Professional Documents
Culture Documents
In the case at bar, just about all of the partners had sold their
partnership interests, amounting to 82% of the total partnership
interest, to Mr. Willy Co and Emmanuel Zapanta. The
acquisition of 82% of the partnership interest by new partners,
(2) SC did not agree with NLRC. Under Article 1840 above,
creditors of the old Jade Mountain are also creditors of the new
Jade Mountain which continued the business of the old one
without liquidation of the partnership affairs. Indeed, a creditor
of the old Jade Mountain, like petitioner Benjamin Yu in respect
of his claim for unpaid wages, is entitled to priority vis--vis any
claim of any retired or previous partner insofar as such retired
partner's interest in the dissolved partnership is concerned. It is
clear to the Court that under Article 1840 above, Benjamin Yu
is entitled to enforce his claim for unpaid salaries, as well as
other claims relating to his employment with the previous
partnership, against the new Jade Mountain.
It is at the same time also evident to the Court that the new
partnership was entitled to appoint and hire a new general or
assistant general manager. The non-retention of Benjamin Yu
as Assistant General Manager did not therefore constitute
unlawful termination, or termination without just or authorized
cause. We think that the precise authorized cause for
termination in the case at bar was redundancy. The new
partnership had its own new General Manager, apparently Mr.
Willy Co, the principal new owner himself. It follows that
petitioner Benjamin Yu is entitled to separation pay at the rate
of one month's pay for each year of service that he had
rendered to the old partnership, a fraction of at least six (6)
months being considered as a whole year.
February 2, 1903
Facts:
This case involves the Veteran Army of the Philippines.
While the Supreme Court was unable to find that there was
any specific verbal agreement of partnership, the same may be
implied from the fact as to the purchase of the casco. It is thus
apparent that a complete and perfect contract of partnership
was entered into by the parties.
The financial report shows that the business was able to make
a profit of P 87,293.79 for 1968 and P150, 000.00 for 1969 was
realized.
1.
Facts:
Petitioner and private respondents are brothers and sisters
who are co-owners of certain lots at Quezon City which were
then being leased to the Shell Company. They agreed to
operate a gas station thereat with an initial investment of P
15,000.00 to be taken from the advance rentals due to them
from SHELL for the occupancy of the said lots owned by them
in common.
2.
3.
4.
After having held the two lots for more than a year, the
petitioners resold them from which they derived 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 of P16,792.
One day before the expiration of the five-year prescriptive
period, the Commissioner of Internal Revenue required the
petitioners to pay corporate income tax in addition to individual
income tax. Further, he considered the share of the profits of
each petitioner as taxable in full and not a mere capital gain of
which is taxable. Petitioners are being held liable for
deficiency income taxes and penalties totaling to P127,781.76.
Commissioner acted on the theory that the four petitioners had
formed an unregistered partnership or joint venture within the
meaning of sections 24(a) and 84(b) of the Tax Code.
Issue:
Whether petitioners formed an unregistered partnership; NO
It is error to consider the petitioners as having formed a
partnership under article 1767 of the Civil Code simply
because they allegedly contributed P178,708.12 to buy the two
lots, resold the same and divided the profit among themselves.
As testified by Jose Obillos, Jr., they had no such intention.
They were co-owners pure and simple. Their original purpose
was to divide the lots for residential purposes. The division of
the profit was merely incidental to the dissolution of the coownership.
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.
All co-ownerships are not deemed unregistered partnership.
Co-Ownership who own properties which produce income
should not automatically be considered partners of an
unregistered partnership, or a corporation, within the purview
of the income tax law. To hold otherwise, would be to subject
the income of all co-ownerships of inherited properties to the
tax on corporations, inasmuch as if a property does not
produce an income at all, it is not subject to any kind of income
tax, whether the income tax on individuals or the income tax on
corporation.
In the instant case, what the Commissioner should have
investigated was whether the father donated the two lots to the
petitioners and whether he paid the donor's tax.
