attempt to continue the partnership, but it is also true that
neither the said heirs collectively, nor the plaintiff individually, took any action in response to that requirement,
nor made any promise to that effect, and therefore no new contract of partnership existed.

• Eufracio D. Rojas vs. Constancio B. Maglana, G.R. No. 30616, December 10, 199

DAN FUE LEUNG vs. INTERMEDIATE APPELLATE COURT and LEUNG YIU
[G.R. No. 70926. January 31, 1989.]
GUTIERREZ, JR., J p:

Principle of Law: Article 1809

FACTS:
A complaint filed by respondent Leung Yiu with the then CFI of Manila to recover the sum equivalent to 22% of
the annual profits derived from the operation of Sun Wah Panciteria since October, 1955 from petitioner Dan
Fue Leung.

The Sun Wah Panciteria, a restaurant at Sta. Cruz, Manila, was established sometime in October, 1955. It was
registered as a single proprietorship and its licenses and permits were issued to and in favor of petitioner Dan
Fue Leung as the sole proprietor. Respondent Leung Yiu adduced evidence during the trial of the case to show
that Sun Wah Panciteria was actually a partnership and that he was one of the partners having contributed
P4,000.00 to its initial establishment. Furthermore, private respondent received from the petitioner the amount of
P12,000.00 covered by the latter's Equitable Banking Corporation Check from the profits of the operation of the
restaurant for the year 1974.

Petitioner denied having received from the private respondent the amount of P4,000.00. That he used his
savings from his salaries as an employee at Camp Stotsenberg in Clark Field and later as waiter at the Toho
Restaurant amounting to a little more than P2,000.00 as capital in establishing Sun Wah Panciteria. To bolster his
contention that he was the sole owner of the restaurant, the petitioner presented various government licenses
and permits showing the Sun Wah Panciteria was and still is a single proprietorship solely owned and operated
by himself alone. Fue Leung also flatly denied having issued to the private respondent the receipt and the
Equitable Banking Corporation's Check No. 13389470 B in the amount of P12,000.00.

Both the trial court and the appellate court found that the private respondent is a partner of the petitioner in
the setting up and operations of the panciteria. There is no question from the factual findings that the
respondent invested in the business as a partner. Hence, the two courts declared that the private petitioner is
entitled to a share of the annual profits of the restaurant.

Petitioner argues: "The complaint avers that private respondent extended 'financial assistance' to herein
petitioner at the time of the establishment of the Sun Wah Panciteria, in return of which private respondent
allegedly will receive a share in the profits of the restaurant. The same complaint did not claim that private
respondent is a partner of the business. It was, therefore, a serious error to grant a relief not called for by the
complaint. It was also error for the IAC to interpret or construe 'financial assistance' to mean the contribution of
capital by a partner to a partnership;

ISSUE:
Whether or not the private respondent is a partner of the petitioner in the establishment of Sun Wah Panciteria?

HELD: YES
We agree with the appellate court's observation to the effect that given its ordinary meaning, financial
assistance is the giving out of money to another without the expectation of any returns therefrom'. It connotes
an ex gratia dole out in favor of someone driven into a state of destitution. But this circumstance under which
the P4,000.00 was given to the petitioner does not obtain in this case. The complaint explicitly stated that "as a
return for such financial assistance, plaintiff (private respondent) would be entitled to twenty-two percentum
(22%) of the annual profit derived from the operation of the said panciteria." The well-settled doctrine is that the
". . . nature of the action filed in court is determined by the facts alleged in the complaint as constituting the
cause of action." (De Tavera v. Philippine Tuberculosis Society, Inc., 113 SCRA 243; Alger Electric, Inc. v. Court of
Appeals, 135 SCRA 37).

The private respondent is a partner of the petitioner in Sun Wah Panciteria. The requisites of a partnership which
are — 1) two or more persons bind themselves to contribute money, property, or industry to a common fund;
and 2) intention on the part of the partners to divide the profits among themselves (Article 1767, Civil Code;
Yulo v. Yang Chiao Cheng, 106 Phil. 110) — have been established. As stated by the respondent, a partner
shares not only in profits but also in the losses of the firm. If excellent relations exist among the partners at the
start of business and all the partners are more interested in seeing the firm grow rather than get immediate
returns, a deferment of sharing in the profits is perfectly plausible. It would be incorrect to state that if a partner
does not assert his rights anytime within ten years from the start of operations, such rights are irretrievably lost.
The private respondent's cause of action is premised upon the failure of the petitioner to give him the agreed
profits in the operation of Sun Wah Panciteria. In effect the private respondent was asking for an accounting of
his interests in the partnership

Regarding the prescriptive period within which the private respondent may demand an accounting, Articles
1806, 1807, and 1809 show that the right to demand an accounting exists as long as the partnership exists.
Prescription begins to run only upon the dissolution of the partnership when the final accounting is done.

