G.R. No.

126881

October 3, 2000

HEIRS OF TAN ENG KEE, petitioners,

vs.
COURT OF APPEALS and BENGUET LUMBER COMPANY,
represented by its President TAN ENG LAY,respondents.
DE LEON, JR., J.:
In this petition for review on certiorari, petitioners pray for the
reversal of the Decision1 dated March 13, 1996 of the former
Fifth Division2 of the Court of Appeals in CA-G.R. CV No.
47937, the dispositive portion of which states:
THE FOREGOING CONSIDERED, the appealed
decision is hereby set aside, and the complaint
dismissed.
The facts are:
Following the death of Tan Eng Kee on September 13, 1984,
Matilde Abubo, the common-law spouse of the decedent, 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 on February 19, 1990. The complaint,3 docketed as Civil
Case No. 1983-R in the Regional Trial Court of Baguio City was
for accounting, liquidation and winding up of the alleged
partnership formed after World War II between Tan Eng Kee
and Tan Eng Lay. On March 18, 1991, the petitioners filed an
amended complaint4 impleading private respondent herein
BENGUET LUMBER COMPANY, as represented by Tan Eng
Lay. The amended complaint was admitted by the trial court in
its Order dated May 3, 1991.5
The amended complaint principally alleged that after the second
World War, Tan Eng Kee and Tan Eng Lay, pooling their
resources and industry together, entered into a partnership
engaged in the business of selling lumber and hardware and
construction supplies. They named their enterprise "Benguet
Lumber" which they jointly managed until Tan Eng Kee's death.
Petitioners herein averred that the business prospered due to
the hard work and thrift of the alleged partners. However, they
claimed that in 1981, Tan Eng Lay and his children caused the
conversion of the partnership "Benguet Lumber" into a
corporation called "Benguet Lumber Company." The
incorporation was purportedly a ruse to deprive Tan Eng Kee
and his heirs of their rightful participation in the profits of the
business. Petitioners prayed for accounting of the partnership
assets, and the dissolution, winding up and liquidation thereof,
and the equal division of the net assets of Benguet Lumber.
After trial, Regional Trial Court of Baguio City, Branch 7
rendered judgment6 on April 12, 1995, to wit:
WHEREFORE, in view of all the foregoing, judgment is
hereby rendered:

c) Declaring that the assets of Benguet Lumber are the

same assets turned over to Benguet Lumber Co. Inc.
and as such the heirs or legal representatives of the
deceased Tan Eng Kee have a legal right to share in
said assets;
d) Declaring that all the rights and obligations of Tan
Eng Kee as joint adventurer and/or as partner in a
particular partnership have descended to the plaintiffs
who are his legal heirs.
e) Ordering the defendant Tan Eng Lay and/or the
President and/or General Manager of Benguet Lumber
Company Inc. to render an accounting of all the assets
of Benguet Lumber Company, Inc. so the plaintiffs
know their proper share in the business;
f) Ordering the appointment of a receiver to preserve
and/or administer the assets of Benguet Lumber
Company, Inc. until such time that said corporation is
finally liquidated are directed to submit the name of
any person they want to be appointed as receiver
failing in which this Court will appoint the Branch Clerk
of Court or another one who is qualified to act as such.
g) Denying the award of damages to the plaintiffs for
lack of proof except the expenses in filing the instant
case.
h) Dismissing the counter-claim of the defendant for
lack of merit.
SO ORDERED.
Private respondent sought relief before the Court of Appeals
which, on March 13, 1996, rendered the assailed decision
reversing the judgment of the trial court. Petitioners' motion for
reconsideration7 was denied by the Court of Appeals in a
Resolution8 dated October 11, 1996.
Hence, the present petition.
As a side-bar to the proceedings, petitioners filed Criminal Case
No. 78856 against Tan Eng Lay and Wilborn Tan for the use of
allegedly falsified documents in a judicial proceeding.
Petitioners complained that Exhibits "4" to "4-U" offered by the
defendants before the trial court, consisting of payrolls
indicating that Tan Eng Kee was a mere employee of Benguet
Lumber, were fake, based on the discrepancy in the signatures
of Tan Eng Kee. They also filed Criminal Cases Nos. 7885778870 against Gloria, Julia, Juliano, Willie, Wilfredo, Jean, Mary
and Willy, all surnamed Tan, for alleged falsification of
commercial documents by a private individual. On March 20,
1999, the Municipal Trial Court of Baguio City, Branch 1,
wherein the charges were filed, rendered judgment9 dismissing
the cases for insufficiency of evidence.
In their assignment of errors, petitioners claim that:

a) Declaring that Benguet Lumber is a joint venture

which is akin to a particular partnership;
b) Declaring that the deceased Tan Eng Kee and Tan
Eng Lay are joint adventurers and/or partners in a
business venture and/or particular partnership called
Benguet Lumber and as such should share in the
profits and/or losses of the business venture or
particular partnership;

I
THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING THAT THERE WAS NO PARTNERSHIP
BETWEEN THE LATE TAN ENG KEE AND HIS
BROTHER TAN ENG LAY BECAUSE: (A) THERE
WAS NO FIRM ACCOUNT; (B) THERE WAS NO FIRM
LETTERHEADS SUBMITTED AS EVIDENCE; (C)
THERE WAS NO CERTIFICATE OF PARTNERSHIP;
(D) THERE WAS NO AGREEMENT AS TO PROFITS

AND LOSSES; AND (E) THERE WAS NO TIME

FIXED FOR THE DURATION OF THE PARTNERSHIP
(PAGE 13, DECISION).

