PARTNERSHIP*(ARTICLES*176711783)*
duly!registered!general!coKpartnerships!
* created! or! organized,! jointKstock! companies,! joint! accounts! (cuentas( en(
1.*EVANGELISTA*V.*CA*(IE)*
! o
Petitioners:* EUFEMIA* EVANGELISTA,* MANUELA* EVANGELISTA,* and* FRANCISCA*
EVANGELISTA*
Respondents:*THE*COLLECTOR*OF*INTERNAL*REVENUE*and*THE*COURT*OF*TAX*APPEALS*
G.R.*No.*L19996*
FACTS:!
Petition! for!review! of! a! decision! of! the! Court! of! Tax! Appeals,! which! held! that! the!
petitioners!are!liable!for!the!income!tax,!real!estate!dealers!tax!and!the!residence!
tax! for! the! years! 1945! to! 1949,! inclusive,! in! accordance! with! the! respondents!
assessment!for!the!same!in!the!total!amount!of!P6,878.34!
Facts!stipulated!by!the!parties:!
o 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,.!
o That!they!bought!parcels!of!land!from!the!ff.!!
February!2,!1943KKKMrs.!Josefina!FlorentinoKKKfor!P100,000.00!
!April!3,!1944KKK!Mrs.!Josefa!OppusKKKfor!P130,000.00!
April!28,!1944KKKInsular!Investments!IncKKKfor!P108,825.00!
April!28,!1944KKKMrs.!Valentina!AfableKKKfor!P237,234.34!
o That! 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;!
o That! after! having! bought! the! aboveKmentioned! real! properties! the!
petitioners!had!the!same!rented!or!leases!to!various!tenants!
o That!they!realized!a!net!rental!income!for!the!years!1945,46,48!
1945KKP5,948.33,!1946KKP7,498.13,!1948KKP12,615.35!
September! 24,! 1954! respondent! Collector! of! Internal! Revenue! demanded! the!
payment! of! income! tax! on! corporations,! real! estate! dealers! fixed! tax! and!
corporation!residence!tax!for!the!years!1945K1949!
o INCOME!TAXESKKP6,157.09!
o REAL!ESTATE!DEALER'S!FIXED!TAXKKP527.00!
o RESIDENCE!TAXES!OF!CORPORATIONKKP193.75!
ISSUE:!WON!petitioners!are!subject!to!the!tax!on!corporations!(Corporate!Income!Tax)!(YES)!
RATIO:!
o 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!NIRC!
o SEC.!24.!Rate!of!tax!on!corporations.KThere!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!
o SEC.! 84! (b).! The! term! corporation! includes! partnerships,! no! matter! how!
participacion),!associations!or!insurance!companies,!but!does!not!include!duly!
registered!general!copartnerships!
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!
o 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.!
o 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!
o 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:!
o 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.!
o They! invested! the! same,! not! merely! not! merely! in! one! transaction,! but! in! a!
series!of!transactions!
o The!number!of!lots!(24)!acquired!and!transactions!undertaken,!as!well!as!the!
brief!interregnum!between!each!!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.!
o Aforesaid!lots!were!not!devoted!to!residential!purposes,!or!to!other!personal!
uses,! of! petitioners! herein.! The! properties! were! leased! separately! to! several!
persons!
o Properties! were! under! the! management! of! one! person,! namely! Simeon!
Evangelista,!the!affairs!relative!to!said!properties!have!been!handled!as!if!the!
same! belonged! to! a! corporation! or! business! and! enterprise! operated! for!
profit.!
*
 o !Wherefore,!the!Court!is!of!the!opinion!and!so!declares!that!the!petitioner!was!
2.*LAND*TRANSPORTATION*CO.,*INC.*V.*SSS*(PR)*
an!employer!engaged!in!business!as!common!carrier!which!had!!been! in!
G.R.!No.!LK!14606/!107!Phil!833!
operation!for!at!least!! two!years!prior!to!the!enactment!of!Republic!Act!No.!
April!28,!1960!
1161,!as!amended!by!Republic!Act!1792!and!by!virtue!!thereof,! it! was! subject!
!
to!compulsory!coverage!under!said!law.!.!.!.!
Barrera,*J.,*
!
!
ISSUE:!
FACTS:!
KW/N! Laguna! Transportation! Co.,! Inc.! is! an! employer! engaged! in! business! as! a! common!
On!January!24,!1958,!Laguna!Transportation!Co.,!Inc.!filed!with!the!Laguna!CFI!a!petition!
carrier!which!had!been!in!operation!for!at!least!2!years!prior!to!the!enactment!of!the!Social!
praying!that!an!order!be!issued!by!the!court!declaring!that!it!is!not!bound!to!register!as!
Security!Act!and,!therefore,!covered!by!it.!YES.!
a!member!of!Social!Security!System!(SSS)!and,!therefore,!not!obliged!to!pay!to!the!latter!
!
the!contributions!required!under!the!Social!Security!Act.!
HELD:!
SSS! filed! an! Answer! praying! for! its! dismissal! due! to! failure! of! petitioner! to! exhaust!
SEC.! 9! Compulsory( Coverage.! ! Coverage! in! the! System! shall! be! compulsory! upon! all!
administrative!remedies,!as!well!as!a!declaration!that!petitioner!is!covered!by!said!Act,!
employees!between!the!ages!of!sixteen!and!sixty!years,!inclusive,!if!they!have!been!for!
since!the!latter's!business!has!been!in!operation!for!at!least!2!years!prior!to!September!
at! least! six! months! in! the! service! of! an! employer! who! is! a! member! of! the! System.!
1,!1957.!
Provided,!That!the(Commission(may(not(compel(any(employer(to(become(a(member(of(
SSS! filed! a! motion! for! preliminary! hearing! on! its! defense! that! Laguna! had! failed! to!
the( System( unless( he( shall( have( been( in( operation( for( at( least( two( years( .! .! .! .! (Italics!
exhaust! administrative! remedies.! After! being! set,! it! was! postponed! by! agreement! of!
supplied.).!
both!parties.!During!trial,!the!parties!agreed!to!present!a!stipulation!of!facts,!in!lieu!of!
It!is!not!disputed!that!the!Laguna!Transportation!Company,!an!unregistered!partnership!
any!other!evidence.!
composed!of!G.!Mercado,!A.!Mercado,!Mata,!and!Vera!Cruz,!commenced!the!operation!
Pertinent!stipulations:!
of!its!business!as!a!common!carrier!on!April!1,!1949.!
o That!petitioner!(Laguna)!is!a!domestic!corporation!duly!organized!and!existing!
The! four! (4)! original! partners,! with! two! (2)! others! converted! the! partnership! into! a!
under!the!laws!of!the!Philippines,!with!principal!place!of!! business! at!
corporate! entity! by! registering! its! articles! of! incorporation! with! the! Securities! and!
Bian,!Laguna;!
Exchange!Commission!on!June!20,!1956.!
o !That! respondent! (SSS)! has! served! notice! upon! the! petitioner! requiring! it! to!
The! firm! name! "Laguna! Transportation! Company"! was! not! altered,! except! with! the!
register!as!member!of!the!System!and!to!remit!the!premiums!due!! from!
addition! of! the! word! "Inc."! to! indicate! that! petitioner! was! duly! incorporated! under!
all!the!employees!of!the!! petitioner!and!the!contribution!of!the!latter!
existing!laws.!
to!the!System!beginning!the!month!of!September,!1957;!
The! corporation! continued! the! same! transportation! business! of! the! unregistered!
o That! sometime! in! 1949,! the! Bian! Transportation! Co.,! a! corporation! duly!
partnership,!using!the!same!lines!and!equipment.!!
registered!with!the!Securities!and!Exchange!Commission,!sold!part!of!! the!
There!was,!in!effect,!only!a!change!in!the!form!of!the!organization!of!the!entity!engaged!
lines!and!equipment!it!operates!! to! Gonzalo! Mercado,! Artemio! Mercado,!
in!the!business!of!transportation!of!passengers.!
Florentino!Mata!and!Dominador!Vera!Cruz;!
Hence,!said!entity!as!an!employer!engaged!in!business,!was!already!in!operation!for!at!
o That! after* the* sale,! the! said! vendees! formed! an! unregistered! partnership!
least!3!years!prior!to!the!enactment!of!the!Social!Security!Act!on!June!18,!1954!and!for!
under!the!name!of!Laguna!Transportation!Company!which!continued** to*
at!least!two!years!prior!to!the!passage!of!the!amendatory!act!on!June!21,!1957.!
operate! the! lines! and! equipment! bought! from! the! Bian! Transportation!
Petitioner's!contention!that!since!it!was!registered!as!a!corporation!only!on!1/20/1956,!
Company,! in! addition! to! new! lines! which! it! was! able! to! secure! from! the!
it! should! be! considered! to! have! been! in! operation! only! on! the! same! date,! is!
! Public!Service!Commission;!
unmeritorious.!
o That! the!original! partners! forming! the! Laguna! Transportation! Company,! with!
While* it* is* true* that* a* corporation* once* formed* is* conferred* a* juridical* personality*
the!addition!of!two!new!members,!organized!a!corporation!known!! as!
separate*and*district*from*the*persons*composing*it,*it*is*but*a*legal*fiction*introduced*
the! Laguna! Transportation! Company,! Inc.,! which! was! registered! with! the!
for*purposes*of*convenience*and*to*subserve*the*ends*of*justice.*The*concept*cannot*
Securities! and! Exchange! Commission! on! June! 20,! 1956,! and! which!
be*extended*to*a*point*beyond*its*reasons*and*policy,*and*when*invoked*in*support*of*
! corporation!is!the!plaintiff!now!in!this!case;!
an*end*subversive*of*this*policy,*will*be*disregarded*by*the*courts.!
Dispositive!portion!of!the!Decision!of!the!lower!court:!!
 As* a* general* rule,* a* corporation* will* be* looked* upon* as* a* legal* entity* but* when* the*
motion* of* legal* entity* is* used* to* defeat* public* convenience,* justify* wrong,* protect*
fraud,* or* defend* crime,* the* law* will* regard* the* corporation* as* an* association* of*
persons.!
Moreover,! petitioner! admitted! that! as! an! employer! engaged! in! the! business! of! a!
common! carrier,! its! operation! commenced! on! April! 1,! 1949! while! it! was! a! partnership!
and!continued!by!the!corporation!upon!its!formation!on!June!20,!1956.!
Unlike! the! conveyance! made! by! Binan! Transportation! Company! to! G.! Mercado,! A.!
Mercado,! Mata! and! Vera! Cruz,! no! such! stipulation! was! made! that! the! lines! and!
equipment! of! the! unregistered! partnership! had! been! sold! and! transferred! to! Laguna!
corporation.!(See!3rd!bullet!point!in!Stipulation!of!Facts)!
Indicates! that! there! was! no! transfer! of! interest! but! a! mere! change! in! the! form! of! the!
organization!of!the!employer!engaged!in!the!transportation!! business,! i.e.,! from! an!
! unregistered!partnership!to!that!of!a!corporation.!As!a!rule,!courts!will!look!to!the!
! substance!and!not!to!the!form.!
Weight! of! authority! supports! the! view! that! where! a! corporation! was! formed! by,! and!
consisted!of!members!of!a!partnership!whose!business!and!! property! was! conveyed!
and!!transferred! to! the! corporation! for! the! purpose! of! continuing! its! business,! in!
payment!for!which!corporate!capital!! stock! was! issued,! such! corporation! is*
presumed*to*have*assumed*partnership*debts,*and*is!prima!facie!liable*therefor.!!
o The!reason!for!the!rule!is!that!the!members!of!the!partnership!may!be!said!to!
have!simply!put!on!a!new!coat,!or!taken!on!a!corporate!! cloak,! and! the!
! corporation!is!a!mere!continuation!of!the!partnership.!
Wherefore,! finding! no! error! in! the! judgment! of! the! court! a( quo,! the! same! is! hereby!
affirmed,!with!costs!against!petitionerKappellant.!So!ordered.!
! allegations!conform!to!the!evidence.!
3.*TUASON*v.*BOLANOS*(RS)*
! of! ownership,! adverse! to! the! entire! world! by! defendant! and! his! predecessorsKinK
G.R.!No.!LK4935!
May!28,!1954!
! defendant!and/or!predecessorsKinKinterest."!
PlaintiffKappellee:! J.M.! Tuason! &! Co.,! Inc.,! represented! by! its! Managing! Partner,! Gregoria!
Araneta,!Inc.!
DefendantKappellant:!Quirino!Bolanos!
! 5.
Reyes,!J.:!
! ISSUE/HELD/RATIO*(Important*1*Error*I):*
SYLLABI*(relevant):*
1. PARTIES;!REAL!PARTY!IN!INTEREST;!ATTORNEY!MAY!BRING!ACTION!IN!PLAINTIFF'S!
NAME.Section!2,!Rule!2.!of!the!Rules!of!Court!requires!that!an!action!be!brought!
in! the! name! of,! but! not! necessarily! by,! the! real! property! interest.! In! fact! the!
practice!is!for!an!attorneyKatKlaw!to!bring!the!action,!that!is,!to!file!the!complaint,!in!
the!name!of!the!plaintiff.!
2. ID.;! CORPORATION! AS! PARTY! MAY! BE! REPRESENTED! BY! ANOTHER! PERSON,!
NATURAL! OR! JUDICIAL.There! is! nothing! against! one! corporation! being!
represented!by!another!person,!natural!or!juridical,!in!a!suit!in!court,!for!the!true!
rule! is! that! "although! a! corporation! has! no! power! to! enter! into! a! partnership,! it!
may!nevertheless!enter!into!a!joint!venture!with!another!where!the!nature!of!that!
venture!is!in!line!with!the!business!authorized!by!its!charter."!(WyomingKIndiana!Oil!
Gas!Co.!vs.!Weston,!80!A.!L.!R.,!1043,!citing!2,!Fletcher!Cyc.!E.!1082.)!
!
FACTS*
1. This! is! an! action! originally! brought! in! the! Court! of! First! Instance! of! Rizal,! Quezon!
City! Branch,! to! recover! possession! of! registered! land! situated! in! barrio! Tatalon,!
Quezon!City!!
2. Complaint!was!amended!three!times:!
a. Original!complaint:!The!land!is!a!portion!of!a!lot!registered*in*plaintiff's*
name*under*Transfer*Certificate*of*Title*No.*37686!of!the!land!record!of!
Rizal!Province!and!contains!an!area!of!13!hectares!more!or!less.!
st
b. 1 ! amendment:! reduced! the! area! to! 6! hectares,! more! or! less,! after!
defendant! had! indicated! to! the! plaintiff's! surveyors! the! portion! of! land!
claimed!and!occupied!by!him!
nd
c. 2 ! amendment:! This! amendment! became! necessary! and! was! allowed!
following!the!testimony!of!plaintiff's!surveyors!that!a!portion*of*the*area*
was* embraced* in* another* certificate* of* title,* which* was* plaintiff's*
Transfer*Certificate*of*Title*No.*37677.!
rd
d. 3 ! amendment:! in! the! course! of! trial,! after! defendant's! surveyor! and!
witness,! Quirino! Feria,! had! testified! that! the! area! occupied! and! claimed!
by!defendant!was!about!13!hectares,!as!shown!in!his!Exhibit!1,*plaintiff*
again,! with! the! leave! of! court,! amended! its! complaint! to! make! its!
3. Defendant* argues! prescription;! that! he! acquired! title! through! "open,! continuous,!
exclusive!and!public!and!notorious!possession!(of!the!land!in!dispute)!under!claim!
interest"! from! "time! immemorial";! and! that! plaintiffs! acquisition! was! thru! "fraud!
or!error!and!without!knowledge!(of)!or!notice!either!personal!or!thru!publication!to!
4. Lower!court!rendered!judgment!for!plaintiff,!declaring!defendant!to!be!without!any!
right! to! the! land! in! question! and! ordering! him! to! restore! possession! thereof! to!
plaintiff!and!to!pay!the!latter!a!monthly!rent!of!P132.62!from!January,!1940,!until!
he!vacates!the!land,!and!also!to!pay!the!costs.!
Defendant!appealed!directly!to!the!SC!because!of!the!value!of!the!land!involved.!
*
I. The*trial*court*erred*in*not*dismissing*the*case*on*the*ground*that*the*case*
was*not*brought*by*the*real*party*in*interest.*
a. What!the!Rules!of!Court!require!is!that!an!action!be!brought!in!the!name!
of,!but!not!necessarily!by,!the!real!party!in!interest.!(Section!2,!Rule!2.)!
 b. The!practice!is!for!an!attorneyKatKlaw!to!bring!the!action,!that!is!to!file!the!
complaint,! in! the! name! of! the! plaintiff.! That! practice! appears! to! have!
been!followed!in!this!case,!since!the!complaint!is!signed!by!the!law!firm!
of!Araneta!and!Araneta,!"counsel!for!plaintiff"!and!commences!with!the!
statement!"comes!now!plaintiff,!through!its!undersigned!counsel.!
c. The! complaint! also! states! that! the! plaintiff! is! "represented! herein! by! its!
Managing! Partner! Gregorio! Araneta,! Inc.",! another! corporation,! but*
there*is*nothing*against*one*corporation*being*represented*by*another*
person,*natural*or*juridical,*in*a*suit*in*court.!
i. The! contention! that! Gregorio! Araneta,! Inc.! can! not! act! as!
managing!partner!for!plaintiff!on!the!theory!that!it!is!illegal!for!
two! corporations! to! enter! into! a! partnership! is! without! merit,!
for!the!true!rule!is!that!"though*a*corporation*has*no*power*to*
enter*into*a*partnership,*it*may*nevertheless*enter*into*a*joint*
venture* with* another* where* the* nature* of* that* venture* is* in*
line* with* the* business* authorized* by* its* charter."* (WyomingK
Indiana!Oil!Gas!Co.!vs.!Weston)!
ii. There! is! nothing! in! the! record! to! indicate! that! the! venture! in!
which! plaintiff! is! represented! by! Gregorio! Araneta,! Inc.! as! "its!
managing!partner"!is!not!in!line!with!the!corporate!business!of!
either!of!them.!
II. The*trial*court*erred*in*admitting*the*third*amended*complaint.*
III. The*trial*court*erred*in*denying*defendant's*motion*to*strike.*
IV. The* trial* court* erred* in* including* in* its* decision* land* not* involved* in* the*
litigation.*
a. RATIO!FOR!ISSUES/ERRORS!II,!III!&!IV:!
i. section!4!of!Rule!17,!Rules!of!Court!
1. Sec.!4.!Amendment(to(conform(to(evidence.!!When!
issues!not!raised!by!the!pleadings!are!tried!by!express!
or! implied! consent! of! the! parties,! they! shall! be!
treated! in! all! respects,! as! if! they! had! been! raised! in!
the! pleadings.! Such! amendment! of! the! pleadings! as!
may! be! necessary! to! cause! them! to! conform! to! the!
evidence!and!to!raise!these!issues!may!be!made!upon!
motion! of! any! party! at! my! time,! even! of! the! trial! of!
these!issues.!If!evidence!is!objected!to!at!the!trial!on!
the!ground!that!it!is!not!within!the!issues!made!by!the!
pleadings,! the! court! may! allow! the! pleadings! to! be!
amended! and! shall! be! so! freely! when! the!
presentation! of! the! merits! of! the! action! will! be!
subserved! thereby! and! the! objecting! party! fails! to!
satisfy!the!court!that!the!admission!of!such!evidence!
would! prejudice! him! in! maintaining! his! action! or!
defense! upon! the! merits.! The! court! may! grant! a!
continuance! to! enable! the! objecting! party! to! meet!
such!evidence.!
2. Under! this! provision! amendment! is! not! even!
necessary! for! the! purpose! of! rendering! judgment! on!
issues!proved!though!not!alleged.!
3. Chief!Justice!Morans!comment!on!the!above!Rule:!
a. Where!the!facts!shown!entitled!plaintiff!to!
relief! other! than! that! asked! for,! no!
amendment! to! the! complaint! is! necessary,!
especially! where! defendant! has! himself!
raised!the!point!on!which!recovery!is!based,!
and! that! the! appellate! court! treat! the!
pleadings! as! amended! to! conform! to! the!
evidence,! although! the! pleadings! were! not!
actually!amended.!
b. Our! conclusion! therefore! is! that! specification! of! error! II,! III,! and! IV! are!
without!merit.!
V. The*trial*court*erred*in*holding*that*the*land*in*dispute*is*covered*by*transfer*
certificates*of*Title*Nos.*37686*and*37677.*
VI. The*trial*court*erred*in*not*finding*that*the*defendant*is*the*true*and*lawful*
owner*of*the*land.**
a. RATIO!FOR!ISSUES/ERRORS!V!&!VI:!
i. At!first,!defendant!admitted,!through!his!attorney,!that!the!land!
in!dispute!"!is!that!described!or!represented!in!Exhibit!A!and!in!
Exhibit! B! enclosed! in! red! pencil! with! the! name! Quirino!
Bolaos,"!
ii. But!the!defendant!later!on!changed!his!attorney!and!his!theory!
by!trying!to!prove!that!the!land!in!dispute!was!not!covered!by!
plaintiff's!certificate!of!title.!!
iii. However,! evidence! clearly! established! the! ownership! of! the!
plaintiff! over! the! lands,! and! that! both! have! been! originally!
registered!on!July!8,!1914!under!original!certificate!of!title!No.!
735.!
iv. The! identity! of! the! lots! was! established! by! the! testimony! of!
Antonio!Manahan!and!Magno!Faustino,!witnesses!for!plaintiff,!
and! the! identity! of! the! portion! thereof! claimed! by! defendant!
was! established! by! the! testimony! of! his! own! witness,! Quirino!
Feria.!
1. The! combined! testimonies! prove! that! the! portion!
claimed!by!defendant!is!made!up!of!the!lands!owned!
by!the!plaintiff,!and!covered!by!the!two!TCTs.!
v. As! the! land! in! dispute! is! covered! by! plaintiff's! Torrens!
certificate! of! title! and! was! registered! in! 1914,! the! decree! of!
registration!can!no!longer!be!impugned!on!the!ground!of!fraud,!
error!or!lack!of!notice!to!defendant,!as!more!than!one!year!has!
already! elapsed! from! the! issuance! and! entry! of! the! decree.!
Neither! can! the! decree! be! collaterally! attacked! by! any! person!
claiming!title!to,!or!interest!in,!the!land!prior!to!the!registration!
proceedings.!
vi. !
VII. The*trial*court*erred*in*finding*that*the*defendant*is*liable*to*pay*the*plaintiff*
the* amount* of* P132.62* monthly* from* January,* 1940,* until* he* vacates* the*
premises.*
 a. Records! show! that! the! reasonable! compensation! for! the! use! and!
occupation! of! the! premises,! as! stipulated! at! the! hearing,! was! P10! a!
month! for! each! hectare! and! that! the! area! occupied! by! defendant! was!
13.2619!hectares.!The!total!rent!to!be!paid!for!the!area!occupied!should!
therefore!be!P132.62!a!month.!
b. Testimony! of! J.! A.! Araneta! and! witness! Emigdio! Tanjuatco! show! that! as!
early! as! 1939! an! action! of! ejectment! had! already! been! filed! against!
defendant.!
i. Therefore,! it! cannot! be! supposed! that! defendant! has! been!
paying!rents,!because!he!argued!that!he!has!been!asserting!all!
the!rights!of!an!adverse!possessor.!
ii. Therefore,!the!error!is!without!merit.!
VIII. The* trial* court* erred* in* not* ordering* the* plaintiff* to* reconvey* the* land* in*
litigation*to*the*defendant.*
a. Error!No.!VIII!is!but!a!consequence!of!the!other!errors!alleged!and!needs!
for!further!consideration.!
! share.*
!
Wherefore,*the*judgment*appealed*from*is*affirmed,*with*costs*against*the*plaintiff.*
*
*
4.*WOODHOUSE*VS.*HALILI*(AJG)*
* o Plaintiff!failed!to!do!his!undertaking!in!the!partnership.*
GR*No.*L14811**|*July*31,*1953*
Petitioner:*Charles!F.!Woodhouse!
Respondent:*Fortunato!F.!Halili!
Partnership*Doctrine:!An!agreement(to(form(a(partnership!is!an!obligation!to!do,!hence!the!
court!may!not!compel!compliance.!
! form!the!partnership!K!NO!
Labrador,*J.:!
Factual*Antecedence*
November! 29,! 1947! ! Woodhouse! and! Halili! entered! into! a! written! agreement,!
with!the!following!important!provisions:*
o They! shall! organize* a* partnership! for! the! bottling! and! distribution! of!
Mission!softdrinks.*
o Woodhouse!will!act!as!an!industrial!partner!and!attend!to!the!operation!
and! development! of! the! bottling! plant;! AND! defendant! to! supply! the!
capital,!as!well!as!decide!matters!of!general!policy.*
o Woodhouse!will!secure!the!Mission!softdrinks!franchise!and!will!receive!
30%!of!the!profits.*
PRIOR! TO! entering! the! agreement,! Woodhouse! informed! the! mother! corporation!
in! Los! Angeles! that! he! found! an! interested! financier! (Halili)! who! was! willing! to!
finance! 500K! USD! and! requested! that! he! be! granted! the! right! to! bottle! and!
distribute!the!softdrink!for!a!limited!time!to!consummate!his!deal!with!Halili.*
The! contract! between! the! two! parties! was! signed.! They! went! to! the! US! and!
obtained! a! franchise! agreement! from! Mission! Dry! Corporation! on! December! 10,!
1947.!It!is!stated!in!the!agreement!that!the!DEFENDANT!has!the!exclusive!right!to!
produce,! bottle,! distribute,! and! sell! Mission! beverages! in! the! Philippines.! (Take!
note:!At!this!point,!the!partnership!has!not!been!formed!yet)*
When! the! plant! was! in! operation,! Woodhouse! demanded! Halili! that! the!
partnership! papers! be! executed.! A! first,! defendant! excused! himself! saying! that!
there! was! no! hurry.! Then! he! again! promised! to! do! it! after! the! sales! had! been!
increased!to!P50,000.!As!nothing!definite!was!forthcoming,!after!this!condition!was!
attained,! and! as! defendant! refused! to! give! further! allowances! to! plaintiff,!
Woodhouse! tried! to! settle! the! matters.! As! none! could! be! arrived! at,! the! present!
action!was!instituted.*
Plaintiffs*contention*
o The! partnership! be! executed! plus! accounting! of! profits! plus! his! 30%!
Respondents*defense*