Lim Tong Lim vs. Philippine Fishing
Facts:
On behalf of "Ocean Quest Fishing Corporation," Antonio Chua
and Peter Yao entered into a Contract for the purchase of
fishing nets from the Philippine Fishing Gear Industries, Inc..
Chua and Yao claimed that they were engaged in a business
venture with Lim Tong Lim, who however was not a signatory
to the agreement.
Buyers, however, failed to pay for the fishing nets and the
floats. Private respondents filed a collection suit against Chua,
Yao and Lim Tong Lim. The suit was brought against the three
in their capacities as general partners, on the allegation that
"Ocean Quest Fishing Corporation" was a nonexistent
The sale of the boats, as well as the division among the three
of the balance remaining after the payment of their loans,
proves beyond cavil 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.
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.
Alicbusan vs. CA
Facts:
Cesar Cordero and Leopoldo Alicbusan were partners in the
operation of Babys Canteen located in the Philtranco terminal
in Pasay City. Pursuant to their agreement, Cordero assumed
the position of Managing partner while Alicbusan took care of
accounting, records keeping and other comptrollership
functions.
The partnership was to exist for a fixed term, between July
1981 up to July 1984. Upon expiration of the said period, both
of them continued their relationship under the original term.
On May 11, 1990, Cordero filed a complaint for collection for
various sums totaling P209, 497. 36 which he later on
amended to P309, 681. 51. This represented the collectibles
he had from Philtranco, by virtue of an arrangement whereby
Philtranco employees were allowed to buy goods and items
from Babys Canteen on credit, which payments were
subsequently deducted by Philtranco from the employees
Held:
The agreement was a sublease not a partnership.
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, PlazaSta. Cruz, Manila, the principal conditions of
the offer being:
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.
Facts:
Plaintiffs purchased, in the ordinary course of business, from
one of the duly authorized agents of the National Charity
Sweepstakes Office one ticket for the sum of two pesos (P2),
said ticket was registered in the name of Jose Gatchalian and
Company. The ticket won one of the third-prizes in the amount
of P50,000.
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. Yulo filed present action in 1954, alleging the existence of
a partnership between them and that Yang has refused to
pay her shares
Defendants Position: The real agreement between plaintiff
and defendant was one of lease and not of partnership; that
the partnership was adopted as a subterfuge to get around the
prohibition contained in the contract of lease between the
owners and the plaintiff against the sublease of the property.
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 any other amount. The agreement is a lease because
plaintiff didnt 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:
Issue:
Whether the Evangelistas were properly subject to the taxes
assessed by the CIR. YES
HELD:
Ruling summary: The SC upheld the ruling of the CTA against
the Evangelistas because the two elements of a partnership
were present:
1 there was an agreement to contribute money,
property or industy to a common fund
2 they had the intent to divide the profits among the
contracting parties
First element: agreement to contribute MPI
This element is undisputed because the sister pooled their own
money and even borrowed money from their father. The funds
they used to buy the properties were not something they found
already in existence. They created it purposely.
Second element intent to gain
1 they invested the money in numerous properties
and entered into numerous transactions - strongly
indicative of a pattern or common design that was not
limited to the conservation and preservation of the
aforementioned common fund or even of the property
acquired; instead, the Court was convinced of the
habitual character peculiar to business transactions
engaged in the purpose of gain
2 lots they purchased were not residential, but were
leased to tenants
3 appointment of Simeon as manager Simeons
appointment and his functions indicate that the affairs
relative to said properties have been handled as if the
same belonged to a corporation or business and
enterprise operated for profit.
4 ^ the aforementioned conditions have existed for
over 10 years
5 The Evangelistas did not present nor explain their
purpose in creating the set up or the causes for
its continued existence.
The arrangement created by the sisters are covered by the
tax
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."
Again, pursuant to said section 84(b), the term
"corporation" includes, among other, joint accounts, and
"associations," none of which has a legal personality of its
own, independent of that of its members.