As a premise, we reiterate the oft-repeated rule that findings of

facts of the Court of Appeals will not be disturbed on appeal if
such are supported by the evidence.10 Our jurisdiction, it must
be emphasized, does not include review of factual issues. Thus:

II
THE HONORABLE COURT OF APPEALS ERRED IN
RELYING SOLELY ON THE SELF-SERVING
TESTIMONY OF RESPONDENT TAN ENG LAY THAT
BENGUET LUMBER WAS A SOLE
PROPRIETORSHIP AND THAT TAN ENG KEE WAS
ONLY AN EMPLOYEE THEREOF.
III
THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING THAT THE FOLLOWING FACTS WHICH
WERE DULY SUPPORTED BY EVIDENCE OF BOTH
PARTIES DO NOT SUPPORT THE EXISTENCE OF A
PARTNERSHIP JUST BECAUSE THERE WAS NO
ARTICLES OF PARTNERSHIP DULY RECORDED
BEFORE THE SECURITIES AND EXCHANGE
COMMISSION:
a. THAT THE FAMILIES OF TAN ENG KEE
AND TAN ENG LAY WERE ALL LIVING AT
THE BENGUET LUMBER COMPOUND;
b. THAT BOTH TAN ENG LAY AND TAN ENG
KEE WERE COMMANDING THE
EMPLOYEES OF BENGUET LUMBER;
c. THAT BOTH TAN ENG KEE AND TAN
ENG LAY WERE SUPERVISING THE
EMPLOYEES THEREIN;
d. THAT TAN ENG KEE AND TAN ENG LAY
WERE THE ONES DETERMINING THE
PRICES OF STOCKS TO BE SOLD TO THE
PUBLIC; AND
e. THAT TAN ENG LAY AND TAN ENG KEE
WERE THE ONES MAKING ORDERS TO
THE SUPPLIERS (PAGE 18, DECISION).
IV
THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING THAT THERE WAS NO PARTNERSHIP
JUST BECAUSE THE CHILDREN OF THE LATE TAN
ENG KEE: ELPIDIO TAN AND VERONICA CHOI,
TOGETHER WITH THEIR WITNESS BEATRIZ
TANDOC, ADMITTED THAT THEY DO NOT KNOW
WHEN THE ESTABLISHMENT KNOWN IN BAGUIO
CITY AS BENGUET LUMBER WAS STARTED AS A
PARTNERSHIP (PAGE 16-17, DECISION).
V
THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING THAT THERE WAS NO PARTNERSHIP
BETWEEN THE LATE TAN ENG KEE AND HIS
BROTHER TAN ENG LAY BECAUSE THE PRESENT
CAPITAL OR ASSETS OF BENGUET LUMBER IS
DEFINITELY MORE THAN P3,000.00 AND AS SUCH
THE EXECUTION OF A PUBLIC INSTRUMENT
CREATING A PARTNERSHIP SHOULD HAVE BEEN
MADE AND NO SUCH PUBLIC INSTRUMENT
ESTABLISHED BY THE APPELLEES (PAGE 17,
DECISION).

Filing of petition with Supreme Court. A party

desiring to appeal by certiorari from a judgment or final
order or resolution of the Court of Appeals, the
Sandiganbayan, the Regional Trial Court or other
courts whenever authorized by law, may file with the
Supreme Court a verified petition for review on
certiorari. The petition shall raise only questions of law
which must be distinctly set forth.11 [emphasis
supplied]
Admitted exceptions have been recognized, though, and when
present, may compel us to analyze the evidentiary basis on
which the lower court rendered judgment. Review of factual
issues is therefore warranted:
(1) when the factual findings of the Court of Appeals
and the trial court are contradictory;
(2) when the findings are grounded entirely on
speculation, surmises, or conjectures;
(3) when the inference made by the Court of Appeals
from its findings of fact is manifestly mistaken, absurd,
or impossible;
(4) when there is grave abuse of discretion in the
appreciation of facts;
(5) when the appellate court, in making its findings,
goes beyond the issues of the case, and such findings
are contrary to the admissions of both appellant and
appellee;
(6) when the judgment of the Court of Appeals is
premised on a misapprehension of facts;
(7) when the Court of Appeals fails to notice certain
relevant facts which, if properly considered, will justify
a different conclusion;
(8) when the findings of fact are themselves conflicting;
(9) when the findings of fact are conclusions without
citation of the specific evidence on which they are
based; and
(10) when the findings of fact of the Court of Appeals
are premised on the absence of evidence but such
findings are contradicted by the evidence on record.12
In reversing the trial court, the Court of Appeals ruled, to wit:
We note that the Court a quo over extended the issue
because while the plaintiffs mentioned only the
existence of a partnership, the Court in turn went
beyond that by justifying the existence of a joint
venture.
When mention is made of a joint venture, it would
presuppose parity of standing between the parties,
equal proprietary interest and the exercise by the
parties equally of the conduct of the business, thus:
xxx

xxx

xxx

We have the admission that the father of the plaintiffs

was not a partner of the Benguet Lumber before the
war. The appellees however argued that (Rollo, p. 104;
Brief, p. 6) this is because during the war, the entire
stocks of the pre-war Benguet Lumber were
confiscated if not burned by the Japanese. After the
war, because of the absence of capital to start a
lumber and hardware business, Lay and Kee pooled
the proceeds of their individual businesses earned
from buying and selling military supplies, so that the
common fund would be enough to form a partnership,
both in the lumber and hardware business. That Lay
and Kee actually established the Benguet Lumber in
Baguio City, was even testified to by witnesses.
Because of the pooling of resources, the post-war
Benguet Lumber was eventually established. That the
father of the plaintiffs and Lay were partners, is
obvious from the fact that: (1) they conducted the
affairs of the business during Kee's lifetime, jointly, (2)
they were the ones giving orders to the employees, (3)
they were the ones preparing orders from the
suppliers, (4) their families stayed together at the
Benguet Lumber compound, and (5) all their children
were employed in the business in different capacities.
xxx

xxx

xxx

It is obvious that there was no partnership whatsoever.

Except for a firm name, there was no firm account, no
firm letterheads submitted as evidence, no certificate
of partnership, no agreement as to profits and losses,
and no time fixed for the duration of the partnership.
There was even no attempt to submit an accounting
corresponding to the period after the war until Kee's
death in 1984. It had no business book, no written
account nor any memorandum for that matter and no
license mentioning the existence of a partnership
[citation omitted].
Also, the exhibits support the establishment of only a
proprietorship. The certification dated March 4, 1971,
Exhibit "2", mentioned co-defendant Lay as the only
registered owner of the Benguet Lumber and
Hardware. His application for registration, effective
1954, in fact mentioned that his business started in
1945 until 1985 (thereafter, the incorporation). The
deceased, Kee, on the other hand, was merely an
employee of the Benguet Lumber Company, on the
basis of his SSS coverage effective 1958, Exhibit "3".
In the Payrolls, Exhibits "4" to "4-U", inclusive, for the
years 1982 to 1983, Kee was similarly listed only as an
employee; precisely, he was on the payroll listing. In
the Termination Notice, Exhibit "5", Lay was mentioned
also as the proprietor.
xxx

xxx

xxx

We would like to refer to Arts. 771 and 772, NCC, that

a partner [sic] may be constituted in any form, but
when an immovable is constituted, the execution of a
public instrument becomes necessary. This is equally
true if the capitalization exceeds P3,000.00, in which
case a public instrument is also necessary, and which
is to be recorded with the Securities and Exchange
Commission. In this case at bar, we can easily assume
that the business establishment, which from the
language of the appellees, prospered (pars. 5 & 9,
Complaint), definitely exceeded P3,000.00, in addition
to the accumulation of real properties and to the fact
that it is now a compound. The execution of a public
instrument, on the other hand, was never established
by the appellees.