o His!consent!to!the!agreement!was!secured!by!the!representation!of!the!
plaintiff! that! he! was! the! owner! or! was! about! to! become! owner! of! an!
exclusive!franchise,!which!was!FALSE,!because!the!franchise!was!granted!
to!him!(Halili).*
*
Issues:!
1. Whether! plaintiff! had! falsely! represented! that! he! had! an! exclusive! franchise! to!
bottle!Mission!beverages!!YES,!but!
2. Whether! this! false! representation! or! fraud,! if! it! existed,! annuls! the! agreement! to!
3. Whether*Halili*may*be*compelled*to*enter*into*a*partnership*with*Woodhouse*1*
NO!
!
Rationale*
FIRST!and!SECOND!ISSUE!
Fraud! is! manifested! in! illimitable! number! of! degrees! or! gradations! from! the!
innocent!praises!of!a!salesman!about!the!excellence!of!his!wares!to!those!malicious!
machinations!and!representations!that!the!law!punishes!as!a!crime.!!
In! consequence,! article! 1270! of! the! Spanish! Civil! Code! distinguishes! two! kinds! of!
(civil)!fraud:!
o !Causal* Fraud! (dolo( causante)K! may! be! a! ground! for! the! annulment! of! a!
contract,!
o !Incidental*Fraud!(dolo(incidente)(A(only!renders!the!party!who!employs!it!
liable!for!damages.!!
 In!order!that!fraud!may!vitiate!consent,!it!must!be!the!causal!(dolo!causante),!not!
merely!the!incidental!(dole!inK!cidente),!inducement!to!the!making!of!the!contract.!
In! the! case! at! bar,! inasmuch! as! the! principal! consideration,! the! main! cause! that!
induced!defendant!to!enter!into!the!partnership!agreement!with!plaintiff,!was!the!
ability! of! plaintiff! to! get! the! exclusive! franchise! to! bottle! and! distribute! for! the!
defendant! or! for! the! partnership,! the* false* representation* made* by* the* plaintiff*
was* not* the* casual* consideration,* or* the* principal* inducement,* that* led* the*
defendant*to*enter*into*the*partnership*agreement.!
o The!representation!was!used!by!plaintiff!to!get!from!defendant!a!share!of!
30%!of!the!net!profits.!By!pretending!that!he!had!the!exclusive!franchise!
and!promising!to!transfer!it!to!the!defendant,!he!obtained!the!consent!of!
the! latter! to! give! him! a! big! slice! in! the! net! profits.! This! is! the! DOLO!
INCIDENTE!defined!in!the!Spanish!Civil!Code.!
THIRD!ISSUE!
The! partnership! was! not! a! fait( accompli! from! the! time! of! the! operation! of! the!
plant.! It! is! evident! from! the! very! language! of! the! agreement! that! the! parties!
intended! that! the! execution! of! the! agreement! to! form! a! partnership! was! to! be!
carried!out!at!a!later!date.!
The! defendant! may! not! be! compelled! against! his! will! to! carry! out! the! agreement!
nor! execute! the! partnership.! The! defendant! has! an! obligation* to* do.* The! law!
recognizes!the!individuals!freedom!or!liberty!to!do!an!act!he!has!promised!to!do,!
or! not! to! do! it,! as! he! pleases.! It! is! a! very! personal! act! which! the! courts! may! not!
compel!compliance.!
*
! CA!!affirmed!judgement!of!the!CFI*
5.*EVANGELISTA*&*CO.*V.*ABAD*SANTOS*(RK)*
G.R.!No.!LK31684!!|!June!28,!1973!
EVANGELISTA! &! CO.,! DOMINGO! C.! EVANGELISTA,! JR.,! CONCHITA! B.! NAVARRO! and!
LEONARDA! ATIENZA! ABAD! SANTOS,!petitioners,!!
vs.!
ESTRELLA!ABAD!SANTOS,!respondent.!
Makalintal(J.:!
FACTS:*
On!October!9,!1954!a!coKpartnership!was!formed!under!the!name!Evangelista!&!Co.!*
The! articles! of! CoKpartnership,! on! June! 7,! 1955,! was! amended! to! include! herein!
respondent,! Estrella! Abad! Santos,! as! industrial! partner! with! herein! petitioners!
Domingo! C.! Evangelista,! Jr.,! Leonardo! Atienza! Abad! Santos! and! Conchita! P.!
Navarro,! the! original! capitalist! partners,! remaining! in! that! capacity,! with! a!
contribution!of!P17,500!each.*
The!amendment!provided!inter(alia!that!the!contribution!of!Estrella!Abad!Santos!
consists! of! her! industry! being! an! industrial! partner,! and! that! the! profits/losses!
shall!be!divided!and!distributed!among!the!partners!...in!proportion!of!70%!for!the!
capitalist!partners;!and!30%!for!Estrella!Abad!Santos.!*
Estrella!Abad!Santos!filed!a!suit!on!December!17,!1963!alleging:*
o That!the!partnership!had!been!paying!dividends!to!the!capitalist!partners!
except!to!her;*
o That! notwithstanding! her! demands,! the! partners! had! refused! and!
continued!to!refuse!and!let!her!examine!the!partnership!books!OR!to!give!
her!information!regarding!its!affairs!to!pay!her!any!share!in!the!dividends!
declared!in!the!Articles.*
The!partnership!and!the!other!partners!in!their!answer:*
o Denied! ever! having! declared! dividends! OR! distributed! profits! of! the!
partnership;*
o Denied!that!Estrella!Abad!Santos!ever!demanded!to!examine!the!books;*
and*
o Alleged!that!the!amended!articles!of!CoKpartnership!did!!not!express!the!
true!agreement!of!the!parties*
That!Estrella!Abad!Santos!was!not!an!industrial!partner;*
That!she!did!not!in!fact!contribute!to!the!partnership;*
That! her! share! of! 30%! was! to! be! based! on! the! profits! which!
might!be!gained!by!the!partnership!ONLY!until!full!payment!of!a!
loan!it!obtained!in!Dec!1955!for!the!sum!of!P30,000,!for!which!
Estrella!Abad!Santos!had!signed!a!promissory!note!as!coKmaker!
and!mortgaged!her!property!as!security*
CFI!!declared!Estrella!Abad!Santos!and!industrial!partner;!ordered!the!Partnership!
to!render!accounting!of!the!business!operations;!pay!Estrella!such!amounts!as!may!
be!due!her;!pay!attorneys!fees!and!costs.*
ISSUE:** Whether! Estrella! Abad! Santos! is! an! industrial! partner! or! merely! a! profit! sharer!
entitled!to!30%!of!the!net!profits!that!may!be!realized!by!the!partnership!from!June!
7,! 1955! until! the! mortgage! loan! shall! be! fully! paid.*
*
HELD:** Estrella! Abad! Santos! is! an! industrial! partner;! We! find! not! reason! in! this! case! to!
depart! from! the! rule! which! limits! this! courts! appellate! jurisdiction! to! reviewing!
only! errors! of! law,! accepting! as! conclusive! the! factual! findings! of! the! lower! court!
upon! its! own! assessment! of! the! evidence.! The! judgement! appealed! from! is!
affirmed,!with!costs.!
RATIO:*(SC!simply!copied!and!pasted!the!CA!decision)!
The! amended! Articles! of! CoKpartnership! (Exhibit! A)! together( with( other! factors,!
consisting!both!testimonial!and!documentary!evidence,!is!conclusive!evidence!that!
Estrella!Abad!Santos!was!in!fact!made!an!industrial!partner!of!Evangelista.*
 o The! genuineness! and! due! execution! was! admitted! by! Petitioners! and!
hence,!was!admitted!without!objection!by!the!CFI*
o The! said! exhibits! indubitably! show! that! Estrella! Abad! Santos! is! an!
industrial!partner*
o Petitioners!are!estopped!from!attempting!to!detract!the!probative!force!
of!the!said!Exhibits*
From!June!7,!1955!up!to!the!filing!of!their!answer!on!February!
8,!1964!(over!8!YEARS),!they!did!nothing!to!correct!the!alleged!
false!agreement!*
Meaning!of!Service!in!Art.!1767*
o The! petitioners! argue! that! they! did! not! contemplate! on! making! Estrella!
Abad! Santos! an! industrial! partner! because! she! was! a! Judge! of! the! City!
Court!of!Manila.!As!such,!she!could!not!lawfully!contribute!her!full!time!
and!industry!which!is!the!obligation!of!an!industrial!partner!pursuant!to!
Art.!1789.!*
o On! the! other! hand,! Estrella! Abad! Santos! testified! that! even! as! she! was!
and! still! is! a! Judge,! she! has! rendered! services! for! the! CoKpartnership!
without!which!they!would!not!have!had!the!wherewithal!to!operate!the!
business!for!which!the!company!was!organized.*
o Court! held! that! under! Art! 1767,! the! law! does! not! specify! the! kind! of!
industry!that!a!partner!may!thus!contribute,!hence!the!said!services!may!
legitimately! be! considered! as! Estrella! Abad! Santoss! contribution! to! the!
common!fund.*
* Moran!actually!supervising!the!work!
On!Conflict!of!Interest!in!Art!1789;!right!of!exclusion*
o ART!1789!!An!individual!partner!cannot!engage!in!business!for!himself,!
unless!the!partnership!expressly!permits!him!to!do!so!and!if!he!should!do!
so,!the!capitalist!partners!may!either!exclude!him!from!the!firm!or!avail!
themselves!of!the!benefit!which!he!may!have!obtained!in!violation!of!this!
provision,!with!a!right!to!damages!in!either!case*
o Court! held! that! Estrella! Abad! Santos! is! not! engaged! in! any! business!
antagonistic!to!the!partnership;!being!a!judge!can!hardly!be!characterized!
as!a!business.*
That! she! has! faithfully! complied! with! her! obligation! to! the!
partnership! is! clearly! shown! by! the! fact! that! it! was! only! after!
filing! an! answer! that! petitioners! exercised! their! right! of!
exclusion!(period!of!around!9!years).*
Also! having! always! known! her! as! city! Judge! why! did! it! take!
many!years!before!excluding!her!from!the!said!company?*
And! how! can! they! reconcile! such! right! of! exclusion! (which!
presupposes!that!she!was!a!partner)!to!their!main!theory!that!
she!was!never!a!partner!but!only!profit!sharer?!*
To! reiterate,! the! Articles! of! Incorporation! together! with! other! factors! persuaded!
the!CA!(whose!decision!was!simply!pasted!by!the!Sc!to!theirs)!to!hold!that!Estrella!
Abad!Santos!is!and!industrial!partner!with!the!right!to!demand!formal!accounting!
and!to!receive!her!share!in!the!net!profit!that!may!result!from!such!an!accounting!
based!on!Art!1899:*
o Any! partner! shall! have! the! right! to! a! formal! account! as! to! partnership!
affairs:*
If! he! is! wrongfully! excluded! from! the! partnership! business! or!
possession!of!its!property!by!his!coKpartners;*
If!the!right!exists!under!the!terms!of!any!agreement;*
As!provided!in!1807;*
Whenever!other!circumstance!render!it!just!and!reasonable.!*
*
6.*MORAN*V.*CA*(EM)*
Isabelo!Moran,!Jr.,!petitioner,!
vs.!
The!Hon.!Court!of!Appeals!and!Mariano!E.!Pecson,!respondents!
G.R.!No.!LK59956,!Oct.!31,!1984!
Guttierez,!Jr.,!J!
!!
Facts:!
o Pecson!and!Moran!entered*into*an*agreement!where!
Both!would!contribute!15000!each!for!the!purpose!of!printing!95000!posters!
featuring!the!delegates!to!the!1971!Constitutional!Convention!
Pecson! entitled! to! receive! a! commission! of! 1,000! a! month! starting! on! April!
1971!until!December!of!the!same!year!
A!liquidation!of!the!accounts!in!the!distribution!and!printing!would!be!made!
o However,!what!happened!was!
Pecson!gave!Moran!10,000!for!which!the!latter!issued!a!receipt!
Only!a!few!posters!were!printed!
Moran!executed!a!promissory!note!in!the!amount!of!20000!payable!in!2!equal!
installments!with!the!whole!becoming!due!upon!default!in!the!first!payment!
o Therefore,!Pecson!filed!a!case!in!the!Court!of!First!Instance!for!the!following!claims!
On! the! alleged! partnership! agreement,! the! return! of! his! contribution! of!
10,000,!payment!of!his!share!in!the!profits!that!the!partnership!WOULD!HAVE!
earned,!and!payment!of!unpaid!commission!
On!the!alleged!promissory!note,!payment!of!the!sum!of!20,000!
Moral!and!exemplary!damages!and!attorney's!fees!
o The!CFI!and!CA!decided!in!favor!of!Pecson!
o Thus,!this!appeal!
Issues:!
o Whether!or!not!Moran!is!liable!for!the!"SUPPOSED!expected!profits"!worth!P47,500!
o Whether!or!not!Moran!is!liable!for!the!"SUPPOSED!commission"!worth!P8,000!
o Whether! or! not! Moran! is! liable! for! the! "SUPPOSED! return"! of! investment! in! a!
magazine!venture!worth!P7,000!
Held:!NO!to!all!
Ratio:!
o On!the!first!issue!K!award!of!47,500!as!share!in!the!profits!
No! dice,* this* award* as* share* in* the* unrealized* profits* of* the* partnership* is*
HIGHLY*SPECULATIVE!
Award!of!speculative!damages!has!no!basis!in!fact!and!in!law!
In! the! case! at! hand,! there! is! no! evidence! whatsoever! that! the! partnership!
would!have!been!a!profitable!venture!K!in!fact,!it!was!a!failure!doomed!from!
the!start!
When!a!partner!who!has!undertaken!to!contribute!a!sum!of!money!fails!to!do!
so,! he! becomes! a! debtor! of! the! partnership! for! whatever! he! may! have!
promised!to!contribute!and!(1786!CC)!and!for!interests!and!damages!from!the!
time!he!should!have!complied!with!his!obligation(1788!CC)!
While! Moran! was! not! able! to! contribute! the! 15000! expected! of! him,!
Pecson! also! was! not! able! to! contribute! the! whole! only! being! able! to!
give!10000!
The!losses!and!profits!shall!be!distributed!in!conformity!with!the!agreement.!If!
only!the!share!of!each!partner!in!the!profits!has!been!agreed!upon,!the!share!
of!each!in!the!losses!shall!be!in!the!same!proportion!(1797!CC)!
Being* a* contract* of* partnership,* each* partner* must* share* in* the*
profits*and*losses*of*the*venture*1*this*is*the*essence*of*partnership*
Even* with* the* assurance* that* they* will* gain* huge* profit,* in* the*
absence* of* fraud,* the* other* partner* cannot* claim* a* right* to* recover*
the*highly*speculative*profits*
However! this! does! not! preclude! the! court! to! allow! Pecson! to! recover! any!
amount!
He!was!granted!6000!by!the!court!
o On!the!second!issue!K!award!of!8000!as!commission!
No!dice!as!well,!supposed*commission*has*no*justifiable*basis*in*law!
The! partnership! agreement! stipulated! such! commission! without! stating! any!
basis!for!such!
The!payment!of!such!commission!could!only!have!been!predicated!on!
relatively!extravagant!profits!K!something!absent!in!this!case!
The* parties* COULD* NOT* have* intended* the* giving* of* a* commission*
inspite*of*loss*or*failure*of*the*venture*
o On!the!third!issue!K!award!of!7000!as!supposed!return!of!investment!in!the!"Voice!of!
the!Veterans"!magazine!venture!
Again,!no!dice!my!friends!
This! claim! was! predicated! on! a! factual! judgement! made! by! the! Court! of!
Appeals!
As!a!rule,!their!factual!findings!are!conclusive!and!cannot!be!reviewed!
on!appeal!to!the!SC!K!however,!this!admits!of!certain!exceptions!
Conclusion! is! a! finding! grounded! entirely! on! speculation,!
surmises!and!conjectures!
When! the! inference! made! is! manifestly! mistaken,! absurd,! and!
impossible!
Where!there!is!grave!abuse!of!discretion!
When!the!judgement!is!bade!on!a!misapprehension!of!facts!
When!the!court,!in!making!its!findings,!went!beyond!the!issues!
of!the!case!and!the!same!are!contrary!to!the!admission!of!both!
parties!
In*this*case,*there*is*a*misapprehension*of*facts*
The!evidence!presented!by!the!private!respondent!himself!shows!that!
his! investment! amounted! only! to! 3000! and! the! remaining! 4000! was!
the!amount!of!profit!that!he!expected!to!receive!
The!respondent!court!erred!when!it!concluded!that!the!project!never!left!the!
ground! because! the! project! never! took! place! K! it! did! take! place,! however,! it!
failed!
As*already*mentioned,*there*are*risks*in*any*business*venture*and*the*
failure* of* the* undertaking* cannot* entirely* be* blamed* on* the*
managing* partner* alone,* especially* if* the* latter* exercised* his* best*
business*judgement,*which*seems*to*be*true*in*this*case*
Dispositive!portion:!
o WHEREFORE,!the!petition!is!granted.!The!decision!of!the!respondent!Court!of!Appeals!
is!hereby!SET!ASIDE!and!a!new!one!is!rendered!ordering!the!petitioner!Isabelo!Moran,!
Jr.,! to! pay! private! respondent! Mariano! Pecson! SIX! THOUSAND! (P6,000.00)! PESOS!
representing!the!amount!of!the!private!respondent's!contribution!to!the!partnership!
but!which!remained!unused;!and!THREE!THOUSAND!(P3,000.00)!PESOS!representing!
one! half! (1/2)! of! the! net! profits! gained! by! the! partnership! in! the! sale! of! the! two!
thousand! (2,000)! copies! of! the! posters,! with! interests! at! the! legal! rate! on! both!
amounts!from!the!date!the!complaint!was!filed!until!fully!payment!is!made!
!!
!
7.*LEYTE1SAMAR*v.*CEA*(IE)*
(Petitioners:!THE!LEYTEKSAMAR!SALES!CO.,!and!RAYMUNDO!TOMASSI!
Respondents:!SULPICIO!V.!CEA,!in!his!capacity!as!Judge!of!the!Court!of!First!Instance!of!Leyte!
and!OLEGARIO!LASTRILLA!
G.R.*No.*L15963*/May*20,*1953*
!
Facts:*
A! civil! case! for! damages! was! filed! by! LeyteKSamar! Sales! Co! (LESSCO)! against! Far!
Eastern! Lumber! &! Commercial! Co.! (FELCO),! Arnold! Hall,! Fred! Brown! and! Jean!
Roxas.!
Judgment! was! rendered! against! FELCO! et.! al,! declaring! them! to! be! ! jointly! and!
severally!liable!for!the!amount!of!P31,589.14!!
Pursuant! to! such! decision,! sheriff! sold! at! auction! all! rights,! interests,! titles! and!
participation!of!FELCO!et.al!in!certain!buildings!and!properties!for!a!total!a!price!of!
8k!to!Robert!Dorfe!and!Pepito!Asturias.!
Thereafter,!Lastrilla!filed!a!motion!in!the!case!claiming!to!be!the!owner!by!purchase!
said! shares! of! FELCO! et.! al.! He! then! requested! the! court! that! he! be! given! law! of!
preference!of!credit.!It!seemed!that!by!the!time!sale!was!made,!Lastilla!was!already!
a!partner!of!FELCO!
The!judge!then!gave!an!order!to!sheriff!to!retain!17%!of!the!money!for!Lastrilla.!
* bearing! its! tradeKname,! maintaining! its! own! books! of! accounts! and! bank!
Issue:*WON!Lastrilla!has!a!proper!claim!to!the!proceeds!of!the!sale!(NO)!
Ratio:*
RULE:!Partner!of!a!partnership!is!not!a!creditor!of!such!partnership!for!the!amount!
of!his!shares.!
In! as! much! as! Lastrilla! acquired! the! shares! of! Brown! before! the! auction! sale,!
Lastrilla!was!NOT!a!party!to!the!litigation.!Hence,!such!shares!could!not!have!been!
transferred!to!Dorfe!and!Austrilla!
ASSUMING! ARGUENDO,! that! the! auction! sale! included! the! interest! or! portion! of!
the! FELCO! properties! corresponding! to! the! shares! of! Lastrilla! in! the! same!
partnership! (17%),! the! resulting! situation! would! be! ! at! most! ! that! the!
purchasers!Dorfe!and!Austrias!will!have!to!recognize!dominion!of!Lastrillas!over!17!
!
per!cent!of!the!properties!awarded!to!them. !
So!Lastrilla!acquired*no*right*to*demand*any*part*of*the*money!paid!by!Dorfe!and!
Austrias!to!the!sheriff!!NOR!to!any!part!of!the!money!paid!by!Dorfe!and!Austrias!to!
the!sheriff!for!the!benefit!of!FELCO!for!the!reason!that,!Lastrillas!!shares!(acquired!
from! Brown)! could! not! have! been! and! were! not! auctioned! off! to! Dorfe! and!
Austrias.!
Even! if! Lastrillas! shares! had! been! actually! but! unlawfully! sold! by! the! sheriff! to!
Dorfe!and!Austrias,!remedy!of!Lastrillas!is!to!claim!the!
property!and!not!the!proceeds!of!the!sale!which!the!sheriff!is!directed!to!deliver!to!
the!judgment!creditor.!
Hence,!Judges!order!was!null!and!void!as!it!was!declared!in!excess!of!jurisdiction.!!
! o He!based!his!assertion!on!the!opinion!of!Senator!Tolentino!in!his!Commercial!
!
* partnership,! because! under! the! Civil! Code,! which! applies! in! the!
8.*COMMISSIONER*OF*INTERNAL*REVENUE*V.*WILLIAM*J.*
SUTER*AND*THE*COURT*OF*TAX*APPEALS*(PR)*
G.R.!No.!LK!25532/!27!SCRA!152!
February!28,!1969!
*
Reyes,*J.B.L.,*J.:!
!
FACTS:!
A! limited! partnership,! named! "William! J.! Suter! 'Morcoin'! Co.,! Ltd.,"! was! formed! on! 30!
September!1947!by!!William!J.!Suter!as!the!general!partner,!and!Julia!Spirig!and!Gustav!
Carlson,!as!the!limited!partners.!
The! partners! contributed,! respectively,! P20,000.00,! P18,000.00! and! P2,000.00! to! the!
partnership.!
!The! limited! partnership! was! registered! with! the! Securities! and! Exchange! Commission!
on!10/1/1947!
The! firm! engaged,! among! other! activities,! in! the! importation,! marketing,! distribution!
and! operation! of! automatic! phonographs,! radios,! television! sets! and! amusement!
machines,!their!parts!and!accessories.!
!It!had!an!office!and!held!itself!out!as!a!limited!partnership!
o by! handling! and! carrying! merchandise,! using! invoices,! bills! and! letterheads!
!accounts,!and!had!a!quota!allocation!with!the!Central!Bank.!
In!1948!general!partner!Suter!and!limited!partner!Spirig!got!married!and,!thereafter,!on!
10/18/1948! limited! partner! Carlson! sold! his! share! in! the! partnership! to! Suter! and! his!
wife.!!
o Sale! was! duly! recorded! with! the! Securities! and! Exchange! Commission! on!
12/20/1948.!
The!limited!partnership!had!been!filing!its!income!tax!returns!as!a!corporation,!without!
objection!from!the!BIR.!
o BUT!in!1959,!BIR,!in!an!assessment,!consolidated!the!income!of!the!firm!and!
the!individual!income!of!the!partnersK!spouses!Suter!and!Spirig.!It!determined!
that!there!was!a!deficiency!tax!income!against!Suter.!
o P2,678.06!for!1954!!
o P4,567.00!for!1955.!
Suter!protested!the!assessment,!and!requested!its!cancellation!and!withdrawal,!as!not!
in! accordance! with! the! law.! This! was! denied.! Unable! to! secure! a! reconsideration,! he!
appealed! to! Court! of! Tax! Appeals! (CTA),! which! reversed! the! decision! of! the!
Commissioner!of!Internal!Revenue!(CIR).!
This!is!a!petition!for!review!filed!by!the!CIR!of!the!CTA!decision.!
CIR!contends:!
o W/N!the!corporate!personality!of!"William!J.!Suter!'Morcoin'!Co.,!Ltd.,"!should!
be! disregarded! for! income! tax! purposes! because! of! the! marriage! of! Suter!
!and!Spirig!actually!formed!a!single!taxable!unit.!
Law!book!which!says:!
A! husband! and! a! wife! may! not! enter! into! a! contract! of! general! coK
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!preKexisting!partnership.!(1!Guy!de!Montella!58)!
o W/N! the! partnership! was! dissolved! when! Suter! and! Spirig! married,! and! the!
subsequent! sale! to! them! by! the! remaining! partner,! Gustav! Carlson,! of! his!
participation! of! P2,000.00! in! the! partnership! for! a! nominal! amount! of!
P1.00.!
CIR!contends!the!marriage!and!subsequent!sale!dissolved!partnership.!
And! if! not,! the! fiction! of! juridical! personality! of! the! partnership!
should! be! disregarded! because! spouses! have! exclusive! ownership!
and!control!of!business.!
CIR! says! that! under! Section! 45(d)! of! the! National! Internal! Revenue!
Code!
! ! ! K! (d)! Husband( and( wife.! ! In! the! case! of! married! persons,! whether!
citizens,!residents!or!nonKresidents,!only!one!consolidated!return!for!the!taxable!year!shall!be!
filed!by!either!spouse!to!cover!the!income!of!both!spouses;!....!
Consequently! the! income! tax! return! of! respondent! Suter! for!
the! years! in! question! should! have! included! his! and! his!
wife's! individual! incomes! and! that! of! the! limited!
 partnership!
!
ISSUE:!
W/N!the!partnership!is!general!or!limited.!LIMITED.!
W/N!the!partnership!is!dissolved!by!the!subsequent!marriage!of!the!partners.!NO.!
! *
HELD:!
CIR!has!evidently!failed!to!observe!the!fact!that!William!J.!Suter!"Morcoin"!Co.,!Ltd.!was!
not(a(universal!partnership,!but!a(particular(one.!
As! appears! from! Articles! 1674! and! 1675! of! the! Spanish! Civil! Code,! of! 1889! (the! law! in!
force!when!the!firm!was!organized!in!1947),!a!universal!partnership*requires!either!that!
the!object!of!the!association!be!all(the(present(property(of!the!partners,!as!contributed!
by! them! to! the! common! fund,! or! else! "all( that! the! partners! may! acquire! by! their!
industry(or(work(during!the!existence!of!the!partnership".!!
William! J.! Suter! "Morcoin"! Co.,! Ltd.! was* NOT! such! a! universal! partnership,! since! the!
contributions! of! the! partners! were! fixed! sums! of! money,! P20,000.00! by! William! Suter! and!
P18,000.00!by!Julia!Spirig!and!neither!one!of!them!was!an!industrial!partner.!It!follows!that!
William! J.! Suter! "Morcoin"! Co.,! Ltd.! was! not! a! partnership! that! spouses! were! forbidden! to!
enter!by!Article!1677!of!the!Civil!Code!of!1889.!
Nor!could!the!subsequent!marriage!of!the!partners!operate!to!dissolve!it,!such!marriage!
not!being!one!of!the!causes!provided!for!that!purpose!either!by!the!Spanish!Civil!Code!
or!the!Code!of!Commerce.!