For purposes of tax on corporations, the NIRC includes
partnerships
Navarro vs. CA
CASE: Petition for annulment of judgment: by Sps Navarro;
dismissed by the CA:
Facts:
On July 23, 1976, Olivia V. Yanson filed a complaint against
Lourdes Navarro for "Delivery of Personal Properties With
Damages". The complaint incorporated an application for a writ
of replevin. (*was subsequently amended to include private
respondent's husband, Ricardo B. Yanson, as co-plaintiff, and
petitioner's husband, as co-defendant.)
On July 27, 1976, then Executive Judge Oscar R. Victoriano
approved Yansons application for a writ of replevin. By virtue
of the same, Yanson has recovered the subject chattels.
Subsequently, the Presiding judge rendered a decision
disposing that
1
3
Issue:
Whether or not petitioners form a partnership as to make them
liable to the income tax assessed by the CTA - YES
Held:
Petitioners are subject to the tax on corporations as provided
for in the NIRC. Applying the leading case of Evangelista v.
Collector of Internal Revenue, and section 84(b) of the NIRC,
which explicitly provides that the term corporation "includes
partnerships" and to Article 1767 of the Civil Code of the
Philippines, defining what a contract of partnership is, "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
Issue:
Whether there is partnership amongst Constantino and
Biglangawa/Espiritu. NONE
Issue:
Who is the partner between Jose Lim and Elfledo Lim?
Elfledo Lim
RULING:
There is no word nor expression in the contract that suggests
any idea of partnership. On the contrary, Constantino expressly
avers in his complaint that Biglangawa and Espiritu appointed
him as their EXCLUSIVE AGENT to develop xxx.
Categorically, he referred to himself as agent, not a partner,
entitled to compensation in the form of commission and/or fee,
not participation and not in the form of share.
HELD:
It is Elfledo Lim based on the evidence presented regardless of
Jimmy Yus testimony in court that Jose Lim was the partner. If
Jose Lim was the partner, then the partnership would have
been dissolved upon his death . A partnership is dissolved
upon the death of the partner. Further, no evidence was
presented as to the articles of partnership or contract of
partnership between Jose, Norberto and Jimmy. Unfortunately,
there is none in this case, because the alleged partnership was
never formally organized.
But at any rate, the Supreme Court noted that based on the
functions performed by Elfledo, he is the actual partner.
The following circumstances tend to prove that Elfledo was
himself the partner of Jimmy and Norberto:
1.) Cresencia testified that Jose gave Elfledo P50,000.00, 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 the case of Heirs of Tan Eng
Kee, a demand for periodic accounting is evidence of a
partnership.
Furthermore, petitioners failed to adduce any evidence to show
that the real and personal properties acquired and registered in
the names of Elfledo and Juliet formed part of the estate of
Jose, having been derived from Joses alleged partnership with
Jimmy and Norberto.
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 Elfredos efforts and hard work that the
Issue:
Whether the CA erred in holding that, notwithstanding the
absence of a partnership between the Olivas and the Antons,
the latter have the obligation to pay the former their shares of
the net profits of the three stores plus legal interest on those
shares until they have been paid. NO.
HELD:
The Court will not disturb the finding of both the RTC and the
CA that, based on the terms of the MOAs and the
circumstances surrounding its implementation, the
relationship between the Olivas and the Antons was one of
creditor-debtor, not of partnership.
The finding is sound since, although the MOA denominated the
Olivas as "partners." the amounts they gave did not appear to
be capital contributions to the establishment of the stores.
Indeed, the stores had to pay the amounts back with interests.
Moreover, the MOAs forbade the Olivas from interfering
with the running of the stores. At any rate, none of the
parties has made an issue of the common finding of the courts
below respecting the nature of their relationship.
On Jose Miguels contention: since the Olivas were not the
Antons' partners in the stores, they were not entitled to receive
percentage shares of the net profits from the stores'
operations.
But, as the CA correctly held, although the Olivas were mere
creditors, not partners, the Antons agreed to compensate them
for the risks they had taken. The Olivas gave the loans with
no security and they were to be paid such loans only if the
stores made profits. Had the business suffered loses and
could not pay what it owed, the Olivas would have ultimately
assumed those loses just by themselves. Still there was
nothing illegal or immoral about this compensation
scheme. Thus, unless the MOAs are subsequently rescinded
on valid grounds or the parties mutually terminate them, the
same remain valid and enforceable.