G.R. No. 126334 November 23, 2001

EMILIO EMNACE, petitioner,
vs.
COURT OF APPEALS, ESTATE OF VICENTE TABANAO, SHERWIN TABANAO, VICENTE WILLIAM TABANAO, JANETTE
TABANAO DEPOSOY, VICENTA MAY TABANAO VARELA, ROSELA TABANAO and VINCENT TABANAO, respondents.
YNARES-SANTIAGO, J.:

NOTE: CITED TWICE - Article 1809 & 1842 [Case No. 27 & 41]

CASE SUMMARY:
Emnace, Tabanao, and Divina-Gracia were partners in a fishing industry. They decided to dissolve their
partnership. However, throughout the existence of the partnership, and even after Vicente Tabanao’s demise,
Emnace failed to submit to Tabanao’s heirs any statement of assets and liabilities of the partnership, and to
render an accounting of the partnership’s finances. Emnace also failed to turn over Tabanao’s shares. Heirs of
Tabanao filed an action for accounting and payment of shares against Emnace. The issue in this case is WON
the heirs action for accounting has prescribed. The SC ruled in favor of Emnace.

DOCTRINE:
For as long as the partnership exists, any of the partners may demand an accounting of the partnership’s
business, and prescription of the said right starts to run only upon the dissolution of the partnership when the
final accounting is done.

FACTS:
Emilio Emnace, Vicente Tabanao and Jacinto Divina-gracia were partners in a fishing business, Ma. Nelma
Fishing Industry.

After Jacinto Divinagracia’s withdrew from the partnership, they decided to dissolve their partnership and
executed an agreement of partition and distribution of the partnership properties among them sometime in
January of 1986. Assets to be distributed were 5 fishing boats, 6 vehicles, and 2 parcels of land.
Tabanao died in 1994.

Throughout the existence of the partnership, and even after Vicente Tabanao’s demise, Emnace failed to
submit to Tabanao’s heirs any statement of assets and liabilities of the partnership, and to render an
accounting of the partnership’s finances. Emnace also reneged on his promise to turn over to Tabanao’s heirs
the deceased’s 1/3 share in the total assets of the partnership, amounting to P30,000,000.00, or the sum of
P10,000,000.00, despite formal demand for payment thereof.

Consequently, Tabanao’s heirs, respondents herein, filed against petitioner an action for accounting, payment
of shares, division of assets and damages.

Emnace filed a motion to dismiss the complaint on the grounds of improper venue, lack of jurisdiction over the
nature of the action or suit, and lack of capacity of the estate of Tabanao to sue.

RTC denied the motion to dismiss.

Tabanao’s heirs filed an amended complaint, incorporating the additional prayer that petitioner be ordered to
“sell all (the partnership’s) assets and thereafter pay/remit/deliver/surrender/yield to the plaintiffs” their
corresponding share in the proceeds thereof.
Emnace filed a manifestation and motion to dismiss. As an additional ground, Emnace raised prescription
warranting the outright dismissal of the complaint trial court denying the motion to dismiss

RTC ruled that prescription begins to run only upon the dissolution of the partnership when the final accounting
is done. Hence, prescription has not set in the absence of a final accounting.

CA rendered the assailed decision, dismissing the petition for certiorari.

Emnace filed the instant petition for review.

ISSUE #1:
WON the action for accounting was filed in an improper venue. (NO)

Petitioner’s argument: Petitioner insists that venue was improperly laid since the action is a real action involving
a parcel of land that is located outside the territorial jurisdiction of the court a quo.

HELD #1: NO.

SC ruled that there was no error on the part of the RTC and the CA in holding that it was filed in correct venue.

An action for accounting, payment of partnership shares, division of assets and damages is a personal action
which, under the Rules, may be commenced and tried where the defendant resides or may be found, or
where the plaintiffs reside, at the election of the latter

ISSUE #2:
WON the surviving spouse of Tabunao has legal capacity to sue.

Petitioner’s argument: Petitioner asserts that the surviving spouse of Vicente Tabanao has no legal capacity to
sue since she was never appointed as administratrix or executrix of his estate.

HELD #2: YES.

SC ruled that petitioner’s objection in this regard is misplaced. The surviving spouse does not need to be
appointed as executrix or administratrix of the estate before she can file the action. She and her children are
complainants in their own right as successors of Vicente Tabanao. From the very moment of Vicente Tabanao’s
death, his rights insofar as the partnership was concerned were transmitted to his heirs, for rights to the
succession are transmitted from the moment of death of the decedent.

Whatever claims and rights Vicente Tabanao had against the partnership and petitioner were transmitted to
respondents by operation of law, more particularly by succession. Moreover, respondents became owners of
their respective hereditary shares from the moment Vicente Tabanao died.

As successors who stepped into the shoes of their decedent upon his death, they can commence any action
originally pertaining to the decedent. From the moment of his death, his rights as a partner and to demand
fulfillment of petitioner’s obligations as outlined in their dissolution agreement were transmitted to respondents.
They, therefore, had the capacity to sue and seek the court’s intervention to compel petitioner to fulfill his
obligations.