The!marriage!of!the!partners!did!not!result!in!a!single!proprietorship!because!the!capital!
contributions!of!the!spouses!were!contributed!by!them!before(their!marriage;!and!after!
being! joined! in! wedlock,! such! remained! separate! property.! (Article! 1396! Spanish! Civil!
CodeK!that!which!is!brought!to!the!marriage!as!his/!her!shall!remain!exclusive!property!
of!each!spouse)!
Under!Spanish!and!Philippine!law,!the!partnership!has!a!juridical!personality!of!its!own,!
distinct!and!separate!from!that!of!its!partners.!
The!limited!partnership's!separate!individuality!makes!it!impossible!to!equate!its!income!
with!that!of!the!component!members.!
Although! Section! 24! of! the! Internal! Revenue! Code! merges! registered! general! coK
partnerships! (compaias( colectivas)! with! the! personality! of! the! individual! partners! for!
income! tax! purposes,! this! rule! is! exceptional! and! cannot! be! extended! by! mere!
implication!to!limited!partnerships.!
As!the!limited!partnership!under!consideration!is!taxable!on!its!income,!to!require!that!
income!to!be!included!in!the!individual!tax!return!of!respondent!Suter!is!to!overstretch!
the!letter!and!intent!of!the!law.!
! K!This!clearly!violates!the!distinction!made!by!law!between!general*co1*partnerships*
(the!members,!and!not!the!firm,!are!taxable!in!their!individual!! capacities! for! any!
dividend! or! share! of! the! profit! derived! from! the! duly! registered! general! partnership)! and!
limited*partnerships!(tax!on!income).!
The! difference! in! tax! rates! between! the! income! of! the! limited! partnership! being!
consolidated!with,!and!when!split!from!the!income!of!the!spouses,!is!not!a!justification!
for!requiring!consolidation;!the!revenue!code,!as!it!presently!stands,!does!not!authorize!
it,!and!even!bars!it!by!requiring!the!limited!partnership!to!pay!tax!on!its!own!income.!
! c. !The!Canons!of!Professional!Ethics!are!not!transgressed!by!the!continued!
* use! of! the! name! of! a! deceased! partner! in! the! firm! name! of! a! law!
9.*In*re:*Petition*for*Authority*to*Continue*Use*of*the*Firm*
Name*SyCip,*Salazar,*Feliiano,*Hernandez*&*Castillo*(RS)*
*
PETITION* FOR* AUTHORITY* TO* CONTINUE* USE* OF* THE* FIRM* NAME* "SYCIP,* SALAZAR,*
FELICIANO,* HERNANDEZ* &* CASTILLO."* LUCIANO* E.* SALAZAR,* FLORENTINO* P.* FELICIANO,*
BENILDO*G.*HERNANDEZ.*GREGORIO*R.*CASTILLO.*ALBERTO*P.*SAN*JUAN,*JUAN*C.*REYES.*
JR.,*ANDRES*G.*GATMAITAN,*JUSTINO*H.*CACANINDIN,*NOEL*A.*LAMAN,*ETHELWOLDO*E.*
FERNANDEZ,*ANGELITO*C.*IMPERIO,*EDUARDO*R.*CENIZA,*TRISTAN*A.*CATINDIG,*ANCHETA*
K.*TAN,*and*ALICE*V.*PESIGAN,petitioners.!
!
IN*THE*MATTER*OF*THE*PETITION*FOR*AUTHORITY*TO*CONTINUE*USE*OF*THE*FIRM*NAME*
"OZAETA,* ROMULO,* DE* LEON,* MABANTA* &* REYES."* RICARDO* J.* ROMULO,* BENJAMIN* M.*
DE* LEON,* ROMAN* MABANTA,* JR.,* JOSE* MA,* REYES,* JESUS* S.* J.* SAYOC,* EDUARDO* DE* LOS*
ANGELES,*and*JOSE*F.*BUENAVENTURA,*petitioners.!
!
En!Banc,!Resolution!
!
MELENCIO1HERRERA,*J.:!
!
*
FACTS:!
1. This!resolution!is!a!consolidation!of!two!petitions!filed:!
a. by! the! surviving! partners! of! Atty.! Alexander! Sycip,! who! died! on! May! 5,!
1975,!and!
b. by!the!surviving!partners!of!Atty.!Herminio!Ozaeta,!who!died!on!February!
14,!1976,!praying!that!they!be!allowed!to!continue!using,!in!the!names!of!
their!firms,!the!names!of!partners!who!had!passed!away.!
2. Petitioners*arguments:!
a. A!partnership!is!not!prohibited!from!continuing!its!business!under!a!firm!
name,! which! includes! the! name! of! a! deceased! partner.! Article! 1840! of!
the!Civil!Code!explicitly!sanctions!the!practice!when!it!provides!in!the!last!
paragraph!that:!
i. The!use!by!the!person!or!partnership!continuing!the!business!
of!the!partnership!name,!or!the(name(of(a(deceased(partner(as(
part(thereof,(shall!not!of!itself!make!the!individual!property!of!
the! deceased! partner! liable! for! any! debts! contracted! by! such!
person!or!partnership.!
b. In!regulating!other!professions,!such!as!accountancy!and!engineering,!the!
legislature! has! authorized! the! adoption! of! firm! names! without! any!
restriction! as! to! the! use,! in! such! firm! name,! of! the! name! of! a! deceased!
partner!
 partnership! because! Canon! 33! of! the! Canons! of! Professional! Ethics!
adopted!by!the!American!Bar!Association!declares!that:!
i. ...! The! continued! use! of! the! name! of! a! deceased! or! former!
partner!when!permissible!by!local!custom,!is!not!unethical!but!
care! should! be! taken! that! no! imposition! or! deception! is!
practiced!through!this!use!
d. There!is!no!possibility!of!imposition!or!deception!because!the!deaths!of!
their!respective!deceased!partners!were!wellKpublicized!in!all!newspapers!
of!general!circulation!for!several!days;!the!stationeries!now!being!used!by!
them! carry! new! letterheads! indicating! the! years! when! their! respective!
deceased! partners! were! connected! with! the! firm;! petitioners! will! notify!
all! leading! national! and! international! law! directories! of! the! fact! of! their!
respective!deceased!partners'!deaths.!
e. No! local! custom! prohibits! the! continued! use! of! a! deceased! partner's!
name!in!a!professional!firm's!name!
f. The!continued!use!of!a!deceased!partner's!name!in!the!firm!name!of!law!
partnerships! has! been! consistently! allowed! by! U.S.! Courts! and! is! an!
accepted!practice!in!the!legal!profession!of!most!countries!in!the!world.!
3. Cases*where*this*Court*has*resolved*a*similar*issue*presented*by*the*petitioners:!
a. The! question! involved! in! these! Petitions! first! came! under! consideration!
by!this!Court!in!1953!when!a!law!firm!in!Cebu!(the!Deen!case)!continued!
its!practice!of!including!in!its!firm!name!that!of!a!deceased!partner,!C.D.!
Johnston.! The! matter! was! resolved! with! this! Court! advising! the! firm! to!
desist!from!including!in!their!firm!designation!the!name!of!C.!D.!Johnston,!
who!has!long!been!dead.!
b. 1958!K!Register!of!Deeds!of!Manila!vs.!China!Banking!Corporation:!!
i. The! law! firm! of! Perkins! &! Ponce! Enrile! (Atty.! EA! Perkins,!
deceased!partner)!moved!to!intervene!as!amicus(curiae.!
ii. Said! law! firm,! raising( substantially( the( same( arguments( as!
those! now! being! raised! by! petitioners,! prayed! that! the!
continued! use! of! the! firm! name! "Perkins! &! Ponce! Enrile"! be!
held!proper.!
iii. The! Court! believes! that,! in! view! of! the! personal! and!
confidential! nature! of! the! relations! between! attorney! and!
client,! and! the! high! standards! demanded! in! the! canons! of!
professional! ethics,! no! practice! should! be! allowed! which! even!
in! a! remote! degree! could! give! rise! to! the! possibility! of!
deception.! Said! attorneys! are! accordingly! advised! to! drop! the!
name!"PERKINS"!from!their!firm!name.!
ISSUE:!Petitioners!seek!reKexamination!and!reconsideration!of!the!policy!laid!down!by!the!SC.!
HELD:!Policy!stands.!
RATIO:!
1. Inasmuch! as! "Sycip,! Salazar,! Feliciano,! Hernandez! and! Castillo"! and! "Ozaeta,!
Romulo,! De! Leon,! Mabanta! and! Reyes"! are! partnerships,! the! use! in! their!
partnership! names! of! the! names! of! deceased! partners! will! run! counter! to! Article!
1815!of!the!Civil!Code!which!provides:!
a. Art.* 1815.! Every! partnership! shall! operate! under! a! firm! name,! which!
may!or!may!not!include!the!name!of!one!or!more!of!the!partners.!Those!
who,! not! being! members! of! the! partnership,! include! their! names! in! the!
firm!name!shall!be!subject!to!the!liability,!of!a!partner.!
b. It!is!clear!that!names!in!a!firm!name!of!a!partnership!must!either!be!those!
of! living! partners! and,! in! the! case! of! nonKpartners,! should! be! living!
persons!who!can!be!subjected!to!liability.!
c. In! fact,! Article! 1825! of! the! Civil! Code! prohibits! a! third! person! from!
including!his!name!in!the!firm!name!under!pain!of!assuming!the!liability!
of!a!partner.!
d. The!heirs!of!a!deceased!partner!in!a!law!firm!cannot!be!held!liable!as!the!
old! members! to! the! creditors! of! a! firm! particularly! where! they! are!
nonKlawyers.!
e. Thus,! Canon! 34! of! the! Canons! of! Professional! Ethics! "prohibits! an!
agreement!for!the!payment!to!the!widow!and!heirs!of!a!deceased!lawyer!
of!a!percentage,!either!gross!or!net,!of!the!fees!received!from!the!future!
business!of!the!deceased!lawyer's!clients,!both!because!the!recipients!of!
such! division! are! not! lawyers! and! because! such! payments! will! not!
represent!service!or!responsibility!on!the!part!of!the!recipient."!
i. Accordingly,!neither!the!widow!nor!the!heirs!can!be!held!liable!
for! transactions! entered! into! after! the! death! of! their!
lawyerKpredecessor.!
ii. There! being! no! benefits! accruing,! there! can! be! no!
corresponding!liability.!
f. The! public! relations! value! of! the! use! of! an! old! firm! name! can! tend! to!
create! undue! advantages! and! disadvantages! in! the! practice! of! the!
profession.!
2. In! regards! to! the! last! paragraph! of! Article! 1840! of! the! Civil! Code! cited! by!
petitioners,!supra,(the!first!factor!to!consider!is!that!it!is!within!Chapter!3!of!Title!IX!
of!the!Code!entitled!"Dissolution!and!Winding!Up."!
a. What! the! law! contemplates! therein! is! a! holdKover! situation! preparatory!
to!formal!reorganization.!
b. Secondly,! Article! 1840! treats! more! of! a! commercial( partnership! with! a!
good! will! to! protect! rather! than! of! a! professional( partnership,! with! no!
saleable! good! will! but! whose! reputation! depends! on! the! personal!
qualifications! of! its! individual! members.! Thus,! it! has! been! held! that! a!
saleable!goodwill!can!exist!only!in!a!commercial!partnership!and!cannot!
arise!in!a!professional!partnership!consisting!of!lawyers.!
i. General*rule:!!Upon!the!dissolution!of!a!commercial(partnership(
the! succeeding! partners! or! parties! have! the! right! to! carry! on!
the! business! under! the! old! name,! in! the! absence! of! a!
stipulation! forbidding! it,! (s)ince! the! name! of! a! commercial!
partnership! is! a! partnership! asset! inseparable! from! the! good!
will!of!the!firm.!...!(60!Am!Jur!2d,!s!204,!p.!115)!
ii. Exception:! ...! A! professional! partnership! the! reputation! of!
which!depends!or;!the!individual!skill!of!the!members,!such!as!
partnerships!of!attorneys!or!physicians,!has!no!good!will!to!be!
distributed! as! a! firm! asset! on! its! dissolution,! however!
intrinsically! valuable! such! skill! and! reputation! may! be,!
especially! where! there! is! no! provision! in! the! partnership!
 agreement! relating! to! good! will! as! an! asset.! ...! (ibid,( s! 203,! p.!
115)!
3. A!partnership!for!the!practice!of!law!cannot!be!likened!to!partnerships!formed!by!
other! professionals! or! for! business.! For! one! thing,! the! law! on! accountancy!
specifically! allows! the! use! of! a! trade! name! in! connection! with! the! practice! of!
accountancy!
a. A! partnership! for! the! practice! of! law! is! not! a! legal! entity.! It! is! a! mere!
relationship! or! association! for! a! particular! purpose.! ...! It! is! not! a!
partnership!formed!for!the!purpose!of!carrying!on!trade!or!business!or!of!
holding! property."! Thus,! it! has! been! stated! that! "the! use! of! a! nom! de!
plume,!assumed!or!trade!name!in!law!practice!is!improper.!
b. Primary! characteristics! which! distinguish! the! legal! profession! from!
business!are:!
i. A! duty! of! public! service,! of! which! the! emolument! is! a! byK
product,! and! in! which! one! may! attain! the! highest! eminence!
without!making!much!money.!
ii. A! relation! as! an! "officer! of! court"! to! the! administration! of!
justice!involving!thorough!sincerity,!integrity,!and!reliability.!
iii. A!relation!to!clients!in!the!highest!degree!fiduciary.!4.!A!relation!
to!colleagues!at!the!bar!characterized!by!candor,!fairness,!and!
unwillingness! to! resort! to! current! business! methods! of!
advertising! and! encroachment! on! their! practice,! or! dealing!
directly!with!their!clients.!!
c. "The!right!to!practice!law!is!not!a!natural!or!constitutional!right!but!is!in!
the! nature! of! a! privilege! or! franchise.! It! is! limited! to! persons! of! good!
moral!character!with!special!qualifications!duly!ascertained!and!certified.!
The! right! does! not! only! presuppose! in! its! possessor! integrity,! legal!
standing! and! attainment,! but! also! the! exercise! of! a! special! privilege,!
highly(personal(and!partaking!of!the!nature!of!a!public!trust."!!
4. Petitioners!cited!Canon!33!of!the!Canons!of!Professional!Ethics!of!the!American!Bar!
Association"!in!support!of!their!petitions.!
a. It!is!true!that!Canon!33!does(not(consider(as(unethical(the!continued!use!
of!the!name!of!a!deceased!or!former!partner!in!the!firm!name!of!a!law!
partnership! when! such! a! practice! is! permissible( by( local( custom( but! the!
Canon!warns!that!care!should!be!taken!that!no!imposition!or!deception!is!
practiced!through!this!use!
b. It! must! be! conceded! that! in! the! Philippines,! no! local! custom! permits( or(
allows(the!continued!use!of!a!deceased!or!former!partner's!name!in!the!
firm!names!of!law!partnerships.!Firm!names,!under!our!custom,!identify(
the(more(active(and/or(more(senior(members(or(partners(of(the(law(firm.!
5. Petitioners!argue!that!U.S.!Courts!have!consistently!allowed!the!continued!use!of!a!
deceased! partner's! name! in! the! firm! name! of! law! partnerships.! But! that! is! so!
because!it!is!sanctioned!by!custom.!
a. Custom! has! been! defined! as! a! rule! of! conduct! formed! by! repetition! of!
acts,! uniformly! observed! (practiced)! as! a! social! rule,! legally! binding! and!
obligatory.! Courts! take! no! judicial! notice! of! custom.! A! custom! must! be!
proved!as!a!fact,!according!to!the!rules!of!evidence.*A!local!custom!as!a!
source! of! right! cannot! be! considered! by! a! court! of! justice! unless! such!
custom!is!properly!established!by!competent!evidence!like!any!other!fact.!
b. We! find! such! proof! of! the! existence! of! a! local! custom,! and! of! the!
elements! requisite! to! constitute! the! same,! wanting! herein.! Merely!
because! something! is! done! as! a! matter! of! practice! does! not! mean! that!
Courts! can! rely! on! the! same! for! purposes! of! adjudication! as! a! juridical!
custom.!!
c. Juridical! custom! must! be! differentiated! from! social! custom.! The! former!
can! supplement! statutory! law! or! be! applied! in! the! absence! of! such!
statute.!Not!so!with!the!latter.!
!
!
ACCORDINGLY,! the! petitions! filed! herein! are! denied! and! petitioners! advised! to! drop! the!
names!"SYCIP"!and!"OZAETA"!from!their!respective!firm!names.!Those!names!may,!however,!
be!included!in!the!listing!of!individuals!who!have!been!partners!in!their!firms!indicating!the!
years!during!which!they!served!as!such.!SO!ORDERED.!
*
*
10.*Palting*vs.*San*Jose*Petroleum*Incorporated*(AJG)*
*
GR*No.*L114441*|*December*17,*1966*
Petitioner:! Pedro! R.! Palting! ! the! aggrieved! party! who! sought! to! nullify! the! order! of! SEC!
approving!the!license!of!San!Jose!Petroleum!to!sell!its!shares.!
Respondent:!San!Jose!Petroleum!,!Inc!!a!corporation!organized!under!the!laws!of!Panama,!
tiedKup!with!San!Jose!Oil.!
Partnership*Doctrine:!This!case!illustrates!an!example!of!an!illegal!juridical!entity.!
!
Some*businesses*before*I*start*(Sobrang!nakakalito!yung!case!!So!be!ready!for!this,!I!hope!I!
make!it!simpler)!
San! Jose! Petroleum! (Panamian! Corporation)! is! related! to,! but! different! from! San!
Jose!Oil!(Philippine!Corporation)!
Parity! Amendment,! or! the! LaurelKLangley! Agreement! ! ! the! right! to! utilize,!
exploit,! and! develop! the! natural! resources! of! this! country! was! granted! by! the!
Constitution!to!Filipino!citizens!or!to!corporations!or!associations!60%!of!the!capital!
is!owned!by!such!citizens.!Because!of!the!Parity!Amendment,!this!right!was!ALSO!
granted!to!citizens*of*the*United*states!/!business!enterprises!owned!or!controlled!
directly* or* indirectly* by! US! citizens..(Dito! palang! mahuhulaan! nyo! na! yung! case,!
kasi!granted!nga!to!US!entities!eh.!Not!Panamian!entities!)!
Structure! of! ownership! of! the! two! corporations:! (This! is! important! for! you! to!
consider!whether!SJP!might!fall!under!indirect!control!by!US!citizens)!
o SAN!JOSE!OIL,!outstanding!capital!stock!!90%!owned!by!SJP,!10%!owned!
by!others!
o SAN!JOSE!PETROLEUM!!majority!interest!is!owned!by!two!corporations:!
Oil!Investments,!Inc!
 Another! Panamanian! Company! ! 100%! owned! by! two!
companies! (Pantepec! Oil! Company! and! Pancoastal! Petroleum!
Company),!both!organized!under!the!laws!of!Venezuela!
Pantepec! Oil! Co.! ! 9,976! stockholders! found! in! 49!
American!States,!though!citizenship!not!known.!
Pancoastal!Petroleum!Co!!12,373!stockholders!found!
in!49!American!States,!though!citizenship!not!known.!
! ordered.!
Factual*Antecedence!
September! 7,! 1956! K! San! Jose! Petroleum! (SJP)! filed! with! the! Philippine! Securities!
and!Exchange!Commission!a!sworn!registration!statement,!for!the!registration!and!
licensing!for!sale!in!the!Philippines!Voting!Trust!Certificates!representing!2,000,000!
shares!of!its!capital!stock!of!a!par!value!of!$0.35!a!share,!at!P1.00!per!share!
o It! was! alleged! that! the! entire! proceeds! of! the! sale! of! said! securities! will!
be!devoted!or!used!exclusively!to!finance!the!operations!of!San!Jose!Oil!
Company,!Inc.!
June! 20,! 1958:! San! Jose! Petroleum! amended! Statement! increasing! 2,000,000! to!
5,000,000,!at!a!reduced!offering!price!of!from!P1.00!to!P0.70!per!share!
Pedro! R.! Palting! and! others,! allegedly! prospective! investors! in! the! share! of! SJP!
filed!with!the!SEC!an!opposition!to!the!registration!and!licensing!of!the!securities!
on!the!grounds!that:!
o The!tieKup!of!the!two!corporations!violates!the!Constitution,!Corporation!
Law,! and! Petroleum! Act! of! 1949! (inhibits! a! mining! corporation! from!
acquiring!an!interest!in!another!mining!corporation)!
o SJP!!has!not!been!licensed!to!transact!business!in!the!Philippines!
o Sale! of! the! shares! is! fraudulent,! and! tends! to! work! a! fraud! upon!
Philippine!purchasers!
o The!corporation!is!based!upon!unsound!business!principles.!
SJPs!answer!to!the!opposition:!
o Enjoys!Parity!Rights,!which!may!be!exercised!only!thorugh!the!medium!of!
a!corporation!organized!under!the!laws!of!the!Philippines!(SJO)!
o Does!not!violate!Corporation!Code,!because!such!applies!only!to!foreign!
corporations!doing!business!in!the!Philippines.!SJP!is!not.!
SEC!denied!Paltings!opposition,!and!granted!the!registration!and!licensing!the!sale!
in!the!Philippines!of!the!shares!of!stock!of!SJP.!Hence!this!appeal.!
! in*the*Philippines?**NO*
Issues*
1. Whether!or!not!Palting,!as!a!mere!prospective!investor,!has!personality!to!file!the!
present!petition!for!review!K!YES!
2. Whether! or! not! the! issue! raised! herein! is! moot! and! academic,! because!
respondents!shares!became!registered!and!licensed!due!to!the!order!of!the!SEC!K!
NO!
3. Whether*or*not*the*tie1up*between*SJO*and*SJP*is*violative*of*the*Constitution,*
the* Laurel1Langley* Agreement,* the* Petroleum* Act* of* 1949,* and* the* Corporation*
Law**YES!
4. Whether*or*not*the*sale*of*respondents*securities*is*fraudulent,*or*would*work*
or*tend*to*work*fraud*to*purchasers*of*such*securities*in*the*Philippines**YES!
Dispositive*Portion*
FOR! ALL! THE! FOREGOING! CONSIDERATIONS,! the! motion! of! respondent! to! dismiss! this!
appeal,!is!denied!and!the!orders!of!the!Securities!and!Exchange!Commissioner,!allowing!the!
registration!of!Respondent's!securities!and!licensing!their!sale!in!the!Philippines!are!hereby!
set!aside.!The!case!is!remanded!to!the!Securities!and!Exchange!Commission!for!appropriate!
action!in!consonance!with!this!decision.!With!costs.!Let!a!copy!of!this!decision!be!furnished!
the!Solicitor!General!for!whatever!action!he!may!deem!advisable!to!take!in!the!premises.!So!
Rationale*
FIRST!ISSUE!
Respondents(Contention((Palting!is!a!mere!prospective!investor,!he!is!not!an!aggrieved!
or!interested!party!!(This!rule!is!pursuant!to!a!ruling!of!UTAH!SUPREME!COURT!!!)!
SCs( ruling( ( Pursuant! to! the! Philippines! Securities! Act,! ANY* PERSON* (who! may! not! be!
aggrieved!or!interested)!is!permitted!to!file!an!opposition!to!the!registration!of!securities!
for! sale! in! the! Philippines.! It! is! enacted! to! protect! investors! and! purchasers! and! to! prevent!
fraud.!
!
SECOND!ISSUE!
Respondents( Contention! ! The! SECs! order! already! took! effect!! Therefore,! we! are! already!
licensed!to!sell!our!stocks.!This!issue!is!therefore!moot!and!academic.!
SCs(ruling!
Yes,!the!orders!of!the!SEC!may!be!a!final!order!and!is!not!mere!interlocutory.!But!it!
is! appealable,! and! such! authority! may! be! later! on! suspended! or! revoked,!
depending!on!future!developments.!
AND,!you!may!have!the!authority!to!sell,!but!it!does!not!mean!that!what!you!are!
selling! is! legal!! So! long! as! the! securities! are! outstanding! and! are! placed! in! the!
channels!of!trade!and!commerce,!members!of!the!investing!public!are!entitled!to!
have!the!question!of!the!worth!or!legality!of!the!securities.!
!
THIRD!ISSUE!
Respondents(Contention((The!corporation!falls!under!the!Parity!Amendment,!therefore!it!is!
legal.!
SCs( Answer( (it! is! actually! the! mainest! issue! of! them! all.! If! not,! then! their! undertaking! is!
illegal!)(!is*herein*respondent*SJP*an*American*Business*enterprise*entitled*to*parity*rights*
It! is! not! owned! or! controlled! directly! by! US! citizens! through! the! Oil! Investments!
Corporation!because!it!is!a!Panamanian!corporation!(see!structure!above)!
It!is!not!owned!or!controlled!indirectly!by!US!citizens!through!the!Oil!Investments!
Corporation! because! it! is! controlled! not! by! US! citizens,! but! by! another! two!
Venezuelan! Corporations,! which! the! citizenships! of! the! stockholders! are! not!
established.!
It!is!not!established!that!Filipino!Citizens!may!engage!in!the!exploitation,!etc.!of!the!
natural!resources!as!indicated!in!their!business.!
THEREFORE,! the! respondent! SJP,! as! presently! constituted,! is! not! a! business!
enterprise!that!is!authorized!to!exercise!the!parity!privileges.!ITS*TIE1UP*WITH*SJO*
IS*CONSEQUENTLY*ILLEGAL.!
!
FOURTH!ISSUE!
The!sale!of!respondents!securities!would!tend!to!work!fraud!to!Philippine!investors!because:!
By! looking! at! the! provisions! in! the! Articles! of! Incorporation! of! SJP,! The! directors!
and!officers!of!the!company!can!do!anything,!short!of!actual!fraud,!with!the!affairs!
of!the!corporation!even!to!benefit!themselves!directly!or!other!persons!or!entities!
in! which! they! are! interested,! and! with! immunity! because! of! the! advance!
condonation!or!relief!from!responsibility!by!reason!of!such!acts.!This!and!the!other!
provision! which! authorizes! the! election! of! nonKstockholders! as! directors,!
completely! disassociate! the! stockholders! from! the! government! and! management!
of!the!business!in!which!they!have!invested!(See!appendix)!
The! voting! trust! certificates! are! also! suspicious! because! only! the! trustees! has! the!
sole*discretion!to!vote!for!the!election!of!directors!as!well!as!their!removal.!These!
trustees!were!assigned!by!Oil!Investments,!the!holder(of(the(only(subscribed(stock(
of(SJP!and!acting(on(behalf(of(all(future(holders(of(voting(trust(certificates.!
!
!
APPENDIX:!FRAUDULENT!Provisions!in!the!Articles!of!Incorporation!of!SJP!