And then in 1981, the business was incorporated and

the incorporators were only Lay and the members of
his family. There is no proof either that the capital
assets of the partnership, assuming them to be in
existence, were maliciously assigned or transferred by
Lay, supposedly to the corporation and since then
have been treated as a part of the latter's capital
assets, contrary to the allegations in pars. 6, 7 and 8 of
the complaint.
These are not evidences supporting the existence of a
partnership:
1) That Kee was living in a bunk house just across the
lumber store, and then in a room in the bunk house in
Trinidad, but within the compound of the lumber
establishment, as testified to by Tandoc; 2) that both
Lay and Kee were seated on a table and were
"commanding people" as testified to by the son, Elpidio
Tan; 3) that both were supervising the laborers, as
testified to by Victoria Choi; and 4) that Dionisio
Peralta was supposedly being told by Kee that the
proceeds of the 80 pieces of the G.I. sheets were
added to the business.
Partnership presupposes the following elements
[citation omitted]: 1) a contract, either oral or written.
However, if it involves real property or where the
capital is P3,000.00 or more, the execution of a
contract is necessary; 2) the capacity of the parties to
execute the contract; 3) money property or industry
contribution; 4) community of funds and interest,
mentioning equality of the partners or one having a
proportionate share in the benefits; and 5) intention to
divide the profits, being the true test of the partnership.
The intention to join in the business venture for the
purpose of obtaining profits thereafter to be divided,
must be established. We cannot see these elements
from the testimonial evidence of the appellees.
As can be seen, the appellate court disputed and differed from
the trial court which had adjudged that TAN ENG KEE and TAN
ENG LAY had allegedly entered into a joint venture. In this
connection, we have held that whether a partnership exists is a
factual matter; consequently, since the appeal is brought to us
under Rule 45, we cannot entertain inquiries relative to the
correctness of the assessment of the evidence by the court a
quo.13 Inasmuch as the Court of Appeals and the trial court had
reached conflicting conclusions, perforce we must examine the
record to determine if the reversal was justified.
The primordial issue here is whether Tan Eng Kee and Tan Eng
Lay were partners in Benguet Lumber. 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.
Two or more persons may also form a partnership for
the exercise of a profession.14
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.15 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,16 and (2) when the partnership has a
capital of three thousand pesos or more.17 In both

cases, a public instrument is required.18 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.19
The trial court determined that Tan Eng Kee and Tan Eng Lay
had entered into a joint venture, which it said is akin to a
particular partnership.20 A particular partnership is distinguished
from a joint adventure, to wit:
(a) A joint adventure (an American concept similar to
our joint accounts) is a sort of informal partnership,
with no firm name and no legal personality. In a joint
account, the participating merchants can transact
business under their own name, and can be
individually liable therefor.
(b) Usually, but not necessarily a joint adventure is
limited to a SINGLE TRANSACTION, although the
business of pursuing to a successful termination may
continue for a number of years; a partnership generally
relates to a continuing business of various transactions
of a certain kind.21
A joint venture "presupposes generally a parity of standing
between the joint co-ventures or partners, in which each party
has an equal proprietary interest in the capital or property
contributed, and where each party exercises equal rights in the
conduct of the business."22 Nonetheless, in Aurbach, et. al. v.
Sanitary Wares Manufacturing Corporation, et. al.,23 we
expressed the view that a joint venture may be likened to a
particular partnership, thus:
The legal concept of a joint venture is of common law
origin. It has no precise legal definition, but it has been
generally understood to mean an organization formed
for some temporary purpose. (Gates v. Megargel, 266
Fed. 811 [1920]) It is hardly distinguishable from the
partnership, since their elements are similar
community of interest in the business, sharing of
profits and losses, and a mutual right of control.
(Blackner v. McDermott, 176 F. 2d. 498, [1949];
Carboneau v. Peterson, 95 P.2d., 1043 [1939]; Buckley
v. Chadwick, 45 Cal. 2d. 183, 288 P.2d. 12 289 P.2d.
242 [1955]). The main distinction cited by most
opinions in common law jurisdiction is that the
partnership contemplates a general business with
some degree of continuity, while the joint venture is
formed for the execution of a single transaction, and is
thus of a temporary nature. (Tufts v. Mann. 116 Cal.
App. 170, 2 P. 2d. 500 [1931]; Harmon v. Martin, 395
Ill. 595, 71 NE 2d. 74 [1947]; Gates v. Megargel 266
Fed. 811 [1920]). This observation is not entirely
accurate in this jurisdiction, since under the Civil Code,
a partnership may be particular or universal, and a
particular partnership may have for its object a specific
undertaking. (Art. 1783, Civil Code). It would seem
therefore that under Philippine law, a joint venture is a
form of partnership and should thus be governed by
the law of partnerships. The Supreme Court has
however recognized a distinction between these two
business forms, and has held that although a
corporation cannot enter into a partnership contract, it
may however engage in a joint venture with others. (At
p. 12, Tuazon v. Bolaos, 95 Phil. 906 [1954])
(Campos and Lopez-Campos Comments, Notes and
Selected Cases, Corporation Code 1981).
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. In addition, petitioners point out that the New Civil