It did not matter that the Antons had already paid for two of the
loans and their interests. Their obligation to share net
profits with the Olivas was not extinguished by such
payment. Indeed, the Antons paid the Olivas their share of the
profits from two stores although the loans corresponding to
them had in the meantime been paid. Only after Jose Miguel's
marital relation with Gladys Miriam turned sour in November
1997 did he cease to pay the Olivas their shares of the profits.
The CA also correctly ruled that, since the Olivas were mere
creditors, not partners, they had no right to demand that the
Antons make an accounting of the money loaned out to them.
Still, the Olivas were entitled to know from the Antons how
much net profits the three stores were making annually
since the Olivas were entitled to certain percentages of those
profits. Indeed, the third and second MO A directed the Antons
to provide the Olivas with copies of the monthly sales reports
from the operations of the stores involved, apparently to enable
them to know how much were due them. There is no reason
why the Antons should not furnish the Olivas copies of
similar reports from the operations of the store at SM
part, proportionate with the sums which the said parties have
invested in said vessels;
the management of said vessels during the time in which said
debt remains unpaid to remain with the partnership of Nicasio
and Gaspar, with the understanding that whatever may be the
result of the business of said vessels, neither the said
partnership nor the parties of the first part shall become
responsible for the payment of said debt, except in so far as
the said vessels shall respond therefor, and in no event shall
they respond therefor with any other property;
injuries to and all losses of said lorchas to be shared by all the
parties hereto, as well as crews' expenses and other outlays
necessary for the preservation of said vessels, in the
proportion which corresponds to each party hereto according
to his investment; the parties of the first part binding
themselves not to encumber or pledge said vessels while said
debt remains unsatisfied to the parties of the second part.
The contract entered into on November 24, 1900, was
dissolved and terminated in July, 1901, and the lorchas was
sold by mutual consent.
In its complaint it was set forth that there was actually a
partnership between the parties to the Nov. 24 contract, and
that the consent of the agent of the plaintiff to its dissolution
and the sale of the lorchas was obtained by fraud of the
defendants.
Issue:
Whether Pastor is a partner or a creditor. Creditor
Held:
The opinion of the writer is that held by the court below, viz,
that upon the face of the contract the plaintiff was a
creditor and not a partner. The contract is not clearly drawn,
but the following seem to indicate that the transaction was
rather a loan than a contract of partnership:
1
2
3
TOCAO vs. CA
OCT. 4, 2000
GR No. 127405
Facts:
Belo, Tocao and Anay entered into a joint venture to distribute
cookware. Belo acted as capitalist, Tocao as president and
general manager and Anay as head of the marketing
department and VP of sales. They operated under the name
Geminesse Enterprise, a sole proprietorship registered in
Marjorie Tocaos name.
The parties agreed that:
a. Belos name should not appear in any documents relating to
their transactions with West Bend Company.
b. Anay would be entitled to 10% of the annual net profits, 6%
overriding commission, 30% of the sales she makes and 2% of
her demonstration services.
The agreement was not reduced to writing.
Anay received her commissions as agreed in 1987. In 1988,
however, she did not receive the same commission, prompting
her to file a complaint for sum of money with damages against
Tocao and Belo.
Tocao and Belo answered that the alleged agreement with
Anay that was neither reduced in writing, nor ratified, was
either unenforceable or void or inexistent. There could not
have been a partnership because Geminesse Enterprise was
the sole proprietorship of Tocao. Also, they alleged that Anay
merely acted as marketing demonstrator of Geminesse
Enterprise for an agreed remuneration, hence was only an
employee.
Trial court and CA ruled in favor of Anay.
Issues:
Whether Anay was a partner or employee in the business?
Partner.
Whether there was dissolution of the partnership? NO.
Held:
(1st Issue) They parties entered into a partnership.