ISSUE #3:
WON the action for accounting has prescribed

Petitioner’s argument: Petitioner contends that the trial court should have dismissed the complaint on the
ground of prescription, arguing that respondents’ action prescribed four (4) years after it accrued in 1986.

HELD #3: NO.

The three (3) final stages of a partnership are:

(1) dissolution;
(2) winding-up; and
(3) termination.

In this case, Emnace and his partners dissolved their partnership but such did not perfect the dissolution
because no accounting took place. The partnership, although dissolved, continues to exist and its legal
personality is retained, at which time it completes the winding up of its affairs, including the partitioning and
distribution of the net partnership assets to the partners.
For as long as the partnership exists, any of the partners may demand an accounting of the partnership’s
business. Prescription of the said right starts to run only upon the dissolution of the partnership when the final
accounting is done.

When a final accounting is made, it is only then that prescription begins to run. In the case at bar, no final
accounting has been made, and that is precisely what the heirs are seeking in their action before the trial
court, since Emnace has failed or refused to render an accounting of the partnership’s business and assets.
Hence, the said action is not barred by prescription.

The SC found that prescription had not even begun to run in the absence of a final accounting.

Article 1842 of the Civil Code provides:

The right to an account of his interest shall accrue to any partner, or his legal representative as against the
winding up partners or the surviving partners or the person or partnership continuing the business, at the date of
dissolution, in the absence of any agreement to the contrary.

The provision states that the right to demand an accounting accrues at the date of dissolution in the absence
of any agreement to the contrary. When a final accounting is made, it is only then that prescription begins to
run. In the case at bar, no final accounting has been made, and that is precisely what respondents are seeking
in their action before the trial court, since petitioner has failed or refused to render an accounting of the
partnership’s business and assets. Hence, the said action is not barred by prescription.

Aurelio K. Litonjua Jr. v. Eduardo K. Litonjua Sr., ROBERT T. YANG, ANGLO PHILS. MARITIME, INC., CINEPLEX, INC.,
DDM GARMENTS, INC., EDDIE K. LITONJUA SHIPPING AGENCY, INC., EDDIE K. LITONJUA SHIPPING CO., INC.,
LITONJUA SECURITIES, INC. (formerly E. K. Litonjua Sec), LUNETA THEATER, INC., E & L REALTY, (formerly E & L INT’L
SHIPPING CORP.), FNP CO., INC., HOME ENTERPRISES, INC., BEAUMONT DEV. REALTY CO., INC., GLOED LAND
CORP., EQUITY TRADING CO., INC., 3D CORP., "L" DEV. CORP, LCM THEATRICAL ENTERPRISES, INC., LITONJUA
SHIPPING CO. INC., MACOIL INC., ODEON REALTY CORP., SARATOGA REALTY, INC., ACT THEATER INC. (formerly
General Theatrical & Film Exchange, INC.), AVENUE REALTY, INC., AVENUE THEATER, INC. and LVF PHILIPPINES,
INC., (Formerly VF PHILIPPINES),
GR No. 166299-300. December 15, 2005
Garcia, J.:

FACTS: On 22 June 1973, Aurelio and Eduardo, who are brothers, entered into a joint venture/partnership for the
continuation of their family business and common family funds. The JV/P agreement was contained in a
memorandum addressed by Eduardo to his siblings, parents, and relatives. Aurelio and Eduardo agreed that in
consideration of retaining his share in the family business and contributing his industry (movie theaters, shipping,
and land development) to the continued operation of these businesses, Aurelio will be given P1 Million or 10%
equity in all these businesses and those to be subsequently acquired by them whichever is greater. In 28 years,
the JV/P accumulated various assets including the corporate defendants. Some of these assets were registered
by Eduardo into the names of other parties. In 1992, when their relationship became sour, Aurelio requested for
accounting and liquidation of his share in the JV/P but the demand was not heeded. Aurelio believed that
Eduardo and Bobby Yang were transferring various real properties of the JVP to other parties, in fraud of
Aurelio. Aurelio moved for the annotation to the title of the real properties a notice of lis pendens.

On Dec. 2, 2002, the respondents filed a joint answer with compulsory counterclaim denying under oath the
material allegations of the complaint more particularly that portion thereof depicting petitioner and Eduardo
as having entered into a contract of partnership. As affirmative defenses, Eduardo, et al., apart from raising a
jurisdictional matter, alleged that the complaint states no cause of action, since no cause of action may be
derived from the actionable document, i.e., Annex "A-1", being void under the terms of Article 1767 in relation
to Article 1773 of the Civil Code, infra. It is further alleged that whatever undertaking Eduardo agreed to do, if
any, under Annex "A-1", are unenforceable under the provisions of the Statute of Frauds. Yang moved to dismiss
the action since the petition has no cause of action and the complaint does not state any.

The RTC dismissed the motions filed by Eduardo and Yang. On appeal to the CA, the CA reversed the decision
of the RTC and ruled in favor of Eduardo and Yang. Hence, this petition.