Code was not yet in effect when the partnership was allegedly
formed sometime in 1945, although the contrary may well be
argued that nothing prevented the parties from complying with
the provisions of the New Civil Code when it took effect on
August 30, 1950. But all that is in the past. The net effect,
however, is that we are asked to determine whether a
partnership existed based purely on circumstantial evidence. A
review of the record persuades us that the Court of Appeals
correctly reversed the decision of the trial court. The evidence
presented by petitioners falls short of the quantum of proof
required to establish a partnership.
Unfortunately for petitioners, Tan Eng Kee has passed away.
Only he, aside from Tan Eng Lay, could have expounded on the
precise nature of the business relationship between them. In the
absence of evidence, we cannot accept as an established fact
that Tan Eng Kee allegedly contributed his resources to a
common fund for the purpose of establishing a partnership. The
testimonies to that effect of petitioners' witnesses is directly
controverted by Tan Eng Lay. It should be noted that it is not
with the number of witnesses wherein preponderance lies;24 the
quality of their testimonies is to be considered. None of
petitioners' witnesses could suitably account for the beginnings
of Benguet Lumber Company, except perhaps for Dionisio
Peralta whose deceased wife was related to Matilde
Abubo.25 He stated that when he met Tan Eng Kee after the
liberation, the latter asked the former to accompany him to get
80 pieces of G.I. sheets supposedly owned by both
brothers.26 Tan Eng Lay, however, denied knowledge of this
meeting or of the conversation between Peralta and his
brother.27 Tan Eng Lay consistently testified that he had his
business and his brother had his, that it was only later on that
his said brother, Tan Eng Kee, came to work for him. Be that as
it may, co-ownership or co-possession (specifically here, of the
G.I. sheets) is not an indicium of the existence of a
partnership.28
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.29 Each has the
right to demand an accounting as long as the partnership
exists.30 We have allowed a scenario wherein "[i]f excellent
relations exist among the partners at the start of the 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."31 But in the situation in the case at
bar, the deferment, if any, had gone on too long to be plausible.
A person is presumed to take ordinary care of his
concerns.32 As we explained in another case:
In the first place, plaintiff did not furnish the supposed
P20,000.00 capital. In the second place, she did not
furnish any help or intervention in the management of
the theatre. In the third place, it does not appear that
she has even demanded from defendant 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 P3,000.00 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. Clearly, plaintiff had always acted in
accordance with the original letter of defendant of June
17, 1945 (Exh. "A"), which shows that both parties
considered this offer as the real contract between
them.33 [emphasis supplied]

A demand for periodic accounting is evidence of a

partnership.34 During his lifetime, Tan Eng Kee appeared never
to have made any such demand for accounting from his brother,
Tang Eng Lay.
This brings us to the matter of Exhibits "4" to "4-U" for private
respondents, consisting of payrolls purporting to show that Tan
Eng Kee was an ordinary employee of Benguet Lumber, as it
was then called. The authenticity of these documents was
questioned by petitioners, to the extent that they filed criminal
charges against Tan Eng Lay and his wife and children. As
aforesaid, the criminal cases were dismissed for insufficiency of
evidence. Exhibits "4" to "4-U" in fact shows that Tan Eng Kee
received sums as wages of an employee. In connection
therewith, Article 1769 of the Civil Code provides:
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 copossessors 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 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 installment 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.
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.
Nevertheless, petitioners would still want us to infer or believe
the alleged existence of a partnership from this set of
circumstances: that Tan Eng Lay and Tan Eng Kee were

commanding the employees; that both were supervising the

employees; that both were the ones who determined the price
at which the stocks were to be sold; and that both placed orders
to the suppliers of the Benguet Lumber Company. They also
point out that the families of the brothers Tan Eng Kee and Tan
Eng Lay lived at the Benguet Lumber Company compound, a
privilege not extended to its ordinary employees.
However, private respondent counters that:
Petitioners seem to have missed the point in asserting
that the above enumerated powers and privileges
granted in favor of Tan Eng Kee, were indicative of his
being a partner in Benguet Lumber for the following
reasons:
(i) even a mere supervisor in a company, factory or
store gives orders and directions to his subordinates.
So long, therefore, that an employee's position is
higher in rank, it is not unusual that he orders around
those lower in rank.
(ii) even a messenger or other trusted employee, over
whom confidence is reposed by the owner, can order
materials from suppliers for and in behalf of Benguet
Lumber. Furthermore, even a partner does not
necessarily have to perform this particular task. It is,
thus, not an indication that Tan Eng Kee was a partner.
(iii) although Tan Eng Kee, together with his family,
lived in the lumber compound and this privilege was
not accorded to other employees, the undisputed fact
remains that Tan Eng Kee is the brother of Tan Eng
Lay. Naturally, close personal relations existed
between them. Whatever privileges Tan Eng Lay gave
his brother, and which were not given the other
employees, only proves the kindness and generosity of
Tan Eng Lay towards a blood relative.
(iv) and even if it is assumed that Tan Eng Kee was
quarreling with Tan Eng Lay in connection with the
pricing of stocks, this does not adequately prove the
existence of a partnership relation between them.
Even highly confidential employees and the owners of
a company sometimes argue with respect to certain
matters which, in no way indicates that they are
partners as to each other.35
In the instant case, we find private respondent's arguments to
be well-taken. Where circumstances taken singly may be
inadequate to prove the intent to form a partnership,
nevertheless, the collective effect of these circumstances may
be such as to support a finding of the existence of the parties'
intent.36 Yet, in the case at bench, even the aforesaid
circumstances when taken together are not
persuasive indicia of a partnership. They only tend to show that
Tan Eng Kee was involved in the operations of Benguet
Lumber, but in what capacity is unclear. We cannot discount the
likelihood that as a member of the family, he occupied a niche
above the rank-and-file employees. He would have enjoyed
liberties otherwise unavailable were he not kin, such as his
residence in the Benguet Lumber Company compound. He
would have moral, if not actual, superiority over his fellow
employees, thereby entitling him to exercise powers of
supervision. It may even be that among his duties is to place
orders with suppliers. Again, the circumstances proffered by
petitioners do not provide a logical nexus to the conclusion
desired; these are not inconsistent with the powers and duties
of a manager, even in a business organized and run as
informally as Benguet Lumber Company.