There was indeed an oral partnership agreement between
Tocao, Belo and Anay. It did not matter that the agreement was
not in writing because Article 1771 of the Civil Code provides
that a partnership may be constituted in any form.
The fact that Geminesse Enterprise was registered in Tocaos
name is not determinative of whether or not the business was
managed and operated by a sole proprietor or a partnership.
Indubitably then, the business name Geminesse Enterprise
was used only for practical reasons - it was utilized as the
Sardane vs. CA
Facts:
Acojedo brought an action in the City Court of Dipolog for
collection of a sum of P5,217.25 based on promissory notes
executed by the herein private respondent Nobio Sardane in
favor of the herein petitioner.
It has been established in the trial court that on many
occasions, Acoejdo demanded the payment of the total amount
of P5,217.25. Due to failure to pay upon extrajudicial demand
(demand letter from a lawyer), Acojedo sought to collect by
filing this case.
City Court of Dipolog issued an order dated May 18, 1976
declaring the private respondent in default and allowed the
petitioner to present his evidence ex-parte. The City Court of
Dipolog rendered judgment by default in favor of the petitioner.
Private respondent filed a motion to lift the order of default
which was granted.
CITY COURT OF DIPOLOG After the trial on the merits, the
City Court of Dipolog rendered its decision in favor of Acojedo
and against Sardaje as follows:
(a) Ordering the Sardaje to pay unto the plaintiff the sum of
(P5,217.25) plus legal interest to commence from April 23,
1976 when this case was filed in court;
(b) pay the plaintiff the sum of P200.00 as attorney's fee and to
pay the cost of this proceeding. 3
APPEAL TO CFI: Sardane appealed to the Court of First
Instance of Zamboanga del Norte which reversed the decision.
He said that he is a partner and that the PNotes are
evidence of his share in the common fund. CFI concluded
that the promissory notes involved were merely receipts for the
contributions to said partnership and, therefore, upheld the
claim that there was ambiguity in the promissory notes, hence
parol evidence was allowable to vary or contradict the terms of
the represented loan contract.
CA: Acojedo then sought the review of said decision by
petition to the CA. The issue on whether the oral testimony for
the therein private respondent Sardane that a partnership
existed between him and therein petitioner Acojedo are
admissible to vary the meaning of the abovementioned
promissory notes was raised in this appeal.
CA said that the exceptions to the rule do not apply in this case
as there is no ambiguity in the writings in question, thus the
issue is.
Issue:
Whether a partnership exists between Acojedo and Sardane
primarily based on the Promissory notes presented as
evidence? NO
Held:
ON THE PROMISSORY NOTES: In the case at bar, the
promissory notes containing a promise to pay a sum certain in
Art. 1770. A partnership must have a lawful object or purpose, and must b
interest of the partners. When an unlawful partnership is dissolved by a ju
confiscated in favor of the State, without prejudice to the provisions of the
the instruments and effects of a crime. (1666a)
Note: This is a digest of the mother case from which this case
was based. Just in case pangutan-on, and dili sad masabtan ni
na case without this backgrounder.
VICTORIANO BORLASAS, ET AL., plaintiffs-appellants, vs.
VICENTE POLISTICO, ET AL., defendants-appellees.
In the month of April, 1911, the plaintiffs and defendants,
together with several hundred other persons, formed an
association under the name of Turnuhan Polistico & Co.
Vicente Polistico, the principal defendant herein, was elected
president and treasurer of the association, and his house in
Lilio, Laguna, was made its principal place of business. The life
of the association was fixed at fifteen years, and under the bylaws each member obligated himself to pay to Vicente
Polistico, as president-treasurer, before 3 o'clock in the
afternoon of every Sunday the sum of 50 centavos, except that
on every fifth Sunday the amount was P1, if the president
elected to call this amount, as he always did.
From April, 1911, until April, 1917, the sums of money
mentioned above were paid weekly by all of the members of
the society with few irregularities. The inducement to these
weekly contributions was found in provisions of the by-laws to
the effect that a lottery should be conducted weekly among the
members of the association and that the successful member
should be paid the amount collected each week, from which,
however, the president-treasurer of the society was to receive
the sum of P200, to be held by him as funds of the society.
