JARANTILLA CASE

A contract need not to be executed in a public document. There is only a need

for the essential requisites to be satisfied.

SY VS. CA

Partnership vs. Employment

Power of Control sa employment

ANTONIA. TORRES VS. COURT OF APPEALS

Partnership vs. Joint Venture

Pwede an credit maging contribution under property or moneypwede co

owned though naka register under sa 1 person.

LIM TONG LIM VS. PHIL. FISHING GEAR INDUSTRIES

Partnership necessary entails co-ownership, but co-ownership does not

necessary entail partnership.

Intention is a creature of the mind. Contemporaneous and previous acts to

look for the intention of the parties.

Corporation by estoppel- people who intoduce themselve thru estoppel are

liable as general partners.

AFISCO INSURANCE CORPORATION v. CA,

FACTS: The petitioners in this case are 41 non-life insurance corporations

operating under Philippine law. They formed a “pool” to handle business
contracts with a nonresident foreign reinsurance company. This “clearing
house” or “insurance pool” facilitated the handling of reinsurance treaties.

ISSUE: The central question was whether the insurance pool constituted a
partnership or association taxable as a corporation under the National
Internal Revenue Code (NIRC).

RULING:
YES. The SC held that the insurance pool constituted a partnership or
association. It satisfied the two essential requisites of partnership….
,,,,,,

Parang XPN ang case na to sa GR kasi kahit hindi expressly stated na ang
goal is to earn profit from the businss venture, it is still considered a
partnership.

PHILEX MINING CORP vs. CIR

On April 16, 1971, Philex Mining Corporation entered into an agreement

with Baguio Gold Mining Company to manage and operate the latter’s
mining claim known as the Sto. Nino mine, located in Atok and Tublay,
Benguet Province. The agreement was denominated as a “Power of Attorney”
and outlined terms related to the management of the mine.

1. Philex Mining was authorized to manage and operate the Sto. Nino mine
on behalf of Baguio Gold.
2. Baguio Gold agreed to make up to P11,000,000.00 available to Philex
Mining within three years for use in managing the mine.
3. The agreement also allowed Philex Mining to transfer its own funds or
property to the Sto. Nino project.
4. The Sto. Nino project maintained separate accounts for the owner (Baguio
Gold) and the managers (Philex Mining).

Tax Dispute:

1. The Commissioner of Internal Revenue (CIR) raised issues related to the

tax treatment of the arrangement.
2. The Court of Tax Appeals ruled in favor of the CIR, and the Court of
Appeals affirmed this decision.

ISSUE: WoN the arrangement that Philex Mining Corp and Baguio Gold
had was that of an agency or of a partnership.

RULING: PARTNERSHIP
1. The Supreme Court upheld the lower courts’ decisions, emphasizing that
the arrangement was essentially a partnership.
2. The Court considered the funds provided by Baguio Gold as capital
contributions, and the Sto. Nino project operated as a joint venture.
3. Consequently, Philex Mining was liable for income tax on its share of the
joint venture’s income.
4. contribution of material resources and industry.

ANICETO G. SALUDO, JR. VS. PHILIPPINE NATIONAL BANK (PNB) ,

In the case of Aniceto G. Saludo, Jr. vs. Philippine National Bank (PNB),
decided on August 20, 2018, the issue revolved around a partnership for the
practice of law.

FACTS: In this case, the SAFA Law Office, a partnership, had entered into a
Contract of Lease with PNB for the lease of office space. After the lease
expired, SAFA Law Office continued to occupy the premises but allegedly
stopped paying rent.

PNB’s Claims: PNB claimed that SAFA Law Office owed outstanding unpaid
rents. They sent demand letters for payment, but SAFA Law Office disputed
the amount and raised issues related to the initial agreement.

ISSUE: WoN

Partnership Juridical Personality: The court emphasized that a

partnership for the practice of law, constituted in accordance with the
Civil Code provisions on partnership, acquires juridical personality
by operation of law. This means that such a partnership has a distinct
and separate legal identity from its individual partners.