There being no partnership, it follows that there is no

dissolution, winding up or liquidation to speak of. Hence, the
petition must fail.
WHEREFORE, the petition is hereby denied, and the appealed
decision of the Court of Appeals is herebyAFFIRMED in toto.
No pronouncement as to costs.
SO ORDERED.
G.R. No. L-9996

October 15, 1957

EUFEMIA EVANGELISTA, MANUELA EVANGELISTA, and

FRANCISCA EVANGELISTA, petitioners,
vs.
THE COLLECTOR OF INTERNAL REVENUE and THE
COURT OF TAX APPEALS, respondents.
Santiago F. Alidio and Angel S. Dakila, Jr., for petitioner.
Office of the Solicitor General Ambrosio Padilla, Assistant
Solicitor General Esmeraldo Umali and Solicitor Felicisimo R.
Rosete for Respondents.

8. That from the month of March, 1945 up to an

including December, 1945, the total amount collected
as rents on their real properties was P9,599.00 while
the expenses amounted to P3,650.00 thereby leaving
them a net rental income of P5,948.33;
9. That on 1946, they realized a gross rental income of
in the sum of P24,786.30, out of which amount was
deducted in the sum of P16,288.27 for expenses
thereby leaving them a net rental income of P7,498.13;
10. That in 1948, they realized a gross rental income
of P17,453.00 out of the which amount was deducted
the sum of P4,837.65 as expenses, thereby leaving
them a net rental income of P12,615.35.
It further appears that 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, computed,
according to assessment made by said officer, as follows:
INCOME TAXES

CONCEPCION, J.:
This is a petition filed by Eufemia Evangelista, Manuela
Evangelista and Francisca Evangelista, for review of a decision
of the Court of Tax Appeals, the dispositive part of which reads:
FOR ALL THE FOREGOING, we hold that the
petitioners are liable for the income tax, real estate
dealer's tax and the residence tax for the years 1945
to 1949, inclusive, in accordance with the respondent's
assessment for the same in the total amount of
P6,878.34, which is hereby affirmed and the petition
for review filed by petitioner is hereby dismissed with
costs against petitioners.
It appears from the stipulation submitted by the parties:
1. That the petitioners borrowed from their father the
sum of P59,1400.00 which amount together with their
personal monies was used by them for the purpose of
buying real properties,.

1945
1946
1947
1948
1949
Total including surcharge and compromise
REAL ESTATE DEALER'S FIXED TAX

2. That on February 2, 1943, they bought from Mrs.

Josefina Florentino a lot with an area of 3,713.40 sq.
m. including improvements thereon from the sum of
P100,000.00; this property has an assessed value of
P57,517.00 as of 1948;

1946

3. That on April 3, 1944 they purchased from Mrs.

Josefa Oppus 21 parcels of land with an aggregate
area of 3,718.40 sq. m. including improvements
thereon for P130,000.00; this property has an
assessed value of P82,255.00 as of 1948;

1948

4. That on April 28, 1944 they purchased from the

Insular Investments Inc., a lot of 4,353 sq. m. including
improvements thereon for P108,825.00. This property
has an assessed value of P4,983.00 as of 1948;
5. That on April 28, 1944 they bought form Mrs.
Valentina Afable a lot of 8,371 sq. m. including
improvements thereon for P237,234.34. This property
has an assessed value of P59,140.00 as of 1948;
6. That in a document dated August 16, 1945, they
appointed their brother Simeon Evangelista to
'manage their properties with full power to lease; to
collect and receive rents; to issue receipts therefor; in
default of such payment, to bring suits against the
defaulting tenants; to sign all letters, contracts, etc., for
and in their behalf, and to endorse and deposit all
notes and checks for them;
7. That after having bought the above-mentioned real
properties the petitioners had the same rented or
leases to various tenants;

1947

1949
Total including penalty

RESIDENCE TAXES OF CORPORATION

1945
1946
1947
1948

1949
Total including surcharge
TOTAL TAXES DUE
Said 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, with costs against the respondent.
After appropriate proceedings, the Court of Tax Appeals the
above-mentioned decision for the respondent, and a petition for
reconsideration and new trial having been subsequently denied,
the case is now before Us for review at the instance of the
petitioners.
The issue in this case 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, as well as to the residence tax for corporations and the
real estate dealers fixed tax. With respect to the tax on
corporations, the issue hinges on the meaning of the terms
"corporation" and "partnership," as used in section 24 and 84 of
said Code, the pertinent parts of which read:
SEC. 24. Rate of tax on corporations.There shall be
levied, assessed, collected, and paid annually upon
the total net income received in the preceding taxable
year from all sources by every corporation organized
in, or existing under the laws of the Philippines, no
matter how created or organized but not including duly
registered general co-partnerships (compaias
colectivas), a tax upon such income equal to the sum
of the following: . . .
SEC. 84 (b). The term 'corporation' includes
partnerships, no matter how created or organized,
joint-stock companies, joint accounts (cuentas en
participacion), associations or insurance companies,
but does not include duly registered general
copartnerships. (compaias colectivas).
Article 1767 of the Civil Code of the Philippines provides:
By the contract of partnership two or more persons
bind themselves to contribute money, properly, or
industry to a common fund, with the intention of
dividing the profits among themselves.
Pursuant to the article, 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, because:
1. Said common fund was not something they found
already in existence. It was not property inherited by
them pro indiviso. They created it purposely. What is
more they jointly borrowed a substantial portion thereof
in order to establish said common fund.
2. They invested the same, not merely not merely in
one transaction, but in a series of transactions. On
February 2, 1943, they bought a lot for P100,000.00.