By virtue of these weekly lotteries Vicente Polistico, as
president-treasurer of the association, received sums of money
amounting to P74,000, more or less, in the period stated,
which he still retains in his power or has applied to the
purchase of real property largely in his own name and partly in
the names of others. Hence this complaint.
Issue:
Whether the members of the unlawful partnership have the
right to be reimbursed of the amount of their contributions
made to the unlawful partnership. YES
Held:
According to Manresa: "Ricci holds that the partner who
limits himself to demanding only the amount contributed
by him need not resort to the partnership contract on
which to base his claim or action. And, he adds in
explanation, that the partner makes his contribution, which
passes to the managing partner for the purpose of carrying on
the business or industry which is the object of the partnership;
or, in other words, to breathe the breath of life into a
partnership contract with an object forbidden by the law. And
as said contract does not exist in the eyes of the law, the
purpose for which the contribution was made has not
come into existence, and the administrator of the
partnership holding said contribution retains what
belongs to others, without any consideration; for which
reason he is bound to return it, and he who has paid in his
share is entitled to recover it.
"[The] Code does not state whether, upon the dissolution of the
unlawful partnership, the amounts contributed are to be
returned to the partners, because it only deals with the
disposition of the profits; but the fact that said contributions
are not included in the disposal prescribed for said profits,
shows that in consequence of said exclusion, the general
rules of law must be followed, and hence, the partners
must be reimbursed the amount of their respective
contributions. Any other solution would be immoral, and the
law will not consent to the latter remaining in the possession of
the manager or administrator who has refused to return them,
by denying to the partners the action to demand them."
(Manresa, Commentaries on the Spanish Civil Code, vol. XI,
pp. 262-264.)
Issue:
Whether the members of the unlawful partnership have the
right to be reimbursed of the amount of the
EARNINGS/PROFITS made by the unlawful partnership. NO
Held:
According to Manresa: " this is not the case with regard to
profits earned in the course of the partnership, because they
do not constitute or represent the partner's contribution but are
the result of the industry, business, or speculation, which
is the object of the partnership; and, therefore, in order to
3.
4.
5.
Held:
1. 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 profits
among themselves.
In their Agreement, petitioners would contribute property to the
partnership in the form of land which was to be developed into
a subdivision; while respondent would give, in addition to his
industry, the amount needed for general expenses and other
costs. Furthermore, the income from the said project would be
Issue:
Whether the marriage of Suter and Spirig dissolved the
partnership and, thus the consolidation of the income of the
firm and individual incomes of the spouses was proper. NO
Held:
The thesis that the limited partnership, William J. Suter
"Morcoin" Co., Ltd., has been dissolved by operation of law
because of the marriage of the only general partner, William J.
Suter to the originally limited partner, Julia Spirig one year after
the partnership was organized is rested by the appellant upon
the opinion of now Senator Tolentino that reads as follows:
"A husband and a wife may not enter into a contract of general
copartnership, because under the Civil Code, which applies in
the absence of express provision in the Code of Commerce,
persons prohibited from making donations to each other are
prohibited from entering into universal partnerships. (2
Echaverri 196) It follows that the marriage of partners
necessarily brings about the dissolution of a pre-existing
partnership. (1 Guy de Montella 58)"
However, the CIR failed to observe the fact that the William J.
Suter "Morcoin" Co., Ltd. was NOT a universal partnership ,
but a PARTICULAR PARTNERSHIP. 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 the
industry or work during the existence of the partnership.
The William J. Suter "Morcoin" Co., Ltd. was NOT a universal
partnership, since the contributions of the partners were fixed
sums of money and neither one of them is an industrial partner
(NB: Industrial partner is one who contributes only his industry
or personal service). If follows therefore, that William J. Suter
"Morcoin" Co., Ltd. was not a partnership that the Spouses
were forbidden to enter by Article 1677 of the Civil Code of
1889.