Real Party-in-Interest: When a contract is entered into in the name of

the partnership and by a person authorized to act on its behalf, the
partnership itself becomes the real party-in-interest in any legal suit
related to that contract.
 Court Decision: The Court of Appeals (CA) ruled that while SAFA Law
Office’s liability is not in solidum with Aniceto G. Saludo, Jr. (one of the
partners), both the partnership and Saludo could be made parties to
PNB’s counterclaims.

In summary, this case underscores the legal recognition of partnerships for

the practice of law and their distinct juridical personality in contractual matters.
The partnership itself, rather than individual partners, is the proper party to
address disputes arising from contracts entered into in its name1234.

We hold that SAFA Law Office is a juridical entity and the real party-in-
interest in the suit filed with the RTC by Saludo against PNB. Hence, it should
be joined as plaintiff in that case.

I.

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
Partnership45 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 opening
paragraph of the Articles of Partnership reveals the unequivocal intention of
its signatories to form a partnership.
The subsequent registration of the Articles of Partnership with the SEC, on
the other hand, was made in compliance with Article 1772 of the Civil Code,
since the initial capital of the partnership was ₱500,000.00. 47 Said provision
states:

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.

xx xx

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 petitioner Saludo as managing partner, 48 and
Attys. Ruben E. Agpalo, Filemon L. Fernandez, and Amado D. Aquino as
industrial partners.49 It also provided for the term of the
partnership,50 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."51 Moreover, it provided for the cause and manner of dissolution of the
partnership.52 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.

AGUILA VS. COURT OF APPEALS

FACTS: Petitioner (Aguila) is the manager of A.C. Aguila & Sons, Co., - a
partnership engaged in lending activities.

Spouses Ruben and Felicidad Abrogar entered into a loan agreement with the
lending firm (A.C. Aguila & Sons, Co., a partnership). To secure the loan, the
spouses mortgaged their house and lot located in the subdivision.
The terms of the loan further stipulate that in case of non-payment, the
property shall be automatically appropriated to the partnership and a deed of
sale be readily executed in favor of the partnership.

However, Felicidad failed to redeem the property within the 90-day

redemption period. Upon demand, she refused to turn over the property and
so the firm filed an ejectment case against her (wherein she lost). She then
filed a civil case against Alfredo Aguila, manager of the firm for the declaration
of nullity of the deed of sale with the RTC against Alfredo Aguila.

Alleging that the signature of her husband on the deed of sale was a forgery
because he was already dead when the deed was supposed to have been
executed.

Petitioner contends that he is not the real party in interest but A.C. Aguila &
Co., against which this case for nullity of deed of sale should have been
brought.

ISSUE: WHether or not petitioner is the real party in interest in this case.

RULING: No, petitioner is not the real party in interest but rather it was the
partnership A.C. Aguila & Sons.

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.

Here, the 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. it is the partnership, not its officers or agents, which
should be impleaded in any litigation involving property registered in its
name.

VILLAREAL VS. RAMIREZ

FACTS: Petitioners and respondents formed a partnership with a capital of

750k for the operation of a restaurant and catering business. Without prior
knowledge of respondents, petitioners closed down the restaurant, allegedly
because of increased rental.

The respondents then decided to withdraw from the partnership and

demanded the return of their capital contribution.

The petitioners refused, claiming that the partnership had suffered losses and
that the respondents had already received their share in the form of furniture
and equipment.

ISSUE: WoN the respondents are entitled to the return of their capital
contribution upon their withdrawal from the partnership.

HELD: No, the respondents have no right to demand from petitioners the
return of their equity share.

Under the law, 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.

That being said, 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.

OBILLOS VS. CIR

FACTS: Obillos Sr. transferred his rights to his four children (herein
petitioners) a parcel of land in order to enable them to build their residences.
The torrens title issued to them showed that they were co-owners of the two
lots.