On April 3, 1944, they purchased 21 lots for

P18,000.00. This was soon followed on April 23, 1944,
by the acquisition of another real estate for
P108,825.00. Five (5) days later (April 28, 1944), they
got a fourth lot for P237,234.14. The number of lots
(24) acquired and transactions undertaken, as well as
the brief interregnum between each, particularly the
last three purchases, is strongly indicative of a pattern
or common design that was not limited to the
conservation and preservation of the aforementioned
common fund or even of the property acquired by the
petitioners in February, 1943. In other words, one
cannot but perceive a character of habitually peculiar
to business transactions engaged in the purpose of
gain.
3. The aforesaid lots were not devoted to residential
purposes, or to other personal uses, of petitioners
herein. The properties were leased separately to
several persons, who, from 1945 to 1948 inclusive,
paid the total sum of P70,068.30 by way of rentals.
Seemingly, the lots are still being so let, for petitioners
do not even suggest that there has been any change
in the utilization thereof.
4. Since August, 1945, the properties have been under
the management of one person, namely Simeon
Evangelista, with full power to lease, to collect rents, to
issue receipts, to bring suits, to sign letters and
contracts, and to indorse and deposit notes and
checks. Thus, the affairs relative to said properties
have been handled as if the same belonged to a
corporation or business and enterprise operated for
profit.
5. The foregoing conditions have existed for more than
ten (10) years, or, to be exact, over fifteen (15) years,
since the first property was acquired, and over twelve
(12) years, since Simeon Evangelista became the
manager.
6. Petitioners have not testified or introduced any
evidence, either on their purpose in creating the set up
already adverted to, or on the causes for its continued
existence. They did not even try to offer an explanation
therefor.
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. Only one or
two of the aforementioned circumstances were present in the
cases cited by petitioners herein, and, hence, those cases are
not in point.
Petitioners insist, however, that they are mere co-owners, not
copartners, 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
characteristics of partnerships are lacking in the case at bar.
This pretense was correctly rejected by the Court of Tax
Appeals.
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 other,
joint accounts, (cuentas en participation)" 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" It
may not be amiss to add that petitioners' allegation to the effect
that their liability in connection with the leasing of the lots above
referred to, under the management of one person even if
true, on which we express no opinion tends to increase the
similarity between the nature of their venture and that
corporations, and is, therefore, an additional argument in
favor of the imposition of said tax on corporations.
Under the Internal Revenue Laws of the United States,
"corporations" are taxed differently from "partnerships". By
specific provisions of said laws, such "corporations" include
"associations, joint-stock companies and insurance companies."
However, the term "association" is not used in the
aforementioned laws.
. . . in any narrow or technical sense. It includes any
organization, created for the transaction of designed
affairs, or the attainment of some object, which like a
corporation, continues notwithstanding that its
members or participants change, and the affairs of
which, like corporate affairs, are conducted by a single
individual, a committee, a board, or some other group,
acting in a representative capacity. It is immaterial
whether such organization is created by an agreement,
a declaration of trust, a statute, or otherwise. It
includes a voluntary association, a joint-stock
corporation or company, a 'business' trusts a
'Massachusetts' trust, a 'common law' trust, and
'investment' trust (whether of the fixed or the
management type), an interinsuarance exchange
operating through an attorney in fact, a partnership
association, and any other type of organization (by
whatever name known) which is not, within the
meaning of the Code, a trust or an estate, or a
partnership. (7A Mertens Law of Federal Income
Taxation, p. 788; emphasis supplied.).
Similarly, the American Law.
. . . provides its own concept of a partnership, under
the term 'partnership 'it includes not only a partnership
as known at common law but, as well, a syndicate,
group, pool, joint venture or other unincorporated
organizations which carries on any business financial
operation, or venture, and which is not, within the
meaning of the Code, a trust, estate, or a corporation. .
. (7A Merten's Law of Federal Income taxation, p. 789;
emphasis supplied.)
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, .
. .. ( 8 Merten's Law of Federal Income Taxation, p.
562 Note 63; emphasis supplied.) .
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.
As regards the residence of tax for corporations, section 2 of
Commonwealth Act No. 465 provides in part:

Entities liable to residence tax.-Every corporation, no

matter how created or organized, whether domestic or
resident foreign, engaged in or doing business in the
Philippines shall pay an annual residence tax of five
pesos and an annual additional tax which in no case,
shall exceed one thousand pesos, in accordance with
the following schedule: . . .
The term 'corporation' as used in this Act includes
joint-stock company, partnership, joint account
(cuentas en participacion), association or insurance
company, no matter how created or organized.
(emphasis supplied.)
Considering that the pertinent part of this provision is analogous
to that of section 24 and 84 (b) of our National Internal Revenue
Code (commonwealth Act No. 466), and that the latter was
approved on June 15, 1939, the day immediately after the
approval of said Commonwealth Act No. 465 (June 14, 1939), it
is apparent that the terms "corporation" and "partnership" are
used in both statutes with substantially the same meaning.
Consequently, petitioners are subject, also, to the residence tax
for corporations.
Lastly, the records show that petitioners have habitually
engaged in leasing the properties above mentioned for a period
of over twelve years, and that the yearly gross rentals of said
properties from June 1945 to 1948 ranged from P9,599 to
P17,453. Thus, they are subject to the tax provided in section
193 (q) of our National Internal Revenue Code, for "real estate
dealers," inasmuch as, pursuant to section 194 (s) thereof:
'Real estate dealer' includes any person engaged in
the business of buying, selling, exchanging, leasing, or
renting property or his own account as principal and
holding himself out as a full or part time dealer in real
estate or as an owner of rental property or properties
rented or offered to rent for an aggregate amount of
three thousand pesos or more a year. . . (emphasis
supplied.)
Wherefore, the appealed decision of the Court of Tax appeals is
hereby affirmed with costs against the petitioners herein. It is so
ordered.
G.R. No. L-6450

August 11, 1954

GONZALO MAKABENTA, petitioner,

vs.
JUAN L. BOCAR, Judge of First Instance of Leyte, and
FILOMENO R. NEGADO, respondents.
Alberto T. Aguja for petitioner.
Mateo Canonoy for respondents.
REYES, J.B.L., J.:
On September 30, 1950, Filomeno R. Negado filed a complaint
in the Justice of the Peace Court of Carigara, Leyte, against
Gonzalo Makabenta for the recovery of a sum of money. Within
the prescribed period, the defendant Gonzalo Makabenta filed
his answer with counterclaim. After issues had been joined, the
case was set for trial on September 18, 1951. At the trial,
defendant failed to appear; plaintiff moved that the former be
declared in default, and accordingly, the Justice of the Peace
Court declared him in default and ordered the plaintiff to present
his evidence. Judgment was rendered for the plaintiff on
November 24, 1951, copy of which defendant Makabenta
received on December 8, 1951, and it was only then that he
learned for the first time that he was declared in default and that
judgment by default had been taken against him. Whereupon,
defendant Gonzalo Makabenta appealed to the Court of First
Instance of Leyte (Civil Case No. 1453), where both parties filed
their respective pleadings. When the case was ready for trial,
the plaintiff appellee Filomeno R. Negado filed on July 20, 1952