(1)!the!directors!of!the!Company!need!not!be!shareholders;!

(2)!that!in!the!meetings!of!the!board!of!directors,!any!director!may!be!represented!and!may!
vote!through!a!proxy!who!also!need!not!be!a!director!or!stockholder;!and!

(3)! that! no! contract! or! transaction! between! the! corporation! and! any! other! association! or!
partnership!will!be!affected,!except!in!case!of!fraud,!by!the!fact!that!any!of!the!directors!or!
officers! of! the! corporation! is! interested! in,! or! is! a! director! or! officer! of,! such! other!
association!or!partnership,!and!that!no!such!contract!or!transaction!of!the!corporation!with!
any!other!person!or!persons,!firm,!association!or!partnership!shall!be!affected!by!the!fact!
that! any! director! or! officer! of! the! corporation! is! a! party! to! or! has! an! interest! in,! such!
contract! or! transaction,! or! has! in! anyway! connected! with! such! other! person! or! persons,!
firm,! association! or! partnership;! and! finally,! that! all! and! any! of! the! persons! who! may!
become! director! or! officer! of! the! corporation! shall! be! relieved! from! all! responsibility! for!
which! they! may! otherwise! be! liable! by! reason! of! any! contract! entered! into! with! the!
corporation,! whether! it! be! for! his! benefit! or! for! the! benefit! of! any! other! person,! firm,!
association!or!partnership!in!which!he!may!be!interested.!