After two years, the petitioners decided to sell them. They shared the amount
derived from the sale.

Later on, the Commissioner of Internal Revenue required the four of them to
pay corporate income tax on the theory that petitioners had formed an
unregistered partnership or joint venture.

ISSUE: WoN the petitioners had indeed formed a partnership or joint venture
and thus liable for corporate tax.

RULING:

No, the petitioners should not be considered to have formed a partnership.

Under Article 1769 (3) of the Civil Code “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.

Here, 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. It had to be terminated sooner or later. They did not
contribute or invest additional capital to increase or expand the properties, nor
was there an unmistakable intention to form partnership or joint venture.

REYES VS. CIR

FACTS: Petitioners (father and son) purchased a lot and building known as
the Gibbs Building by paying an initial payment of Php 835K and the balance
of which is paid through assuming the mortgage obligation of the vendors.

The initial payment was equally shared by petitioners. They entrusted the
administration of the building through an administrator who collected the
rents, kept its books and records, negotiated leases etc.

Petitioners divided equally the income of operation and maintenance.

The Court of Tax Appeals alleged that they are liable for income tax because
the NIRC provides that corporations organized in, or existing under the laws
of the Philippines, no matter how created or organized but not including duly
registered general co-partnerships, no matter how created or organized are
liable for income tax.

ISSUE: WoN petitioners are subject to the tax on corporations provided for in
section 24 of Commonwealth Act No. 466 which explicitly provides that the
term corporation includes partnerships?

RULING: Yes.

Jurisprudence provides that the essential elements of a contract of

partnership is that, there is (a) an agreement to contribute money, property or
industry to a common fund; (b) with the intent to divide the profit among the
contracting parties.

Here, the first element is undoubtedly present for, admittedly, petitioners have
agreed to and did, contribute money and property to a common fund. As to
their intent, the circumstances of the case provide the impression that the
purpose of such a contribution is to engage in real estate transactions for
monetary gain and then divide the same among themselves.

For purposes of the tax on corporations, our National Internal Revenue Code,
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.

BASTIDA VS. MENZI

FACTS:

Menzi, together with his wife and daughter, own Menzi & Co., Inc. The
company entered into a contract with Bastida to engage in the business of
exploiting prepared fertilizers. Under the terms of the agreement, Bastida was
to receive 35% of the profits.

Pursuant to the agreement, the company began to manufacture prepared

fertilizers and manage the business, its book and accounts. Bastida, on the
other hand, supervised the manufacturing and mixing of the fertilizers and had
no participation in the making of these entries, which were wholly in the
Menzi’s charge, under whose orders every entry was made.

When the agreement was finally terminated and during the liquidation, the
auditor found errors in the bookkeeping and determined the balance due to
Bastida. Bastida, in turn, employed his own auditors to examine the books.
ISSUE: WoN a partnership existed which would allow Bastida to demand
P220, 000 from Menzi

RULING: No.

Despite the agreement that Bastida was to receive 35% profit from the
business of mixing and distributing fertilizer registered in the name of Menzi &
Co., there was never any contract of partnership constituted between them
based on the following key elements:

(a) There was a never any common fund created between the parties, since
the entire business as well as the expenses and disbursements for operating
it were entirely for the account of Menzi & Co.;

(b) there was no provision in the agreement for reimbursing Menzi & Co. in
case there should be no profits at the end of the year; and

(c) the fertilizer business was just one of the many lines of business of Menzi
& Co.; and there was no separate books and no separate bank accounts kept
for that particular line of business. The arrangement was deemed to be one of
employment, with Bastida contributing his services to manage the particular
line of business of Menzi &Co.

HEIRS OF TAN ENG KEE VS. COURT OF APPEALS

FACTS: The heirs of Tan Eng Kee filed a suit against the decedent’s brother
Tan Eng Lay for the accounting, liquidation and winding up of the alleged
partnership formed between him and his brother.