ISSUE: Whether or not petitioner Aurelio and respondent Eduardo are partners in the theatre, shipping and
realty business.

RULING: NO. The SC ruled that the JV/P between Aurelio and Eduardo is void and inexistent. Art. 1771 of the
NCC provides that “A partnership may be constituted in any form, except where immovable property or real
rights are contributed thereto, in which case a public instrument shall be necessary.” Art. 1772 provides that
“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.”; and Art. 1773 of the NCC provides that “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.”

In this case, by applying the aforementioned provisions, the JV/P between Aurelio and Eduardo is null and void
and it produces no legal effects. The memorandum of Eduardo contains typewritten entries, personal in tone,
but is unsigned and undated. As an unsigned document, the memorandum clearly does not meet the public
instrumentation requirements exacted under Article 1771 of the Civil Code. Moreover, being unsigned and
doubtless referring to a partnership involving more than P3,000.00 in money or property, the memorandum
cannot be presented for notarization, let alone registered with the Securities and Exchange Commission (SEC),
as called for under the Article 1772 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, such as the contributions made by Aurelio in their supposed JV/P which consisted of immovables
and real property like movie theaters, shipping, and land development. An inventory of the contributed
property duly signed by the parties should be attached to the public instrument, otherwise, it would produce
no legal effects. Their failure to comply with the essential formalities of a valid contract, the JV/P between
Aurelio and Eduardo is legally inexistent and it produces no effect whatsoever. Accordingly, the petitioner has
no valid contractual or legal right which could be violated by the respondents.

MARSMAN DRYSDALE LAND, INC. vs. PHILIPPINE GEOANALYTICS, INC. AND GOTESCO PROPERTIES, INC.
G.R. No. 183374, 29 June 2010
GOTESCO PROPERTIES, INC. vs. MARSMAN DRYSDALE LAND, INC. AND PHILIPPINE GEOANALYTICS, INC.
G.R. No. 183376
CARPIO MORALES, J.:

FACTS:

Marsman Drysdale Land, Inc. (Marsman) and Gotesco Properties, Inc. (Gotesco) entered into a Joint Venture
Agreement (JVA) for the construction and development of an office building on a land owned by Marsman. It
was agreed that Marsman’s contribution is limited to the property with the total appraised value of
P420,000,000.00 while Gotesco will contribute money with the same amount. Via Technical Services Contract
(TSC), the JV engaged the services of Philippine Geoanalytics, Inc. (PGI) to provide subsurface soil exploration,
laboratory testing, seismic study and geotechnical engineering for the project. PGI, was, however, able to drill
only four of five boreholes needed to conduct its subsurface soil exploration and laboratory testing, justifying its
failure to drill the remaining borehole to the failure on the part of the JV partners to clear the area where the
drilling was to be made. PGI was able to complete its seismic study though. PGI billed Marsman and Gotesco
for the work done, but despite repeated demands, the JV partners failed to pay its obligations.

PGI filed a complaint for collection of sum of money and damages against the JV partners. Marsman passed
the responsibility of paying PGI to Gotesco claiming that under the JVA, it is Gotesco who should shoulder
monetary expenses as his contribution is limited to the property only. Gotesco, on the other hand, contends
that PGI has no cause of action because the service it rendered was incomplete and that Marsman failed to
clear the property of debris which prevented PGI from completing its work. RTC ruled in favor of PGI. CA
affirmed RTC decision with modification, deleting only the award of exemplary damages.

ISSUE: Between the joint venturers Marsman and Gotesco, who bears the liability to pay PGI its unpaid claims?

RULING: Both are jointly liable

PGI executed a TSC with the JV and was never a party to the JVA. While the JVA clearly spelled out, inter alia,
the capital contributions of Marsman (land) and Gotesco (cash) as well as the funding and financing
mechanism for the project, the same cannot be used to defeat the lawful claim of PGI against the two JV
partners. The TSC clearly listed Marsman and Gotesco as the beneficial owner of the project, and all billing
invoices indicated the consortium therein as the client. Articles 1207 and 1208 of the Civil Code presume that
the obligation owing to PGI is joint between Marsman and Gotesco.

Art. 1207. The concurrence of two or more creditors or of two or more debtors in one and the same obligation
does not imply that each one of the former has a right to demand, or that each one of the latter is bound to
render, entire compliance with the prestations. There is a solidary liability only when the obligation expressly so
states, or when the law or nature of the obligation requires solidarity.

Art. 1208. If from the law, or the nature or the wording of the obligations to which the preceding article refers
the contrary does not appear, the credit or debt shall be presumed to be divided into as many equal shares as
there are creditors or debtors, the credits or debts being considered distinct from one another, subject to the
Rules of Court governing the multiplicity of suits.

A joint venture being a form of partnership, it is to be governed by the laws on partnership. Article 1797 of the
Civil Code provides:

Art. 1797. The losses and profits shall be distributed in conformity with the agreement. If only the share of each
partner in the profits has been agreed upon, the share of each in the losses shall be in the same proportion.