a motion for the dismissal of the appeal on the ground that the
appellant had been declared in default in the Justice of the
Peace Court and had, therefore, no standing in court. The Court
of First Instance considered the motion well-taken and
dismissed the appeal, holding that Makabenta had no right to
appeal unless the order declaring him in default is first set
aside. A motion for the reconsideration of the order of dismissal
was denied, and defendant-appellant Gonzalo Makabenta came
to this court with a petition for certiorari , asking that after due
hearing, the order of the respondent Judge dismissing his
appeal be annulled, and the case set for trial on the merits.
The petition must be granted. The order of default taken against
the petitioner Gonzalo Makabenta in the Justice of the Peace
Court of Carigara, Leyte is clearly illegal and without effect; for
although petitioner failed to appear during the trial of the case
therein, he filed his answer to the complaint, and as we have
consistently held, the sole ground for default in the inferior
courts is failure to appeal (Veluz vs. Justice of the Peace of
Sariaya, 42 Phil., 557; Quizanvs. Arellano, 90 Phil., 644,
Carballo vs. Hon. Demetrio B. Encarnacion, et al., 92 Phil.,
974). By filing his answer in the Justice of the Peace Court,
petitioner put in his appearance and submitted to its jurisdiction;
hence, he was not, and should not have been declared, in
default. While it was discretionary for the court to proceed with
the trial of the case in the absence of petitioner or his counsel,
and render judgment on the basis of the evidence presented by
the plaintiff, such judgment was not by default, and petitioner
could, under the law, appeal, as he in fact did appeal, to the
Court of First Instance (Carballo vs. Hon. Demetrio B.
Encarnacion, supra). Consequently, in dismissing petitioner's
appeal on the ground that he had no standing in court unless
the order of default is first set aside, the respondent Court
committed a grave abuse of discretion amounting to lack of
jurisdiction.
This petition for certiorari to annul the order of dismissal of the
appeal is in the nature of a petition for mandamus to order the
Court of First Instance to proceed with the hearing of the case,
and it is not barred by the fact that the order complained of was
appealable (Quizan vs. Arellano, Supra).
Wherefore, the petition for certiorari is granted, the order of the
court a quo dismissing petitioner's appeal is annulled, and the
respondent judge is hereby directed to reinstate said appeal
and proceed with the trial of the case on the merits. Costs to be
taxed against the respondent Filomeno R. Negado.

G.R. No. L-12541

August 28, 1959

ROSARIO U. YULO, assisted by her husband JOSE C.

YULO, plaintiffs-appellants,
vs.
YANG CHIAO SENG, defendant-appellee.
Punzalan, Yabut, Eusebio & Tiburcio for appellants.
Augusto Francisco and Julian T. Ocampo for appellee.
LABRADOR, J.:
Appeal from the judgment of the Court of First Instance of
Manila, Hon. Bienvenido A. Tan, presiding, dismissing plaintiff's
complaint as well as defendant's counterclaim. The appeal is
prosecuted by plaintiff.
The record discloses that on June 17, 1945, defendant Yang
Chiao Seng wrote a letter to the palintiff Mrs. Rosario U. Yulo,
proposing the formation of a partnership between them to run
and operate a theatre on the premises occupied by former Cine
Oro at Plaza Sta. Cruz, Manila. The principal conditions of the
offer are (1) that Yang Chiao Seng guarantees Mrs. Yulo a
monthly participation of P3,000 payable quarterly in advance
within the first 15 days of each quarter, (2) that the partnership
shall be for a period of two years and six months, starting from

July 1, 1945 to December 31, 1947, with the condition that if the
land is expropriated or rendered impracticable for the business,
or if the owner constructs a permanent building thereon, or Mrs.
Yulo's right of lease is terminated by the owner, then the
partnership shall be terminated even if the period for which the
partnership was agreed to be established has not yet expired;
(3) that Mrs. Yulo is authorized personally to conduct such
business in the lobby of the building as is ordinarily carried on in
lobbies of theatres in operation, provided the said business may
not obstruct the free ingress and agrees of patrons of the
theatre; (4) that after December 31, 1947, all improvements
placed by the partnership shall belong to Mrs. Yulo, but if the
partnership agreement is terminated before the lapse of one
and a half years period under any of the causes mentioned in
paragraph (2), then Yang Chiao Seng shall have the right to
remove and take away all improvements that the partnership
may place in the premises.
Pursuant to the above offer, which plaintiff evidently accepted,
the parties executed a partnership agreement establishing the
"Yang & Company, Limited," which was to exist from July 1,
1945 to December 31, 1947. It states that it will conduct and
carry on the business of operating a theatre for the exhibition of
motion and talking pictures. The capital is fixed at P100,000,
P80,000 of which is to be furnished by Yang Chiao Seng and
P20,000, by Mrs. Yulo. All gains and profits are to be distributed
among the partners in the same proportion as their capital
contribution and the liability of Mrs. Yulo, in case of loss, shall
be limited to her capital contribution (Exh. "B").
In June , 1946, they executed a supplementary agreement,
extending the partnership for a period of three years beginning
January 1, 1948 to December 31, 1950. The benefits are to be
divided between them at the rate of 50-50 and after December
31, 1950, the showhouse building shall belong exclusively to
the second party, Mrs. Yulo.
The land on which the theatre was constructed was leased by
plaintiff Mrs. Yulo from Emilia Carrion Santa Marina and Maria
Carrion Santa Marina. In the contract of lease it was stipulated
that the lease shall continue for an indefinite period of time, but
that after one year the lease may be cancelled by either party
by written notice to the other party at least 90 days before the
date of cancellation. The last contract was executed between
the owners and Mrs. Yulo on April 5, 1948. But on April 12,
1949, the attorney for the owners notified Mrs. Yulo of the
owner's desire to cancel the contract of lease on July 31, 1949.
In view of the above notice, Mrs. Yulo and her husband brought
a civil action to the Court of First Instance of Manila on July 3,
1949 to declare the lease of the premises. On February 9,
1950, the Municipal Court of Manila rendered judgment ordering
the ejectment of Mrs. Yulo and Mr. Yang. The judgment was
appealed. In the Court of First Instance, the two cases were
afterwards heard jointly, and judgment was rendered dismissing
the complaint of Mrs. Yulo and her husband, and declaring the
contract of lease of the premises terminated as of July 31,
1949, and fixing the reasonable monthly rentals of said
premises at P100. Both parties appealed from said decision and
the Court of Appeals, on April 30, 1955, affirmed the judgment.
On October 27, 1950, Mrs. Yulo demanded from Yang Chiao
Seng her share in the profits of the business. Yang answered
the letter saying that upon the advice of his counsel he had to
suspend the payment (of the rentals) because of the pendency
of the ejectment suit by the owners of the land against Mrs.
Yulo. In this letter Yang alleges that inasmuch as he is a
sublessee and inasmuch as Mrs. Yulo has not paid to the
lessors the rentals from August, 1949, he was retaining the
rentals to make good to the landowners the rentals due from
Mrs. Yulo in arrears (Exh. "E").
In view of the refusal of Yang to pay her the amount agreed
upon, Mrs. Yulo instituted this action on May 26, 1954, alleging
the existence of a partnership between them and that the
defendant Yang Chiao Seng has refused to pay her share from
December, 1949 to December, 1950; that after December 31,
1950 the partnership between Mrs. Yulo and Yang terminated,