They alleged that the two brothers entered into a partnership engaged in the
business of selling lumber and hardware and construction supplies called the
Benguet Lumber which they managed until the death of Tan Eng Kee.

Herein petitioners further alleged that Tan Eng Lay caused the conversion of
the partnership into a corporation in order to deprive the heirs of their rightful
participation in the profits of the business.
On the other hand, respondent Tan Eng Lay averred that the Benguet Lumber
was a sole proprietorship and that the deceased was only an employee
thereof.

ISSUE: WoN there was partnership between the late Tan Eng Kee and his
brother.

RULING: No, there was no partnership between the late Tan Eng Kee and his
brother Tan Eng Lay.

In determining whether a partnership exists, these rules shall apply:

Except as provided by Article 1825, persons who are not partners as to each
other are not partners as to third persons;

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;

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 which the returns are derived;

The receipt by a person of a share of the profits of a business is prima facie

evidence that he is a partner in the business, but no such inference shall be
drawn if such profits were received in payment:

 As a debt by installment or otherwise;

 As wages of an employee or rent to a landlord;
 As an annuity to a widow or representative of a deceased partner;
 As interest on a loan, though the amount of payment vary with the profits
of the business;
 As the consideration for the sale of a goodwill of a business or other
property by installments or otherwise

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

TOCAO VS. CA

FACTS: Through the introduction of Belo, Anay and Tocao met. They agreed
to enter into a joint venture for the importation and local distribution of kitchen
cookwares.

Under the joint venture agreement, Belo acted as capitalist, Tocao as

president and general manager, and Anay as head of the marketing
department and vice-president for sales. They operated under the name of
Geminesse Enterprise, a sole proprietorship registered in Marjorie Tocao’s
name.

Anay was performing well as the Vice President of Sales. However, sometime
in 1987, Anay learned that she is no longer the Vice President of Geminese
Enterprise.

Anay then filed a complaint against Tocao and Belo for collection of sum of
money and damages.

In their answer, Tocao and Bello asserted that there could not have been a
partnership that occurred between them amd Anay because she was just
introduced by Belo to Tocao, that Anay merely acted as marketing
demonstrator of Geminesse Enterprise for an agreed remuneration, and her
complaint referred to either her compensation or dismissal, such complaint
should have been lodged with the Department of Labor and not with the
regular court.

ISSUE: WoN the plaintiff was an employee or partner of Tocao and Belo

RULING: Anay is a partner and not an employee of Geminese Enterprise.

The law provides that, the mere receipt of a percentage of net profits
constitutes a prima facie evidence that the recipient is a partner in the
business.

Here, evidence in the case at bar controverts an employer-employee

relationship between the parties. In the first place, private respondent had a
voice in the management of the affairs of the cookware distributorship,
including selection of people who would constitute the administrative staff and
the sales force. Secondly, petitioner Tocao’s admissions militate against an
employer-employee relationship. She admitted that, like her who owned
Geminesse Enterprise, private respondent received only commissions and
transportation and representation allowances and not a fixed salary.

If indeed petitioner Tocao was the private respondent’s employer, it is difficult

to believe that they shall receive the same income in the business. In a
partnership, each partner must share in the profits and losses of the
venture, except that the industrial partner shall not be liable for the
losses. As an industrial partner, private respondent had the right to demand
for a formal accounting of the business and to receive her share in the net
profit.

YULO VS. YANG CHIAO SENG

FACTS: Yang Chiao Seng proposed to form a partnership with Rosario Yulo
to run and operate a theatre on the premises occupied by Cine Oro, Plaza
Sta. Cruz, Manila, the principal conditions of the offer being

(1) Yang guarantees Yulo a monthly participation of P3,000

(2) partnership shall be for a period of 2 years and 6 months with the condition
that if the land is expropriated, rendered impracticable for business, owner
constructs a permanent building, then Yulo’s right

to lease and partnership even if period agreed upon has not yet expired;

(3)Yulo is authorized to personally conduct business in the lobby of the

building; and

(4) after Dec 31, 1947, all improvements placed by partnership shall belong to
Yulo but if partnership is terminated before lapse of 1 and 1⁄2 years, Yang
shall have right to remove improvements. Parties established, “Yang and Co.
Ltd.”, to exist from July 1, 1945 – Dec 31, 1947.