In the JVA, Marsman and Gotesco agreed on a 50-50 ratio on the proceeds of the project. They did not
provide for the splitting of losses, however. Applying Article 1797 then, the same ratio applies.

J. TIOSEJO INVESTMENT CORP, Vs.SPOUSES BENJAMIN AND ELEANOR ANG

G.R. No. 174149
FACTS:On 28 December 1995 petitioner entered into a Joint VentureAgreement (JVA) with Primetown Property
Group, Inc. (PPGI) for the development of a residential condominium project to be known asThe Meditel on
the formers 9,502 square meter property along SamatSt., Highway Hills, Mandaluyong City. With petitioner
contributing the same property to the joint venture and PPGI undertaking to develop the condominium, the
JVA provided, among other terms and conditions, that the developed units shall be shared by the former
andthe latter at a ratio of 17%-83%, respectively. While both parties were allowed, at their own individual
responsibility, to pre-sell the units pertaining to them. PPGI further undertook to use all proceeds from the
pre-selling of its saleable units for the completion of theCondominium Project. On 17 June 1996, the
Housing and Land UseRegulatory Board (HLURB) issued License to Sell No. 96-06-2854 in favor of petitioner
and PPGI as project owners. By virtue of said license, PPGI executed Contract to Sell No. 0212
with SpousesBenjamin and Eleanor Ang on 5 February 1997, over the 35.45-square meter
condominium unit denominated as Unit A-1006, for the agreed contract price of P52,597.88 per square
meter or a totalP2,077,334.25.[8] On the same date PPGI and respondents also executed
Contract to Sell No. 0214 over the 12.50 square meter parking space identified as Parking Slot No.
0405, for the stipulated consideration of P26,400.00 square meters or a total of P313,500.

ISSUE: :Who are liable or the losses incurred by a joint venture to a third person?

RULING:Under Article 1824 of the Civil Code of the Philippines, all partners are solidarily liable
with the partnership for everything chargeable to the partnership, including loss or injury caused to a third
person or penalties incurred due to any wrongful act or omission of any partner acting in the ordinary course of
the business of the partnership or with the authority of his co-partners. Whether innocent or guilty, all the
partners are solidarily liable with the partnership itself.

G.R. No. 195580 April 21, 2014

NARRA NICKEL MINING AND DEVELOPMENT CORP., TESORO MINING AND DEVELOPMENT, INC., and MCARTHUR
MINING, INC., Petitioners,
vs.
REDMONT CONSOLIDATED MINES CORP., Respondent.

The Facts

Both Narra and MacArthur(through predecessor) were awarded for an MPSA and Exploration Permit (EP) with
the Mines and Geo-Sciences Bureau (MGB), Region IV-B, Office of the Department of Environment and Natural
Resources (DENR).

On January 2, 2007, Redmont filed before the Panel of Arbitrators (POA) of the DENR three (3) separate
petitions for the denial of petitioners’ applications for MPSA designated as AMA-IVB-153, AMA-IVB-154 and
MPSA IV-1-12.

In the petitions, Redmont alleged that at least 60% of the capital stock of McArthur, Tesoro and Narra are
owned and controlled by MBMI Resources, Inc. (MBMI), a 100% Canadian corporation. Redmont reasoned that
since MBMI is a considerable stockholder of petitioners, it was the driving force behind petitioners’ filing of the
MPSAs over the areas covered by applications since it knows that it can only participate in mining activities
through corporations which are deemed Filipino citizens. Redmont argued that given that petitioners’ capital
stocks were mostly owned by MBMI, they were likewise disqualified from engaging in mining activities through
MPSAs, which are reserved only for Filipino citizens.
In their Answers, petitioners averred that they were qualified persons under Section 3(aq) of Republic Act No.
(RA) 7942 or the Philippine Mining Act of 1995 which provided:

Sec. 3 Definition of Terms. As used in and for purposes of this Act, the following terms, whether in singular or
plural, shall mean:

xxxx

(aq) "Qualified person" means any citizen of the Philippines with capacity to contract, or a corporation,
partnership, association, or cooperative organized or authorized for the purpose of engaging in mining, with
technical and financial capability to undertake mineral resources development and duly registered in
accordance with law at least sixty per cent (60%) of the capital of which is owned by citizens of the Philippines:
Provided, That a legally organized foreign-owned corporation shall be deemed a qualified person for purposes
of granting an exploration permit, financial or technical assistance agreement or mineral processing permit.