!
*
*
!
 PARTNERSHIPARTICLES17671783
11.CAMPOSRUEDA&CO.V.PACIFICCOMMERCIAL(RK)
G.R.No.L18703||August28,1922
INVOLUNTARY INSOLVENCY OF CAMPOS RUEDA & CO., S. en C.,appellee,
vs.
PACIFIC COMMERCIAL CO., ASIATIC PETROLEUM CO., and INTERNATIONAL
BANKINGCORPORATION,petitionersappellants.
ROMUALDEZ,J.:
Involuntary Insolvency; Limited Partnership; Act of Bankruptcy; Solvency of
PartnersINthePhilippines,alimitedpartnershipdulyorganizedunderthelawhas
apersonalitydistinctfromthatofitsmembers;andifitcommitsanactofbankruptcy,
suchasthatoffailingformorethan30daystopaydebtsamountingtoP1,000ormore,
itmaybeadjudgedtobeinsolventonthepetitionofthreeofitscreditorsalthoughits
membersmaynotbeinsolvent
FACTS:
Campos, Rueda & CO., a limited partnership, is indebted to the appellants
amountingtonotlessthanP1,000whichwerenotpaidmorethan30daysprior
to the date of the filing by petitioners of the application for voluntary
insolvency.
o There would be involuntary insolvency if a partnership commits act of
bankruptcy;andexampleofsuchactisfailuretopayformorethan30days
topaydebtsamountingtoP1,000ormore.
o Thus, creditors of the limited partnership filed a petition for involuntary
insolvency
Thetrialcourtdeniedthepetition(oftheappellantsherein)onthegroundthat
itwasnotproven,noralleged,thatthemembersofthefirmwereinsolventat
thetimetheapplicationwasfiled.Italsoheldthatthepartnersarepersonally
andsolidarilyliablefortheconsequencesofthetransactionsofthepartnership
ISSUE:Whetherornotalimitedpartnership,suchastheappellee,whichhasfailed
topayitsobligationwiththreecreditorsformorethanthirtydays,maybe
held to have committed an act of insolvency, and thereby be adjudged
insolventagainstitswill.
HELD: YES;Wherefore,thejudgmentappealedfromisreversed,anditisadjudged
thatthelimitedpartnershipCamposRueda&Co.isandwasonDecember28,1921,
insolventandliableforhavingfailedformorethanthirtydaystomeetitsobligations
withthethreepetitionersherein,anditisorderedthatthisproceedingberemanded
to the Court of First Instance of Manila with instruction to said court to issue the
proper decrees under section 24 of Act No. 1956, and proceed therewith until its
finaldisposition.
RATIO:
INthePhilippines,alimitedpartnershipdulyorganizedunderthelawhasa
personalitydistinctfromthatofitsmembers;andifitcommitsanactofbankruptcy,
such as that of failing for more than 30 days to pay debts amounting to P1,000 or
more, it may be adjudged to be insolvent on the petition of three of its creditors
althoughitsmembersmaynotbeinsolvent
RATIOVERBATIM:
XXXThis being so and the juridical personality of a limited partnership being
different from that of its members, it must, on general principle, answer for, and
suffer, the consequence of its acts as such an entity capable of being the subject of
rights and obligations. If, as in the instant case, the limited partnership of Campos
Rueda & Co. Failed to pay its obligations with three creditors for a period of more
thanthirtydays,whichfailureconstitutes,underourInsolvencyLaw,oneoftheacts
of bankruptcy upon which an adjudication of involuntary insolvency can be
predicated,thispartnershipmustsuffertheconsequencesofsuchafailure,andmust
beadjudgedinsolvent.
XXXWearenotunmindfulofthefactthatsomecourtsoftheUnitedStateshaveheld
that a partnership may not be adjudged insolvent in an involuntary insolvency
proceedingunlessallofitsmembersareinsolvent,whileothershavemaintaineda
contraryview.ButitmustbeborneinmindthatundertheAmericancommonlaw,
partnerships have no juridical personality independent from that of its members
XXX Thus, the decision of American courts on this point can have no application in
thisjurisdiction,norweseeanyreasonwhythesepartnershipscannotbeadjudged
bankruptirrespectiveofthesolvencyorinsolvencyoftheirmembers,providedthe
partnershiphas,assuch,committedsomeoftheactsofinsolvencyprovidedinour
law.
Therefore,ithavingbeenproventhatthepartnershipCamposRueda&Co.failedfor
morethanthirtydaystopayitsobligationstothepetitionersthePacificCommercial
Co. the Asiatic Petroleum Co. and the International Banking Corporation, the case
comes under paragraph 11 of section 20 of Act No. 1956, and consequently the
petitionershavetherighttoajudicialdecreedeclaringtheinvoluntaryinsolvencyof
saidpartnership.
12.TAITONGCHUACHE&CO.V.INSURANCECOMMISSION(MB)
February29,1988
Gancayao,J.
Petitioner:TaiTongChuache&Co.(TTCC)
Respondent: The Insurance Commission and Travellers MultiIndemnity
Corporation
FACTS:
Petition for review on certiorari of the decision of the Insurance Commission
dismissing the complaint for recovery of the alleged unpaid balance of the
proceeds of the Fire Insurance Policies issuedby Travellers MultiIndemnity
Corp.infavorofTaiTongChuache&Co.
ComplainantsPalomoacquiredaparceloflandandabuildinglocatedinDavao
City.TheyassumedthemortgageofthebuildinginfavorofSSS,whichbuilding
wasinsuredwithrespondentSSSAccreditedGroupofInsurersforP25,000.
1

 AzucenaPalomoobtainedaP100,000loanfromTaiTongChuacheInc.(TTCC)
and executed a mortgage over the land and the building in favor of Tai Tong
Chuache&Co.assecurityofpayment.
ArsenioChua, representative of TTCC, insured the latter's interest
withTravellersMultiIndemnityCorporation(Travellers)forP100,000.
Pedro Palomo secured a Fire Insurance Policy, covering the building with
respondent Zenith Insurance Corporation (ZIC). AnotherFire
InsurancePolicywaslater procured from respondent Philippine British
AssuranceCompany(PBAC).
OnJuly31,1975,thebuildingandthecontentsweretotallyrazedbyfire.
o Basedonthecomputationoftheloss,respondents,ZIC,PBAC,andSSSpaid
theircorrespondingsharesoftheloss.
DemandwasmadefromrespondentTravellersforitsshareinthelossbutwas
refused. Hence, complainants demanded from the other 3 respondents the
balanceofeachshareinthelossbasedonthecomputationexcludingTravellers
MultiIndemnityintheamountofP30,894.31butwasrefused.
Answersbyinsurers:
o PBAC and ZIC denied liability on the ground that the claim of the
complainantshadalreadybeenwaived,extinguishedorpaid.
o SSS balance had been paid in the amount of in full, based on the
assessmentofthecosts
o Travellers admitted the issuance of Fire PolicyNo. 599 DV, covering the
furniture and building of complainants was secured by a certainArsenio
Chua,mortgagecreditor,forthepurposeofprotectinghismortgagecredit
againstthecomplainants.
That said policy was issued in the name of Azucena Palomo, only to
indicatethatsheownstheinsuredpremises.
That policy contains an endorsement in favor of Arsenio Chua as his
mortgage interest may appear to indicate that insured was Arsenio
Chuaandthecomplainants.
That that the premium due on said fire policy was paid by Arsenio
Chua.
ThatrespondentTravellersisnotliabletopaycomplainants.
TaiTongChuache&Co.filedacomplaintininterventionclaimingtheproceeds
ofthefireInsurancePolicyissuedbyTravellers.
InsuranceCommissiondismissedspousesPalomos'complaintontheground
that the insurance policy subject of the complaint was taken out by Tai Tong
Chuache & Company for its own interest only as mortgagee of the insured
propertyandthuscomplainantasmortgagorsoftheinsuredpropertyhaveno
rightofactionagainsthereinrespondent.
ISSUE:
WhetherornotpetitionerTaiTonghasinsurableinterestinthesaidpolicy.YES
HELD:
Appealed decision SETASIDE and ANOTHERjudgmentisrenderedorderprivate
respondent Travellers to paypetitioner the facevalue of FireInsurance Policy in
theamountofP100,000.
RATIO:
1. Respondent Insurance Commission based its findings on mere inference.
Respondent Insurance Commission absolved respondent insurance company
from liability on the basis of the certification issued by the then CFI, that in a
certain civil action against the Palomos, Arsenio Lopez Chuastands asthe
complainant and not Tai Tong Chuache.From said evidence respondent
commission inferred that the credit extended by herein petitioner to the
Palomossecuredbytheinsuredpropertymusthavebeenpaid.Suchisaglaring
errorwhichthisCourtcannotsanction.
2. Ithasbeenheldinalonglineofcasesthatwhenthecreditorisinpossessionof
the document ofcredit,heneednot provenonpaymentfor itis presumed. The
validityoftheinsurancepolicytakenbypetitionerwasnotassailedbyprivate
respondent.Moreover,petitioner'sclaimthattheloanextendedtothePalomos
hasnotyetbeenpaidwascorroboratedbyAzucenaPalomowhotestifiedthat
theyarestillindebtedtohereinpetitioner.Soatthetimeofthefire,petitioner
asmortgageestillhadinsurableinteresttherein.
3. TTCC'sdeclarationthatArsenioLopezChuaactsasthemanagingpartnerofthe
partnership was corroborated by respondent insurance company.Thus
Chuaasthe managing partner of the partnership may execute all acts
ofadministration,includingtherighttosuedebtorsofthepartnershipincaseof
theirfailuretopaytheirobligationswhenitbecamedueanddemandable.Orat
theleast,ChuabeingapartnerofpetitionerTaiTongChuache&Companyisan
agentofthepartnership.Beinganagent,itisunderstoodthatheactedforandin
behalfofthefirm.
13.PASCUALV.COMMISSIONEROFINTERNALREVENUE(IE)
Petitioners:MARIANOP.PASCUALandRENATOP.DRAGON
Respondents: THE COMMISSIONER OF INTERNAL REVENUE and COURT OF
TAXAPPEALS
G.R.No.78133October18,1988
GANCAYCO,J.:
Relevant Issue: The distinction between coownership and an unregistered
partnershiporjointventureforincometaxpurposesistheissueinthispetition.
FACTS:
Petitionermadetheff.transactions:
o June22,1965boughttwo(2)parcelsoflandfromSantiagoBernardino,et
al.
o SoldtoMarenirDevelopmentCorporation(1968)
o RealizedanetprofitofP165,224.70
May28,1966boughtanotherthree(3)parcelsoflandfromJuanRoque.
o SoldtoErlindaReyesandMariaSamson(1970)
o RealizedanetprofitofP60,000.00
The corresponding capital gains taxes (for the sale of land) were paid by
petitionersin1973and1974byavailingofthetaxamnestiesgrantedinthesaid
years
However, in a letter made by then Acting BIR Commissioner Efren I. Plana,
petitionerswereassessedandrequiredtopayatotalamountofP107,101.70as
allegeddeficiencycorporateincometaxesfortheyears1968and1970.
2

 Petitioners protested the said assessment in a letter of June 26, 1979 asserting
thattheyhadavailedoftaxamnestieswaybackin1974.
InareplyofAugust22,1979,respondentCommissionerinformedpetitioners
o thatintheyears1968and1970,petitionersascoownersintherealestate
transactionsformedanunregisteredpartnershiporjointventuretaxableas
a corporation under Section 20(b) and its income was subject to the taxes
prescribedunderSection24,bothoftheNationalInternalRevenueCode
o that the unregistered partnership was subject to corporate income tax as
distinguished from profits derived from the partnership by them which is
subjecttoindividualincometax;and
o that the availment of tax amnesty under P.D. No. 23, as amended, by
petitionersrelievedpetitionersoftheirindividualincometaxliabilitiesbut
did not relieve them from the tax liability of the unregistered partnership.
Hence, the petitioners were required to pay the deficiency income tax
assessed.
PetitionersfiledapetitionforreviewwiththerespondentCourtofTaxAppeals,
thelatteraffirmedthedecisionandactiontakenbyrespondentcommissioner
o It ruled that on the basis of the principle enunciated inEvangelista3an
unregistered partnership was in fact formed by petitioners which like a
corporationwassubjecttocorporateincometaxdistinctfromthatimposed
onthepartners.
ISSUEs:
WONPetitionersformedanunregisteredpartnershipsubjecttoCorporate
IncomeTax(NO)
WONRespondentcourterredinrulingthatthetaxamnestydidnotrelieve
thepetitionersfrompaymentofothertaxesfortheperiodcoveredbysuch
amnesty.(YES)
RATIO:
The basis of the subject decision of the respondent court is the ruling of this
Court inEvangelista.(the court basically reiterated the Evangelista Decision as
intro)
In the present case, there is no evidence that petitioners entered into an
agreement to contribute money, property or industry to a common fund, and
thattheyintendedtodividetheprofitsamongthemselves.
o Respondent commissioner and/ or his representative just assumed these
conditionstobepresentonthebasisofthefactthatpetitionerspurchased
certainparcelsoflandandbecamecoownersthereof.
In Evangelista,there was a series of transactions where petitioners purchased
twentyfour (24) lotsshowing that the purpose was not limited to the
conservation or preservation of the common fund or even the properties
acquired by them.The character of habituality peculiar to business transactions
engagedinforthepurposeofgainwaspresent.
Intheinstantcase,petitionersboughttwo(2)parcelsoflandin1965.Theydid
not sell the same nor make any improvements thereon. In 1966, they bought
another three (3) parcels of land from one seller. It was only 1968 when they
soldthetwo(2)parcelsoflandafterwhichtheydidnotmakeanyadditionalor
newpurchase.Theremainingthree(3)parcelsweresoldbythemin1970.The
transactions were isolated. The character of habituality peculiar to business
transactionsforthepurposeofgainwasnotpresent.
InEvangelista,thepropertieswereleasedouttotenantsforseveralyears.The
business was under the management of one of the partners. Such condition
existedforoverfifteen(15)years.Noneofthecircumstancesarepresentinthe
caseatbar.Thecoownershipstartedonlyin1965andendedin1970.
Thus,intheconcurringopinionofMr.JusticeAngeloBautistainEvangelistahe
said:(JustincaseSirwillask)
o IwishhowevertomakethefollowingobservationArticle1769ofthenew
CivilCodelaysdowntherulefordeterminingwhenatransactionshouldbe
deemedapartnershiporacoownership.Saidarticleparagraphs2and3,
(SeeArt.1769)
o Fromthearticleitappearsthatthefactthatthosewhoagreetoformaco
ownershipshareordonotshareanyprofitsmadebytheuseoftheproperty
held in common does not convert their venture into a partnership. Or the
sharingofthegrossreturnsdoesnotofitselfestablishapartnershipwhether
ornotthepersonssharingthereinhaveajointorcommonrightorinterestin
theproperty.Thisonlymeansthat,asidefromthecircumstanceofprofit,the
presenceofotherelementsconstitutingpartnershipisnecessary,suchasthe
clear intent to form a partnership, the existence of a juridical personality
differentfromthatoftheindividualpartners,andthefreedomtotransferor
assignanyinterestinthepropertybyonewiththeconsentoftheothers.Itis
evidentthatanisolatedtransactionwherebytwoormorepersonscontribute
funds to buy certain real estate for profit in the absence of other
circumstances showing a contrary intention cannot be considered a
partnership.
Thesharingofreturnsdoesnotinitselfestablishapartnershipwhetherornot
the persons sharing therein have a joint or common right or interest in the
property.Theremustbeaclearintenttoformapartnership,theexistenceofa
juridicalpersonalitydifferentfromtheindividualpartners,andthefreedomof
eachpartytotransferorassignthewholeproperty.
In the present case, there is clear evidence of coownership between the
petitioners. There is no adequate basis to support the proposition that they
therebyformedanunregisteredpartnership.
Thetwoisolatedtransactionswherebytheypurchasedpropertiesandsoldthe
sameafewyearsthereafterdidnottherebymakethempartners.Theyshared
inthegrossprofitsascoownersandpaidtheircapitalgainstaxesontheirnet
profitsandavailedofthetaxamnestythereby.
Under the circumstances, they cannot be considered to have formed an
unregistered partnership which is thereby liable for corporate income tax, as
therespondentcommissionerproposes.
FORISSUE#2:
Andevenassumingforthesakeofargumentthatsuchunregisteredpartnership
appears to have been formed, since there is no such existing unregistered
partnershipwithadistinctpersonalitynorwithassetsthatcanbeheldliablefor
said deficiency corporate income tax, then petitioners can be held individually
liable as partners for this unpaid obligation of the partnership.However, as
petitionershaveavailedofthebenefitsoftaxamnestyasindividualtaxpayersin
thesetransactions,theyaretherebyrelievedofanyfurthertaxliabilityarising
therefrom.


WHEREFROM, the petition is hereby GRANTED and the decision of the
respondentCourtofTaxAppealsofMarch30,1987isherebyREVERSEDandSET
ASIDE and another decision is hereby rendered relieving petitioners of the
corporateincometaxliabilityinthiscase,withoutpronouncementastocosts.
14.FORTISV.GUTIERREZHERMANOS(PR)
6Phil100
April11,1906
Willard,J.:
FACTS:
FortisistheemployeeofGutierrezHermanosfrom19001902.Hebroughtthis
actiontorecoverabalanceduehimassalaryfortheyear1902.
Inthecomplaint:
o Heallegedthathewasentitled,assalary,to5percentofthenetprofitsofthe
business ofthedefendantsGutierrezHermanosforsaidyear.
o Therewasalsoacauseofactionforthesumof600pesos,moneyexpended
byFortis forthedefendantsduringtheyear1903.
The court rendered judgment saying that the contract had been made as
claimedbyFortis:.
5% of the net profits of the business for 1902 amounted to 26,378.68 pesos,
Mexicancurrency
BUTFortisreceivedonaccountofsuchsalaryonly12,811.75pesos,Mexican
and the court ordered judgment against the defendants for the sum 13,566.93
pesos,Mexicancurrency,withinterestthereonfromDecember31,1904.
o thecourtalsoordereddefendantstopayFortisthe600pesosmentionedin
the complaint.
o Total judgment rendered against defendant in favor of plaintiff (when
reducedto Philippinecurrency)amountedtoP13,025.40.
ISSUES:
A.W/NthecontractmadeFortisacopartner,asallegedbythedefendants.NO.
B.W/NdefendantsareliabletoFortisforthe600pesosthelatteradvancedin1903.
YES.
HELD:
A.
Thereissufficientevidencetosupportthecourt'sfindingthatFortisworkedfor
the defendants during the year 1902 under a contract by which he was to
receiveascompensation5percentofthenetprofitsofthebusiness.
The contract was made on the part of the defendants by Miguel Alonzo
Gutierrez. By the provisions of the articles of partnership he (Miguel Alonzo
Gutierrez) was made one of the managers of the company, with full power to
transactallofthebusinessthereof.Assuchmanagerhehadauthoritytomakea
contractofemploymentwithFortis.
Thus, the contract entered into by Fortis and Gutierrez was merely one of
employment.
Fortishadnovoicenorvoteinthemanagementoftheaffairsofthecompany.
The fact that the salary of Fortis was to be determined with reference to the
profitsmadebythedefendantsintheirbusinessdidnotinanysensemakebya
partnertherein.
The articles of partnership between the defendants provided that the profits
should be divided among the partners named in a certain proportion. The
contract made between the plaintiff and the then manager of the defendant
partnership did not in any way vary or modify thisprovision of the articles of
partnership.
o Theprofitsofthebusinesscouldnotbedetermineduntilalltheexpenses
hadbeenpaid.
o Apartoftheexpensestobepaidfor1902wasFortis'salary.
o Said salary had to be first deducted before the net profits of the business,
whichwereto bedividedamongthepartners,couldbeascertained.
o It was undoubtedly necessary in order to determine what the salary of the
plaintiffwas, to determine what the profits of the business were,
afterpayingalloftheexpenses except his, but that determination was
notthefinaldeterminationofthenetprofitsofthe business. It was
made for the purpose of fixing the basis upon which his compensation
shouldbedetermined.
B.
Inreferencetothecauseofactionrelatingtothe600pesos,itappearsthatthe
FortisleftforHongKongonMarch19,1903atthedefendants'request,andwas
thereforabouttwomonthslookingafterthebusinessofthedefendantsinthe
matter of the repair of a certain steamship. The defendant appellants
(Gutierrez Hermanos) in their brief say that the plaintiff is entitled to no
currency,
compensation for his services thus rendered, because by the provisions of
article 1711 of the Civil Code, in the absence of an agreement to the contrary,
thecontractofagencyissupposedtobegratuitous.
Saidarticleisnotapplicabletothiscase,becausetheamountof600pesosnot
claimed as compensation for services but as a reimbursment for money
expended by the plaintiff in the business of the defendants. The article of the
codethatisapplicableisarticle1728.
15.DELUAOV.CASTEEL(GP)
G.R.No.L21906December24,1968
INOCENCIADELUAOandFELIPEDELUAOplaintiffsappellees,
vs.
NICANORCASTEELandJUANDEPRA,defendants,
NICANORCASTEEL,defendantappellant.
AportaderaandPalabricaandPelaez,JalandoniandJamirplaintiffsappellees.
RuizLawOfficesfordefendantappellant.
CASTRO,J.:
4