Even the subsequent marriage of the partners could NOT
operate to dissolve the partnership, such marriage not being
one of the causes provided for that purpose either by the
Spanish Civil Code or the Code of Commerce.
Morevoer, the CIR'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).
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, 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
(compaias 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.
E. S. LYONS, plaintiff-appellant,
vs.
C. W. ROSENSTOCK, Executor of the Estate of Henry W.
Elser, deceased, defendant-appellee.
Facts:
Prior to his death on June 18, 1923, Henry W. Elser was
engaged in buying, selling, and administering real estate. In
several ventures, the plaintiff, E. S. Lyons, had joined with him,
the profits being shared by the two in equal parts. In April,
1919, Lyons, a missionary, went on leave to the United States
and was gone for nearly a year and a half. Elser made a
written statements showing that Lyons was, at that time, half
owner with Elser of three particular pieces of real property.
Concurrently with this act, Lyons execute in favor of Elser a
general power of attorney empowering Elser to manage and
dispose of said properties at will and to represent him fully and
amply, to the mutual advantage of both. During the absence of
Lyons two of the pieces of properties were sold, leaving in his
hands a single piece of property located at Carriedo Street.
In the spring of 1920 the attention of Elser was drawn to a
piece of land, referred to as the San Juan Estate. The amount
required for the first payment was P150,000, and as Elser had
available only about P120,000, including the P20,000
advanced upon the option, it was necessary to raise the
remainder by obtaining a loan for P50,000 which was obtained
from a Chinese merchant named Uy Siuliong. With this money
and what he already had in bank, Elser purchased the San
PIONEER INSURANCE v. CA
Note: Jacob Lim : purchaser of the plane // Maglana,
Cervantes and BORMAHECO: invested funds to purchase the
plane // Pioneer Insurance: insurer of the plane // Japan
Domestic Airlines: vendor of the plane
Facts:
Jacob S. Lim was engaged in the airline business as owneroperator of Southern Air Lines (SAL) a single proprietorship.
He bought two two DC-3A Type aircrafts and one set of
necessary spare parts from Japan Domestic Airlines. Jacob S.
Lim was able to get funds for payment out of Constancio
Maglana, Francisco and Modesto Cervantes and
BORMAHECO. The funds were supposed to be their
contributions to a new corporation proposed by Lim to expand
his airline business.
Contrary to the agreement among the Lim and Maglana,et al.,
Lim in connivance with Pioneer Insurace, signed and executed
the alleged chattel mortgage and surety bond agreement in his
personal capacity as the alleged proprietor of the SAL.
Maglana, Cervantes and Bormaherco learned for the first time
of this trickery and misrepresentation of the other, Jacob Lim,
when the herein plaintiff chattel mortgage allegedly executed
by defendant Lim, thereby forcing them to file an adverse claim
in the form of third party claim.
Issue:
What legal rules govern the relationship among co-investors
whose agreement was to do business through the corporate
vehicle but who failed to incorporate the entity in which they
had chosen to invest?
Relevance of the issue: If it the law on partnership that
governs, then Maglana, Cervantes and BORMAHECO should
share the loss. But if there is no partnership, Lim must
reimburse them for what they have paid
Held:
There was no de facto partnership formed
The rule is, while it has been held that as between themselves
the rights of the stockholders in a defectively incorporated
association should be governed by the supposed charter and
the laws of the state relating thereto and not by the rules
governing partners, it is ordinarily held that persons who
attempt, but fail, to form a corporation and who carry on
business under the corporate name occupy the position of
partners inter se. Thus, where persons associate themselves
together under articles to purchase property to carry on a
business, and their organization is so defective as to come
short of creating a corporation within the statute, they become
in legal effect partners inter se, and their rights as members of
the company to the property acquired by the company will be
recognized
However, in this case, it was shown that Lim did not have the
intent to form a corporation with Maglana et al. This can be
inferred from acts of unilaterally taking out a surety from
Pioneer Insurance and not using the funds he got from
Maglana et al. The record shows that Lim was acting on his
own and not in behalf of his other would-be incorporators in
transacting the sale of the airplanes and spare parts.