Additionally, they stated that their nationality as applicants is immaterial because they also applied for
Financial or Technical Assistance Agreements (FTAA) denominated as AFTA-IVB-09 for McArthur, AFTA-IVB-08 for
Tesoro and AFTA-IVB-07 for Narra, which are granted to foreign-owned corporations. Nevertheless, they
claimed that the issue on nationality should not be raised since McArthur, Tesoro and Narra are in fact
Philippine Nationals as 60% of their capital is owned by citizens of the Philippines. They asserted that though
MBMI owns 40% of the shares of PLMC (which owns 5,997 shares of Narra),3 40% of the shares of MMC (which
owns 5,997 shares of McArthur)4 and 40% of the shares of SLMC (which, in turn, owns 5,997 shares of Tesoro), 5 the
shares of MBMI will not make it the owner of at least 60% of the capital stock of each of petitioners. They added
that the best tool used in determining the nationality of a corporation is the "control test," embodied in Sec. 3 of
RA 7042 or the Foreign Investments Act of 1991. They also claimed that the POA of DENR did not have
jurisdiction over the issues in Redmont’s petition since they are not enumerated in Sec. 77 of RA 7942. Finally,
they stressed that Redmont has no personality to sue them because it has no pending claim or application over
the areas applied for by petitioners.

On December 14, 2007, the POA issued a Resolution disqualifying petitioners from gaining MPSAs.

Subsequently, on September 8, 2008, Redmont filed before the Regional Trial Court of Quezon City, Branch 92
(RTC) a Complaint16 for injunction with application for issuance of a temporary restraining order (TRO) and/or
writ of preliminary injunction, docketed as Civil Case No. 08-63379. Redmont prayed for the deferral of the MAB
proceedings pending the resolution of the Complaint before the SEC.

But before the RTC can resolve Redmont’s Complaint and applications for injunctive reliefs, the MAB issued an
Order on September 10, 2008, finding the appeal meritorious. It held:

Court of appeals

After a careful review of the records, the CA found that there was doubt as to the nationality of petitioners
when it realized that petitioners had a common major investor, MBMI, a corporation composed of 100%
Canadians. Pursuant to the first sentence of paragraph 7 of Department of Justice (DOJ) Opinion No. 020,
Series of 2005, adopting the 1967 SEC Rules which implemented the requirement of the Constitution and other
laws pertaining to the exploitation of natural resources, the CA used the "grandfather rule" to determine the
nationality of petitioners

In determining the nationality of petitioners, the CA looked into their corporate structures and their
corresponding common shareholders. Using the grandfather rule, the CA discovered that MBMI in effect
owned majority of the common stocks of the petitioners as well as at least 60% equity interest of other majority
shareholders of petitioners through joint venture agreements. The CA found that through a "web of corporate
layering, it is clear that one common controlling investor in all mining corporations involved x x x is MBMI." 25 Thus,
it concluded that petitioners McArthur, Tesoro and Narra are also in partnership with, or privies-in-interest of,
MBMI.
Petitioners question the CA’s use of the exception of the res inter alios acta or the "admission by co-partner or
agent" rule and "admission by privies" under the Rules of Court in the instant case, by pointing out that
statements made by MBMI should not be admitted in this case since it is not a party to the case and that it is
not a "partner" of petitioners.

Petitioners claim that before the above-mentioned Rule can be applied to a case, "the partnership relation
must be shown, and that proof of the fact must be made by evidence other than the admission itself." 49 Thus,
petitioners assert that the CA erred in finding that a partnership relationship exists between them and MBMI
because, in fact, no such partnership exists.

ISSUE: WHETHER PARTIES HERE ARE IN PARTNERSHIP OR JOINT VENTURE?

RULING

JOINT VENTURE

Application of the res inter alios acta rule

Secs. 29 and 31, Rule 130 of the Revised Rules of Court provide:

Sec. 29. Admission by co-partner or agent.- The act or declaration of a partner or agent of the party within the
scope of his authority and during the existence of the partnership or agency, may be given in evidence against
such party after the partnership or agency is shown by evidence other than such act or declaration itself. The
same rule applies to the act or declaration of a joint owner, joint debtor, or other person jointly interested with
the party.

Sec. 31. Admission by privies.- Where one derives title to property from another, the act, declaration, or omission
of the latter, while holding the title, in relation to the property, is evidence against the former.

Partnerships vs. joint venture agreements

Petitioners claim that the CA erred in applying Sec. 29, Rule 130 of the Rules by stating that "by entering into a
joint venture, MBMI have a joint interest" with Narra, Tesoro and McArthur. They challenged the conclusion of
the CA which pertains to the close characteristics of

"partnerships" and "joint venture agreements." Further, they asserted that before this particular partnership can
be formed, it should have been formally reduced into writing since the capital involved is more than three
thousand pesos (PhP 3,000). Being that there is no evidence of written agreement to form a partnership between
petitioners and MBMI, no partnership was created.

We disagree.

A partnership is defined as two or more persons who bind themselves to contribute money, property, or industry
to a common fund with the intention of dividing the profits among themselves.50 On the other hand, joint
ventures have been deemed to be "akin" to partnerships since it is difficult to distinguish between joint ventures
and partnerships. Thus:

[T]he relations of the parties to a joint venture and the nature of their association are so similar and closely akin
to a partnership that it is ordinarily held that their rights, duties, and liabilities are to be tested by rules which are
closely analogous to and substantially the same, if not exactly the same, as those which govern partnership. In
fact, it has been said that the trend in the law has been to blur the distinctions between a partnership and a
joint venture, very little law being found applicable to one that does not apply to the other. 51
Though some claim that partnerships and joint ventures are totally different animals, there are very few rules
that differentiate one from the other; thus, joint ventures are deemed "akin" or similar to a partnership. In fact, in
joint venture agreements, rules and legal incidents governing partnerships are applied.52

Accordingly, culled from the incidents and records of this case, it can be assumed that the relationships
entered between and among petitioners and MBMI are no simple "joint venture agreements." As a rule,
corporations are prohibited from entering into partnership agreements; consequently, corporations enter into
joint venture agreements with other corporations or partnerships for certain transactions in order to form
"pseudo partnerships."