Facts:
1. In 1940 and during the Japanese Occupation, Nicanor Casteel filed a fishpond
applicationforabigtractofswampylandinthethenSitioofMalalag,Davao.No
actionwastakenthereonbytheauthoritiesconcerned.
2. In 1945 he filed a third fishpond application for the same area, which, after a
survey,wasfoundtocontain178.76hectares.Uponinvestigationconductedby
a representative of the Bureau of Forestry, it was discovered that the area
applied for was still needed for firewood production. Hence, this third
applicationwasdisapproved.
3. Despite the said rejection, Casteel did not lose interest. So he filed a new
applicationin1947.
4. Meanwhile, several applications were submitted by other persons for portions
of the area covered by Casteel's application. (numerous people not important
except)
a. In 1948 Felipe Deluao filed his own fishpond application for the area
coveredbyCasteel'sapplication.
5. Casteel realized the urgent necessity of expanding his occupation thereof by
constructing dikes and cultivating marketable fishes. But lacking financial
resourcesatthattime,hesoughtfinancialaidfromhisuncleFelipeDeluaowho
thenextendedloansforP27,000.Hence,awideproductivefishpondwasbuilt.
6. Casteel immediately filed the corresponding protests. Consequently, two
administrativecasesensuedinvolvingtheareainquestion
a. However, despite the finding made in the investigation of the above
administrativecasesthatCasteelhadalreadyintroducedimprovementson
portions of the area applied for by him, the Director of Fisheries
neverthelessrejectedCasteel'sapplication,requiredhimtoremoveallthe
improvementswhichhehadintroducedontheland,andorderedthatthe
landbeleasedthroughpublicauction.CasteelappealedtotheSecretaryof
AgricultureandNaturalResources.
7. In1949InocenciaDeluao(wifeofFelipeDeluao)andNicanorCasteelexecuted
a contract denominated a "contract of service" the salient provisions of
whichareasfollows:
a. That Deluao in consideration of the mutual covenants and agreements
made herein to Casteel, hereby enter into a contract of service, whereby
DeluaohiresandemploysCasteelonthefollowingtermsandconditions,to
wit:
i. That Deluao will finance as she has hereby financed the sum of
(P27,000.00), to Casteel who renders only his services for the
constructionandimprovementsofafishpond
ii. ThatDeluaowillbetheManagerandsolebuyerofalltheproduceofthe
fishthatwillbeproducedfromsaidfishpond;
iii. ThatDeluaowillbetheadministratorofthesame
8. In1950theSecretaryofAgricultureandNaturalResourcesissuedadecision:
a. In view of all the foregoing considerations, application of Nicanor Casteel
shouldbe,reinstatedandgivenduecoursefortheareaindicated
9. In 1951 Nicanor Casteel forbade Inocencia Deluao from further administering
thefishpond,andejectedthelatter'srepresentative
10. Allegingviolationofthecontractofservice,FelipeDeluaoandInocenciaDeluao,
filed an action in the Court of First Instance of Davao for specific performance
anddamagesagainstNicanorCasteel
11. On the scheduled date of hearing, the lower court directed the plaintiffs to
introducetheirevidenceexparte,therebeingnoappearanceonthepartofthe
defendants or their counsel. On the basis of the plaintiffs' evidence, a decision
wasrenderedthedispositiveportionofwhichreadsasfollows:(it'sinSpanish)
a. ENSUVIRTUD,elJuzgadodictadedecisionafavordelosdemandantesy
encontradeldemandadoNicanorCasteel:(I'mguessinginfavorofDeluao)
12. The defendant Casteel filed a petition for relief from the foregoing decision,
alleging lack of knowledge of the order of the court a quo setting the case for
trial.Thepetition,however,wasdenied
Issues:
1. Whetherthelowercourtcommittedgrossabuseofdiscretionwhenitordered
receptionoftheappellees'evidenceintheabsenceoftheappellantatthetrial
No
2. Whether the lower court committed grave abuse of discretion when it denied
theverifiedpetitionforrelieffromjudgmentfiledbytheappellantNo
3. Whether the lower court erred in ordering the issuance ex parte of a writ of
preliminaryinjunctionagainstdefendantappellantYes
Ratio:
1. Thefirstandsecondissuesmustberesolvedagainsttheappellant.
The record indisputably shows that in the order given in open court on
March 21, 1956, the lower court set the case for hearing on May 2 and 3,
1956at8:30o'clockinthemorningandempathicallystatedthat,sincethe
case had been pending since April 3, 1951, it would not entertain any
furthermotionfortransferofthescheduledhearing.
An order given in open court is presumed received by the parties on the
verydateandtimeofpromulgationandamountstoalegalnotificationfor
alllegalpurposes.
The appellant's statement that parties as a matter of right are entitled to
noticeoftrial,iscorrect.Buthewasproperlyaccordedthisright.
2.Finally,theappellantcontendsthatthelowercourtincurredanerrorinordering
the issuance ex parte of a writ of preliminary injunction against him, and in not
dismissingtheappellee'scomplaint.Wefindthiscontentionmeritorious.
Apparently,thecourtaquoreliedonthesocalled"contractofservice"and
the appellees' contention that it created a contract of coownership and
partnershipbetweenInocenciaDeluaoandtheappellantoverthefishpond
inquestion.
Toowellsettledistherulethateveryoneisconclusivelypresumedtoknow
the law. It must be assumed, conformably to such rule, that the parties
enteredintothesocalled"contractofservice"cognizantofthemandatory
and prohibitory laws governing the filing of applications for fishpond
permits. This view must perforce negate the appellees' allegation that the
contract created a contract of coownership between the parties over the
disputedfishpond.
Weshallthereforeconstruethecontractasoneofpartnership,dividedinto
two parts namely, a contract of partnership to exploit the fishpond
pendingitsawardtoeitherFelipeDeluaoorNicanorCasteel,andacontract

 ofpartnershiptodividethefishpondbetweenthemaftersuchaward.The
firstisvalid,thesecondillegal.
Clearly, although the fishpond was then in the possession of Casteel,
neitherhenor,FelipeDeluaowastheholderofafishpondpermitoverthe
area. But be that as it may, they were not however precluded from
exploiting the fishpond pending resolution of Casteel's appeal or the
approvalofDeluao'sapplication.
Theevidencepreponderatesinfavoroftheviewthattheinitialintentionof
thepartieswasnottoformacoownershipbuttoestablishapartnership
InocenciaDeluaoascapitalistpartnerandCasteelasindustrialpartner
the ultimate undertaking of which was to divide into two equal parts
suchportionofthefishpondasmighthavebeendevelopedbytheamount
extendedbytheplaintiffsappellees,withthefurtherprovisionthatCasteel
should reimburse the expenses incurred by the appellees over onehalf of
thefishpondthatwouldpertaintohim.
Pursuant to the foregoing suggestion of the appellant that a document be
drawn evidencing their partnership, the appellee and the appellant
executedthecontractwhich,althoughdenominateda"contractofservice,"
wasactuallythememorandumoftheirpartnershipagreement.
Further exchanges of letters between the parties reveal the continuing
intenttodividethefishpond.Inaletter,theappellantsuggestedthatthey
divide the fishpond and the remaining capital, and offered to pay the
DeluaosayearlyinstallmentofP3,000.Twodayslater,theappelleereplied,
expressing his concurrence in the appellant's suggestion and advising the
lattertoaskforareconsiderationoftheorderoftheDirectorofFisheries
disapproving his (appellant's) application, so that if a favorable decision
wassecured,thentheywoulddividethearea.
Thearrangementunderthesocalled"contractofservice"continueduntil
the decisions were issued by the Secretary of Agriculture and Natural
Resources in DANR. This development, by itself, brought about the
dissolution of the partnership. Moreover, subsequent events likewise
revealtheintentofbothpartiestoterminatethepartnershipbecauseeach
refusedtosharethefishpondwiththeother.
Art. 1830(3) of the Civil Code enumerates, as one of the causes for the
dissolutionofapartnership,"...anyeventwhichmakesitunlawfulforthe
businessofthepartnershiptobecarriedonorforthememberstocarryit
oninpartnership."
o The approval of the appellant's fishpond application by the decisions
inDANRbroughttotheforeseveralprovisionsoflawwhichmadethe
continuationofthepartnershipunlawfulandthereforecauseditsipso
factodissolution.
Act 4003, known as the Fisheries Act, prohibits the holder of a fishpond
permitfromtransferringorsublettingthefishpondgrantedtohim,without
the previous consent or approval of the Secretary of Agriculture and
NaturalResources.
Sec.40ofCommonwealthAct141,otherwiseknownasthePublicLandAct,
likewiseprovidesthat
o Thelesseeshallnotassign,encumber,orsublethisrightswithoutthe
consent of the Secretary of Agriculture and Commerce, and the
violationofthisconditionshallavoidthecontract;
Finally, section 37 of Administrative Order No. 14 of the Secretary of
Agriculture and Natural Resources issued in August 1937, prohibits a
transfer or sublease unless first approved by the Director of Lands and
undersuchtermsandconditionsashemayprescribe.
Sincethepartnershiphadforitsobjectthedivisionintotwoequalpartsof
the fishpond between the appellees and the appellant after it shall have
been awarded to the latter, and therefore it envisaged the unauthorized
transfer of onehalf thereof to parties other than the applicant Casteel, it
was dissolved by the approval of his application and the award to him of
the fishpond. The approval was an event which made it unlawful for the
businessofthepartnershiptobecarriedonorforthememberstocarryit
oninpartnership.
However, assuming in gratia argumenti that the approval of Casteel's
application, coupled with the foregoing prohibitory laws, was not enough
to cause the dissolution ipso facto of their partnership, succeeding events
revealtheintentofbothpartiestoterminatethepartnershipbyrefusingto
sharethefishpondwiththeother.
o Casteel wrote the appellee Inocencia Deluao, expressing his desire to
divide the fishpond so that he could administer his own share, such
division to be subject to the approval of the Secretary of Agriculture
andNaturalResources.
o TheappellantwrotealastlettertotheappelleeFelipeDeluaowherein
the former expressed his determination to administer the fishpond
himself because the decision of the Government was in his favor and
the only reason why administration had been granted to the Deluaos
wasbecausehewasindebtedtothem.
Inasmuch as the erstwhile partners articulated in the aforecited letters
theirrespectiveresolutionsnottosharethefishpondwitheachotherin
direct violation of the undertaking for which they have established their
partnershipeachmustbedeemedtohaveexpresslywithdrawnfromthe
partnership,therebycausingitsdissolutionpursuanttoart.1830(2)ofthe
Civil Code which provides, inter alia, that dissolution is caused "by the
expresswillofanypartneratanytime."
Inthecaseatbar,theSecretaryofAgricultureandNaturalResourcesgave
duecoursetotheappellant'sfishpondapplicationandawardedtohimthe
possessionoftheareainquestion.InviewofthefinalityoftheSecretary's
decision, and considering the absence of any proof that the said official
exceeded his statutory authority, exercised unconstitutional powers, or
actedwitharbitrarinessandindisregardofhisduty,orwithgraveabuseof
discretion, we can do no less than respect and maintain unfettered his
officialactsinthepremises.
Therefore,withtheviewthatwetakeofthiscase,andevenassumingthat
the injunction was properly issued because present all the requisite
grounds for its issuance, its continuation, and, worse, its declaration as
permanent, was improper in the face of the knowledge later acquired by
the lower court that it was the appellant's application over the fishpond
whichwasgivenduecourse.
However, pursuant to our holding that there was a partnership between
the parties for the exploitation of the fishpond before it was awarded to
Casteel,thiscaseshouldberemandedtothelowercourtforthereception

 of evidence relative to an accounting from November 25, 1949 to
September 15, 1950, in order for the court to determine (a) the profits
realized by the partnership, (b) the share (in the profits) of Casteel as
industrial partner, (e) the share (in the profits) of Deluao as capitalist
partner,and(d)whethertheamountstotallingaboutP27,000advancedby
Deluao to Casteel for the development and improvement of the fishpond
havealreadybeenliquidated.Besides,sincetheappelleeInocenciaDeluao
continued in possession and enjoyment of the fishpond even after it was
awarded to Casteel, she did so no longer in the concept of a capitalist
partner but merely as creditor of the appellant, and therefore, she must
likewise submit in the lower court an accounting of the proceeds of the
salesofallthefishesharvestedfromthefishpondfromSeptember16,1950
untilCasteelshallhavebeenfinallygiventhepossessionandenjoymentof
thesame.IntheeventthattheappelleeDeluaohasreceivedmorethanher
lawful credit of P27,000 (or whatever amounts have been advanced to
Casteel), plus 6% interest thereon per annum, then she should reimburse
theexcesstotheappellant.
ACCORDINGLY, the judgment of the lower court is set aside. Another judgment is
hereby rendered: (1) dissolving the injunction issued against the appellant, (2)
placingthelatterbackinpossessionofthefishpondinlitigation,and(3)remanding
thiscasetothecourtoforiginforthereceptionofevidencerelativetotheaccounting
that the parties must perforce render in the premises, at the termination of which
the court shall render judgment accordingly. The appellant's counterclaim is
dismissed.Nopronouncementastocosts.
16.LOZANAVS.DEPAKAKIBO(AJG)
GRNo.L13680|April27,1960
Petitioner:MauroLozana
Respondent:SerefinDepakakibo
PartnershipDoctrines:
Apartnershipmusthavealawfulobjectorpurpose:Theactofthepartnership
inoperatingunderthefranchiseofanotherpersonandsupplyingthatpersonwith
theirbusinesswithouttheapprovalofthePublicServiceCommissionisnotillegal,
contrarytolawandpublicpolicysuchastomakethecontractvoidabinitio.
ConTRIbutions by the partners: Once property is contributed, it becomes the
property of the partnership, and as such, it could not be disposed of the party
contributingthesamewithouttheconsentorapprovalofthepartnership.
Labrador,J.:
FactualAntecedence
On November 17, 1954, Lozana entered into a contract of partnership with
Depakakibo,forthepurposeofmaintaining,operating,anddistributingelectric
lightandpowerinDumangas,Iloilo.
o 30,000 capital, Lozana contributed 60% while Depakakibo contributed
40%.
o Lozana also contributed a Generator Buda (diesel) and some other
equipment (wooden posts), while Depakakibo contributed electric wires
forinstallationindeliverylines.
TheyoperatedunderafranchisegrantedtoMrs.PiadrosaBuenaflor.
ThisfranchisewascancelledandrevokedbyPublicServiceCommissiononMay
15,1955.
Because of the cancellation, (cancellation of franchise, not dissolution or
windingupofthepartnership.Thepartnershipstillsubsists)LozanaSOLDthe
Generator Buda to Olimpia Decolongon on October 30, 1955. Olimpia
Decolongan was thereafter granted a temporary certificate of public
conveniencebyPublicServiceCommission.
Lozanabroughtanactionforreconveyanceagainstthedefendant,allegingthat
he is the owner of the Generator Buda and 70 wooden posts, and that he is
entitledtothepossessionthereof,butthatthedefendanthaswrongfullydetained
them.
In his counterclaim, Depakakibo countered alleging that those items indeed
belong to the plaintiff, but those had been contributed by the plaintiff to the
partnership, therefore he is not unlawfully detaining them. He also added that
plaintiff sold his contribution to the partnership, in violation of the terms of
theiragreement.
Issue/Held
1. Whether or not plaintiff violated the terms of the partnership by selling his
contributionwithouttheconsentofthepartnerYES
2. WhetherornotthepartnershipisillegalandthereforevoidabinitioNO.
Rationale
FIRSTISSUE(Article17841809issue)
Itappearsfromtherecordthatthetwoenteredintoacontractofpartnership.
It is not stated that the partnership assets have already been liquidated at the
timeofthesaleoftheBudaDieselEngine.
Becauseofsuch,theenginehadbecomethepropertyofthepartnership.As
properties of the partnership, the same could not be disposed of by the party
contributingthesamewithouttheconsentorapprovalofthepartnershiporof
theotherpartner.
SECONDISSUE(Article1770)
Wereversetherulingofthelowercourtdeclaringthepartnershipvoidabinitio.
Operating under the franchise belonging to another person (Mrs. Buenaflor)
doesnotmaketheagreementillegalorcontrarytolawandpublicpolicy.
The fact of furnishing electric current to the holder of the franchise alone,
without previous approval of the Public Service Commission, does not per se
makethecontractofpartnershipnullandvoid
Moreover, the partnership is also NOT void pursuant to the fact that during
cross examination, defendant admitted that he and plaintiff are dummies
(pursuanttoAntiDummyLaw).However,thisisjustanerroroflawandnota
statementoffact.TheAntiDummylawhasnotbeenviolatedbecausesuchlaw
refersonlytoaliens.PetitionerandrespondentarebothFilipinos.
7

17.KIELV.HEIRSOFP.S.SABERT(RK)
G.R.No.21639||September25,1924
ALBERTF.KIEL,plaintiffappellee,
vs.
ESTATEOFP.S.SABERT,defendantappellant.
MALCOLM,J.:
Partnership; Proof of Partnership; Declarations and Admissions The
declaration of one partner, not made in the presence of his copartner, are not
competent to prove the existence of a partnership between them as against such
other partner. The existence of a partnership cannot be established by general
reputation,rumor,orhearsay.
Id.;Id.;IntentionofPartiestoGovernTheintentionoftheparties,asgathered
fromthefactsandasascertainedfromtheirlanguageandconduct,shouldbesought
outandthengiveneffect.
Id.; Id.; Id.; Case at Bar That, applying the tests as to the existence of a
partnership,competentevidenceexistestablishingtheverbalpartnershipformedby
KielandSaber,andthatKielhaslegalrighttoaskforanaccountingwithreferenceto
theimprovementsandpersonalpropertyonthelandasofthedateuponwhichhe
lefttheplantationinthehandsofSabertastrustee.
FACTS: In 1907, Albert F. Kiel along with William Milfeil commenced to work on
certain public lands situated in the municipality of Parang, Province of Cotabato,
known as Parang Plantation Company. Kiel subsequently took over the interest of
Milfeil. In 1910, Kiel and P. S. Sabert entered into an agreement to develop the
ParangPlantationCompany.Sabertwastofurnishthecapitaltoruntheplantation
and Kiel was to manage it. They were to share and share alike in the property. It
seems that this partnership was formed so that the land could be acquired in the
name of Sabert, Kiel being a German citizen and not deemed eligible to acquire
publiclandsinthePhilippines.
Byvirtueoftheagreement,from1910to1917,Kielworkeduponanddevelopedthe
plantation.DuringtheWorldWar,hewasdeportedfromthePhilippines.
On August 16, 1919, five persons, including P. S. Sabert, organized the Nituan
Plantation Company, with a subscribed capital of P40,000. On April 10, 1922, P. S.
Saberttransferredallofhisrightsintwoparcelsoflandsituatedinthemunicipality
of Parang, Province of Cotabato, embraced within his homestead application No.
21045andhispurchaseapplicationNo.1048,inconsiderationofthesumofP1,to
theNituanPlantationCompany.
Inthissameperiod,KielappearstohavetriedtosecureasettlementfromSabert.At
leastinaletterdatedJune6,1918,SabertwroteKielthathehadoffered"tosellall
property that I have for P40,000 or take in a partner who is willing to develop the
plantation,totakeuptheK.&S.debtnomatterwhichwayIwillstraightenoutwith
you." But Sabert's death came before any amicable arrangement could be reached
and before an action by Kiel against Sabert could be decided. Thus, these
proceedingsagainsttheestateofSabert.
LOWERCOURTRULEDINFAVOURofKIEL,PSSaubertAppealsthedecisionhere.
ISSUE: Whether (1) There was a resulting Trust; (2) whether testimony of the
Plaintiffshouldbeadmitted;(3)WhetherAcopartnershipExisted.
HELD:Thereisapartnership;buttherecordsareremandedforfurtherhearingwith
regardthepropershare.(DISPOSITIVE:Thejudgmentappealedfromissetasideand
the record is returned to the lower court where the plaintiff, if he so desires, may
proceedfurthertoprovehisclaimagainsttheestateofP.S.Sabert.Withoutcosts.So
ordered)
RATIO:
1. IssueonTRUST:
a. Thepartiesarewronginassumingthatthetrialjudgefoundthatthiswas
an action to establish a resulting trust in land. In reality, all that the trial
judgedidwastogroundonepointofhisdecisiononanauthoritycoming
from the Supreme Court of California, which discussed the subject of
resultingtrusts.
2. IssueonTestimony:
a. KIEL A party to an action against an executor or administrator of a
deceasedperson,uponaclaimagainsttheestateofthelatter,isabsolutely
prohibitedbylawfromgivingtestimonyconcerningsuchclaimordemand
astoanythingthatoccurredbeforethedeathofthepersonagainstwhose
estatetheactionisprosecuted."
b. OTHERSThetestimonyofotherwitnessespresentedbyplaintiffwith
reference to the acts or declarations of Sabert was, therefore, properly
receivedforwhatevertheymightbeworth.
3. EXISTENCEOFPARTNERSHIP(IMPORTANTPART)
a. NopartnershipagreementinwritingwasenteredintobyKielandSabert
b. The question consequently is whether or not the alleged verbal
copartnershipformedbyKielandSaberthasbeenproved,ifweeliminate
the testimony of Kiel and only consider the relevant testimony of other
witnesses.
i. In performing this task, we are not unaware of the rule of partnership
that the declarations of one partner, not made in the presence of his
copartner, are not competent to prove the existence of a partnership
betweenthemasagainstsuchotherpartner,andthattheexistenceofa
partnership cannot be established by general reputation, rumor, or
hearsay.
ii. BUT: The testimony of the plaintiff's witnesses, together with the
documentaryevidence,leavesthefirmimpressionwithusthatKieland
Sabertdidenterintoapartnership,andthattheyweretoshareequally.
1. Applying the tests as to the existence of partnership, we feel that
competent evidence exists establishing the partnership. Even more
primarythananyoftherulesofpartnershipaboveannounced,isthe
injunctiontoseekouttheintentionoftheparties,asgatheredfrom
the facts and as ascertained from their language and conduct, and
thentogivethisintentioneffect.
4. ErrorinjudgmentastoproperSHARE:
a. WedonotthinkthatKielisentitledtoanyshareinthelanditself,butwe
are of the opinion that he has clearly shown his right to onehalf of the
valueoftheimprovementsandpersonalpropertyonthelandastothedate
upon which he left the plantation. Such improvements and personal
property include buildings, coconut palms, and other plantings, cattle and
8