In June 1946, they executed a supplementary agreement extending the

partnership for 3 years beginning Jan 1, 1948 to Dec 31, 1950.

The land on which the theater was constructed was leased by Yulo from
owners, Emilia Carrion and Maria Carrion Santa Marina for an indefinite
period but that after 1 year, such lease may be cancelled by either party upon
90-day notice. In Apr 1949, the owners notified Yulo of their desire to cancel
the lease contract come July. Yulo and husband brought a civil action to
declare the lease for a indefinite period. Owners brought their own civil action
for ejectment upon Yulo and Yang.

CFI: Two cases were heard jointly; Complaint of Yulo and Yang dismissed
declaring contract of

lease terminated.

CA: Affirmed the judgment.

In 1950, Yulo demanded from Yang her share in the profits of the business.
Yang answered saying he had to suspend payment because of pending
ejectment suit. Yang has refused to pay her shares.

Trial Court: Dismissal. It is not true that a partnership was created between
them because defendant has not actually contributed the sum mentioned in
the Articles of Partnership or anyother amount. The agreement is a lease
because plaintiff didn’t share either in the profits or in the losses of the
business as required by Art 1769 (CC) and because plaintiff was granted a
“guaranteed participation” in the profits belies the supposed existence of a
partnership.

ISSUE: WoN the agreement is a contract a lease or a partnership?

RULING: The agreement was a sublease not a partnership. The following are
the requisites of partnership:

(1) two or more persons who bind themselves to contribute money, property
or industry to a common fund;

(2) the intention on the part of the partners to divide the profits among
themselves (Article 1761, CC)

Plaintiff did not furnish the supposed P20,000 capital nor did she furnish any
help or intervention in the management of the theatre. Neither has she
demanded from defendant any accounting of the expenses and earnings of
the business. She was absolutely silent with respect to any of the acts that a
partner should have done; all 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 premises which she had leased from the owners.

EVANGELISTA vs. CIR

FACTS: Petitioners borrowed sum of money from their father and together
with their own personal funds they used said money to buy several real
properties. They then appointed their brother (Simeon) as manager of the said
real properties with powers and authority to sell, lease or rent out said
properties to third persons. They realized rental income from the said
properties for the period 1945-1949.

On September 24, 1954 respondent Collector of Internal Revenue demanded

the payment of income tax on corporations, real estate dealer's fixed tax and
corporation residence tax for the years 1945-1949. The letter of demand and
corresponding assessments were delivered to petitioners on December 3,
1954, whereupon they instituted the present case in the Court of Tax Appeals,
with a prayer that "the decision of the respondent contained in his letter of
demand dated September 24, 1954" be reversed, and that they be absolved
from the payment of the taxes in question. CTA denied their petition and
subsequent MR and New Trials were denied.

ISSUE: Whether or not petitioners have formed a partnership and

consequently, are subject to the tax on

corporations provided for in section 24 of Commonwealth Act. No. 466,

otherwise known as the National

Internal Revenue Code, as well as to the residence tax for corporations and
the real estate dealers fixed tax.

RULING: YES.

The essential elements of a partnership are two, namely:

(a) an agreement to contribute money, property or industry to a common fund;

and

(b) intent to divide the 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. 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, because of the following observations, among others:

(1) Said common fund was not something they found already in existence;

(2) They invested the same, not merely in one transaction, but in a series of
transactions;
(3) The aforesaid lots were not devoted to residential purposes, or to other
personal uses, of petitioners herein.

Although, taken singly, they might not 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.

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