Obviously, as the intricate web of "ventures" entered into by and among petitioners and MBMI was executed to
circumvent the legal prohibition against corporations entering into partnerships, then the relationship created
should be deemed as "partnerships," and the laws on partnership should be applied. Thus, a joint venture
agreement between and among corporations may be seen as similar to partnerships since the elements of
partnership are present.

Considering that the relationships found between petitioners and MBMI are considered to be partnerships, then
the CA is justified in applying Sec. 29, Rule 130 of the Rules by stating that "by entering into a joint venture, MBMI
have a joint interest" with Narra, Tesoro and McArthur.

Gilbert G. Guy vs. Court of Appeals, et al., G.R. Nos. 165849, 170185, 170186, 171066 & 176650, December 10,
2007

HEIRS OF MARIA DE LA CRUZ Y GUTIERREZ, Petitioners, v. COURT OF APPEALS and HEIRS OF MARIA DE LA CRUZ Y
GUEVARRA, Respondents.
G.R. No. 76590. February 26, 1990.]
Paras, J

DOCTRINE:

CIVIL LAW; TRUST; EXPRESS TRUST; MAY NOT BE EXPRESSLY STATED IN A DOCUMENT; AND MAY BE ORAL; HOW
CREATED. — It has been held that under the law on Trusts, it is not necessary that the document expressly state
and provide for the express trust, for it may even be created orally, no particular words are required for its
creation (Article 1444, Civil Code). An express trust is created by the direct and positive acts of the parties, by
some writing or deed or will or by words evidencing an intention to create a trust (Sotto v. Teves, 86 SCRA 154
[1978]). No particular words are required for the creation of an express trust, it being sufficient that a trust is
clearly intended (Vda. de Mapa v. Court of Appeals, 154 SCRA 294 [1987]). Hence, petitioner’s action, being
one based on express trust, has not yet prescribed

ACTION FOR RECONVEYANCE DOES NOT PRESCRIBE EXCEPT WHEN TRUSTEE REPUDIATES TRUST. — Be it noted
that Article 1443 of the Civil Code which states "No express trusts concerning an immovable or any interest
therein may be proved by parol evidence," refers merely to enforceability, not validity of a contract between
the parties. Otherwise stated, for purposes of validity between the parties, an express trust concerning an
immovable does not have to be in writing. Thus, Article 1443 may be said to be an extension of the Statute of
Frauds. The action to compel the trustee to convey the property registered in his name for the benefit of the
cestui for trust does not prescribe. If at all, it is only when the trustee repudiates the trust that the period of
prescription may run (Enriquez v. Court of Appeals, 104 SCRA 656 [1981]).

Facts:
Maria dela Cruz y Gutierrez resided in the subject lot in the concept of an owner. Later, she entrusted the
administration of the said lot to her niece Maria de la Cruz y Guevarra. When cadastral proceedings were held,
Maria de la Cruz y Gutierrez filed an answer to the questioned lot, affixing her thumbmark. In the space
provided to be filled up with the personal circumstances of claimant Maria de la Cruz y Gutierrez, what
appears therein is the name Maria de la Cruz, married to Calixto Dimalanta, instead of Maria de la Cruz y
Gutierrez; and in the space provided intended for the personal circumstances of other person or persons who
may have an interest on the said lot, the name Fermin de la Cruz, single, appears. The trial court adjudicated
the subject Lot in favor of Maria de la Cruz, 26 years old, married to Calixto Dimalanta and Fermin de la Cruz,
Single.

Petitioners filed a complaint for reconveyance. Private respondents claimed that the land in question is their
exclusive property, having inherited the same from their parents. Moreover, they asserted that petitioners have
lost their cause of action by prescription.

Petitioners’ predecessor-in-interest, Maria de la Cruz y Gutierrez, was an unlettered woman, a fact borne out by
her affixing her thumbmark in her answer in Cadastral Case. Because of her mental weakness, in a prepared
document for her, Exhibit B-3, she consented and authorized her niece Maria de la Cruz y Guevarra to
administer the lot in question. Such fact is corroborated by the testimony of Daniel Lansay, the son of Maria de
la Cruz y Gutierrez that Maria de la Cruz y Guevarra was the one entrusted with the paying of land taxes.

Private respondents argue that said Exhibit "B-3" is a portion of the tax declaration (Exhibit "B") which was
prepared by the Office of the Municipal Assessor Treasurer where the lot in question is located, and clearly not
the written instrument constituting an express trust required under Article 1443 of the Civil Code.