 other animals, implements, fences, and other constructions, as well as
outstanding collectible credits, if any, belonging to the partnership. The
value of these improvements and of the personal property cannot be
ascertainedfromtherecordandthecasemustthereforeberemandedfor
furtherproceedings.
18.AGADV.MABATO(MR)
No.L24193|June28,1968
Petitioner:MauricioAgad(partner)
Respondent:SeverinoMabato(partner)andMabato&AgadCompany(partnership)
Concepcion,C.J.
Facts
Agad filed a complaint against Mabato and the company with the following
allegationsandprayer:
He and Mabato arepursuant to a public instrumentpartners in a fishpond
business,tothecapitalofwhichbothcontributedPhp1k
He had the right to receive 50% of the profits; from 19521956, Mabato had
yearlyrenderedaccountsoftheoperations;
Despite demands, Mabato had failed and refused to render accounts for 1957
1963
Agadprayedthat
o judgment be rendered against Mabato to pay him his share in the
profitsforsaidperiod
o orderingthedissolutionofthepartnership,aswellasthewindingup
ofitsaffairsbyareceiver
Mabatosanswerandprayerandsubsequentmotiontodismiss:
deniedtheexistenceofthepartnership,becausethecontractwasnotperfected,
despite the execution of the public instrument because Agad failed to give his
Php1kcontributiontothecapital.
Mabatoprayedthatthecomplaintbedismissedandthatthepublicinstrument
bedeclaredvoid
Subsequently, Mabato filed a motion to dismiss because the complaint
statesnocauseofaction
Courtgrantedthemotiontodismiss,predicateduponthetheorythatthecontractof
partnershipisvoid,pursuanttoArt.1773ofourCivilCode,becauseaninventoryofthe
fishpondreferredinsaidinstrumenthadnotbeenattachedthereto.
Issue
WasthecontractvoidpursuanttoArt.1773?NO.
Ratio
(Read Art. 1773) The issue hinges on w/n immovable property was contributed.
Mabato alleged and the lower court held that its inconceivable to engage in a
fishpond business without contributing a fishpond, which is immovable property.
ButtheSCheldthattherewasnofishpondcontributed:
as stated in the public instrument, the partnership was established to
operateafishpond,nottoengageinafishpondbusiness
none of the partners contributed either a fishpond or a real right to any
fishpond.TheircontributionswerelimitedtothesumofPhp1keach
Article1773oftheCivilCodeisnotinpointandthat,theorderappealedfrom
should be, as it is hereby set aside and the case remanded to the lower court
forfurtherproceedings.
19.AURBACHV.SANITARYWARES(RC)
G.R.No.75875December15,1989
WOLRGANGAURBACH,JOHNGRIFFIN,DAVIDP.WHITTINGHAMandCHARLES
CHAMSAY,petitioners,
vs.
SANITARYWARESMANUFACTURINGCORPORATOIN,ERNESTOV.LAGDAMEO,
ERNESTOR.LAGDAMEO,JR.,ENRIQUER.LAGDAMEO,GEORGEF.LEE,RAULA.
BONCAN,BALDWINYOUNGandAVELINOV.CRUZ,respondents.
G.R.No.75951December15,1989
SANITARYWARESMANUFACTURINGCORPORATION,ERNESTOR.LAGDAMEO,
ENRIQUEB.LAGDAMEO,GEORGEFL.EERAULA.BONCAN,BALDWINYOUNG
andAVELINOV.CRUX,petitioners,
vs.
THECOURTOFAPPEALS,WOLFGANGAURBACH,JOHNGRIFFIN,DAVIDP.
WHITTINGHAM,CHARLESCHAMSAYandLUCIANOSALAZAR,respondents.
G.R.Nos.7597576December15,1989
LUCIANOE.SALAZAR,petitioner,
vs.
SANITARYWARESMANUFACTURINGCORPORATION,ERNESTOV.LAGDAMEO,
ERNESTOR.LAGDAMEO,JR.,ENRIQUER.LAGDAMEO,GEORGEF.LEE,RAULA.
BONCAN,BALDWINYOUNG,AVELINOV.CRUZandtheCOURTOF
APPEALS,respondents.
(Im really sorry. Ill read this case till I understand it. :)) Ill explain tomorrow.
PROMISE!)
TheseconsolidatedpetitionsseekthereviewoftheamendeddecisionoftheCourtof
AppealsinCAG.R.SPNos.XandYwhichsetasidetheearlierdecisiondatedJune5,
1986, of the then Intermediate Appellate Court and directed that (1) in all
subsequent elections for directors of Sanitary Wares Manufacturing Corporation
(Saniwares), American Standard Inc. (ASI) cannot nominate more than three
directors; (2) that the Filipino stockholders shall not interfere in ASI's choice of its
threenominees;(3)that,ontheotherhand,theFilipinostockholderscannominate
only six candidates and in the event they cannot agree on the six nominees, they

shall vote only among themselves to determine who the six nominees will be, with
cumulativevotingtobeallowedbutwithoutinterferencefromASI.
FACTS:
In 1961, Saniwares, a domestic corporation was incorporated for the primary
purpose of manufacturing and marketing sanitary wares. One of the
incorporators, Mr. Baldwin Young went abroad to look for foreign partners,
EuropeanorAmericanwhocouldhelpinitsexpansionplans.
OnAugust15,1962,ASI,aforeigncorporationfrominDelaware,USAentered
into an Agreement with Saniwares and some Filipino investors whereby ASI
and the Filipino investors agreed to participate in the ownership of an
enterprise which would engage primarily in the business of manufacturing in
thePhilippinesandsellinghereandabroadvitreouschinaandsanitarywares.
The parties agreed that the business operations in the Philippines shall be
carriedonbyanincorporatedenterpriseandthatthenameofthecorporation
shallinitiallybe"SanitaryWaresManufacturingCorporation."
This Agreement provided for (1) COMULATIVE VOTING FOR DIRECTORS, and
(2)BOARDOFDIRECTORSOF9INDIVIDUALS,and(3)AMERICANSTANDARD
OWN30%OFSTOCKandSHALLDESIGNATED3OFTHE9BOARDMEMBERS.,
theother6tobedesignatedbyotherstockholders.
Later,the30%capitalstockofASIwasincreasedto40%.Thecorporationwas
also registered with the Board of Investments for availment ofincentives with
theconditionthatatleast60%ofthecapitalstockofthecorporationbeowned
byPhilippinenationals.
Unfortunately, with the business successes, there came a deterioration of the
initiallyharmoniousrelationsbetweenthetwogroups.AccordingtotheFilipino
group, a basic disagreement was due to their desire to expand the export
operations of the company to which ASI objected as it apparently had other
subsidiaries of joint venture groups in the countries where Philippine exports
werecontemplated.
On March 8, 1983, the annual stockholders' meeting was held. The meeting
was presided by Baldwin Young. The minutes were taken by the Secretary,
AvelinoCruz.TheyheldtheELECTION,whichissubjectofcontroversy.
o The ASI group nominated three persons namely; Aurbach, Griffin and
Whittingham.
o The Philippine investors nominated six, namely; Lagdameo, Sr., Boncan,
Lagdameo, Jr., Lee, and Young. Ceniza (some other dude at the meeting)
thennominatedSalazar,whointurnnominatedMr.CharlesChamsay.
o But ASI objected to the last two nominations because Filipinos could only
nominate6.
SONOWTHEYREALLFIGHTING.SopetitionswerefiledwithSEC:
o The first petition filed was for preliminary injunction by Saniwares,
Lagdameo Sr., Young, Boncan, Lagdameo, Jr., and Lee against Luciano
SalazarandCharlesChamsay.ThecasewasdenominatedasSECCaseNo.Y.
o Thesecondpetitionwasforquowarrantoandapplicationforreceivership
byAurbach,Griffin,Whittingham,SalazarandChamsayagainstthegroupof
YoungandLagdameo(petitionersinCaseY)andAvelinoF.Cruz.Thecase
wasdocketedasSECCaseNo.X.
o Both sets of parties except for Avelino Cruz claimed to be the legitimate
directorsofthecorporation.
Thetwopetitionswereconsolidatedandtriedjointlybyahearingofficerwho
rendered a decision upholding the election of the Lagdameo Group and
dismissing the quo warranto petition of Salazar and Chamsay. The ASI Group
and Salazar appealed the decision to the SEC en banc which affirmed the
hearingofficer'sdecision.
Went to CA on two appeals. Then SC in a consolidated appeal, discussing both
CAcases.
ISSUE/HELD/RATIO:
(Sorryguys,theydiscussedalltheissuestogetherforbothappeals,Ijustorganized
themthebestwaypossible)
WHOSHOULDBEBOARDOFDIRECTORS?ANDWHY?
ThemainissuehingesonwhowerethedulyelecteddirectorsofSaniwaresfor
theyear1983duringitsannualstockholders'meetingheldonMarch8,1983.
(1)thenatureofthebusinessestablishedbythepartieswhether
itwasajointventureoracorporationand
(2)whetherornottheASIGroupmayvotetheiradditional10%
equityduringelectionsofSaniwares'boardofdirectors.
The rule is that whether the parties to a particular contract have thereby
establishedamongthemselvesajointventureorsomeotherrelationdepends
upon their actual intention which is determined in accordance with the
rulesgoverningtheinterpretationandconstructionofcontracts.
The "Agreement" dated August 15,1962 wherein it is clearly stated that the
parties'intentionwastoformacorporationandnotajointventure.
o LookintoprovisionsoftheAgreementaswellasthetestimonialevidence
presented by the Lagdameo and Young Group shows that the parties
agreedtoestablishajointventureandnotacorporation.
o ThehistoryoftheorganizationofSaniwaresandtheunusualarrangements
whichgovernitspolicymakingbodyareallconsistentwithajointventure
andnotwithanordinarycorporation.
o The unrebutted testimony of Mr. Baldwin Young, he negotiated the
Agreement with ASI in behalf of the Philippine nationals. He testified that
ASI agreed to accept the role of minority visavis the Philippine National
group of investors, on the condition that the Agreement should contain
provisionstoprotectASIastheminority.Forexample:
The vote of 7 out of 9 directors is required in certain enumerated
corporateacts
ASI is contractually entitled to designate a member of the Executive
Committee and the vote of this member is required for certain
transactions
o Premisesconsidered,webelievethatundertheAgreementthereare
two groups of stockholders who established a corporation with
provisionsforaspecialcontractualrelationshipbetweentheparties,
i.e.,ASIandtheotherstockholders
ASI in its communications referred to the enterprise as joint venture. Baldwin
Young also testified that Section 16(c) of the Agreement that "Nothing herein
containedshallbeconstruedtoconstituteanyofthepartiesheretopartnersor
jointventurersinrespectofanytransactionhereunder"wasmerelytoobviate
10

 the possibility of the enterprise being treated as partnership for tax purposes enterprisemustalwaysbetakenintoaccount,solongasthecompanyexistsunder
andliabilitiestothirdparties. itsoriginalagreement.CumulativevotingmaynotbeusedasadevicetoenableASI
Havingenteredintoawelldefinedcontractualrelationship,itisimperativethat to achieve stealthily or indirectly what they cannot accomplish openly. There are
the parties should honor and adhere to their respective rights and obligations substantialsafeguardsintheAgreementwhichareintendedtopreservethemajority
thereunder. status of the Filipino investors as well as to maintain the minority status of the
foreigninvestorsgroupasearlierdiscussed.Theyshouldbemaintained.
o Necessarily,theappellatecourtwascorrectinupholdingtheagreementof
thepartiesasregardstheallocationofdirectorseatsandtherightofeach
group of stockholders to cumulative voting in the process of determining WHEREFORE,thepetitionsinG.R.Nos.7597576andG.R.No.75875areDISMISSED
whothegroup'snomineeswouldbe. andthepetitioninG.R.No.75951ispartlyGRANTED.Theamendeddecisionofthe
o ToallowtheASIGrouptovotetheiradditionalequitytohelpelectevena CourtofAppealsisMODIFIEDinthatMessrs.WolfgangAurbachJohnGriffin,David
Filipino director who would be beholden to them would obliterate their Whittingham Emesto V. Lagdameo, Baldwin Young, Raul A. Boncan, Ernesto R.
minority status as agreed upon by the parties. As aptly stated by the Lagdameo,Jr.,EnriqueLagdameo,andGeorgeF.Leearedeclaredasthedulyelected
appellatecourt: directorsofSaniwaresattheMarch8,1983annualstockholders'meeting.Inallother
... ASI, however, should not be allowed to interfere in the voting respects,thequestioneddecisionisAFFIRMED.CostsagainstthepetitionersinG.R.
within the Filipino group. Otherwise, ASI would be able to Nos.7597576andG.R.No.75875.
designatemorethanthethreedirectorsitisallowedtodesignate SOORDERED.
under the Agreement, and may even be able to get a majority of
the board seats, a result which is clearly contrary to the
contractualintentoftheparties.
Such a ruling will give effect to both the allocation of the board
seatsandthestockholder'srighttocumulativevoting.Moreover,
thisrulingwillalsogivedueconsiderationtotheissueraisedby
the appellees on possible violation or circumvention of the Anti
Dummy Law (Com. Act No. 108, as amended) and the
nationalization requirements of the Constitution and the laws if
ASIisallowedtonominatemorethanthreedirectors.
o Equally important as the consideration of the contractual intent of the
parties is the consideration as regards the possible domination by the
foreign investors of the enterprise in violation of the nationalization
requirementsenshrinedintheConstitutionandcircumventionoftheAnti
Dummy Act. In this regard, petitioner Salazar's position is that the Anti
Dummy Act allows the ASI group to elect board directors in
proportion to theirshare in the capital of the entity. It is to be noted,
however, that the same law also limits the election of aliens as
members of the board of directors inproportion to their allowance
participationofsaidentity.
o In the instant case, the foreign Group ASI was limited to designate three
directors. This is the allowable participation of the ASI Group. Hence, in
futuredealings,thislimitationofsixtothreeboardseatsshouldalwaysbe
maintained as long as the joint venture agreement exists considering that
in limiting 3 board seats in the 9man board of directors there are
provisionsalreadyagreeduponandembodiedintheparties'Agreementto
protect the interests arising from the minority status of the foreign
investors.

TheinsinuationthattheASIGroupmaybeabletocontroltheenterpriseunderthe
cumulative voting procedure cannot, however, be ignored. The validity of the
cumulative voting procedure is dependent on the directors thus elected being
genuinemembersoftheFilipinogroup,notvoterswhoseinterestistoincreasethe
ASI share in the management of Saniwares. The joint venture character of the
11