as a result of which, plaintiff became the absolute owner of the

building occupied by the Cine Astor; that the reasonable rental
that the defendant should pay therefor from January, 1951 is
P5,000; that the defendant has acted maliciously and refuses to
pay the participation of the plaintiff in the profits of the business
amounting to P35,000 from November, 1949 to October, 1950,
and that as a result of such bad faith and malice on the part of
the defendant, Mrs. Yulo has suffered damages in the amount
of P160,000 and exemplary damages to the extent of P5,000.
The prayer includes a demand for the payment of the above
sums plus the sum of P10,000 for the attorney's fees.
In answer to the complaint, defendant alleges that the real
agreement between the plaintiff and the 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 said property. As to the other claims, he
denies the same and alleges that the fair rental value of the
land is only P1,100. By way of counterclaim he alleges that by
reason of an attachment issued against the properties of the
defendant the latter has suffered damages amounting to
P100,000.
The first hearing was had on April 19, 1955, at which time only
the plaintiff appeared. The court heard evidence of the plaintiff
in the absence of the defendant and thereafter rendered
judgment ordering the defendant to pay to the plaintiff P41,000
for her participation in the business up to December, 1950;
P5,000 as monthly rental for the use and occupation of the
building from January 1, 1951 until defendant vacates the
same, and P3,000 for the use and occupation of the lobby from
July 1, 1945 until defendant vacates the property. This decision,
however, was set aside on a motion for reconsideration. In said
motion it is claimed that defendant failed to appear at the
hearing because of his honest belief that a joint petition for
postponement filed by both parties, in view of a possible
amicable settlement, would be granted; that in view of the
decision of the Court of Appeals in two previous cases between
the owners of the land and the plaintiff Rosario Yulo, the plaintiff
has no right to claim the alleged participation in the profit of the
business, etc. The court, finding the above motion, wellfounded, set aside its decision and a new trial was held. After
trial the court rendered the decision making the following
findings: that it is not true that a partnership was created
between the plaintiff and the defendant because defendant has
not actually contributed the sum mentioned in the Articles of
Partnership, or any other amount; that the real agreement
between the plaintiff and the defendant is not of the partnership
but one of the lease for the reason that under the agreement
the plaintiff did not share either in the profits or in the losses of
the business as required by Article 1769 of the Civil Code; and
that the fact that plaintiff was granted a "guaranteed
participation" in the profits also belies the supposed existence
of a partnership between them. It. therefore, denied plaintiff's
claim for damages or supposed participation in the profits.
As to her claim for damages for the refusal of the defendant to
allow the use of the supposed lobby of the theatre, the court
after ocular inspection found that the said lobby was very
narrow space leading to the balcony of the theatre which could
not be used for business purposes under existing ordinances of
the City of Manila because it would constitute a hazard and
danger to the patrons of the theatre. The court, therefore,
dismissed the complaint; so did it dismiss the defendant's
counterclaim, on the ground that the defendant failed to present
sufficient evidence to sustain the same. It is against this
decision that the appeal has been prosecuted by plaintiff to this
Court.

The first assignment of error imputed to the trial court is its

order setting aside its former decision and allowing a new trial.
This assignment of error is without merit. As that parties agreed
to postpone the trial because of a probable amicable
settlement, the plaintiff could not take advantage of defendant's
absence at the time fixed for the hearing. The lower court,
therefore, did not err in setting aside its former judgment. The
final result of the hearing shown by the decision indicates that
the setting aside of the previous decision was in the interest of
justice.
In the second assignment of error plaintiff-appellant claims that
the lower court erred in not striking out the evidence offered by
the defendant-appellee to prove that the relation between him
and the plaintiff is one of the sublease and not of partnership.
The action of the lower court in admitting evidence is justified by
the express allegation in the defendant's answer that the
agreement set forth in the complaint was one of lease and not
of partnership, and that the partnership formed was adopted in
view of a prohibition contained in plaintiff's lease against a
sublease of the property.
The most important issue raised in the appeal is that contained
in the fourth assignment of error, to the effect that the lower
court erred in holding that the written contracts, Exhs. "A", "B",
and "C, between plaintiff and defendant, are one of lease and
not of partnership. We have gone over the evidence and we
fully agree with the conclusion of the trial court that 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) intention on the part of the partners to divide
the profits among themselves. (Art. 1767, Civil Code.).
In the first place, plaintiff did not furnish the supposed P20,000
capital. In the second place, she did not furnish any help or
intervention in the management of the theatre. In the third
place, it does not appear that she has ever demanded from
defendant 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 can not be
interpreted in any manner than a payment for the use of the
premises which she had leased from the owners. Clearly,
plaintiff had always acted in accordance with the original letter
of defendant of June 17, 1945 (Exh. "A"), which shows that both
parties considered this offer as the real contract between them.
Plaintiff claims the sum of P41,000 as representing her share or
participation in the business from December, 1949. But the
original letter of the defendant, Exh. "A", expressly states that
the agreement between the plaintiff and the defendant was to
end upon the termination of the right of the plaintiff to the lease.
Plaintiff's right having terminated in July, 1949 as found by the
Court of Appeals, the partnership agreement or the agreement
for her to receive a participation of P3,000 automatically ceased
as of said date.
We find no error in the judgment of the court below and we
affirm it in toto, with costs against plaintiff-appellant.