Issue: WON Exhibit B-3 constitutes an express trust required under Article 1443 of the Civil Code

Held: YES

It has been held that under the law on Trusts, it is not necessary that the document expressly state and provide
for the express trust, for it may even be created orally, no particular words are required for its creation (Article
1444, Civil Code). An express trust is created by the direct and positive acts of the parties, by some writing or
deed or will or by words evidencing an intention to create a trust (Sotto v. Teves, 86 SCRA 154 [1978]). No
particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended
(Vda. de Mapa v. Court of Appeals, 154 SCRA 294 [1987]). Hence, petitioner’s action, being one based on
express trust, has not yet prescribed. Be it noted that Article 1443 of the Civil Code which states "No express
trusts concerning an immovable or any interest therein may be proved by parol evidence," refers merely to
enforceability, not validity of a contract between the parties. Otherwise stated, for purposes of validity
between the parties, an express trust concerning an immovable does not have to be in writing. Thus, Article
1443 may be said to be an extension of the Statute of Frauds. The action to compel the trustee to convey the
property registered in his name for the benefit of the cestui for trust does not prescribe. If at all, it is only when
the trustee repudiates the trust that the period of prescription may run (Enriquez v. Court of Appeals, 104 SCRA
656 [1981]).

G.R. NO. 154096 AUGUST 22, 2008

MARCOS-ARANETA v. COURT OF APPEALS

FACTS: Sometime in 1968 and 1972, Ambassador Roberto S. Benedicto, now deceased, and his business
associates (Benedicto Group) organized Far East Managers and Investors, Inc. (FEMII) and Universal Equity
Corporation (UEC), respectively. As petitioner Irene Marcos-Araneta would later allege, both corporations
were organized pursuant to a contract or arrangement whereby Benedicto, as trustor, placed in his name and
in the name of his associates, as trustees, the shares of stocks of FEMII and UEC with the obligation to hold those
shares and their fruits in trust and for the benefit of Irene to the extent of 65% of such share. Several years after,
Irene, through her trustee-husband, Gregorio Ma. Araneta III, demanded the reconveyance of said 65%
stockholdings, but the Benedicto Group refused to oblige.

In March 2000, Irene thereupon instituted before the RTC two similar complaints for conveyance of shares of
stock, accounting and receivership against the Benedicto Group. The first covered the UEC shares and named
Benedicto, his daughter, and at least 20 other individuals as defendants. The second sought the recovery to the
extent of 65% of FEMII shares held by Benedicto and the other defendants named therein.

Francisca Benedicto-Paulino, Benedicto's daughter, filed a Motion to Dismiss the case followed later by an
Amended Motion to Dismiss. Benedicto, on the other hand, moved to dismiss the case adopting in toto the five
(5) grounds raised by Francisca in her amended motion to dismiss. Among these were: (1) the cases involved
an intra-corporate dispute over which the Securities and Exchange Commission, not the RTC, has jurisdiction;
(2) venue was improperly laid; and (3) the complaint failed to state a cause of action, as there was no
allegation therein that plaintiff, as beneficiary of the purported trust, has accepted the trust created in her
favor.

ISSUE: Whether or not a trust was established

Can the alleged trust be resolved in a petition for certiorari under Rule 65 of the Rules of Court?

HELD: No. As they aptly pointed out, the CA, in the exercise of its certiorari jurisdiction under Rule 65, is limited to
reviewing and correcting errors of jurisdiction only. It cannot validly delve into the issue of trust which, under the
premises, cannot be judiciously resolved without first establishing certain facts based on evidence.

Clearly then, the CA overstepped its boundaries when, in disposing of private respondents' petition for
certiorari, it did not confine itself to determining whether or not lack of jurisdiction or grave abuse of discretion
tainted the issuance of the assailed RTC orders, but proceeded to pass on the factual issue of the existence
and enforceability of the asserted trust. In the process, the CA virtually resolved petitioner Irene's case for
reconveyance on its substantive merits even before evidence on the matter could be adduced. The cases
that was files in fact have not even reached the pre-trial stage. To stress, the nature of the trust allegedly
constituted in Irene's favor and its enforceability, being evidentiary in nature, are best determined by the trial
court. The original complaints and the amended complaint certainly do not even clearly indicate whether the
asserted trust is implied or express. To be sure, an express trust differs from the implied variety in terms of the
manner of proving its existence. Surely, the onus of factually determining whether the trust allegedly established
in favor of Irene, if one was indeed established, was implied or express properly pertains, at the first instance, to
the trial court and not to the appellate court in a special civil action for certiorari, as here. In the absence of
evidence to prove or disprove the constitution and necessarily the existence of the trust agreement between
Irene, on one hand, and the Benedicto Group, on the other, the appellate court cannot intelligently pass upon
the issue of trust. A pronouncement on said issue of trust rooted on speculation and conjecture, if properly
challenged, must be struck down. So it must be here.