 2. Whether!or!not!the!partnership!is!illegal!and!therefore!void$ab$initio!!NO.!
PARTNERSHIP*ARTICLES*178411809* !
* Rationale*
1.*LOZANA*VS.*DEPAKAKIBO*(AJG)* FIRST!ISSUE!(Article!1784!!1809!issue)!
GR!No.!L)13680!|!April!27,!1960! It!appears!from!the!record!that!the!two!entered!into!a!contract!of!partnership.!!
! It! is! not! stated! that! the! partnership! assets! have! already! been! liquidated! at! the!
Petitioner:*Mauro!Lozana! time!of!the!sale!of!the!Buda!Diesel!Engine.!!
Respondent:*Serefin!Depakakibo! Because! of! such,! the! engine! had* become* the* property* of* the* partnership.! As!
Partnership*Doctrines:* properties! of! the! partnership,! the! same! could! not! be! disposed! of! by! the! party!
A!partnership!must!have!a!lawful*object*or*purpose:!The$act$of$the$partnership$in$ contributing!the!same!without!the!consent!or!approval!of!the!partnership!or!of!
operating$under$the$franchise$of$another$person$and$supplying$that$person$with$ the!other!partner.!
their$business$without$the$approval$of$the$Public$Service$Commission$is$not$illegal,$ !
contrary$to$law$and$public$policy$such$as$to$make$the$contract$void$ab$initio.* SECOND!ISSUE!(Article!1770)!
ConTRIbutions! by! the! partners:! Once! property! is! contributed,! it! becomes! the! We!reverse!the!ruling!of!the!lower!court!declaring!the!partnership!void!ab!initio.!
property! of! the! partnership,! and! as! such,! it! could! not! be! disposed! of! the! party! Operating!under!the!franchise!belonging!to!another!person!(Mrs.!Buenaflor)!does!
contributing!the!same!without!the!consent!or!approval!of!the!partnership.* not!make!the!agreement!illegal!or!contrary!to!law!and!public!policy.!
* The! fact! of! furnishing! electric! current! to! the! holder! of! the! franchise! alone,!
Labrador,*J.:$ without! previous! approval! of! the! Public! Service! Commission,! does! not! per! se!
Factual*Antecedence* make!the!contract!of!partnership!null!and!void!
On! November! 17,! 1954,! Lozana! entered! into! a! contract! of! partnership! with! Moreover,!the!partnership!is!also!NOT!void!pursuant!to!the!fact!that!during!cross!
Depakakibo,! for! the! purpose! of! maintaining,! operating,! and! distributing! electric! examination,!defendant!admitted!that!he!and!plaintiff!are!dummies!(pursuant!to!
light!and!power!in!Dumangas,!Iloilo.* Anti)Dummy! Law).! However,! this! is! just! an! error! of! law! and! not! a! statement! of!
o 30,000!capital,!Lozana!contributed!60%!while!Depakakibo!contributed!40%.* fact.!The!Anti)Dummy!law!has!not!been!violated!because!such!law!refers!only!to!
o Lozana! also! contributed! a! Generator! Buda! (diesel)! and! some! other! aliens.!Petitioner!and!respondent!are!both!Filipinos.!
equipment!(wooden!posts),!while!Depakakibo!contributed!electric!wires!for! !
installation!in!delivery!lines.* !
They!operated!under!a!franchise!granted!to!Mrs.!Piadrosa!Buenaflor.* 2.*SANCHO*V.*LIZZARAGA*(PR)*
This!franchise!was!cancelled!and!revoked!by!Public!Service!Commission!on!May! 55!Phil!100!
15,!1955.* February!6,!1931!
Because!of!the!cancellation,!(cancellation!of!franchise,!not!dissolution!or!winding! !
up!of!the!partnership.!The!partnership!still!subsists)!Lozana!SOLD!the!Generator! Romualdez,*J.:*
Buda! to! Olimpia! Decolongon! on! October! 30,! 1955.! Olimpia! Decolongan! was! !
thereafter! granted! a! temporary! certificate! of! public! convenience! by! Public! FACTS:!
Service!Commission.* Maximiliano! Sancho! (plaintiff)! brought! an! action! for! the! rescission! of! a!
Lozana! brought! an! action! for! reconveyance! against! the! defendant,! alleging! that! partnership! contract! between! himself! and! Severiano! Lizzaraga! (defendant),!
he! is! the! owner! of! the! Generator! Buda! and! 70! wooden! posts,! and! that! he$ is$ entered!into!on!October!15,!1920,!the!reimbursement!by!the!latter!of!his!50,000!
entitled$to$the$possession$thereof,$but$that$the$defendant$has$wrongfully$detained$ peso!investment!therein,!with!interest!at!12%!per!annum!form!October!15,!1920,!
them.!* with!costs,!and!any!other!just!and!equitable!remedy!against!said!defendant.!
In! his! counterclaim,! Depakakibo! countered! alleging! that! those! items! indeed! On!the!other!hand,!Lizzaraga!denies!generally!and!specifically!all!the!allegations!
belong! to! the! plaintiff,! but! those! had! been! contributed* by! the! plaintiff! to! the! of! the! complaint! which! are! incompatible! with! his! special! defenses,! cross)
partnership,! therefore! he! is! not! unlawfully! detaining! them.! He! also! added! that! complaint!and!counterclaim,!setting!up!the!latter!and!asking!for!the!dissolution!
plaintiff!sold!his!contribution!to!the!partnership,!in!violation!of!the!terms!of!their! of!the!partnership,!and!the!payment!to!him!as!its!manager!and!administrator!of!
agreement.* P500! monthly! from! October! 15,! 1920,! until! the! final! dissolution,! with! interest,!
* one)half!of!said!amount!to!be!charged!to!the!plaintiff.!He!also!prays!for!any!other!
Issue/Held* just!and!equitable!remedy.!
1. Whether! or! not! plaintiff! violated! the! terms! of! the! partnership! by! selling! his! CFI! Manila! after! hearing! the! cause,! found! it! duly! proved! that! Lizzaraga! had! not!
contribution!without!the!consent!of!the!partner!!YES! contributed!all!the!capital!he!had!bound!himself!to!invest,!and!that!Sancho!had!
! 1!
 demanded!that!Lizzaraga!liquidate!the!partnership.!
Said!court!declared!the!partnership!dissolved!on!account!of!the!expiration!of!the!
period!for!which!it!was!constituted,!and!ordered!Lizarraga,!as!managing!partner,!
to!proceed!without!delay!to!liquidate!it,!submitting!to!the!court!the!result!of!the!
liquidation! together! with! the! accounts! and! vouchers! within! the! period! of! thirty!
days!from!receipt!of!notice!of!said!judgment,!without!costs.!
Sancho!appealed!and!contended!that!the!court!erred:!
o !In!holding!that!the!Sancho!and!Lizzaraga!is!not!entitled!to!the!rescission!of!the!
partnership! contract,! Exhibit! A,! and! that! article! 1124! of! the! Civil! Code! is!
! not!applicable!to!! the!present!case.!
o In!failing!to!order!Lizzaraga!to!return!the!sum!of!P50,000!to!the!plaintiff!with!
interest!from!October!15,!1920,!until!fully!paid.!
o In!denying!the!motion!for!a!new!trial.!
! been*delivered,*without*the*need*of*any*demand.*(1681a)!
ISSUE:!
A.!W/N!Lizzaraga's!(partner)!appeal!is!meritorious.!NO.!
B.! W/N! plaintiff! acquired! the! right! to! demand! rescission! of! the! partnership! contract!
according!to!article!1124!of!the!Civil!Code!(now!Article!1191).!NO.!
! any* amount* he* may* have* taken* from* the* partnership* coffers,* and* his*
HELD:!
A.!
Such!appeal!is!PREMATURE!because!inasmuch!as!the!liquidation!ordered!by!the!
trial! court,! and! the! consequent! accounts,! have! not! been! made! and! submitted,!
the! case! cannot! be! deemed! terminated! in! said! court! and! its! ruling! is! not! yet!
appealable.!!
Until! the! accounts! have! been! rendered! as! ordered! by! the! trial! court,! and! until!
they! have! been! either! approved! or! disapproved,! the! litigation! involved! in! this!
action!cannot!be!considered!as!completely!decided;!!
B.!
Owing! to! the! defendants! failure! to! pay! to! the! partnership! the! whole! amount!
which!he!bound!himself!to!pay,!he!became!indebted!to!it!for!the!remainder,!with!
interest! and! any! damages! occasioned! thereby,! but! the! plaintiff! did! not! thereby!
acquire! the! right! to! demand! rescission! of! the! partnership! contract! according! to!
article!1124!of!the!Code.!!
NOTE:! Article! 1124! of! the! Old! Civil! Code! is! now! Article! 1191! of! the! NCC,! which!
states:!
o Art.*1191.*The*power*to*rescind*obligations*is*implied*in*reciprocal*ones,*in*
case*one*of*the*obligors*should*not*comply*with*what*is*incumbent*upon*
him.The* injured* party* may* choose* between* the* fulfillment* and* the*
rescission* of* the* obligation,* with* the* payment* of* damages* in* either* case.*
He* may* also* seek* rescission,* even* after* he* has* chosen* fulfillment,* if* the*
latter* should* become* impossible.The* court* shall* decree* the* rescission*
claimed,*unless*there*be*just*cause*authorizing*the*fixing*of*a*period.This*is*
understood* to* be* without* prejudice* to* the* rights* of* third* persons* who*
have*acquired*the*thing,*in*accordance*with*Articles*1385*and*1388*and*the*
Mortgage*Law.*(1124)!
! 5. For! failure! to! pay! the! amount! of! P8,773! owing! to! the! City! of! Manila! for! the!
This! article! cannot* be* applied! to! the! case! in! question,! because! it! refers! to! the!
! 2!
resolution! of! obligations! in! general,! whereas* article* 1681* and* 1682* specifically*
refer* to* the* contract* of* partnership* in* particular.* And* it* is* a* well* known*
principle*that*special*provisions*prevail*over*general*provisions.!
By! virtue! of! the! foregoing,! this! appeal! is! hereby! dismissed,! leaving! the! decision!
appealed!from!in!full!force,!without!special!pronouncement!of!costs.!So!ordered.!
!
NCC*counterpart*of*Article*1681.*It*has*been*amended.*
o Art.* 1786.* Every* partner* is* a* debtor* of* the* partnership* for* whatever* he*
may* have* promised* to* contribute* thereto.He* shall* also* be* bound* for*
warranty*in*case*of*eviction*with*regard*to*specific*and*determinate*things*
which*he*may*have*contributed*to*the*partnership,*in*the*same*cases*and*
in*the*same*manner*as*the*vendor*is*bound*with*respect*to*the*vendee.*He*
shall* also* be* liable* for* the* fruits* thereof* from* the* time* they* should* have*
Article*1682*is*now*
o Art.* 1788.* A* partner* who* has* undertaken* to* contribute* a* sum* of* money*
and*fails*to*do*so*becomes*a*debtor*for*the*interest*and*damages*from*the*
time*he*should*have*complied*with*his*obligation.The*same*rule*applies*to*
liability*shall*begin*from*the*time*he*converted*the*amount*to*his*own*use.*
(1682)!
!
*
3.*MORAL*ELECTRIC*CO.,*INC.*V.*MATIC*(RS)*
G.R.*No.*L145441*
June*26,*1939*
AVANCEA,*C.J.$
*
FACTS:*
1. Paulino! Matic! obtained! from! the! City! of! Manila! the! concession! to! provide! the!
lighting! system! of! the! Manila! North! and! South! Cemeteries! on! All! Saint's! Day! in!
1934,!for!the!amount!of!P8,733,!the!payment!of!which!was!guaranteed!by!Luzon!
Surety!Co.*
2. Matic! thereafter! transferred! his! rights! to! said! concession! to! Benita! Quiogue,!
authorizing!her!to!enter!into!a!contract!with!Mora!Electric!Co.,!Inc.,!to!make!the!
installation! and! to! pay! the! P8,773! to! the! City! of! Manila! with! the! money! to! be!
collected!from!the!installations.*
3. Benita!Quiogue!entered!into!this!contract!with!Mora!Electric!Co.,!Inc.,!each*party*
binding* itself* to* contribute* the* necessary* labor* and* material* which* the* latter*
may* be* unable* to* put* up,* and* dividing* the* profits* between* them* after*
deducting*therefrom*all*the*necessary*expenses!for!labor,!materials,!cost!of!the!
current!and!the!amount!of!P8,773!which!should!be!paid!to!the!city,!both!parties!
also! binding! themselves,! for! this! purpose,! to! report! the! expenses! which! each!
might!have!incurred.*
4. The!business!was!a!failure!because!it!did!not!yield!the!expected!profit.*
concession,!Luzon!Surety!Co.,!had!to!make!good!the!said!amount.*
6. Luzon! Surety! Co.,! thereupon! sued! Paulino! Matic! and! Benita! Quiogue! for! the!
recovery!of!this!amount.*
7. Paulino!Matic!and!Benita!Quiogue,!in!turn,!filed!the!present!action!against!Mora!
Electric!Co.,!Inc.,!to!recover!from!the!latter!the!amount!of!P8,773!to!which!they!
were!sentenced!to!pay!in!the!case!commenced!against!them!by!Luzon!Surety!Co.*
8. (THIS* IS* TO* BE* THE* SCS* BASIS* FOR* ITS* DECISION)* The* Court* of* Appeals,*
affirming*the*judgment*of*the*Court*of*First*Instance,*sentenced*Mora*Electric*
Co.,*Inc.,*to*pay*Paulino*Matic*and*Benita*Quiogue*the*amount*of*P8,773,*minus*
that*of*P235*which*had*already*been*paid*on*account*of*the*former,*or*P8,518*
with*interest*thereon*at*12*per*cent*per*annum,*plus*8*per*cent*of*this*amount*
as*attorney's*fee.*Hence,!this!appeal!on!certiorari!by!Mora!Electric.!
! Petitioners:!Antonia!Torres!(assisted!by!husband!Angelo)!and!Emeteria!Baring!!
ISSUE:*WON*Mora*Electric*is*liable*to*Matic*and*Quiogue*the*amount*of*P8,773.*1*YES*
* Respondent:*Manuel!Torres!!contributed!money!+!industry,!40%!share!in!profits.!
RATIO:*
1. The!Court!of!Appeals,!relying!upon!the!evidence!oral!and!documentary,!held!that!
Mora!Electric!Co.,!Inc.,!bound!itself!in!its!contract!with!Benita!Quiogue!to!pay!the!
City!of!Manila!the!P8,773.!Unable!to!review!this!evidence,!we!have!to!decide!this!
appeal!on!the!basis!of!this!finding!of!the!Court!of!Appeals.!Having!undertaken!to!
pay!this!amount!to!the!City!of!Manila,!Mora!Electric!Co.,!Inc.,!is!under!a!duty!to!
reimburse! whoever! made! good! the! amount! for! it,! namely,! Paulino! Matic! and!
Benita!Quiogue.*
2. However,!Mora!Electric!Co.,!Inc.,!also!contends!that,!at!all!events,!Benita!Quiogue!
should!share!in!the!payment!of!this!amount!to!the!City!of!Manila.!It!alleges!that!
the!contract!entered!into!between!them!is!a!civil!partnership.!It!then!invokes!the!
provisions! of! the! Civil! Code! regarding! the! distribution! of! the! profits! and! losses!
between!the!partners.*
a. This$question,$however,$is$not$raised$in$this$case.!It!properly!pertains!to!the!
liquidation!of!the!partnership!and!the!distribution!of!the!profits!and!losses,!
which*are*not*here*at*issue*
3. The!amount!now!sought!to!be!recovered!is!not*claimed*as*loss*or*profit,!but*as*
the* contribution* which* Mora* Electric* Co.,* Inc.,* bound* itself* to* make* to* the*
partnership!and!which!it!was!under!a!duty!to!pay,!although!it!was!paid!instead!by!
Matic!and!Quiogue.*
4. The!liquidation!of!the!partnership!is!not!now!sought.!Indeed,!there!is!no*reason*
for*such*liquidation.*
a. While! it! is! mentioned! in! the! appealed! decision! that! the! business! produced!
P9,636.40,!it!does!not!appear!that!the!parties!have!made!a!report,!as!they!
have!agreed!to!do,!of!the!expenses!incurred!by!each,!and!it!is!not*possible*
to* determine* whether* there* was* a* profit* or* loss* and* what* is* the* extent*
thereof*and*the*measure*of*the*respective*liability*or*benefit.*
5. As! to! the! interest! on! the! amount! of! P8,518,! Matic! and! Quiogue! having! been!
sentenced!to!pay!it,!it!constitutes!damages!suffered!by!them!due!to!the!breach!
by!Mora!Electric!Co.,!Inc.,!of!the!obligation!it!assumed!to!pay!the!City!the!amount!
of! the! concession.! The! same! is! true! with! respect! to! the! judgment! to! pay! 8! per!
cent!on!the!amount!of!P8,518.*
! contract!with!an!engineering!firm!to!build!60!low)cost!housing!
! 3!
Wherefore,!the!judgment!of!the!Court!of!Appeals!is!affirmed,!with!the!costs!to!
the!petitioner.!So!ordered.!
!
!
ARTICLE*1797*
*
Torres*v.*CA*(AJG)*
GR!No.!134559!|!December!9,!1999!
!
partner)sisters!who!contributed!land!to!the!partnership,!60%!share!in!profits.!
Partnership*Doctrine:*Article!1797,!Side!issues!about!Article!1773!
!
Panganiban,!J.:!
Factual*Antecedence*
Antonia!and!Emeteria!(sisters)!entered!into!a!joint!venture!agreement!
with!Manuel!Torres!for!the!development$of$land$into$a$subdivision.*
o They!executed!a!deed!of!sale!covering!their!land!in!favor!of!
Manuel.!This!is!the!land!that!they!will!develop!into!a!subdivision.*
Manuel!then!obtained!a!loan!of!P40,000!from!Equitable!Bank!with!the!said!
land!as!security!(mortgage).*
The!project!did!not!push!through,!and!the!land!was!subsequently!foreclosed!
by!the!bank.*
Petitioners!contentions!regarding!the!failure!of!the!business:*
o Project!failed!because!of!respondents!lack!of!funds!or!means!and!
skills.*
o Respondent!used!the!loan!not!for!the!venture,!but!for!the!
furtherance!of!his!own!company!(Universal!Umbrella!Company).*
Respondents!counter)allegations!regarding!the!failure!of!the!business:*
o He!said!that!the!project!failed!because!petitioners!and!their!
relatives!had!separately!caused!the!annotation!of!adverse!claims!
on!the!title!to!the!land,!which!eventually!scared!away!prospective!
buyers.*
o On!the!other!hand,!it!cannot!be!said!that!he!used!the!loan!for!his!
own!good,!instead!he!used!the!loan!to!implement!the!agreement,!
because:!!(1)!he!was!able!to!effect!the!survey!and!subdivision!of!
the!lots,!(2)!secured!Lapu)Lapu!City!Councils!approval!of!the!
project,!(3)!advertised!it!in!a!local!newspaper,!(4)!caused!the!
construction!of!roads,!curbs,!and!gutters,!and!(5)!entered!into!a!
units.*
 o His!total!expense!was!P85,000*
RTCs!dismissed!petitioners!complaint.*
CA!also!dismissed!the!complaint,!and!ruled!that:!(Article*1797*doctrine,!to!
be!reiterated!later!by!the!SC)*
o The!two!parties,!no!matter!what!they!call!it,!nevertheless!entered!
into!a!contract!of!partnership.*
o As!such,!they!must!bear!the!loss!in!the!same!proportion!as!their!
share!in!the!profits!stipulated!in!the!contract.*
o Article! 1797The$ losses$ and$ profits$ shall$ be$ distributed$ in$
conformity$with$the$agreement.$If$only$the$share$of$each$partner$in$
the$ profits$ has$ been$ agreed$ upon,$ the$ share$ of$ each$ in$ the$ losses$
shall$be$in$the$same$proportion.$
o In$ the$ absence$ of$ stipulation,$ the$ share$ of$ each$ partner$ in$ the$
profits$ and$ losses$ shall$ be$ in$ proportion$ to$ what$ he$ may$ have$
contributed,$ but$ the$ industrial$ partner$ shall$ not$ be$ liable$ for$ the$
losses.$
Issue**Whether!or!not!the!partnership!contract!between!Antonia!+!Emeteria!and!
Manuel!is!valid.!
! Petitioners$ Contention:$ Partnership! is! void! because! the! deed! of! sale! has! no! valid!
Held**YES.!WHEREFORE,!the!Petition!is!hereby!DENIED!and!the!challenged!Decision!
AFFIRMED.!
!
Rationale*
Partnership$Exists$
Pertinent!portions!of!the!Joint!Venture!Agreement.*
o Antonia!and!Emeteria!voluntarily!offered!Manuel!the!land!located!
at!LapuLapu!City,!to!be!subdivided!by!the!Manuel.*
o Manuel!had!given!Antonia!and!Emeteria!20,000!for!development!
purposes.*
o The!sales!will!be!subdivided!into!60%!for!Antonia!and!Emeteria,!
and!40%!for!Manuel,!and!additional!profits!will!be!divided!
according!to!percentage!agreed!upon.*
Under!the!agreement,!petitioners!contributed!land,!and!the!respondent!
contributed!money!for!development!including!his!industry!(mortgaged!the!
land!+!undertook!other!necessary!contracts).!The!income!will!also!be!
divided.!Clearly,!this!is!a!contract!of!partnership.*
o This!belied!the!claim!of!petitioner!that!respondent!has!not!
contributed!anything,!because!aside!from!money,!a!partner!may!
also!contribute!industry.*
*
Petitioners$Bound$by$Terms$of$Contract$
! 4!
It! is! undisputed! that! petitioners! are! educated! and! are! thus! presumed! to!
have!understood!the!terms!of!the!contract!they!voluntarily!signed.!If!it!was!
not!in!consonance!with!their!expectations,!they!should!have!objected!to!it.!
Courts! are! not! authorized! to! extricate! parties! from! the! necessary!
consequences! of! their! acts,! and! the! fact! that! the! contractual! stipulations!
may! turn! out! to! be! financially! disadvantageous! will! not! relieve! parties!
thereto!of!their!obligations.!
!
Alleged$Nullity$of$Partnership$Agreement$
Petitioners$ Contention:$ Partnership! is! VOID! because! According! to! Article! 1773,!
whenever! immovable! property! is! contributed! and! no! inventory! is! made! +! signed! +!
attached,!the!contract!of!partnership!is!void.!
SCs$Answer:!
Article!1773!was!intended!primarily!to!protect!third!persons.!The!case!at!bar!
does!not!involve!third!parties!who!may!be!prejudiced.!
Petitioners! themselves! invoke! the! allegedly! void! contract! as! basis! for! their!
claim! that! respondent! should! pay! them! 60%! of! the! value! of! the! property.!
They!cannot!in!one!breath!deny!the!contract!and!in!another!recognize!it.!
!
Partnership$Agreement$not$the$Result$of$an$Earlier$Illegal$Contract!
consideration!
SCs$Answer:$
JVA!clearly!states!that!the!consideration!for!the!sale!was!the!expectation!of!
profits,!not!necessarily!the!peso!value!of!the!land.!
!
Liability$of$the$parties$
Petitioners$ Contention:$ Claiming! that! respondent! was! solely! responsible! for! the!
failure,! petitioners! maintain! that! he! should! be! made! to! pay! damages! equivalent! to!
60%!of!the!value!of!the!property,!which!was!their!share!in!the!profits.!
SCs$Answer:$
CA! held! that! neither! party! is! liable! for! the! failure.! Petitioner! failed! to! give!
any! reason! why! we! should! disregard! factual! findings! of! CA! relieving!
respondent!of!fault.!
!
!
ARTICLE*1799*
*
Cuenco*v.*Vda.*De*Manguera*(RK)*
FACTS*
 Concepcion!(respondent)!filed!the!initiatory!complaint!herein!for!specific!
performance!against!her!uncle!Miguel!Cuenco!(petitioner,!later!substituted!
by!Cuyegkeng).!
o Concepcions!father,!the!late!Don!Mariano!Jesus!Cuenco!(who!
became!Senator)!and!Miguel!Cuenco!formed!the!Cuenco!and!
Cuenco!Law!Offices!
o Cuenco!and!Cuenco!Law!Offices!served!as!lawyers!in!two!(2)!cases!
entitled!Valeriano!Solon!versus!Zoilo!Solon!and!Valeriano!Solon!
versus!Apolonia!Solon!involving!a!dispute!among!relatives!over!
ownership!of!lot!903!of!the!Banilad!Estate!
Records!of!said!cases!indicate!the!name!of!the!Miguel!alone!as!counsel!of!
record,!but!in!truth!and!in!fact,!the!real!lawyer!behind!the!success!of!said!
cases!was!the!influential!Don!Mariano!Jesus!Cuenco!
After!winning!the!said!cases:!!
o Lot!903)A:!5000!square!meters!(Don!Mariano!Jesus!Cuencos!
attorneys!fees)!
ISSUE:!Whether*Concepcion*is*entitled*to*ownership*of*the*property*(Lot*9031A16)*
o Lot!903)B:!5000!square!meters!(Miguel!Cuencos!attorneys!fees)!
o Lot!903)C:!54,000!square!meters!(Solons!retention)!
RULING*
Mariano!Cuenco!entrusted!Lot!903!A!to!Miguel.!
o Miguel!was!able!to!obtain!in!his!own!name!a!title!for!Lot!903)A!
o Miguel!was!under!the!obligation!to!hold!the!title!in!trust!for!his!
brother!Marianos!children!by!first!marriage!
Lot!903)A!was!partitioned!into!six!(6)!sub)lots!(Lots!903)A)1!to!903)A)6)!to!
correspond!to!the!six!(6)!children!of!Marianos!first!marriage!(Teresita,!
Manuel,!Lourdes,!Carmen,!Consuelo,!and!Concepcion)!
The!case!of!Concepcion!
o Five!deeds!of!donation!were!executed!in!favour!of!five!children.!
This!left!out!Concepcion!(who!became!respondent!in!this!case).!
o Concepcion!occupied!Lot!903)A)6!and!paid!taxes!for!it.!!
o When!Concepcion!went!to!the!Register!of!Deeds!to!register!the!
Lot!903)A)6,!there!was!an!adverse!claim!by!Miguel!saying!that!he!
was!the!absolute!owner!of!said!lot.!!
Miguels!allegations!
o He!executed!five!deeds!of!donation!to!five!children!of!his!brother!
because!of!the!love,!care!and!gratitude!<3!they!exhibited!during!
his!long!sickness.!
o Concepcion!never!visited!him.!
! 5!
Miguel!was!able!to!take!the!witness!stand!but!he!became!sick!and!was!not!
able!to!be!present!on!cross)examination!so!his!testimony!was!stricken!off!
the!record.!
Marietta!Cuyegkeng!(her!only!daughter)!substituted!him!in!the!case.!
o She!is!the!owner!of!the!lot!as!he!purchased!it!from!his!father.!
o That!she!was!aware!of!the!case!because!her!father!used!to!
commute!to!Cebu!to!attend!hearings.!
o That!she!constructed!a!house!on!the!said!lot.!
Lower!court!and!appellate!court:!!
o Concepcion!has!the!legal!right!of!ownership!over!lot!903)A)6.!
o The!CA!ruled!that!the!subject!land!"is!part!of!the!attorneys!fees!of!
Don!Mariano!Cuenco,!predecessor)in)interest!of!Concepcion!
Cuenco!vda.!de!Manguerra!and!Miguel!merely!holds!such!property!
in!trust!for!her.!
Given!as!attorneys!fees!was!one!hectare!of!Lot!903,!of!which!two!five)
thousand!square!meter!portions!were!identified!as!Lot!903)A!and!Lot!903)B.!
That!only!Miguel!handled!Civil!Case!No.!9040!does!not!mean!that!he!alone!is!
entitled!to!the!attorneys!fees!in!the!said!cases.!"When*a*client*employs*the*
services*of*a*law*firm,*he*does*not*employ*the*services*of*the*lawyer*who*
is*assigned*to*personally*handle*the*case.*Rather,*he*employs*the*entire*
law*firm."*Being*a*partner*in*the*law*firm,*Mariano*11*like*Miguel*11*was*
likewise*entitled*to*a*share*in*the*attorneys*fees*from*the*firms*clients.*
Although!Lot!903)A!was!titled!in!Miguels!name,!the!circumstances!
surrounding!the!acquisition!and!the!subsequent!partial!dispositions!of!this!
property!eloquently!speak!of!the!intent!that!the!equitable!or!beneficial!
ownership!of!the!property!should!belong!to!Mariano!and!his!heirs.!!
o Lot!903)A!was!one!half!of!the!one)hectare!portion!of!Lot!903!given!
as!attorneys!fees!by!a!client!of!the!law!firm!of!Partners!Miguel!
and!Mariano!Cuenco.!Lot!903)A!was!one!half!of!the!one)hectare!
portion!of!Lot!903!given!as!attorneys!fees!by!a!client!of!the!law!
firm!of!Partners!Miguel!and!Mariano!Cuenco!
 o Miguel!readily!surrendered!his!Certificate!of!Title!and!interposed!
no!objection!to!the!subdivision!and!the!allocation!of!the!property!
to!Marianos!six!children,!including!Concepcion.!!
o Marianos!children,!including!Concepcion,!were!the!ones!who!
shouldered!the!expenses!incurred!for!the!subdivision!of!the!
property!

o After!the!subdivision!of!the!property,!Marianos!children!))!
including!Concepcion!))!took!possession!of!their!respective!
portions!thereof.!!
o The!legal!titles!to!five!portions!of!the!property!were!transferred!
via!a!gratuitous!deed!of!conveyance!to!Marianos!five!children,!
following!the!allocations!specified!in!the!subdivision!plan!prepared!
for!Lourdes!Cuenco.!
Respondent!is!not!barred!by!laches.!In!the!present!case,!respondent!has!
persistently!asserted!her!right!to!Lot!903)A)6!against!petitioner.!

*
*
!

! 6!